REG - Macau Prop Opp Fund - Interim Results for the period ended 31 Dec 2015 <Origin Href="QuoteRef">MPO.L</Origin> - Part 2
29/02/2016 07:11
- Part 2: For the preceding part double click ID:nRSc3865Qa
Loss for the period - (36,971) - - (36,971)
Items that may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations - - - 53 53
Total comprehensive loss for the period - (36,971) - 53 (36,918)
Share buyback 12 (11) - (3,005) - (3,016)
Balance carried forward at 31 December 2015 764 47,404 66,208 1,137 115,513
Movement for the 6-month period from 1 July 2014 to 31 December 2014 (unaudited)
Share capitalUS$'000 Retained earnings US$'000 Distributable reserves US$'000 Foreign currency translation reserve US$'000 Total US$'000
Balance brought forward at 1 July 2014 814 136,902 84,049 1,089 222,854
Loss for the period - (16,675) - - (16,675)
Items that may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations - - - (97) (97)
Total comprehensive loss for the period - (16,675) - (97) (16,772)
Share buyback (29) - (11,783) - (11,812)
Balance carried forward at 31 December 2014 785 120,227 72,266 992 194,270
Movement for the year from 1 July 2014 to 30 June 2015 (audited)
Share capitalUS$'000 Retained earnings US$'000 Distributable reserves US$'000 Foreign currency translation reserve US$'000 Total US$'000
Balance brought forward at 1 July 2014 814 136,902 84,049 1,089 222,854
Loss for the year - (52,527) - - (52,527)
Items that may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations - - - (5) (5)
Total comprehensive loss for the year - (52,527) - (5) (52,532)
Share buyback (39) - (14,836) - (14,875)
Balance carried forward at 30 June 2015 775 84,375 69,213 1,084 155,447
The notes below form part of these interim condensed consolidated financial
statements.
Interim Condensed Consolidated Statement of Cash Flows (Unaudited)
For the 6-month period from 1 July 2015 to 31 December 2015
Note Unaudited 6 months 1 Jul 15 - 31 Dec 15 US$'000 Unaudited 6 months 1 Jul 14 - 31 Dec 14 US$'000 Audited 12 months 1 Jul 14 - 30 Jun 15 US$'000
Net cash used in operating activities 10 (2,085) (51,070) (38,497)
Cash flows from investing activities
Capital expenditure on investment properties 3 (444) (70) (103)
Proceeds from disposal of investment property - 6,452 6,452
Movement in pledged bank balances (540) (3,140) 6
Net cash (used in)/generated from investing activities (984) 3,242 6,355
Cash flows from financing activities
Proceeds from bank borrowings 36,302 23,025 51,441
Repayment of bank borrowings (38,070) - (13,622)
Share buyback (3,016) (11,812) (14,875)
Interest and bank charges paid (3,347) (2,477) (5,654)
Net cash (used in)/generated from financing activities (8,131) 8,736 17,290
Net movement in cash and cash equivalents (11,200) (39,092) (14,852)
Cash and cash equivalents at beginning of period/year 28,749 43,528 43,528
Effect of foreign exchange rate changes (37) 157 73
Cash and cash equivalents at end of period/year 17,512 4,593 28,749
The notes below form part of these interim condensed consolidated financial
statements.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)
For the 6-month period from 1 July 2015 to 31 December 2015
General information
Macau Property Opportunities Fund Limited (the "Company") is a Company
incorporated and registered in Guernsey under The Companies (Guernsey) Law,
1994. This law was replaced by the Companies (Guernsey) Law, 2008 on 1 July
2008. The Company is an authorised entity under the Authorised Closed-Ended
Investment Schemes Rules 2008 and is regulated by the Guernsey Financial
Services Commission. The address of the registered office is given below.
The interim condensed consolidated financial statements for the 6 months ended
31 December 2015 comprise the interim financial statements of the Company and
its subsidiaries (together referred to as the "Group"). The Group invests in
residential and commercial property and property-related ventures primarily in
Macau.
There have been no changes to the Group's principal risks and uncertainties in
the 6-month period to 31 December 2015 and the Board of Directors does not
anticipate any changes to the principal risks and uncertainties in the second
half of the year. Principal risks and uncertainties are further discussed in
the Manager's Report above.
The interim condensed consolidated financial statements are presented in US
Dollars ("US$") and are rounded to the nearest thousand ($'000).
These interim condensed consolidated financial statements have been approved
for issue by the Board of Directors on 26 February 2016.
1. Significant accounting policies
Basis of accounting
The annual consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), as adopted by the
European Union; applicable legal and regulatory requirements of Guernsey Law
and under the historical cost convention as modified by the revaluation of
investment properties and derivative financial instruments.
The interim condensed consolidated financial statements have been prepared in
accordance with International Accounting Standard ("IAS") 34, Interim
Financial Reporting. The same accounting policies and methods of computation
are followed in the interim financial statements as compared with the annual
financial statements. The interim condensed consolidated financial statements
do not include all information and disclosures required in the annual
financial statements and should be read in conjunction with the Group's annual
financial statements as of 30 June 2015. The interim report has been reviewed,
not audited, by the Auditor.
New and amended standards and interpretations applied
The following amendments to existing standards and interpretations were
effective for the year ended 30 June 2016 and therefore were applied in the
current interim period, but either they were not applicable to or did not have
a material impact on the group:
· Annual Improvements to IFRSs 2011 - 2013 Cycle
· IAS 19 Employee Benefits - Defined Benefit Plans: Employee Contributions
(Amendments)
· Annual Improvements to IFRSs 2010 - 2012 Cycle
Going concern
The Group continues to meet its capital requirements and day-to-day liquidity
needs through the Group's cash resources. As part of their assessment of the
going concern of the Group as at 31 December 2015, the Directors have reviewed
the comprehensive cash flow forecasts prepared by management which make
assumptions based upon current and expected future market conditions,
including predicted future sales of properties. It is the Directors' belief
that, based upon these forecasts and their assessment of the Group's committed
banking facilities, it is appropriate to prepare the financial statements of
the Group on a going concern basis.
The Directors, after passing the continuation resolution in 2014 to extend the
Fund's life until the end of 2016, assessed whether the continuation vote
before the end of 2016 gives rise to a material uncertainty that might cast
significant doubt about the Fund's ability to continue as a going concern. The
Directors have also considered the going concern assumption outside the
primary going concern horizon. The Directors expect to receive continuation
support from major shareholders and only 25% of shareholder support is
required to ensure continuation; and it is likely that returns from sales of
properties would be lower if the Fund were forced to sell as a result of
discontinuation and it is therefore commercially sensible for the Fund to
continue in business. Therefore, the Directors believe it is appropriate to
prepare the financial statements of the Group on the going concern basis based
upon existing cash resources, the forecasts described above, the extension of
the life of the Company until the end of 2016 agreed at the Extraordinary
General Meeting on 7 April 2014 and the Directors' assessment of the Group's
committed banking facilities and expected continuing compliance with related
covenants.
Seasonal and cyclical variations
The Group does not operate in an industry where significant or cyclical
variations as a result of seasonal activity are experienced during the
financial year.
2. Segment reporting
The chief operating decision maker (the "CODM") in relation to Macau Property
Opportunities Fund Limited is deemed to be the Board itself. The factors used
to identify the Group's reportable segments are centred on asset class,
differences in geographical area and differences in regulatory environment.
Further, foreign exchange and political risk is identified, as these also
determine where resources are allocated.
Based on the above and a review of information provided to the Board, it has
been concluded that the Group is currently organised into one reportable
segment based on the geographical sector, Macau.
This segment includes residential, commercial and mixed-use properties.
Furthermore, there are multiple individual properties that are held within
each property type. However, the CODM considers on a regular basis the
operating results and resource allocation of the aggregated position of all
property types as a whole, as part of their on-going performance review. This
is supported by a further breakdown of individual property groups only to help
support their review and investment appraisal objectives.
3. Investment property
Unaudited 1 Jul 15 - 31 Dec 15 US$'000 Unaudited 1 Jul 14 - 31 Dec 14 US$'000 Audited 1 Jul 14 - 30 Jun 15 US$'000
At the beginning of the period/year 243,810 306,575 306,575
Capital expenditure on property* 444 70 (631)
Fair value adjustment (35,923) (12,579) (62,048)
Exchange difference 52 (143) (86)
Balance at end of the period/year (208,383) 293,923 243,810
* Stamp duty expenditure relating to the purchase of The Waterside had been
capitalised in the year ended 30 June 2014. During the year ended 30 June
2015, the stamp duty was settled at an amount equal to US$734,000, less than
estimated initially. This amount has been removed from the asset cost at 30
June 2015.
Valuation gains and losses from investment property are recognised in profit
and loss for the period and are attributable to changes in unrealised gains or
losses relating to investment property (completed and under construction) held
at the end of the reporting period.
The valuation process is initiated by the Investment Adviser who appoints a
suitably qualified valuer to conduct the valuation of the investment property.
The results are overseen by the Investment Adviser. Once satisfied with the
valuations based on their expectations, the Investment Adviser reports the
results to the Board. The Board reviews the latest valuations based on its
knowledge of the property market and compare these to previous valuations.
The Group's investment properties were revalued at 31 December 2015 by
independent, professionally-qualified valuers: Savills (Macau) Limited. The
valuation has been carried out in accordance with the current Royal
Institution of Chartered Surveyors (RICS) Appraisal and Valuation Standards to
calculate the market value of the investment properties in their existing
state and physical condition, with the assumptions that:
• The owner sells the property in the open market without any arrangement
which could serve to affect the value of the property.
• The property is held for investment purposes.
• The property is free from encumbrances, restrictions and outgoings of any
onerous nature which could affect its value.
The fair value of investment property is determined by Savills (Macau) Limited
using recognised valuation techniques. The technique deployed was the income
capitalisation method. The determination of the fair value of investment
property requires the use of estimates such as future cash flows from assets
(such as lettings, tenants' profiles, future revenue streams, capital values
of fixtures and fittings, plant and machinery, any environmental matters and
the overall repair and condition of the property) and discount rates
applicable to those assets. These estimates are based on local market
conditions existing at the reporting date.
See Note 13 in relation to deferred tax liabilities on investment property.
Capital expenditure in the period relates to the fit-out costs for The
Waterside.
Rental income arising from The Waterside of US$1,104,000 (6 months ended 31
December 2014: US$2,453,000, 12 months ended 30 June 2015: US$4,311,000) was
received during the period. Direct operating expenses of US$251,000 (6 months
ended 31 December 2014: US$314,000, 12 months ended 30 June 2015:
US$1,400,000) arising from The Waterside that generated rental income were
incurred during the 6-month period. Direct operating expenses during the
period arising from vacant units totalled US$171,000 (6 months ended 31
December 2014: US$46,000, 12 months ended 30 June 2015: US$159,000).
The table below shows the assumptions used in valuing the investment
properties which are classified as Level 3 in the fair value hierarchy:
Propertyinformation Carrying amount /fair value as at31 December 2015:US$'000 Valuation technique Input Unobservable andobservable inputsused in determinationof fair values Other keyinformation
Name The Waterside 208,383 Term and Reversion Analysis Term rent(existing tenancies) HK$25.1 psf Age of building
Type Completed apartments Term rent(new tenancies)(inclusive of managementfee and furniture) HK$15.9 psf Remaining usefullife of building
Location One Central Tower 6 Macau Term yield(existing tenancies) 2.4%
Term yield(new tenancies) 1.6%
Reversionary rent (exclusive of management fee and furniture) HK$20.1 psf
Reversionary yield 2.10%
The fair value of The Waterside is determined using the income approach, more
specifically a term and reversion analysis, where a property's fair value is
estimated based on the rent receivable and normalised net operating income
generated by the property, which is divided by the capitalisation (discount)
rate. The difference between gross and net rental income includes the same
expense categories as those for the discounted cash flow method with the
exception that certain expenses are not measured over time, but included on
the basis of a time weighted average, such as the average lease up costs.
Under the income capitalisation method, over and under-rent situations are
separately capitalised (discounted).
If the estimated reversionary rent increased/decreased by 5%, (and all other
assumptions remained the same) the fair value of The Waterside would increase
by US$10 million (6 months ended 31 December 2014: US$15 million, 12 months
ended 30 June 2015: US$12 million) or decrease by US$10 million (6 months
ended 31 December 2014: US$15 million, 12 months ended 30 June 2015: US$12
million).
If the term and reversionary yields or discount rates increased/decreased by
5%, (and all other assumptions remained the same) the fair value of The
Waterside would decrease by US$10 million (6 months ended 31 December 2014:
US$14 million, 12 months ended 30 June 2015: US$12 million) or increase by
US$11 million (6 months ended 31 December 2014: US$15 million, 12 months ended
30 June 2015: US$13 million).
The same valuation method was deployed in June 2015 and December 2015.
The Waterside is currently valued at its highest and best use. There is no
extra evidence available to suggest that it has an alternative use that would
provide a greater fair value measurement.
There have been no transfers between levels during the period or a change in
valuation technique since the last period.
4. Deposits with lenders
Pledged bank balances represents deposits pledged to the Group's bankers to
secure the banking facilities and interest rate swaps granted to the Group.
Deposits amounting to US$3.0 million (31 December 2014: US$5.8 million, 30
June 2015: US$1.9 million) have been pledged to secure long-term banking
facilities and are, therefore, classified as non-current assets. There are no
other significant terms and conditions associated with these pledged bank
balances.
Unaudited 31 Dec 15 US$'000 Unaudited 31 Dec 14 US$'000 Audited 30 Jun 15 US$'000
Pledged for loan covenants 2,958 4,700 1,941
Pledged for interest rate swaps 232 1,096 709
3,190 5,796 2,650
5. Inventories
Unaudited 1 Jul 15 - 31 Dec 15 US$'000 Unaudited 1 Jul 14 - 31 Dec 14 US$'000 Audited 1 Jul 14 - 30 Jun 15 US$'000
Cost
Balance brought forward 67,288 54,351 54,351
Additions 296 24,023 23,955
Disposals (254) - (11,004)
Exchange difference 16 (26) (14)
Balance carried forward 67,346 78,348 67,288
Additions include capital expenditure, development costs and capitalisation of
financing costs. Interest costs of US$nil (6 months ended 31 December 2014:
US$193,000, 12 months ended 30 June 2015: US$225,000) relating to The
Fountainside loan facility were capitalised during the period.
Under IFRS, inventories are valued at the lower of cost and net realisable
value. The carrying amounts for inventories as at 31 December 2015 amount to
US$67,346,000 (6 months ended 31 December 2014: US$78,348,000, 12 months ended
30 June 2015: US$67,288,000). Net realisable value as at 31 December 2015 as
determined by independent, professionally-qualified valuer, Savills (Macau)
Limited, was US$195,343,000 (6 months ended 31 December 2014: US$251,102,000,
12 months ended 30 June 2015: US$217,655,000).
3 car parking spaces and 1 motorcycle parking space of The Fountainside were
sold during the period for a total consideration of US$1.0 million (HK$8.1
million) against a total cost of US$0.2 million (HK$2.0 million) which
resulted in a net profit of US$0.8 million (HK$6.1 million) after all
associated fees and transaction costs. These disposals were completed on
various dates during the current period.
6. Interest rate swaps
During the period the Group paid net interest to the banks of US$393,000 (6
months to 31 December 2014: US$523,000, 12 months to 30 June 2015:
US$1,035,000) as shown in financing expenses on the consolidated statement of
comprehensive income.
The swaps are treated as financial liabilities at fair value through profit or
loss with a net period end value of US$68,000 (31 December 2014: US$377,000,
30 June 2015: US$395,000). For the period ended, a fair value gain of
US$327,000 (6 months ended 31 December 2014: US$283,000, 12 months ended 30
June 2015: US$265,000) arising from the net interest rate swaps has been
recognised in the consolidated statement of comprehensive income.
All swaps held are categorised in level 2 of the fair value hierarchy. There
were no transfers between levels 1, 2 and 3 or changes in valuation techniques
during the period. The swaps have been valued on the basis of discounting
future cash flows at prevailing interest rates.
There are no changes in the counterparty credit risk during the period.
Standard Chartered Bank
The Group has one (31 December 2014: five, 30 June 2015: five) interest rate
swap with Standard Chartered Bank to mitigate risks associated with the
variability of cash flows arising from interest rate fluctuations.
The notional amount of the interest rate swap is HK$100,000,000
(US$12,903,000) (31 December 2014: HK$500,000,000 (US$64,485,000), 30 June
2015: HK$500,000,000 (US$64,500,000)), being a notional amount of
HK$100,000,000 for each swap. The tenor of the swap is five years with the
maturity date being 20 May 2016.
Under this swap, the Group would receive quarterly interest at variable rates
of 3-month HIBOR and pay quarterly interest at a fixed rate of 2.09% per
annum. The Group has placed HK$1,800,000 (US$232,000) (31 December 2014:
HK$8,500,000 (US$1,096,000), 30 June 2015: HK$5,500,000 (US$709,500)) with
Standard Chartered Bank as a pledged deposit to secure the interest rate swap
facilities.
Hang Seng Bank
The Group also has an interest rate swap with Hang Seng Bank to mitigate risks
associated with the variability of cash flows arising from interest rate
fluctuations.
The notional amount for the interest rate swap is HK$250,000,000
(US$32,257,000) (31 December 2014: HK$250,000,000 (US$32,243,000), 30 June
2015: HK$250,000,000 (US$32,250,000)), the tenor of the swap is five years
with a maturity date of 19 March 2018. Under this swap, the Group receives
quarterly interest at variable rates of 3-month HIBOR and pays quarterly
interest at fixed rate of 1.00% per annum.
7. Interest-bearing loans
Unaudited 31 Dec 15 US$'000 Unaudited 31 Dec 14 US$'000 Audited 30 Jun 15 US$'000
Bank loans - Secured
- Current portion 1,768 27,263 19,194
- Non-current portion 163,273 124,714 147,576
165,041 151,977 166,770
The Group has a term loan facility with Hang Seng Bank for The Waterside and
the individual One Central Residences units. On 4 November 2015, a new Tranche
of the facility was executed for HK$282 million (US$36.4 million) (Tranche 5)
to finance the principal instalments of the previous tranches for up to the
end of 2017.
As at 31 December 2015, three Tranches remained outstanding. Tranche 1 had
been fully repaid during the period (31 December 2014: HK$79.4 million
(US$10.2 million), 30 June 2015: HK$79.4 million (US$10.2 million)); Tranche 3
had an outstanding balance of HK$572 million (US$73.8 million) (31 December
2014: HK$750 million (US$96.7 million), 30 June 2015: HK$750 million (US$96.7
million)); Tranche 4 had an outstanding balance of HK$76 million (US$9.8
million) (31 December 2014: HK$100 million (US$13 million), 30 June 2015:
HK$100 million (US$12.9 million)); and Tranche 5 had an outstanding balance of
HK$281 million (US$36.3 million) (31 December 2014: HK$nil (US$nil), 30 June
2015: HK$nil (US$nil)). Interest is paid quarterly on this loan facility. As
at 31 December 2015, the loan-to-value ratio for the Hang Seng One Central
facility was 54.16%.
The interest rates applicable to Tranche 3, Tranche 4 and Tranche 5 of the
term loan are 2.25% per annum, 2.35% per annum and 2.35% per annum,
respectively, over the 1, 2 or 3-month HIBOR rate. The choice of rate is at
the Group's discretion. The term loan matures on 19 September 2020. The
principal is to be repaid in half-yearly instalments commencing 19 March 2018
with 50% of the principal due upon maturity. The loan-to-value covenant is
60%. The facility is secured by means of a first registered legal mortgage
over The Waterside and the individual residential units owned by the Group at
One Central Residences as well as a pledge of all income from the units. The
Company is the guarantor for the credit facility. In addition, the Group is
required to maintain a cash reserve equal to 6 months' interest with the
lender. Early prepayment covenant for sales proceeds out of the individual One
Central Residence units will be waived, subject to the Group maintaining a
loan-to-value ratio of not more than 50% on the facility.
During the year ended 30 June 2015, the Group executed a loan facility with
the Industrial and Commercial Bank of China (Macau) Limited to refinance the
credit facility with OCBC Wing Hang Limited (Macau) (previously known as Banco
Weng Hang S.A.) in relation to The Fountainside redevelopment project. The
facility amount is HK$220 million (US$28.4 million) with a tenor of 3 years to
mature in March 2018. The full amount of the facility was drawdown in March
2015 to repay the OCBC Wing Hang facility. Interest is charged at 3% per annum
over the 3-month HIBOR rate. The principal is to be repaid in half-yearly
instalments commencing 12 months after drawdown date with 50% of the principal
due upon maturity. The loan-to-value covenant is 60%. The facility is secured
by means of a first registered legal mortgage over all unsold units and car
parking spaces of The Fountainside as at the loan facility date as well as a
pledge of all income from the units and the car parking spaces. The Company is
the guarantor for the credit facility.
As at 31 December 2015, the facility had an outstanding balance of HK$200.7
million (US$25.9 million) (31 December 2014: HK$100 million (US$12.9 million),
30 June 2015: HK$214.4 million (US$27.7 million)). Sales proceeds of US$0.1
million (31 December 2014: US$1.8 million, 30 June 2015: US$0.3million) were
pledged with the lender. As at 31 December 2015, the loan-to-value ratio for
The Fountainside facility was 52.57%.
The Group has two loan facilities for the purchase and redevelopment of
Estrada da Penha:
Banco Tai Fung
The loan facility with Banco Tai Fung has a term of 3 years and the facility
amount is HK$70 million. Interest is charged at 3.2% per annum over the
6-month HIBOR rate and repayment is due in full at maturity in June 2017. As
at 31 December 2015, the facility had an outstanding balance of HK$70 million
(US$9.0 million) (31 December 2014: HK$70 million (US$9.0 million), 30 June
2015: HK$70 million (US$9.0 million)). This facility is secured by a first
legal mortgage over the property as well as a pledge of all income from the
property. Interest is paid monthly on this loan facility. As at 31 December
2015, the loan-to-value ratio for this facility was 48.28%.
ICBC Macau
The loan facility with Industrial and Commercial Bank of China (Macau) Limited
was executed on 11 December 2014. The term of the loan is 3 years and the
facility amount is HK$79 million. Interest is charged at 3.2% per annum over
the 3-month HIBOR rate and repayment is due in full at maturity in December
2017. As at 31 December 2015, the facility had an outstanding balance of HK$79
million (US$10.2 million) (31 December 2014: HK$79 million (US$10.2 million),
30 June 2015: HK$79 million (US$10.2 million)). This facility is secured by a
first legal mortgage over the property as well as a pledge of all income from
the property. The Group is the guarantor for this term loan. In addition, the
Group is required to maintain a cash reserve equal to 6 months' interest with
the lender. Interest is paid monthly on this loan facility. As at 31 December
2015, the loan-to-value ratio for this facility was 45.93%.
Bank loan interest paid during the period was US$2,374,000 (6 months period
ended 31 December 2014: US$1,872,000, 12 months period ended 30 June 2015:
US$4,126,000), including US$nil (31 December 2014: US$193,000, 30 June 2015:
US$225,000), capitalised during the period (see Note 5).
The fair value of fixed rate financial assets and liabilities carried at
amortised cost are estimated by comparing market interest rates when they were
first recognised with current market rates for similar financial instruments.
The estimated fair value of fixed interest bearing loans is based on
discounted cash flows using prevailing market interest rates for debts with
similar credit risk and maturity. As at 31 December 2015, the fair value of
the financial liabilities was US$289,000 lower than the carrying value of the
financial liabilities (31 December 2014: US$176,000 higher than the carrying
value of the financial liabilities, 30 June 2015: US$57,000 higher than the
carrying value of the financial liabilities).
The Group's Interest-bearing loans have been classified within Level 2 as they
have observable inputs from similar loans. There have been no transfers
between levels during the period or a change in valuation technique since last
period.
8. Basic and diluted loss per ordinary share
Basic and diluted loss per equivalent Ordinary Share is based on the following
data:
Unaudited 6 months 1 Jul 15 - 31 Dec 15 Unaudited 6 months 1 Jul 14 - 31 Dec 14 Audited 12 months 1 Jul 14 - 30 Jun 15
Loss for the period/year (US$'000) (36,971) (16,675) (52,527)
Weighted average number of Ordinary Shares ('000) 76,733 79,571 78,863
Basic and diluted loss per share (US$) (0.4818) (0.2096) (0.6661)
9. Net asset value reconciliation
Unaudited 31 Dec 15 US$'000 Unaudited 31 Dec 14 US$'000 Audited 30 Jun 15 US$'000
Net assets attributable to ordinary shareholders 115,513 194,270 155,447
Uplift of inventories held at cost to market value 129,971 175,290 152,565
Adjusted Net Asset Value 245,484 369,560 308,012
Number of Ordinary Shares Outstanding ('000) 76,433 78,484 77,534
NAV per share (IFRS) (US$) 1.51 2.48 2.00
Adjusted NAV per share (US$) 3.21 4.71 3.97
Adjusted NAV per share (£)* 2.18 3.02 2.53
* US$:GBP rates as at relevant period end
The NAV per share is arrived at by dividing the net assets as at the date of
the consolidated statement of financial position, by the number of Ordinary
Shares in issue at that date.
Under IFRS, inventories are carried at the lower of cost and net realisable
value. The Adjusted NAV includes the uplift of inventories to their market
values.
The Adjusted NAV per share is arrived at by dividing the Adjusted Net Asset
Value as at the date of the consolidated statement of financial position, by
the number of Ordinary Shares in issue at that date.
There are no potentially dilutive instruments in issue.
10. Cash flows from operating activities
Unaudited 6 months 1 Jul 15 - 31 Dec 15US$'000 Unaudited 6 months 1 Jul 14 - 31 Dec 14US$'000 Audited 12 months 1 Jul 14 - 30 Jun 15US$'000
Cash flows from operating activities
Loss for the period/year before tax (41,127) (18,184) (58,042)
Adjustments for:
Net gain on valuation of interest rate swap (327) (283) (265)
Net loss from fair value adjustment on investment property 35,923 12,579 62,048
Taxation paid (1,319) - -
Net finance costs 2,950 2,445 5,440
Operating cash flows before movements in working capital (3,900) (3,443) 9,181
Effect of foreign exchange rate changes 53 (97) (5)
Movement in receivables 1,947 114 (3,028)
Movement in payables (143) (23,621) (31,933)
Movement in inventories (42) (24,023) (12,712)
Net change in working capital 1,762 (47,530) (47,673)
Net cash used in operating activities (2,085) (51,070) (38,497)
Cash and cash equivalents (which are presented as a single class of assets on
the face of the interim condensed consolidated statement of financial
position) comprise cash at bank and other short-term, highly-liquid
investments with a maturity of three months or less.
11. Related party transactions
The directors of the Company are all Non-Executive and by way of remuneration
receive only an annual fee.
Unaudited 6 months 1 Jul 15 - 31 Dec 15US$'000 Unaudited 6 months 1 Jul 14 - 31 Dec 14US$'000 Audited 12 months 1 Jul 14 - 30 Jun 15US$'000
Directors' fees 106 118 231
Thomas Ashworth is a shareholder and Director of Sniper Capital Limited.
Sniper Capital Limited is the Manager to the Group and received management
fees during the period as detailed in the Interim Condensed Consolidated
Statement of Comprehensive Income. Management fees are paid quarterly in
advance and amounted to US$3,108,000 (6 months to 31 December 2014:
US$4,195,000, 12 months to 30 June 2015: US$8,117,000) at a fee of 2.0% per
annum of the Net Asset Value, as adjusted to reflect the Property Investment
Valuation Basis. Thomas Ashworth received no Directors' fees from the Group.
Performance fee of US$nil was accrued at period end (6 months to 31 December
2014: US$nil, 12 months to 30 June 2015: US$nil). Performance fee of US$nil
was paid during the period (6 months to 31 December 2014: US$23,964,000, 12
months to 30 June 2015: US$23,964,000). No performance fee was accrued in the
current period as the previous high watermark had not been surpassed.
Thomas Ashworth is a shareholder and Director of Adept Capital Partners
Services Limited. Adept Capital Partners Services Limited provides
administrative services to the Macanese, Hong Kong and British Virgin Islands
SPVs and received fees during the period of US$50,000 of which US$nil was
outstanding at the period end (6 months to 31 December 2014: US$49,000 of
which US$nil was outstanding, 12 months to 30 June 2015: US$99,000 of which
US$nil was outstanding).
The Group has a Development Management Services Agreement with a development
management company named Headland Developments Limited ("Headland"). Headland
is part-owned by Thomas Ashworth and therefore constitutes a related party of
the Group. During the period, Development Management Services fees of HK$nil
(US$nil) (6 months to 31 December 2014: HK$nil (US$nil), 12 months to 30 June
2015: HK$nil (US$nil)) were capitalised in investment property and HK$20,000
(US$3,000) (6 months to 31 December 2014: HK$807,000 (US$104,000), 12 months
to 30 June 2015: HK$875,000 (US$113,000)) were capitalised in inventories. As
at 31 December 2015, US$3,000 (6 months to 31 December 2014: US$10,000, 12
months to 30 June 2015: US$nil) was outstanding.
All intercompany loans and related interest are eliminated on consolidation.
12. Ordinary Share repurchases
During the period, under the authority first granted in the Extraordinary
General Meeting of 28 June 2010, and renewed at each Annual General Meeting
since then, the Company repurchased 1,101,000 Ordinary Shares or 1.05% (1.42%
since 1 July 2015) of the originally issued shares, at an average share price
of 176.64p. All shares bought back under the buyback programme were
cancelled.
The following table summarises all shares repurchased by the Company as at 31
December 2015:
Number of Shares Repurchase Price per Share *
Total shares repurchased/average price at beginning of period 27,466,036 163.72
12 August 2015 550,000 184.00
19 August 2015 129,000 171.00
21 August 2015 122,000 171.00
28 August 2015 150,000 170.24
4 September 2015 150,000 165.50
Total shares repurchased/average price during the current period 1,101,000 176.64
Total shares repurchased/Average price at end of period 28,567,036 164.22
* Price in pence sterling
13. Taxation provision
The Group has exposure to People's Republic of China taxation for its previous
business operation in the People's Republic of China. The Board considers that
the Group's exposure to People's Republic of China tax has been properly
reflected in the Group's consolidated financial statements.
As at period end, the following amounts are the outstanding tax provisions.
Unaudited 31 Dec 15 US$'000 Unaudited 31 Dec 14 US$'000 Audited 30 Jun 15 US$'000
People's Republic of China tax authorities provision 1,514 2,324 2,324
Deferred taxation 13,078 23,317 17,385
Provisions for Macanese taxation 2,235 - 2,600
16,827 25,641 22,309
People's Republic of China tax authorities provision
As at 31 December 2015, due to disposal during the year ended 30 June 2014 of
the APAC Logistics Centre and Cove Residences in Zhuhai, China, the Group is
in the process of submitting a tax return to the People's Republic of China
tax authorities. The provision has arisen due to the profit on the disposal.
The Group has received taxation advice as to the potential charge that may be
imposed by the People's Republic of China tax authorities. As the outcome is
uncertain as to the charge, the Group has taken the approach of taking the
mean of the highest and lowest potential charge estimated. The provision
relating to the estimated tax is expected to be settled after more than one
year. The Group is unlikely to be reimbursed for this provision. During the
period, an interim payment of HK$6,278,000 (US$810,000) was made against this
provision to the PRC tax authorities.
Deferred taxation
The Group has recognised the deferred tax liability for the taxable temporary
difference relating to the investment property carried at fair value.
Provision for Macanese taxations
The Group has made provisions for property tax and complementary tax arising
from its Macau business operations.
14. Provision
Unaudited 31 Dec 15 US$'000 Unaudited 31 Dec 14 US$'000 Audited 30 Jun 15 US$'000
Macau tax authorities provision - 1,343 -
In the prior year, a provision of US$1,343,000 was made for potential
additional stamp duty and related costs due in relation to The Waterside.
During the year ended 30 June 2015, an amount totalling US$609,000
(MOP4,860,000) was paid to the Macau tax authorities relating to this
provision. The remaining provision of US$734,000 was written back and reduced
the cost of The Waterside, as it had been initially capitalised therein.
15. Subsequent events
There have been no significant events occurring after the reporting date of
the Interim Report for the period ended 31 December 2015.
Directors & Company Information
Directors: Corporate Broker:
Chris Russell (Chairman) Liberum Capital Limited
Thomas Ashworth Ropemaker Place, Level 12
Alan Clifton 25 Ropemaker Street
Wilfred Woo London EC2Y 9LY
David Hinde (resigned 13/11/15)
Independent Auditors:
Audit Committee: Ernst & Young LLP
Alan Clifton (Chairman) PO Box 9
Wilfred Woo Royal Chambers
Chris Russell St Julian's Avenue
St Peter Port
Management Engagement Committee: Guernsey GY1 4AF
Chris Russell (Chairman)
Alan Clifton Property Valuers:
Wilfred Woo Savills (Macau) Limited
David Hinde (resigned 13/11/15) Suite 1310
13/F Macau Landmark
Nomination and Remuneration Committee: 555 Avenida da Amizade
Alan Clifton (Chairman) Macau
Thomas Ashworth
Wilfred Woo Administrator & Company Secretary:
Chris Russell Heritage International Fund Managers Limited
David Hinde (resigned 13/11/15) Heritage Hall
PO Box 225
Manager: Le Marchant Street
Sniper Capital Limited St Peter Port
PO Box 957 Guernsey GY1 4HY
Offshore Incorporations Centre
Road Town Macau and Hong Kong Administrator:
British Virgin Islands Adept Capital
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