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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Aseana Properties Limited | LSE:ASPL | London | Ordinary Share | JE00B1RZDJ41 | ORD USD0.05 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.12 | 0.11 | 0.13 | 0.12 | 0.115 | 0.115 | 0.00 | 08:00:03 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Agents & Mgrs | 11.95M | -15.87M | -0.0799 | -1.50 | 23.84M |
From Apr 2019 to Apr 2024
TIDMASPL
RNS Number : 3028M
Aseana Properties Limited
27 April 2018
27 April 2018
Aseana Properties Limited
("Aseana" or "the Company")
Full Year Results for the Year Ended 31 December 2017
Aseana Properties Limited (LSE: ASPL), a property developer in Malaysia and Vietnam listed on the Main Market of the London Stock Exchange, is pleased to announce its audited results for the year ended 31 December 2017.
Operational highlights
Hot Features
Premium
-- Shareholders voted in favour of the Board's
proposals at a general meeting of the Company
held on 23 April 2018, to continue with the
Company's investment policy to enable a realisation
of the Company's assets in a controlled, orderly
and timely manner as well as supported Board's
recommendation to vote against the Discontinuation
Resolution proposed at the general meeting.
To the extent that the Company has not disposed
of all its assets by 31 December 2019, Shareholders
will be provided with an opportunity to review
the future of the Company, which would include
the option for shareholders to vote for the
continuation of the Company.
-- Sales at SENI Mont' Kiara progressed to 99.3%
to date based on sale and purchase agreements
signed
-- The sale of the last unit at Tiffani by i-ZEN
("Tiffani") was completed in October 2017.
-- Two plots of land ("D2 & D3 land") at the
International Healthcare Park ("IHP") were
divested for approximately US$5.4 million
and US$7.7 million respectively. The transaction
for D2 land was completed in May 2017 while
D3 land was completed in August 2017.
-- The RuMa Hotel and Residences achieved 56.7%
sales based on signed sale and purchase agreements.
-- The occupancy rate at Harbour Mall Sandakan
("HMS") improved to 71.4% to date (2016: 67.7%).
Four Points by Sheraton Sandakan Hotel ("FPSS")
achieved an occupancy rate of 42.1% for as
at 31 December 2017 and was 38.5% occupied
for the 3-month period to 31 March 2018.
-- The operation of the City International Hospital
("CIH") has been improving steadily over 2017
with outpatient and inpatient volumes increasing
by 58.0% and 67.2% respectively, compared
to 2016.
Financial highlights
-- Revenue decreased to US$19.1 million in 2017
(2016: US$112.5 million), mainly due to lack
of large asset sales compared with the previous
year, which included the disposal of Aloft
Kuala Lumpur Sentral ("AKLS").
-- Net loss before tax stood at US$5.0 million
in 2017 compared to a net profit before tax
of US$16.2 million in 2016. The divestment
of lands at IHP generated gains of US$5.0
million but were offset by operating losses
and finance costs of IHP of US$2.0 million,
CIH of US$5.4 million, FPSS and HMS totalling
US$1.6 million.
-- The consolidated comprehensive profit for
the year ended 31 December 2017 was US$2.0
million compared to US$10.5 million in 2016.
The consolidated comprehensive profit included
gains on foreign currency translation differences
for foreign operations of US$7.9 million compared
to a loss of US$2.5 million in 2016, attributable
to the strengthening of Ringgit against US
Dollars from RM4.4860/US$1.0 as at 31 December
2016 to RM4.0469/US$1.0 as at 31 December
2017.
-- Cash and cash equivalents stood at US$26.0
million (2016: US$26.6 million).
Included in the borrowings is a Dong loan
of US$16 million equivalent which would be
used to refinance part of the existing US
Dollars loan for CIH.
-- Loss per share of US$0.0210 (2016: Earning
per share of US$0.0889), based on voting share
capital.
-- Net asset value per share US$0.69 (2016: US$0.68),
based on voting share capital.
* These results have been extracted from the Annual Report and financial statements, and do not constitute the Group's Annual Report and financial statements for the year ended 31 December 2017. The financial statements for 2017 have been prepared under International Financial Reporting Standards. The auditors, KPMG LLP, have reported on those financial statements. Their report was unqualified and did not include a reference to any matters to which the auditors draw attention by way of emphasis without qualifying their report.
Commenting on the Company's results and outlook, Mohammed Azlan Hashim, Chairman of Aseana Properties Limited, said:
"Despite improvements shown in both the Malaysian and Vietnamese economies, Aseana Properties is still facing challenges with its investments in both these markets. However, the Company is making progress in its Divestment Investment Policy, having divested of two more plots of land at IHP during the year and completed the sale of the final unit at Tiffani. With the extension of life of the Company, the Board and the Manager will focus on disposing of its remaining assets in an orderly and timely manner whilst achieving optimum value for its shareholder."
-Ends-
For further information:
Aseana Properties Limited Tel: +603 6411 6388 Chan Chee Kian Email: cheekian.chan@ireka.com.my N+1 Singer Tel: 020 7496 3000 James Maxwell/ Liz Yong/ James Moat (Corporate Finance) Sam Greatrex (Sales) Tavistock Tel: 020 7920 3150 Jeremy Carey Email: jeremy.carey@tavistock.co.uk
Notes to Editors:
London-listed Aseana Properties Limited (LSE: ASPL) is a property developer investing in Malaysia and Vietnam.
Ireka Development Management Sdn Bhd ("IDM") is the exclusive Development Manager for Aseana. It is a wholly-owned subsidiary of Ireka Corporation Berhad, a company listed on the Bursa Malaysia since 1993, which has over 51 years' experience in construction and property development. IDM is responsible for the day-to-day management of Aseana's property portfolio and the implementation of the Divestment Investment Policy.
CHAIRMAN'S STATEMENT
Global economic growth was more evenly balanced in 2017. During the year, many encouraging results were achieved across several fronts. Economic powerhouses such as the United States of America, the world's largest economy, got growth back on track, while the Eurozone and Japan are set to register growth exceeding expectations, courtesy of burgeoning global trade. On the back of a rebound in investment and trade, accommodative policies and the dissipating impact of the earlier commodity price collapse, global growth is expected to be sustained over the next couple of years. In tandem with this, The World Bank forecasts global economic growth to edge up to 3.1% in 2018 after a stronger-than-expected year in 2017. However, the global outlook is still vulnerable to downside risks, including regional instability, possible financial stress, rising geopolitical tensions and the recent trade dispute between the United States of America and China.
The solid global growth has boded well for Aseana Properties' core markets in Malaysia and Vietnam, with both countries performing well above forecasts. Malaysia's real Gross Domestic Product ("GDP") growth for instance, showed an impressive steady upward trend to reach 5.9% for the whole of 2017, driven primarily by strong domestic demand and robust exports. Malaysia leveraged its strong economic fundamentals to record strong growth despite the prevalence of cautious sentiment earlier in the year, given that the Ringgit was by far the worst performing currency in Asia. The local currency was kept in check due to prudent measures implemented by Bank Negara Malaysia ("BNM"), Malaysia's Central Bank and rebounded strongly from a 19-year low to deliver a total appreciation of approximately 10.0%. In addition, in January 2018, BNM increased the country's Overnight Policy Rate ("OPR") from 3.0% to 3.25%, the first hike since July 2016, against a background of steady growth. Despite the lingering uncertainties ahead of the 14(th) General Election, which could somewhat dampen sentiment, analysts predict that Malaysia's economy will remain resilient in 2018.
Similarly, Vietnam has emerged as one of the most impressive emerging market success stories with GDP growth of 6.8% in 2017, the highest in the last decade. The country's strong GDP growth was driven by the robust manufacturing and services sectors as well as resilient domestic demand, underpinned by thriving Foreign Direct Investment ("FDI") growth. Vietnam attracted a record US$35.9 billion of foreign investments in 2017 as a result of the low cost of doing business in the country, an abundant labour force and solid macroeconomic growth. Furthermore, the nation's average inflation grew at 3.53% against the previous year, below the 4.0% target set by the Government whilst the Vietnamese Dong was one of the most stable Asian currencies in 2017. However, the unresolved issues with the thinly-capitalised banks and non-performing loans pose other medium-term risks to the country's economy.
Despite higher GDP growth and recovery in crude oil prices, the Malaysian properties in both residential and commercial markets are still hampered by factors such as the increased cost of living and oversupply. The rising cost of living, the disparity between the population's income and affordability level, as well as the oversupply of both residential and commercial properties are the main reasons why the nation's property market is still facing headwinds. Completed-but-unsold residential units increased to approximately RM12.3 billion during the first half of 2017, from approximately RM8.6 billion a year ago. In addition, new residential launches fell 9.1% to 28,397 units in the first half of 2017 from 31,257 units in the same period last year. With the impending 14(th) General Election, consumers are exercising more caution in big-ticket long-term purchases. On the other hand, the Vietnamese property market saw positive growth, underpinned by the country's strong economic performance, relatively stable currency and rapid urbanisation, which have fuelled massive interest from foreign investors into the Vietnamese real estate market. During the year, there were a total of 64,000 real estate transactions in Ho Chi Minh City ("HCMC") and Hanoi alone, up by 24,000 transactions compared to 2016. 2017 has also emerged as a landmark year for mergers and acquisitions in the Vietnamese property sector. According to Vietnam's Ministry of Construction, the country currently has over US$145 billion of real estate developments under construction.
Aseana Properties Limited and its subsidiaries ("the Group") registered a significant decrease in revenue from US$112.5 million in 2016 to US$19.1 million in 2017, largely due to the lack of major asset sales during the year compared to the sale of the Aloft Kuala Lumpur Sentral Hotel ("AKLS") in 2016. The Group recorded a net loss before taxation of US$5.0 million compared to a net profit of US$16.2 million in 2016. The disposal of lands at International Healthcare Park ("IHP") generated gains of US$5.0 million but were offset by operating losses and finance costs of IHP of US$2.0 million, City International Hospital ("CIH") of US$5.4 million, Four Points by Sheraton Sandakan Hotel ("FPSS") and Harbour Mall Sandakan ("HMS") totalling US$1.6 million. Aseana Properties recorded a gain on foreign currency translation differences of US$7.9 million compared to a loss of US$2.5 million in 2016, as a result of the strengthening of Ringgit against US Dollars from RM4.4860/US$1.00 as at 31 December 2016 to RM4.0469/US$1.00 as at 31 December 2017.
Progress of the property portfolio
Amidst the sluggish property market in Malaysia, sales of properties at SENI Mont' Kiara ("SENI") and The RuMa Hotel and Residences ("The RuMa") also progressed at a slower pace. Sales at SENI to date progressed to approximately 99.3% and sales at The RuMa increased marginally to 56.7% to date, based on signed sale and purchase agreements. In addition, the last unit at Tiffani by i-ZEN was sold during the year.
Meanwhile, the business environment and tourism in Sabah showed signs of improvement over the year. International and Malaysian tourist arrivals in Sabah reached 3.7 million in 2017, which contributed approximately RM7.8 billion to tourism receipts. Of this, 0.4 million were tourists from China, as a result of increased flights to Sabah from China. Xiamen Airlines has recently introduced direct flights from Beijing to Sabah and this move is expected to spur the number of Chinese tourist arrivals including those from southern and central China. In addition, the impending extension of the Sandakan Airport runway will enable the airport to accommodate larger aircraft, and this will also benefit local tour operators and indirectly generate revenue for the local economy. FPSS recorded an occupancy level of 42.1% as at the year ended 31 December 2017 and 38.5% for year 2018 to date. Home to the first purpose-built cinema in Sandakan, the performance of HMS has also improved to 71.4% occupancy to date, including a number of new tenant signings over the past few months.
In Vietnam, two plots of land at IHP were divested for approximately US$5.4 million and US$7.7 million respectively. On the operations side, the performance of CIH has seen steady improvement over the year, with a 58.0% increase in outpatient volume, and 67.2% increase in inpatient volume compared to 2016. Dr. John Lucas, a highly reputable and experienced former Medical Director of FV Hospital, HCMC was appointed as the new Chief Executive Officer ("CEO") of CIH with effect from January 2018.
Further information on each of the Company's properties is set out in the Manager's report on pages 7 to 9.
Continuation vote
At a general meeting of the Company held on 23 April 2018, Shareholders voted in favour of the Board's proposals to reject the 2018 Discontinuation Resolution and to continue with the Company's investment policy, for a period of 18 months from the expected date of the 2018 AGM, to enable a realisation of the Company's assets in a controlled, orderly and timely manner, with the objective of achieving a balance between periodically returning cash to Shareholders and maximising the realisation value of the Company's investments. The Board believes this will maximise the value of the Company's assets and returns to Shareholders, both up to and upon the eventual liquidation of the Company.
To the extent that the Company has not disposed of all of its assets by 31 December 2019, Shareholders will be provided with an opportunity to review the future of the Company, which would include the option for shareholders to vote for the continuation of the Company.
Outlook
Despite Malaysia's buoyant economic growth in 2017, the repercussions of subdued investor confidence, political uncertainty and weak currency have adversely affected the Malaysian property market. On the other hand, Vietnam's property market has shown noticeable improvements during the year, in tandem with its robust economic growth. Nevertheless, The Board and the Manager are now focusing on realising the remaining assets of the Company in line with its divestment policy. Aseana Properties remains committed to ensure optimum capital value is achieved for the portfolio in a properly managed and timely manner.
On a final note, I wish to take this opportunity to thank the Board of Aseana Properties, our advisors, shareholders and business associates for their continued support and guidance throughout the year.
MOHAMMED AZLAN HASHIM
Chairman
26 April 2018
DEVELOPMENT MANAGER'S REVIEW
BUSINESS OVERVIEW
Aseana Properties has come through another challenging year in 2017. There were however some encouraging signs of improved performances in Malaysia and Vietnam. During the year under review, the Group successfully sold its remaining unit at Tiffani by i-ZEN and divested two plots of land in Vietnam for a total consideration of approximately US$13.1 million. Furthermore, performance at each of the Company's three operating assets has shown encouraging improvements and losses have narrowed. This is in line with the robust Vietnamese economy and the recovery in Malaysia's economic conditions, which have remained resilient despite being dampened by the weak currency and subdued investor confidence at the beginning of the year. In addition, the recent positive economic indicators should bode well for the Malaysian property market, which will be supported by strong economic fundamentals. However, the higher-end properties remain flat and challenging for at least the near future as supply is still growing faster than demand at the moment. The current freeze in new approvals for properties above RM1.0 million will help to re-dress this imbalance in the coming years.
On the back of the lukewarm property market in Malaysia, sales at both SENI and The RuMa have progressed marginally to 99.3% and 56.7% to date respectively. Meanwhile, HMS showed notable improvement in its performance during the year under review with increased occupancy and footfall contributed by the addition of a number of new tenants. Similarly, in Vietnam, CIH performed well over the year with increased revenue and patient numbers.
Malaysia Economic Update
Malaysia's economic growth improved during 2017, surpassing expectations, largely underpinned by strong domestic demand with additional impetus provided by improved external demand. The nation's solid performance saw the International Monetary Fund ("IMF") upgraded its outlook on Malaysia's GDP growth to between 5.5% and 6.0%, while the World Bank made an upward revision to the country's GDP growth forecast to 5.8% in 2017. The Malaysian economy grew at 5.9% in 2017, the strongest pace of expansion in three years and was among the top performers in Asia, underpinned by solid private consumption growth. Meanwhile, a series of good news towards the year end boosted investors' confidence and the Ringgit rebounded from being one of the worst performing currencies in Asia at the beginning of the year, to climb almost 10.0% against the US Dollar towards the end of the year. The Ringgit took its cue from sturdier crude oil prices to rise from a low of RM4.4860/US$1.0 at the end of 2016 to approximately RM4.0469/US$1.0 by the end of 2017. Market interventions such as BNM's policy that requires exporters to convert 75.0% of their proceeds back to Ringgit have enhanced liquidity and demand for the currency. On the back of stronger growth and a manageable inflation rate as well as upbeat results in the last quarter of 2017, BNM increased the country's OPR from 3.0% to 3.25% in January 2018. The rate was kept unchanged by the Malaysian Central Bank since July 2016.
Echoing the country's resilient economic performance, Moody's Investors Service ("Moody's") had in December 2017, reaffirmed the Government's local and foreign currency issuer and senior unsecured bond ratings at A3, with the outlook being maintained at "stable". Similarly, in August 2017, Fitch Ratings affirmed Malaysia's Long-Term Foreign and Local-Currency Issuer Default Ratings ("IDRs") at "A-" with a stable outlook. During 2017, domestic inflation was driven mostly by movements in global oil prices. Malaysia's Consumer Price Index ("CPI") stood at 3.7% for the whole of 2017, which is within its Central Bank's target of 3.0% to 4.0%.
FDI plays a major role in stimulating the Malaysian economy and it serves as an impetus to the development of the country. Emerging markets, such as Malaysia, will continue to reap benefits as global investors undertake risk diversification in the region. Mega infrastructure projects such as the Mass Rapid Transit ("MRT") in Kuala Lumpur, High-Speed Rail, East Coast Rail Link and China's One Belt One Road initiatives will create new job opportunities and expand high value-added activities, which will pave the way for higher-income jobs. The weaker Ringgit over the past few years has also made Malaysia a more attractive investment destination. China remained as Malaysia's largest trading partner for the ninth consecutive year. The Malaysia-China bilateral trade reached a total amount of RM237.96 billion in the first 10 months of 2017, up 24.1% from the same period last year. In addition, the nation's trade and export activities to the European Union, Japan and the United States have also increased. The favourable news of Malaysia and China signing RM144.0 billion worth of agreements and the Saudi Aramco and Petronas RM31.0 billion deals have been noteworthy in lifting the positive business sentiment in Malaysia. Following a record high FDI in 2016, Malaysia recorded an FDI net inflow of RM39.2 billion in 2017. Notwithstanding the positive developments in the nation's FDI growth, the lingering uncertainties ahead of the 14(th) General Election ("GE14") will be seen as a risk to the country's political health. The 13(th) Malaysian Parliament was dissolved on 7 April 2018 to pave way for the GE14 which is now scheduled to be held on 9 May 2018.
Vietnam Economic Update
Vietnam saw a very positive year for its economic development notwithstanding that the year started off on a subdued note due to a prolonged drought. The country's economy expanded by 6.8% in 2017, the highest growth of the last decade and slightly higher than the Government's initial target of 6.7%. The robust GDP growth was driven by strong activity in the manufacturing and services sector as well as an increase in domestic demand and sturdy retail sales growth. Additionally, during the last quarter of the year, Vietnam's economy expanded 7.65% compared to the same period in the previous year. Vietnam emerged as one of the world's most impressive emerging market countries, achieving high growth rates and attracting significant foreign direct investment.
Meanwhile, through the implementation of market stabilisation measures by the Vietnamese Government, as well as the adoption of timely monetary policies by its Central Bank to bolster macroeconomic stability, Vietnam's core inflation growth was contained at 1.4% in 2017. Despite the nation's average CPI edging up by 3.53% against the previous year, it is still below the Vietnamese Government's target of 4.0%. Strong increases were recorded in the healthcare and education services, with hikes of 42.3% and 9.1% respectively, mainly caused by scheduled fee adjustments.
In July 2017, The State Bank of Vietnam unexpectedly eased the country's monetary policy by cutting its benchmark interest rate for the first time in three years from 6.5% to 6.25%. This was positive for the country's economic growth and as a result, the emergence of new companies hit a record high, with 127,000 new companies registered in 2017, well above the record of 110,000 firms set up the year before. Vietnam remained an attractive destination to foreign investors with total FDI inflow hitting a record high of US$35.9 billion, an increase of 44.4% against 2016. The nation's export revenue expanded by 21.0% in 2017 to reach US$213.7 billion, the highest in the past five years. Despite these notable achievements, there remain shortcomings in the country's economy, such as high public debt and non-performing loans, dependence on a low-cost labour force and depleting natural resources which need to be addressed soon.
PORTFOLIO REVIEW
MALAYSIA
Property Market Review
The Malaysian Property market remained in a lull in 2017, although some believed that the country's property market was on the road to recovery. Despite the country's improved economic growth, Malaysia's commercial and housing property markets continued to face a glut of supply. The key issues of price unaffordability, overhang of high-rise homes, rising cost of living and tight lending guidelines have had a dampening effect on the property market. According to the National Property Information Centre ("NAPIC"), the number of unsold properties in the country increased by 41.0% to 21,000 units, valued at RM12.3 billion, in the first half of 2017 compared to the corresponding period in the previous year. In a bid to avoid the oversupply issue affecting the nation's economy, the Government has recently frozen the approvals for developments of four components of the property market which include condominiums and serviced apartments priced at RM1.0 million and above. On a brighter side, the Malaysian Government has not proceeded with the proposal to increase stamp duty rates from 3.0% to 4.0% on transfer instruments for properties worth more than RM1.0 million, which was initially planned for 1 January 2018.
Malaysia's tourism sector remains as the third largest contributor to the country's economy and is one of the twelve National Key Economic Areas in the Government's vision to propel Malaysia to be a high-income nation by 2020. The Malaysian Government aspires to attract 36.0 million tourists to Malaysia which will generate income of RM168.0 billion by 2020. Sabah has, for instance, welcomed 3.68 million international and Malaysian tourists in 2017, representing an increase of 7.5% compared to the same period in 2016. Of this, 0.4 million of them were tourists from China. Room rates remained competitive and the average occupancy for hotels located in the Klang Valley for January to September increased by 5.0% year-on-year. From the beginning of September 2017, tourism tax was officially enforced by the Malaysian Government. A flat rate of RM10 per room per night for all hotel classifications has been imposed on foreign tourists. In addition, the nation has been recognised as the "Medical Travel Destination of the Year" for the third consecutive year at the International Medical Travel Journal's Medical Travel Awards 2017. The RM30.0 million allocations to the Malaysia Healthcare Travel Council under Budget 2018 will further spur the growth of the country's medical tourism industry.
Aseana Properties currently has five investments in Malaysia. These investments consist of residential properties, hotels and a retail mall:
SENI Mont' Kiara
SENI is a completed upmarket condominium development situated on one of the highest points in Mont' Kiara. The project consists of two 12-storey blocks and two 40-storey blocks, comprising 605 residential units. The majority of units command impressive views of the city skyline including the 88-storey Petronas Twin Towers and the KL Tower. Sales at SENI have progressed to 99.3% to date, with only four large units remaining unsold. Debt on the project was fully repaid.
The RuMa Hotel and Residences
This project is strategically located in the heart of Kuala Lumpur City Centre ("KLCC") on Jalan Kia Peng, near landmarks such as the world-famous Petronas Twin Towers, KLCC Convention Centre, Suria KLCC shopping mall, KLCC Park and the Grand Hyatt Kuala Lumpur. Aseana Properties owns 70.0% of this project and remaining 30.0% is owned by Ireka Corporation Berhad. The project consists of 199 units of luxury residences (The RuMa Residences) and a 253-room luxury bespoke hotel (The RuMa Hotel), built on 43,559 sq ft of development land. The RuMa Hotel will be managed by Urban Resort Concepts, a renowned bespoke hotel management company based in Shanghai, which created and operates the award-winning The Puli Hotel in Shanghai.
Construction of the main building is expected to complete in June 2018. The RuMa Hotel and Residences was first launched in 2013. Sales were affected by the cooling measures imposed by the Government to curb property speculation as well as the current subdued property market in Malaysia. To date, total sales at The RuMa have increased marginally to 56.7%, based on signed sale and purchase agreements. During 2017 and year-to-date, the Manager has participated in various marketing and promotional events to boost sales of the remaining units, both locally and internationally, but the results were below expectation. Debt on the project was fully repaid.
Harbour Mall Sandakan
HMS commenced operations in July 2012. The occupancy rate at HMS is currently recorded at 71.4%. Notable tenants include Lotus Five Star Cinema, Popular Bookstore, Levi's, The Body Shop, Watsons and McDonalds, amongst others. Leasing initiatives at HMS to both local and international retailers are ongoing. The outlook for HMS is promising, particularly with the opening of the cinema which has significantly increased the footfall to the Mall.
HMS is funded by medium term notes amounting to approximately US$24.3 million (RM100.0 million) as at 31 December 2017.
Four Points by Sheraton Sandakan Hotel
FPSS recorded an occupancy rate of 38.5% for year 2018 to date, with an Average Daily Rate of about US$57 (RM230). Sandakan's hotel occupancy has been greatly affected by on-going negative travel advisories issued by some countries in response to previous cases of kidnapping for ransom along the coast of Eastern Sabah. Occupancy has improved over the last two years in line with the marked improvement in coastal security in Sabah. The management of FPSS continues to improve the efficiency of its operations and to work with the relevant authorities to improve tourist arrivals to Sandakan. The impending extension of Sandakan Airport Runway will attract more commercial airlines and charter flights, especially from China, to fly directly to Sandakan.
Kota Kinabalu Seafront resort & residences
Aseana Properties acquired three adjoining plots of land totalling approximately 80 acres in September 2008 with the intention of developing a resort hotel, resort villas and resort homes at the seaside area in Kota Kinabalu, Sabah. In 2012, the Board decided not to proceed with the development and to dispose of the land instead. Marketing efforts are on-going and the Manager is currently in negotiation with a potential buyer.
VIETNAM
Property Market Review
The property market in Vietnam was buoyant in 2017 on the back of the nation's robust economic growth, a relatively stable currency, more stringent Government lending controls and interest rates, as well as the removal of barriers to foreign ownership. The announcement made in August 2017 concerning a draft amendment to the Land Law which allows foreigners to own properties for up to 99 years, as well as mortgaging of assets associated with land-use rights at foreign credit institutions, have created an impetus in the Vietnamese property market. FDI in the real estate sector has continually increased over the last five years and is ranked third in attracting FDI to Vietnam, accounting for 8.5% of the total registered capital of the country during the year.
The Vietnamese property market performed well as the country celebrated stellar GDP growth in 2017. The demand for residential property in the nation's two largest housing markets remained at strong levels in 2017. In HCMC, record sales of villas and townhouses were achieved during the last quarter of the year as new launches in the mid-end segment reached new heights. In addition, apartment sales in HCMC were over 15,100 units in Q4 2017, increasing 44.0% compared to last year.
Apart from the strength in the residential market, the office market in both HCMC and Hanoi was positive, recording healthy occupancy rates with the average occupancy in HCMC reaching as much as 96.0%. In tandem with the increase in newly registered businesses, Vietnam's office market is expected to continue to experience healthy absorption momentum and bustling new supply. Similarly, Vietnam's retail sector is attracting investments from many foreign enterprises owing to its favourable economic outlook, improved standard of living, increasingly open economy with rising employment opportunities and large population. The Government's policy of allowing foreign retailers to establish businesses with 100.0% foreign capital since 2015 has made Vietnam one of the world's leading investment destinations. According to AT Kearney, Vietnam is ranked 6(th) in the Global Retail Development Index in 2017, which signifies the nation's appeal in the retail market.
In line with the buoyant retail sector, Vietnam's tourism industry bore encouraging results in 2017. According to the Vietnam National Administration of Tourism, the number of international visitors during the year reached 12.9 million with tourism revenue reaching more than US$23.0 billion, an uplift of 29.1% and 25.0% respectively, compared to 2016. China and South Korea were still the largest sources of visitors with 6.4 million arrivals during the year. Furthermore, Vietnam jumped eight notches to the 67(th) position in the Travel and Tourism Competitiveness Report 2017, published by the World Economic Forum.
Aseana Properties now has two investments in Vietnam:-
International Healthcare Park
IHP is a planned mixed development on 37.5 hectares of land comprising private hospitals, mixed commercial, hospitality and residential developments. It is located in the Binh Tan District, close to Chinatown and is approximately 11 km from District 1, the central business and commercial district of HCMC. Aseana Properties has a 72.4% stake in this development and its minority partner, Hoa Lam Group holds a significant minority stake together with a consortium of investors from Singapore, Malaysia and Vietnam. There is a total of 19 plots of land which have been fully approved for development and Land Use Right ("LUR") issued and paid for 69 years lease. Of the 19 plots, 6 plots are dedicated to hospital and related functions. To date, 7 plots have been developed or divested. Apart from the international-class City International Hospital, IHP also boasts the largest AEON retail mall in Ho Chi Minh City.
US$14.3 million of loan facilities to part finance the land and working capital remain outstanding as at 31 December 2017.
City International Hospital
Construction of CIH was completed in March 2013 and it commenced business in January 2014. CIH is a modern private care hospital conforming to international standards with 320 beds (Phase 1: 168 beds). In early 2018, the hospital appointed Dr John Lucas as the Chief Executive Officer ("CEO") to lead the operations team and to replace Dr Le Quoc Su, who left his position as the CEO of the hospital at the end of 2017. Prior to joining CIH, Dr John Lucas was the Medical Director of FV Hospital, where he was instrumental in achieving the first Joint Commission International ("JCI") accreditation in HCMC and transformed a stand-alone hospital into an integrated healthcare system. Dr Lucas has an excellent track record in managing world-class hospitals.
The development of City International Hospital is funded by total facilities of US$37.1 million as at 31 December 2017.
OUTLOOK
Overall, Malaysia has fared well in 2017 as the country's economy remained bullish amid a combination of daunting domestic and external factors, which included the weak currency and low commodity prices at the beginning of the year. However, the country's property market is expected to remain flat and challenging going into 2018, with oversupply and affordability issues remaining unresolved. The impending 14(th) General Election brings with it lingering uncertainties that could somewhat dampen sentiment. Nevertheless, the recent curbs implemented by the Government on high-end properties are expected to provide a breather for the tough luxury residential sector. On the other hand, Vietnam's real estate market continues to maintain a positive growth rate due to the country's thriving and robust economic growth, which has propelled the nation's domestic property market.
Given the extension of life of Aseana Properties to 31 December 2019, the Manager, together with the Board of Directors of Aseana Properties remain focused on exploring all possible opportunities to divest the remaining assets in its portfolio in an orderly and timely manner.
In closing, please allow me to take this opportunity to express my warmest thanks to the Board of Directors of Aseana Properties, our advisors, shareholders and business associates for the relentless support and guidance rendered throughout the year.
LAI VOON HON
President
Ireka Development Management Sdn. Bhd.
Development Manager
26 April 2018
PERFORMANCE SUMMARY
Year ended Year ended
31 December 31 December
2017 2016
----------------------------- ------------- -------------
Total Returns since listing
Ordinary share price -47.00% -48.00%
FTSE All-share index 26.71% 16.25%
FTSE 350 Real Estate Index -39.43% -45.11%
One Year Returns
Ordinary share price 1.92% 15.56%
FTSE All-share index 9.00% 12.45%
FTSE 350 Real Estate Index 10.34% -12.42%
Capital Values
Total assets less current
liabilities (US$ million) 189.03 188.62
Net asset value per share
(US$) 0.69 0.68
Ordinary share price (US$) 0.53 0.52
FTSE 350 Real Estate Index 568.05 514.80
Debt-to-equity ratio
Debt-to-equity ratio (1) 68.26% 58.75%
Net debt-to-equity ratio
(2) 48.93% 40.01%
(Loss)/ Earnings Per Share
Earnings per ordinary share
- basic (US cents) -2.10 8.89
- diluted (US cents) -2.10 8.89
Notes:
(1) Debt-to-equity ratio = (Total Borrowings ÷ Total Equity) x 100%
(2) Net debt-to-equity ratio = (Total Borrowings less Cash and Cash Equivalents ÷ Total Equity) x 100%
FINANCIAL REVIEW
INTRODUCTION
The Group recorded consolidated comprehensive profit of US$2.0 million for the financial year ended 31 December 2017, attributable to gains on disposal of lands and gains on foreign currency translation differences for foreign operations, offset by operating losses and finance costs of its International Healthcare Park, City International Hospital, Four Points by Sheraton Sandakan Hotel and Harbour Mall Sandakan.
STATEMENT OF COMPREHENSIVE INCOME
The Group registered revenue of US$19.1 million for the financial year ended 31 December 2017, compared to US$112.5 million for previous financial year. The revenue was mainly attributable to the sale of two plots of land at International Healthcare Park during the year, generating US$13.1 million, while the sale of Aloft Kuala Lumpur Sentral Hotel in 2016 generated revenue of US$104.3 million.
The Group recorded a net loss before taxation of US$5.0 million for the financial year ended 31 December 2017, compared to a net profit before taxation of US$16.2 million for the previous financial year. The disposal of the two plots of land at International Healthcare Park generated gains on disposal of US$5.0 million but were offset by operating losses and finance costs of International Healthcare Park of US$2.0 million, City International Hospital of US$5.4 million, Four Points by Sheraton Sandakan and Harbour Mall Sandakan of total US$1.6 million.
Net loss attributable to equity holders of the parent was US$4.2 million for the year ended 31 December 2017, compared to a net profit of US$18.9 million for previous financial year. Taxation for the year was higher at US$0.9 million (2016: US$0.7 million) due to an increase in the number of completed units of SENI and Tiffani sold in 2017.
The consolidated comprehensive income for the year ended 31 December 2017 was US$2.0 million (2016: US$10.5 million), which included gains on foreign currency translation differences for foreign operations of US$7.9 million (2016: losses of US$2.5 million) due to strengthening of Ringgit against US Dollars from RM4.4860/US$1.00 as at 31 December 2016 to RM4.0469/US$1.00 as at 31 December 2017. There was no fair value adjustment on available-for-sale assets in the financial year as the remaining shares in Nam Long Investment Corporation were sold in 2016.
Basic and diluted loss per share for the year ended 31 December 2017 were both US cents 2.10 (2016: Basic and diluted earnings per share of US cents 8.89).
STATEMENT OF FINANCIAL POSITION
Total assets as at 31 December 2017 were US$325.7 million, compared to US$294.4 million for previous year, representing an increase of US$31.3 million. This was mainly due to an increase in The RuMa inventories of US$32.7 million which is under construction.
Total liabilities as at 31 December 2017 were US$191.2 million, compared to US$152.2 million for previous year, representing an increase of US$39.0 million. This was mainly due to an increase of trade and other payables of US$29.1 million, which are attributable to The RuMa.
Net Asset Value per share at 31 December 2017 was US$ 0.69 (2016: US$ 0.68).
CASH FLOW AND FUNDING
Cash flow generated from operations before interest and tax paid was US$8.9 million for financial year ended 31 December 2017, compared to US$105.1 million for previous year. The latter was mainly due to disposal of Aloft Kuala Lumpur Sentral Hotel.
The Group generated net cash flow of US$2.1 million from investing activities, compared to US$9.4 million for previous year. The latter was mainly due to the disposal of the remaining shares in Nam Long Investment Corporation.
The Group's subsidiaries borrow to fund property development projects. As at 31 December 2017, the Group's gross borrowings stood at US$91.8 million (2016: US$83.6 million). The borrowings included a Dong loan of US$16.0 million equivalent which would be used to refinance part of the existing US Dollar loan for the City International Hospital. Net debt-to-equity ratio was 49.0% (2016: 40.0%). The Group will continue to focus on parring down its borrowings.
Finance income was US$0.39 million for financial year ended 31 December 2017 (2016: US$0.4 million). Finance costs were US$5.7 million (2016: US$9.6 million), incurred by International Healthcare Park, City International Hospital, Four Points by Sheraton Sandakan Hotel and Harbour Mall Sandakan.
On 10 January 2017 the Company returned US$10,000,500 to Shareholders by way of a Tender Offer, purchasing 13,334,000 shares, representing 6.29 per cent of the Company's share capital, at a price of US$0.75 per share.
event after statement of financial position date
At a general meeting of the Company held on 23 April 2018, Shareholders voted in favour of the Board's proposals to reject the 2018 Discontinuation Resolution and to continue with the Company's investment policy, for a period of 18 months from the expected date of the 2018 AGM, to enable a realisation of the Company's assets in a controlled, orderly and timely manner, with the objective of achieving a balance between periodically returning cash to Shareholders and maximising the realisation value of the Company's investments. The Board believes this will maximise the value of the Company's assets and returns to Shareholders, both up to and upon the eventual liquidation of the Company.
To the extent that the Company has not disposed of all of its assets by 31 December 2019, Shareholders will be provided with an opportunity to review the future of the Company, which would include the option for shareholders to vote for the continuation of the Company.
DIVID
No dividend was declared or paid in 2017 and 2016.
PRINCIPAL RISKS AND UNCERTAINTIES
A review of the principal risks and uncertainties facing the Group is set out in the Directors' Report of the Annual Report.
TREASURY AND FINANCIAL RISK MANAGEMENT
The Group undertakes risk assessments and identifies the principal risks that affect its activities. The responsibility for the management of each key risk has been clearly identified and delegated to the senior management of the Development Manager. The Development Manager's senior management team is involved in the day-to-day operation of the Group.
A comprehensive discussion on the Group's financial risk management policies is included in the notes to the financial statements of the Annual Report.
MONICA LAI VOON HUEY
Chief Financial Officer
Ireka Development Management Sdn. Bhd.
Development Manager
26 April 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 DECEMBER 2017
2017 2016
Continuing activities Notes US$'000 US$'000
------------------------------------ ------ --------- ---------
Revenue 3 19,098 112,535
Cost of sales 5 (13,383) (77,547)
------------------------------------ ------ --------- ---------
Gross profit 5,715 34,988
Other income 6 14,176 21,963
Administrative expenses (927) (1,466)
Foreign exchange gain/(loss) 7 3,419 (5,051)
Management fees 8 (3,129) (3,331)
Marketing expenses (496) (99)
Other operating expenses (18,417) (21,625)
------------------------------------ ------ --------- ---------
Operating profit 341 25,379
--------- ---------
Finance income 392 401
Finance costs (5,744) (9,616)
--------- ---------
Net finance costs 9 (5,352) (9,215)
Net (loss)/profit before
taxation 10 (5,011) 16,164
Taxation 11 (863) (686)
------------------------------------ ------ --------- ---------
(Loss)/Profit for the year (5,874) 15,478
------------------------------------ ------ --------- ---------
Other comprehensive income/(loss),
net of tax
Items that are or may be reclassified
subsequently to profit or loss
Foreign currency translation differences
for foreign operations 7,863 (2,534)
Fair value adjustment in
relation to available-for-sale
investments 12 - (2,441)
------------------------------------ ------ --------- ---------
Total other comprehensive
income/(loss) for the year 12 7,863 (4,975)
------------------------------------ ------ --------- ---------
Total comprehensive income for
the year 1,989 10,503
-------------------------------------------- --------- ---------
The notes to the financial statements form an integral part of the financial statements.
2017 2016
Continuing activities Notes US$'000 US$'000
------------------------------ ------ -------- --------
(Loss)/Profit attributable
to:
Equity holders of the parent 13 (4,176) 18,856
Non-controlling interests (1,698) (3,378)
------------------------------ ------ -------- --------
(Loss)/Profit for the year (5,874) 15,478
------------------------------ ------ -------- --------
Total comprehensive income
attributable to:
Equity holders of the parent 3,825 13,674
Non-controlling interests (1,836) (3,171)
------------------------------ ------ -------- --------
Total comprehensive income
for the year 1,989 10,503
------------------------------ ------ -------- --------
(Loss)/Earnings per share
Basic and diluted (US cents) 13 (2.10) 8.89
------------------------------ --- -------- -----
The notes to the financial statements form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS at 31 DECEMBER 2017
2017 2016
Notes US$'000 US$'000
------------------------------- ------ --------- ---------
Non-current assets
Property, plant and equipment 663 743
Intangible assets 14 4,201 7,081
Deferred tax assets 15 4,268 1,623
------------------------------- ------ --------- ---------
Total non-current assets 9,132 9,447
------------------------------- ------ --------- ---------
Current assets
Inventories 16 278,879 244,959
Trade and other receivables 11,012 11,571
Prepayments 293 1,093
Current tax assets 372 660
Cash and cash equivalents 25,984 26,650
Total current assets 316,540 284,933
------------------------------- ------ --------- ---------
TOTAL ASSETS 325,672 294,380
------------------------------- ------ --------- ---------
Equity
Share capital 17 10,601 10,601
Share premium 18 208,925 218,926
Capital redemption reserve 19 1,899 1,899
Translation reserve (21,141) (29,142)
Accumulated losses (62,614) (58,922)
------------------------------- ------ --------- ---------
Shareholders' equity 137,670 143,362
Non-controlling interests (3,216) (1,148)
------------------------------- ------ --------- ---------
Total equity 134,454 142,214
------------------------------- ------ --------- ---------
The notes to the financial statements form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS at 31 DECEMBER 2017 (cont'd)
2017 2016
Notes US$'000 US$'000
------------------------------- -------- --------- ---------
Non-current liabilities
Loans and borrowings 21 54,572 46,405
Total non-current liabilities 54,572 46,405
------------------------------- -------- --------- ---------
Current liabilities
Trade and other payables 83,040 53,880
Amount due to non-controlling
interests 20 13,400 12,573
Loans and borrowings 21 12,882 10,807
Medium term notes 22 24,324 26,343
Current tax liabilities 3,000 2,158
------------------------------- -------- --------- ---------
Total current liabilities 136,646 105,761
------------------------------- -------- --------- ---------
Total liabilities 191,218 152,166
------------------------------- -------- --------- ---------
TOTAL EQUITY AND LIABILITIES 325,672 294,380
------------------------------- -------- --------- ---------
The notes to the financial statements form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 december 2017
Total
Equity
Attributable
to Equity
Redeemable Capital Fair Holders Non-
Ordinary Management Share Redemption Translation Value Accumulated of the Controlling Total
Shares Shares Premium Reserve Reserve Reserve Losses Parent Interests Equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------- ------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
1 January 2016 10,601 - * 218,926 1,899 (26,401) 2,441 (77,301) 130,165 1,433 131,598
Issuance of
management
shares (Note 17) - - * - - - - - - - -*
Changes in
ownership
interests in
subsidiaries
(Note 24) - - - - - - (477) (477) 477 -
Non-controlling
interests
contribution - - - - - - - - 113 113
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Profit for the
year - - - - - - 18,856 18,856 (3,378) 15,478
Total other
comprehensive
loss for the
year - - - - (2,741) (2,441) - (5,182) 207 (4,975)
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Total
comprehensive
income for the
year - - - - (2,741) (2,441) 18,856 13,674 (3,171) 10,503
At 31 December
2016/ 1 January
2017 10,601 -* 218,926 1,899 (29,142) - (58,922) 143,362 (1,148) 142,214
Share buy back
(Note 18) - - (10,001) - - - - (10,001) - (10,001)
Changes in
ownership
interests in
subsidiaries
(Note 24) - - - - - - 484 484 (484) -
Non-controlling
interests
contribution - - - - - - - - 252 252
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Loss for the
year - - - - - - (4,176) (4,176) (1,698) (5,874)
Total other
comprehensive
income for the
year - - - - 8,001 - - 8,001 (138) 7,863
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Total
comprehensive
income for the
year - - - - 8,001 - (4,176) 3,825 (1,836) 1,989
Shareholders'
equity at 31
December
2017 10,601 -* 208,925 1,899 (21,141) - (62,614) 137,670 (3,216) 134,454
----------------- ------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
*represents 2 management shares at US$0.05 each
The notes to the financial statements form an integral part of the financial statements.
CONSOLIDATED Statement OF Cash FlowS
For the year ended 31 december 2017
2017 2016
Notes US$'000 US$'000
Cash Flows from Operating Activities
Net (loss)/profit before taxation (5,011) 16,164
Finance income (392) (401)
Finance costs 5,744 9,616
Unrealised foreign exchange (gain)/loss 7 (2,973) 4,939
Disposal/Impairment of intangible
assets 14 2,880 152
Depreciation of property, plant
and equipment 10 84 98
Gain on disposal of available-for-sale
investments - (2,285)
Gain on disposal of property,
plant and equipment - (5)
Operating profit before changes
in working capital 332 28,278
Changes in working capital:
(Increase)/Decrease in inventories (20,459) 55,303
Decrease in trade and other receivables
and prepayments 1,449 6,103
Increase in trade and other payables 27,589 15,426
---------------------------------------------- ------ --------- --------
Cash generated from operations 8,911 105,110
Interest paid (5,744) (9,616)
Tax paid (2,606) (318)
---------------------------------------------- ------ --------- --------
Net cash from operating activities 561 95,176
---------------------------------------------- ------ --------- --------
Cash Flows from Investing Activities
Proceeds from disposal of available-for-sale
investments (iii) 893 8,955
Purchase of property, plant and
equipment (5) -
Proceeds from disposal of property,
plant and equipment - 5
Proceeds from disposal of an indirectly
held subsidiary 23 800 -
Finance income received 392 401
Net cash from investing activities 2,080 9,361
---------------------------------------------- ------ --------- --------
2017 2016
Notes US$'000 US$'000
Cash Flows from Financing Activities
Advances from non-controlling
interests 327 2,819
Issuance of ordinary shares of
subsidiaries to non-controlling
interests (ii) 252 113
Issuance of management shares - -*
Share buy back 18 (10,001) -
Repayment of loans and borrowings 21 (14,773) (17,057)
Repayment of medium term notes 22 (4,615) (87,823)
Drawdown of loans and borrowings 21 25,038 1,571
Net decrease/(increase) in pledged
deposits for loans and borrowings
and Medium Term Notes 7,923 (698)
Deposits subject to restriction (iv)
in use (13,867) -
------------------------------------------ ------ --------- ----------
Net cash used in financing activities (9,716) (101,075)
------------------------------------------ ------ --------- ----------
Net changes in cash and cash equivalents
during the year (7,075) 3,462
Effect of changes in exchange
rates (270) (155)
Cash and cash equivalents at the
beginning of the year (i) 16,639 13,332
Cash and cash equivalents at the
end of the year (i) 9,294 16,639
------------------------------------------ ------ --------- ----------
*represents 2 management shares at US$0.05 each
(i) Cash and Cash Equivalents
Cash and cash equivalents included in the consolidated statement of cash flows comprise the following consolidated statement of financial position amounts:
Cash and bank balances 10,343 14,858
Short term bank deposits 15,641 11,792
-------------------------------------- ----- ---------- -----------
25,984 26,650
Less Deposits subject to restriction (iv)
in use (13,867) -
Less: Deposits pledged (v) (2,823) (10,011)
-------------------------------------- ----- ---------- -----------
Cash and cash equivalents 9,294 16,639
-------------------------------------- ----------------- -----------
(ii) During the financial year, US$252,000 (2016: US$113,000) of ordinary shares of subsidiaries were issued to non-controlling shareholders which was satisfied via cash consideration.
(iii) In the previous financial year, the Group disposed the entire balance representing 9,784,653 shares in Nam Long for a consideration of US$9,848,000 of which US$8,955,000 was received in 2016. The balance consideration of US$893,000 was received during the financial year.
(iv) Included in short term bank deposits in 2017 is US$13,867,000 obtained from the term loan granted to City International Hospital Company Ltd ("CIH") by Vietbank during the year where the utilisation of this balance is restricted solely for the purpose of refinancing the existing syndicated term loan under CIH.
(v) Included in short term bank deposits and cash and bank balance is US$2,823,000 (2016US$10,011,000) pledged for loans and borrowings and Medium Term Notes of the Group
The notes to the financial statements form an integral part of the financial statements.
Notes to the Financial Statements
1 General Information
The principal activities of the Group are development of upscale residential and hospitality projects, sale of development land and operation and sale of hotel, mall and hospital in Malaysia and Vietnam.
2 BASIS OF PREPARATION 2.1 Statement of compliance and going concern
The Group and the Company financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), and IFRIC interpretations issued, and effective, or issued and early adopted, at the date of these financial statements.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The Board has reviewed the accounting policies set out below and considers them to be the most appropriate to the Group's business activities.
The financial statements have been prepared on the historical cost basis and on the assumption that the Group and the Company are going concerns.
The Group has prepared and considered prospective financial information based on assumptions and events that may occur for at least 12 months from the date of approval of the financial statements and the possible actions to be taken by the Group. Prospective financial information includes the Group's profit and cash flow forecasts for the ongoing projects. In preparing the cash flow forecasts, the Directors have considered the availability of cash, adequacy of bank loans and medium term notes and also the refinancing of the medium term notes (as described in Notes 21 and 22) and the Directors believe that the business will be able to realise its assets and discharge its liabilities in the normal course of business for at least 12 months from the date of the approval of these financial statements.
The Directors expect to raise sufficient funds to finance the completion of the Group's existing projects and the necessary working capital via the disposal of its development lands in Vietnam and East Malaysia, its existing units of condominium inventories in West Malaysia, and through the disposals of the City International Hospital, the Four Points Sheraton Sandakan Hotel and the Harbour Mall Sandakan.
Should the planned disposals of the assets not materialise, or are delayed, the Directors expect to "roll-over" the medium term notes which are due to expire in the next 12 months, given that the notes are "AAA" rated and secured by two completed inventories of the Group with carrying amount of US$81.31 million as at 31 December 2017. Included in the terms of the medium term notes programme is an option for the Group to refinance the notes, as and when they expire. This option to refinance is available until 2021.
The Group also has significant borrowings in Vietnam secured by the City International Hospital and development lands. The Directors expect to repay the short term portion of the borrowings via sale of land in Vietnam. The remaining scheduled installments are due in 2019
and 2020.
The forecasts also incorporate current payables, committed expenditure and other future expected expenditure, along with sales of all completed inventories and disposal of all development lands.
2.1.1 2018 Discontinuation Resolution
When the Company was launched in 2007, the Board considered it desirable that Shareholders should have an opportunity to review the future of the Company at appropriate intervals. Accordingly, at the 2015 AGM, held on 22 June 2015, the Board put forward a resolution to Shareholders to determine if the Company should continue in existence. Shareholders voted for the Company to continue in existence, at the same time as approving the adoption of a divestment investment policy to enable the controlled, orderly and timely realisation of the Company's assets, with the objective of achieving a balance between periodically returning cash to Shareholders and maximising the realisation value of the Company's investments (the "Divestment Investment Policy"). Pursuant to the Divestment Investment Policy, the Company committed to dispose of all of its assets by June 2018, ahead of the annual general meeting of the Company to be held in 2018 (the "2018 AGM"), at which, pursuant to the Existing Articles, the Board is required to propose a discontinuation resolution for the Company to cease trading as presently constituted (the "2018 Discontinuation Resolution").
Whilst significant progress has been made in realising the Company's assets in an orderly manner and paying down project debts since the Divestment Investment Policy was adopted, not all of the Company's assets have yet been realised. Although discussions are ongoing in relation to the realisation of the Company's remaining assets, the Board cannot be certain that these discussions will successfully conclude by June 2018 and therefore ahead of the 2018 AGM and the 2018 Discontinuation Resolution.
At a general meeting of the Company held on 23 April 2018, Shareholders voted in favour of the Board's proposals to reject the 2018 Discontinuation Resolution and to continue with the Company's investment policy, for a period of 18 months from the expected date of the 2018 AGM, to enable a realisation of the Company's assets in a controlled, orderly and timely manner, with the objective of achieving a balance between periodically returning cash to Shareholders and maximising the realisation value of the Company's investments. The Board believes this will maximise the value of the Company's assets and returns to Shareholders, both up to and upon the eventual liquidation of the Company.
To the extent that the Company has not disposed of all of its assets by 31 December 2019, Shareholders will be provided with an opportunity to review the future of the Company, which would include the option for shareholders to vote for the continuation of the Company.
The Directors have considered the appropriateness of preparing the accounts on a going concern basis in light of the decision to realise the Group's investments in an orderly manner. There is no certainty over the timeframe over which the investments will be realised. The Directors note that other viable alternative strategies to a wind-down remain available and they will continue to evaluate whether to propose continuation of the current divestment investment policy or a
change to an alternative strategy.
2.1.2 Statement of Compliance
The Group and the Company have not applied the following new/revised accounting standards that have been issued by International Accounting Standards Board but are not yet effective.
New/Revised International Issued/Revised Effective
Financial Reporting Standards Date
----------------------------------------------------- --------------- -------------------
IFRS 9 Financial Finalised version, July 2014 Effective
Instruments incorporating requirements for annual
for classification periods beginning
and measurement, on or after
impairment, general 1 January
hedge accounting 2018
and derecognition
-------------------- ------------------------------- --------------- -------------------
IFRS 10 Amendments regarding December Deferred
Consolidated the sale or contribution 2015 indefinitely
Financial of assets between
Statements an investor and
its associate or
joint venture
-------------------- ------------------------------- --------------- -------------------
IFRS 15 IASB defers effective April 2016 Effective
Revenue date to annual periods for annual
from Contracts beginning on or periods beginning
with Customers after 1 January on or after
2018 1 January
2018
-------------------- ------------------------------- --------------- -------------------
IFRS 16 Original Issue January Effective
Leases 2016 for annual
periods beginning
on or after
1 January
2019
-------------------- ------------------------------- --------------- -------------------
IFRIC 22 clarifies December Effective
IFRIC 22 that the date of 2016 date to be
Foreign the transaction confirmed.
Currency - which is used
Transactions to determine the
and Advance spot exchange rate
Consideration for translating
the related item
on initial recognition
- is the date of
the initial recognition
of the non-monetary
asset or liability
arising from the
payment or receipt
of the advance consideration.
-------------------- ------------------------------- --------------- -------------------
Annual Improvements Amendments to IFRS December Effective
to IFRSs 1 delete the short-term 2016 for annual
2014-2016 exemptions provided periods beginning
Cycle (Amendments by Appendix E6-E7 on or after
to IFRS of IFRS 1. As a 1 January
1 First-time result, a first-time 2018
Adoption adopter transitioning
of IFRSs to IFRS on or after
and IAS 1 January 2018 assesses
28 Investments whether it qualifies
in Associates as an investment
and Joint entity retrospectively.
Ventures)
-------------------- ------------------------------- --------------- -------------------
The Directors anticipate that the adoption of the above standards, amendments and interpretations in future periods will have no material impact on the financial information of the Group or Company except as mentioned below.
(a) IFRS 9, Financial instruments
IFRS 9 is applicable to the Group's Consolidated Financial Statements for the year ending 31 December 2018. The new standard addresses the classification, measurement and recognition of financial assets and financial liabilities. It simplifies the existing categories of financial instruments, introduces an expected credit loss model and redefines the criteria required for hedge effectiveness. On adoption of the new standard, these changes are not expected to have a material impact on the consolidated financial statements of the Group. There will however be limited changes to presentation and disclosure.
(b) IFRS 15, Revenue from contracts with customers
IFRS 15 replaces the guidance in IFRS 11, Construction Contracts, IAS 18, Revenue, IFRIC 13, Customer Loyalty Programmes, IFRIC 15, Agreements for Construction of Real Estate and IFRIC 18, Transfer of Assets from Customers which is applicable to the Group's Consolidated Financial Statements for the year ending 31 December 2018.
The Group currently applies IAS 18, Revenue and IFRIC 15, Agreements for Construction of Real Estate for revenue recognition from its sales of land held for property development, work-in-progress and stock of completed units. Revenue is recognised at a point in time when the effective control of ownership of the properties is transferred to the customers when the completion certificate or occupancy permit has been issued.
The adoption of the new standard is not expected to have a material impact on the consolidated financial statements of the Group, except for the effect of changes to the timing of revenue recognition for the property development activities of serviced residences under The RuMa Hotel and Residences ("The RuMa").
Revenue from the development of serviced residences is recognised as and when the control of the asset is transferred to the customer and it is probable that the Group will collect the consideration to which it will be entitled in exchange for the asset that will be transferred to the customer. In light of the terms of the contract and the laws that apply to the contract, control of the asset is transferred over time as the Group's performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.
Revenue from the development of serviced residences is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation.
The Directors are currently assessing and have yet to quantify the potential financial impact of the initial application of the standard to the Group.
(c) IFRS 16, Leases
IFRS 16 replaces, the guidance in IAS 17, Leases, IFRIC 4, Determining whether an Arrangement contains a Lease, SIC-15, Operating Leases - Incentives and SIC-27, Evaluating the Substance of Transactions Involving the Legal Form of Lease. The Directors are currently determining the impact of IFRS 16.
3 revenue AND SEGmeNTAL information
The Company is an investment holding company and has no operating revenue. The Group's operating revenue for the year was mainly attributable to the sale of completed units in Malaysia and land held for property development in Vietnam.
Income earned from hotel, mall and hospital operations are included in other income in line with management's intention to dispose of the properties.
3.1 Revenue recognised during the year as follows:
2017 2016
US$'000 US$'000
--------------------------------- -------- --------
Sales of land held for property
development 13,132 411
Sale of completed
units 5,966 112,124
19,098 112,535
------------------------------------ -------- --------
3.2 Segmental Information
The Group's assets and business activities are managed by Ireka Development Management Sdn. Bhd. ("IDM") as the Development Manager under a Management Agreement dated 27 March 2007.
Segmental information represents the level at which financial information is reported to the Executive Management of IDM, being the chief operating decision maker as defined in IFRS 8. The Executive Management consists of the Chief Executive Officer, the Chief Financial Officer, Chief Operating Officer and Chief Investment Officer of IDM. The management determines the operating segments based on reports reviewed and used by the Executive Management for strategic decision making and resource allocation. For management purposes, the Group is organised into project units.
The Group's reportable operating segments are as follows:
(i) Investment Holding Companies - investing activities;
(ii) Ireka Land Sdn. Bhd. - develops Tiffani ("Tiffani") by i-ZEN;
(iii) ICSD Ventures Sdn. Bhd. - owns and operates Harbour Mall Sandakan ("HMS") and Four Points by Sheraton Sandakan Hotel ("FPSS");
(iv) Amatir Resources Sdn. Bhd. - develops SENI Mont' Kiara ("SENI");
(v) Iringan Flora Sdn. Bhd. - owns and operates Aloft Kuala Lumpur Sentral Hotel ("AKLS");
(vi) Urban DNA Sdn. Bhd.- develops The RuMa Hotel and Residences("The Ruma"); and
(vii) Hoa Lam Shangri-La Healthcare Group - master developer of International Healthcare Park ("IHP"); owns and operates the City International Hospital ("CIH").
Other non-reportable segments comprise the Group's development projects. None of these segments meets any of the quantitative thresholds for determining reportable segments in 2017 and 2016.
Information regarding the operations of each reportable segment is Notes 3.3. The Executive Management monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is based on segment gross profit/(loss) and profit/(loss) before taxation, which the Executive Management believes are the most relevant in evaluating the results relative to other entities in the industry. Segment assets presented are inclusive of inter-segment balances and inter-segment pricing is determined on an arm's length basis.
The Group's revenue generating development projects are in Malaysia and Vietnam.
3.3 Analysis of the group's reportable operating segments are as follows:-
Operating Segments - ended 31 December 2017
Hoa Lam
Investment Ireka ICSD Amatir Urban Shangri-La
Holding Land Ventures Resources DNA Healthcare
Companies Sdn. Sdn. Sdn. Sdn. Group Total
Bhd. Bhd. Bhd. Bhd.
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------------------- ------------- -------- ----------- ------------ --------- ------------ ----------
Segment profit/ (loss)
before taxation 1,077 (432) (1,554) 193 (1,413) (2,852) (4,981)
--------------------------- ------------- -------- ----------- ------------ --------- ------------ ----------
Included in the measure
of segment profit/
(loss) are:
Revenue - 935 - 5,031 - 13,132 19,098
Other income from
hotel operations - - 3,842 - - - 3,842
Other income from
mall operations - - 1,440 - - - 1,440
Other income from
hospital operations - - - - - 8,234 8,234
Disposal of intangible
assets - - - (53) - (2,827) (2,880)
Marketing expenses - - - (8) (488) - (496)
Expenses from hotel
operations - - (3,939) - - - (3,939)
Expenses from mall
operations - - (1,488) - - - (1,488)
Expenses from hospital
operations - - - - - (10,491) (10,491)
Depreciation of property,
plant and equipment - - - - - (84) (84)
Finance costs - - (1,713) - - (4,031) (5,744)
Finance income 6 2 236 12 23 113 392
Segment assets 735 523 83,525 15,438 106,355 104,829 311,405
--------------------------- ------------- -------- ----------- ------------ --------- ------------ ----------
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items
Profit or loss US$'000 -------------------------------------- -------- Total profit for reportable segments (4,981) Other non-reportable segments 30 Consolidated profit before taxation (5,011) -------------------------------------- -------- 3.3 Analysis of the group's reportable operating segments are as follows:-
Operating Segments - ended 31 December 2016
Hoa Lam
Investment Ireka ICSD Amatir Iringan Urban Shangri-La
Holding Land Ventures Resources Flora DNA Healthcare
Companies Sdn. Sdn. Sdn. Sdn. Sdn. Group Total
Bhd. Bhd. Bhd. Bhd. Bhd.
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------- ------------- -------- ----------- ------------ ---------- -------- ------------ ---------
Segment profit/
(loss)
before taxation (4,410) 135 (6,237) 515 37,223 (1,338) (9,359) 16,529
------------------- ------------- -------- ----------- ------------ ---------- -------- ------------ ---------
Included in the
measure
of segment profit/
(loss) are:
Revenue - 1,306 - 6,529 104,289 - 411 112,535
Other income from
hotel operations - - 3,435 - 8,762 - - 12,197
Other income from
mall operations - - 1,041 - - - - 1,041
Other income from
hospital
operations - - - - - - 5,754 5,754
Impairment of
inventory
* - - (2,408) - - - - (2,408)
Disposal of
intangible
assets - - - (79) - - (73) (152)
Marketing expenses - - - - - (99) - (99)
Expenses from
hotel
operations - - (3,763) - (5,719) - - (9,482)
Expenses from mall
operations - - (1,399) - - - - (1,399)
Expenses from
hospital
operations - - - - - - (9,039) (9,039)
Depreciation of
property,
plant and
equipment - - (6) - (3) - (89) (98)
Finance costs - - (2,992) - (1,957) - (4,363) (9,312)
Finance income 57 2 258 9 2 7 66 401
------------------- ------------- -------- ----------- ------------ ---------- -------- ------------ ---------
Segment assets 12,160 1,843 76,174 18,722 - 69,618 97,833 276,350
------------------- ------------- -------- ----------- ------------ ---------- -------- ------------ ---------
* The amount relates to impairment of FPSS as the recoverable amount, estimated based on its net realisable
value, is below its carrying amount (refer to Note 16).
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items
Profit or loss US$'000 -------------------------------------- -------- Total profit for reportable segments 16,529 Other non-reportable segments (61) Finance cost (304) Consolidated profit before taxation 16,164 -------------------------------------- --------
There were no additions to non-current assets other than financial instruments and deferred tax assets for the financial year ended 2016.
Additions
2017 Finance Finance Segment to non-current
US$'000 Revenue Depreciation costs income assets assets
---------------------- --------- ------------- -------- -------- --------- -----------------
Total reportable
segment 19,098 (84) (5,744) 392 311,405 -
Other non-reportable
segments - - - - 14,267 5
---------------------- --------- ------------- -------- -------- --------- -----------------
Consolidated total 19,098 (84) (5,744) 392 325,672 5
---------------------- --------- ------------- -------- -------- --------- -----------------
Additions
2016 Finance Finance Segment to non-current
US$'000 Revenue Depreciation costs income assets assets
---------------------- --------- ------------- -------- -------- --------- -----------------
Total reportable
segment 112,535 (98) (9,312) 401 276,350 -
Other non-reportable
segments - - (304) - 18,030 -
---------------------- --------- ------------- -------- -------- --------- -----------------
Consolidated total 112,535 (98) (9,616) 401 294,380 -
---------------------- --------- ------------- -------- -------- --------- -----------------
There were no additions to non-current assets other than financial instruments and deferred tax assets for financial year ended 2016.
Geographical Information - ended 31 December 2017
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 5,966 13,132 19,098
Non-current assets 4,954 4,178 9,132
-------------------- --------- -------- -------------
Included in the revenue of the Group for the financial year ended 31 December 2017 is revenue from the sale of two plots of land (Lot D2 and D3) at the International Healthcare Park ("IHP").
For the year ended 31 December 2017, two customers exceeded 10% of the Group's total revenue as follows:
US$'000 Segments
--------------------------------- -------- -------------------
Tien Phat Consultancy Investment Hoa Lam Shangri-La
Co. Ltd 5,399 Healthcare Group
Tri Hanh Consultancy Co. Hoa Lam Shangri-La
Ltd 7,733 Healthcare Group
--------------------------------- -------- -------------------
Geographical Information - ended 31 December 2016
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 112,124 411 112,535
Non-current assets 2,359 7,088 9,447
-------------------- --------- -------- -------------
Included in the revenue of the Group for the financial year ended 31 December 2016 is revenue from the sale of Aloft Kuala Lumpur Sentral Hotel ("AKLS") and a plot of land (Lot GD1) at the IHP.
For the year ended 31 December 2016, one customer exceeded 10% of the Group's total revenue as follows:
US$'000 Segments
----------------------- -------------- --------------
Prosper Group Holdings Iringan Flora
Limited 104,289 Sdn. Bhd.
----------------------- -------------- --------------
4 SEASONALITY
The Group's business operations are not materially affected by seasonal factors for the period under review.
5 Cost of Sales
2017 2016
US$'000 US$'000
Direct costs attributable to:
Completed units (Note 16) 5,212 74,796
Sales of land held for property
development (Note 16) 5,291 191
Impairment of inventory (Note
16) - 2,408
Disposal/Impairment of intangible
assets (Note 14) 2,880 152
13,383 77,547
----------------------------------- -------- --------
Included in the cost of sales of the Group for the financial year ended 31 December 2017 is cost of sales related to the sale of two plots of land (Lot D2 and D3) at the IHP (2016: sale of Aloft Kuala Lumpur Sentral and a plot of land (Lot GD1) at the IHP).
6 Other Income
2017 2016
US$'000 US$'000
Dividend income - 208
Gain on disposal of available-for-sale
investments - 2,285
Gain on disposal of property,
plant and equipment - 5
Rental income 260 211
Other income from hotel operations
(a) 3,842 12,197
Other income from mall operations
(b) 1,440 1,041
Other income from hospital operations
(c) 8,234 5,754
Sundry income 400 262
14,176 21,963
---------------------------------------- -------- ---------
(a) Other income from hotel operations
The income in 2017 relates to the hotel operations of FPSS which is owned by a subsidiary of the Company, ICSD Ventures Sdn. Bhd. The income in 2016 includes the income from hotel operations of FPSS and AKLS amounting to US$3,435,000 and US$8,762,000 respectively. AKLS was owned by a subsidiary of the Company, Iringan Flora Sdn. Bhd which was disposed of in 2016. The income earned from hotel operations is included in other income in line with management's intention to dispose of the hotel.
(b) Other income from mall operations
The income relates to the operation of HMS which is owned by a subsidiary of the Company, ICSD Ventures Sdn. Bhd.. The income earned from mall operations is included in other income in line with management's intention to dispose of the mall.
(c) Other income from hospital operations
The income relates to the operation of CIH which is owned by a subsidiary of the Company, City International Hospital Company Limited. The income earned from hospital operations is included in other income in line with management's intention to dispose of the hospital.
7 Foreign exchange GAIN/(LOSS)
2017 2016
US$'000 US$'000
--------------------------------------- -------- --------
Foreign exchange gain/(loss) comprises:
Realised foreign exchange gain/(loss) 446 (112)
Unrealised foreign exchange
gain/(loss) 2,973 (4,939)
--------------------------------------- -------- --------
3,419 (5,051)
--------------------------------------- -------- --------
8 Management Fees
2017 2016
US$'000 US$'000
------------------- -------- --------
Management fees 3,129 3,331
------------------- -------- --------
The management fees payable to the Development Manager are based on 2% per annum of the Group's net asset value calculated on the last business day of June and December of each calendar year and payable quarterly in advance. The management fees were allocated to the subsidiaries and the Company based on where the service was provided.
In addition to the annual management fee, the Development Manager is entitled to a performance fee calculated at 20% of the out performance of the net asset value over a total compounded return hurdle rate of 10% per annum. No performance fee has been paid or accrued during the year (2016: US$Nil).
9 Finance (Costs)/ INCOME
2017 2016
US$'000 US$'000
Interest income from banks 392 401
Agency fees (34) (194)
Arrangement fee - (621)
Bank guarantee commission - (50)
Interest on bank loans (4,031) (4,313)
Interest on financial liabilities
at amortised cost - (1)
Interest on medium term notes (1,679) (4,437)
----------------------------------- -------- --------
(5,352) (9,215)
----------------------------------- -------- --------
10 net (Loss) /PROFIT BEFORE TAXATION
2017 2016
US$'000 US$'000
----------------------------------------------------- ----------- ---------
Net (loss)/profit before taxation is stated after charging/(crediting):
Auditor's remuneration 202 205
Directors' fees/emoluments 235 297
Depreciation of property, plant
and equipment 84 98
Expenses of hotel operations 3,939 9,482
Expenses of mall operations 1,488 1,399
Expenses of hospital operations 10,491 9,039
Unrealised foreign exchange (gain)/loss (2,973) 4,939
Realised foreign exchange (gain)/loss (446) 112
Disposal/impairment of intangible
assets 2,880 152
Loss on disposal of an indirectly -
held subsidiary (Note 23) 1,298
Gain on disposal of available-for-sale
investments - (2,285)
Gain on disposal of property,
plant and equipment - (5)
Tax services 13 8
11 TAXATION
2017 2016
US$'000 US$'000
Current tax- Current year 3,096 796
- Prior year 412 262
Deferred tax credit- Current
year (2,046) (354)
- Prior year (599) (18)
------------------------------------------- -------------------- ------------------
Total tax expense for the
year 863 686
------------------------------------------- -------------------- ------------------
The numerical reconciliation between the income tax expenses and the product of accounting results multiplied by the applicable tax rate is computed as follows:
2017 2016
US$'000 US$'000
---------------------------------------- -------- -------------------
Net (loss)/profit before taxation (5,011) 16,164
Income tax at a rate of 24% (2016:24%) (1,203) 3,879
Add :
Tax effect of expenses not deductible
in determining taxable profit 592 6,854
Current year losses and other tax
benefits for which no deferred
tax asset was recognised 1,742 2,029
Tax effect of different tax rates
in subsidiaries 590 1,521
Less :
Tax effect of income not taxable
in determining taxable profit (671) (13,841)
(Over)/Under provision in respect
of prior years (187) 244
---------------------------------------- -------- -------------------
Total tax expense for the year 863 686
---------------------------------------- -------- -------------------
The applicable corporate tax rate in Malaysia is 24% (2016: 24%).
The Company is treated as a tax resident of Jersey for the purpose of Jersey tax laws and is subject to a tax rate of 0%.
The applicable corporate tax rates in Singapore and Vietnam are 17% and 20% (2016: 17% and 20%) respectively.
A subsidiary of the Group, CIH is granted preferential corporate tax rate of 10% for the results of the hospital operations. The preferential income tax is given by the government of Vietnam due to the subsidiary's involvement in the healthcare industry.
A Goods and Services Tax was introduced in Jersey in May 2008. The Company has been registered as an International Services Entity so it does not have to charge or pay local GST. The cost for this registration is GBP200 per annum.
The tax effect of income not taxable in determining taxable profit for the prior year mainly relates to the net gain on disposal from the sale of the AKLS.
The Directors intend to conduct the Group's affairs such that the central management and control is not exercised in the United Kingdom and so that neither the Company nor any of its subsidiaries carries on any trade in the United Kingdom. The Company and its subsidiaries will thus not be residents in the United Kingdom for taxation purposes. On this basis, they will not be liable for United Kingdom taxation on their income and gains other than income derived from a United Kingdom source.
12 COMPRENHENSIVE income/(LOSS)
Items that are or may be reclassified 2017 2016
subsequently to profit or loss, US$'000 US$'000
net of tax
--------------------------------------- --------- ---------
Foreign currency translation
differences for foreign operations
--------- ---------
Gains/(Losses) arising during
the year 8,944 (3,522)
Reclassification to profit or
loss on disposal of land held
for property development 61 988
Reclassification to profit or
loss on disposal of an indirectly
held subsidiary (1,142) -
--------- ---------
7,863 (2,534)
Fair value of available-for-sale
investment
--------- ---------
Losses arising during the year - (233)
Reclassification adjustments
for gain on disposal included
in profit or loss - (2,208)
--------- ---------
- (2,441)
7,863 (4,975)
--------------------------------------- --------- ---------
13 (LOSS)/EARNINGS Per Share
Basic and diluted (loss)/earnings per ordinary share
The calculation of basic and diluted (loss)/earnings per ordinary share for the year ended 31 December 2017 was based on the (loss)/profit attributable to equity holders of the parent and a weighted average number of ordinary shares outstanding, calculated as below:
2017 2016
----------------------------------- ------------- ------------
(Loss)/Profit attributable to
equity holders of the parent
(US$000) (4,176) 18,856
Weighted average number of shares 199,019,784 212,025,002
(Loss)/Earnings per share
Basic and diluted (US cents) (2.10) 8.89
----------------------------------- ------------- ------------
Weighted average number of ordinary shares
2017 2016
------------------------------------- -------------- ------------
Issued ordinary shares at 1
January 212,025,002 212,025,002
Effect of share buy back (Note
18) (13,005,218) -
-------------- ------------
Weighted average number of ordinary
shares at
31 December 199,019,784 212,025,002
-------------- ------------
14 Intangible Assets
Licence
Contracts
and Related
Relationships Goodwill Total
US$'000 US$'000 US$'000
------------------------------ --------------- --------- --------
Cost
At 1 January 2016/ 31
December 2016 / 31 December
2017 10,695 6,479 17,174
------------------------------ --------------- --------- --------
Accumulated impairment
At 1 January 2016 4,276 5,665 9,941
Disposals 73 79 152
------------------------------ --------------- --------- --------
At 31 December 2016 /
1 January 2017 4,349 5,744 10,093 Disposals 2,827 53 2,880 ------------------------------ --------------- --------- -------- At 31 December 2017 7,176 5,797 12,973 ------------------------------ --------------- --------- -------- Carrying amounts At 31 December 2016 6,346 735 7,081 ------------------------------ --------------- --------- -------- At 31 December 2017 3,519 682 4,201 ------------------------------ --------------- --------- --------
The licence contracts and related relationships represent the Land Use Rights ("LUR") for the Group's lands in Vietnam. LUR represents the rights to develop the IHP within a lease period ending on 9 July 2077. In 2017, the Group disposed of its undeveloped land in the IHP (Lot D2 and D3) to third party purchasers (2016: Lot GD1).
For the purpose of impairment testing, goodwill and licence contracts and related relationships are allocated to the Group's operating divisions which represent the lowest level within the Group at which the goodwill and licence contracts and related relationships are monitored for internal management purposes.
The aggregate carrying amounts of intangible assets allocated to each unit are as follows:
2017 2016
US$'000 US$'000
------------------------------- --------- ---------
Licence contracts and related
relationships
International Healthcare
Park 3,519 6,346
-------------------------------- --------- ---------
Goodwill
SENI Mont' Kiara 132 185
Sandakan Harbour Square 550 550
-------------------------------- --------- ---------
682 735
------------------------------- --------- ---------
The recoverable amount of licence contracts and related relationships has been tested based on the net realisable value of the LUR owned by the subsidiaries. The key assumption used is the expected market value of the LUR. The Group believes that any reasonably possible changes in the above key assumptions applied is not likely to materially cause the recoverable amount to be lower than its carrying amounts.
The recoverable amount of goodwill has been tested by reference to underlying profitability of the ongoing operations of the developments using discounted cash flow projections (refer to Note 16).
Intangible assets of US$53,000 (2016: US$79,000) and US$2,827,000 (2016: US$73,000) in relation to SENI and IHP projects respectively were written down as certain components from the developments were sold during the year.
15 Deferred Tax Assets
2017 2016
US$'000 US$'000
------------------------------- --------- ---------
At 1 January 1,623 1,337
Exchange adjustments 311 (86)
Deferred tax credit relating
to origination of
temporary differences during
the year 2,334 372
At 31 December 4,268 1,623
------------------------------- --------- ---------
The deferred tax assets comprise:
2017 2016
US$'000 US$'000
----------------------------------------- --------- ---------
Taxable temporary differences
between accounting profit and
taxable profit of property development
units sold 4,268 1,623
At 31 December 4,268 1,623
----------------------------------------- --------- ---------
Deferred tax assets have not been recognised in respect of unused tax losses of US72,240,000 (2016: US$65,440,000) and other tax benefits which includes temporary differences between net carrying amount and tax written down value of property, plant and equipment, accrual of construction costs and other deductible temporary differences of US$4,920,000 (2016: US$4,460,000) which are available for offset against future taxable profits. Deferred tax assets have not been recognised due to the uncertainty of the recovery of the losses.
16 INVENTORIES
2017 2016
Notes US$'000 US$'000
--------------------------- ------- --------- ---------
Land held for property
development (a) 19,021 22,514
Work-in-progress (b) 95,450 62,708
Stock of completed units,
at cost (c) 163,880 159,334
Consumables 528 403
At 31 December 278,879 244,959
------------------------------------ --------- ---------
Carrying amount of inventories
pledged as security for Loans
and borrowings and Medium Term
Notes 156,857 148,427
-------- --------
(a) Land held for property development
2017 2016
US$'000 US$'000
----------------------------------- ---------- --------
At 1 January 22,514 23,223
Add :
Exchange adjustments 925 (604)
Additions/(disposal) 873 86
At 31 December 24,312 22,705
------------------------------------ ---------- --------
Less: Costs recognised
as expenses in the consolidated
statement of comprehensive
income during the year
(Note 5) (5,291) (191)
------------------------------------ ---------- --------
At 31 December 19,021 22,514
------------------------------------ ---------- --------
(b) Work-in-progress
2017 2016
US$'000 US$'000
----------------------------------- -------- --------
At 1 January 62,708 53,182
Add :
Exchange adjustments 6,809 (3,967)
Work-in-progress incurred during
the year 25,933 13,493
At 31 December 95,450 62,708
----------------------------------- -------- --------
Included in the previous financial year are the borrowing costs capitalised at interest rate ranging from 5.50% to 10.00% per annum of US$0.2 million.
(c) Stock of completed units, at cost
2017 2016
US$'000 US$'000
--------------------------------- --------- ---------
At 1 January 159,334 230,436
Less :
Exchange adjustments 9,758 6,102
Costs recognised as expenses
in the consolidated statement
of comprehensive income during
the year (Note 5) (5,212) (74,796)
Impairment of inventory - (2,408)
At 31 December 163,880 159,334
--------------------------------- --------- ---------
The net realisable value of completed units have been tested by reference to underlying profitability of the ongoing operations of the developments using discounted cash flow projections and/or comparison method with the similar properties within the local market which provides an approximation of the estimated selling price that is expected to be achieved in the ordinary course of business.
Included in the stock of completed units are SENI as well as the following completed units:
Four Points by Sheraton Sandakan Hotel ("FPSS")
The recoverable amount of FPSS was determined based on an internal valuation performed by management, supported by valuation undertaken by an external, independent valuer with appropriate recognised professional qualification. The recoverable amount US$40,788,000 (2016: US$37,012,000) of FPSS was determined to approximate with its carrying amount. In 2016, impairment loss of US$2,408,000 in relation to inventory amount was included in cost of sales.
The valuation of FPSS was determined by discounting the future cash flows expected to be generated from the continuing operations of FPSS and was based on the following key assumptions:
(1) Cash flows were projected based on past experience, actual operating results in 2017 and the 10 years budget of FPSS;
(2) The occupancy rate of FPSS will improve to 73% in 2027 which is when the hotel's operations are expected to stabilise;
(3) Average daily rates of the hotel will improve to US$103 in 2027 which is when the hotel's operations are expected to stabilise;
(4) Projected gross margin reflects the average historical gross margin, adjusted for projected market and economic conditions and internal resources efficiency; and
(5) Pre-tax discount rate of 9% was applied in discounting the cash flows. The discount rates take into the prevailing trend of the hotel industry in Malaysia.
Sensitivity analysis
The above estimates are sensitive in the following key areas:
(a) an increase/(decrease) of 1% in discount rate used would have (decreased)/ increased the recoverable amount by approximately (US$5,342,000)/US$6,624,000;
(b) an increase/(decrease) of 1% in occupancy rate throughout the entire projection term used would have increased/ (decreased) the recoverable amount by approximately US$758,000/ (US$758,000); and
(c) an increase/(decrease) of 5% in average daily rates throughout the entire projection term used would have increased/ (decreased) the recoverable amount by approximately US$3,476,000/ (US$3,476,000).
Harbour Mall Sandakan ("HMS")
The recoverable amount of HMS was determined based on an internal valuation performed by management, supported by valuation undertaken by an external, independent valuer with appropriate recognised professional qualification. The recoverable amount US$43,490,000 (2016: US$41,237,000) of HMS was determined to be higher than its carrying amount and no impairment losses in relation to the inventory amount was recognised.
The valuation of HMS was determined by the capitalisation of net income expected to be generated from the continuing operations of HMS ("investment approach") when the mall operates at an optimum occupancy rate and was based on the following key assumptions:
(1) Occupancy rate will improve to 95% by 2020 which is when the mall's operations are expected to stabilise;
(2) Projected optimum average rental rates to improve to US$1.44 per square feet over a ten-year period;
(3) Outgoing rate projected at 35% against gross annual income;
(4) Capitalisation rate assumed at 6%; and
(5) Capitalisation period of 84 years covering the period of HMS achieving optimum operations to expiration of the title term.
Sensitivity analysis
The above estimates are sensitive in the following key areas:
(a) an increase/(decrease) of 0.25% in capitalisation rate used would have (decreased) /increased the recoverable amount by approximately (US$1,730,000)/ US$1,730,000;
(b) an increase/(decrease) of 1% in optimum occupancy rate throughout the entire projection term would have increased/(decreased) the recoverable amount by approximately US$494,000/ (US$494,000); and
(c) an increase/(decrease) of 5% in average rental rate used would have increased /(decreased) the recoverable amount by approximately US$1,977,000/ (US$2,224,000).
City International Hospital ("CIH")
The recoverable amount US$75,200,000 (2016: US$75,200,000) of CIH was determined based on a valuation by an external, independent valuer with appropriate recognised professional qualification. The recoverable amount of CIH was determined to be higher than its carrying amount and no impairment losses in relation to the inventory amounts was recognised.
The valuation of CIH was determined by discounting the future cash flows expected to be generated from the continuing operations of CIH. The followings are the key assumptions:
(1) Cash flows were projected based on past experience, actual operating results in 2017 and the 5 years budget of CIH adjusted by the valuer;
(2) Projected revenue growth reflects the increase in average historical growth figures, adjusted for projected market and economic conditions and internal resources efficiency. Revenue is projected to grow at a compound annual growth rate of 25% from 2018 to 2022;
(3) Pre-tax discount rate of 12% was applied in discounting the cash flows. The discount rates take into the prevailing trend of the hospital industry in Vietnam; and
(4) Terminal capitalisation rate of 10% was applied. The rates take into the prevailing trend of the hospital industry in Vietnam.
Sensitivity analysis
The above estimates are sensitive in the following key areas:
(a) an increase/(decrease) of 1% in revenue growth rates would have increased/(decreased) the recoverable amount by approximately US$2,100,000/(US$3,900,000);
(b) an increase/(decrease) of 1% in discount rate used would have (decreased)/increased the recoverable amount by approximately (US$5,502,000)/ US$6,023,000; and
(c) an increase/(decrease) of 1% in capital terminalisation rate used would have (decreased)/increased the recoverable amount by approximately (US$3,739,000)/ US$4,481,000.
17 Share Capital
Number Number of
of shares Amount shares Amount
2017 2017 2016 '000 2016
'000 US$'000 US$'000
-------------------------- ----------- --------- ----------- ---------
Authorised Share Capital
Ordinary shares of
US$0.05 each 2,000,000 100,000 2,000,000 100,000
Management shares - * - *
of US$0.05 each - * - *
-------------------------- ----------- --------- ----------- ---------
2,000,000 100,000 2,000,000 100,000
-------------------------- ----------- --------- ----------- ---------
Issued Share Capital
Ordinary shares of
US$0.05 each 212,025 10,601 212,025 10,601
Management shares - # - #
of US$0.05 each - # - #
---------------------- -------- ------- -------- -------
212,025 10,601 212,025 10,601
---------------------- -------- ------- -------- -------
*represents 10 management shares at US$0.05 each
# represents 2 management shares at US$0.05 each
In 2015, the shareholders of the Company approved the creation and issuance of management shares by the Company as well as a compulsory redemption mechanism that was proposed by the Board.
The Company increased its authorised share capital from US$100,000,000 to US$100,000,000.50 by the creation of 10 management shares of US$0.05 each for cash.
The Company also increased its issued and paid-up share capital from US$10,601,250 to US$10,601,250.10 by way of an allotment of 2 new management shares of US$0.05 each at par via cash consideration.
In accordance with the compulsory redemption scheme, the Company's ordinary shares were converted into redeemable ordinary shares.
The ordinary shares and the management shares shall have attached thereto the rights and privileges, and shall be subjected to the limitations and restrictions, as are set out below:
(a) Distribution of dividend:
(i) The ordinary shares carry the right to receive all the profits of the Company available for distribution by way of interim or final dividend at such times as the Directors may determine from time to time; and
(ii) The management shares carry no right to receive dividends out of any profits of the Company.
(b) Winding-up or return of capital:
(i) The holders of the management shares shall be paid an amount equal to the paid-up capital on such management shares; and
(ii) Subsequent to the payment to holders of the management shares, the holders of the ordinary shares shall be repaid the surplus assets of the Company available for distribution.
(c) Voting rights:
(i) The holders of the ordinary shares and management shares shall have the right to receive notice of and to attend and vote at general meetings of the Company; and
(ii) Each holder of ordinary shares and management shares being present in person or by a duly authorised representative (if a corporation) at a meeting shall upon a show of hands have one vote and upon a poll each such holder present in person or by proxy or by a duly authorised representative (if a corporation) shall have one vote in respect of every full paid share held by him.
18 Share Premium
Share premium represents the excess of proceeds raised on the issuance of shares over the nominal value of those shares. The costs incurred in issuing shares were deducted from the share premium.
2017 2016
US$'000 US$'000
----------------- --------- ---------
At 1 January 218,926 218,926
Treasury shares (10,001) -
As at 31 December 208,925 218,926
-------------------- -------- --------
On 4 January 2017, the Shareholders of the Company at an Extraordinary General Meeting approved a proposal to return US$10,000,500 or US$0.75 per share for 13,334,000 shares representing 6.29 per cent of the Company's share capital to Shareholders. The capital distribution was completed on 10 January 2017 and the repurchased shares of 13,334,000 are currently held as Treasury Shares. The issued and paid up share capital of the Company remains unchanged at 212,025,002.
19 CAPITAL REDEMPTION RESERVE
The capital redemption reserve was incurred after the Company cancelled its 37,475,000 and 500,000 ordinary shares of US$0.05 per share in 2009 and 2013 respectively.
20 AMOUNT DUE TO NON-CONTROLLING INTERESTS
2017 2016
US$'000 US$'000
----------------------------------------------------------- -------- --------
Current
Minority Shareholder of Bumiraya
Impian Sdn. Bhd.:
* Global Evergroup Sdn. Bhd. 1,225 1,105
Minority Shareholders of Hoa
Lam Services Co Ltd:
* Tran Thi Lam 1,756 1,752
* Tri Hanh Consultancy Co Ltd 3,954 3,944
* Hoa Lam Development Investment Joint Stock Company 2,560 2,228
* Duong Ngoc Hoa 227 226
Minority Shareholder of The
RuMa Hotel KL Sdn. Bhd.:
* Ireka Corporation Berhad 2 2
Minority Shareholder of Urban
DNA Sdn. Bhd.:
* Ireka Corporation Berhad 3,676 3,316
13,400 12,573
----------------------------------------------------------- -------- --------
The current amount due to non-controlling interests amounting to US$13,400,000 (2016: US$12,573,000) is unsecured, interest free and repayable on demand.
21 Loans AND BORROWINGS
2017 2016
US$'000 US$'000
--------------------------- -------- --------
Non-current
Bank loans 54,572 46,405
54,572 46,405
--------------------------- -------- --------
Current
Bank loans 12,882 10,804
Finance lease liabilities - 3
---------------------------- -------- --------
12,882 10,807
--------------------------- -------- --------
67,454 57,212
--------------------------- -------- --------
The effective interest rates on the bank loans for the year ranged from 5.35% to 10.50% (2016: 5.25% to 10.50%) per annum. In 2016, the effective interest rates for finance lease arrangements was at 2.50% per annum.
Borrowings are denominated in Ringgit Malaysia, United State Dollars and Vietnam Dong.
Bank loans are repayable by monthly, quarterly or semi-annually instalments.
Bank loans are secured by land held for property development, work-in-progress, operating assets of the Group, pledged deposits and some by the corporate guarantee of the Company.
Reconciliation of movement of loan and borrowings to cash flows arising from financing activities:
As at Foreign As at
1 January Drawdown Repayment exchange 31 December
2017 of loan of loan movements 2017
US$'000 US$'000 US$'000 US$'000 US$'000
Bank loans 57,209 25,038 (14,770) (23) 67,454
Finance lease
liabilities 3 - (3) - -
----------- --------- ---------- ----------- -------------
Total 57,212 25,038 (14,773) (23) 67,454
----------- --------- ---------- ----------- -------------
Finance lease liabilities are payable as follows:
Present Present
Future value Future value
minimum of minimum minimum of minimum
lease lease lease lease
payment Interest payment payment Interest payment
2017 2017 2017 2016 2016 2016
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------- ---------- ---------- ------------- --------- --------- ------------
Within
one year -* - - 3 - 3
Between
one and
five - - - - - -
years
----------- ---------- ---------- ------------- --------- --------- ------------
-* - - 3 - 3
---------- ---------- ------------------------- --------- --------- ------------
* Finance lease liabilities has been repaid in the current financial year.
22 MEDIUM TERM NOTES
2017 2016
US$'000 US$'000
----------------------------------- --------- ---------
Outstanding medium term notes 24,710 26,748
Net transaction costs (386) (405)
Less:
Repayment due within twelve
months * (24,324) (26,343)
Repayment due after twelve months - -
----------------------------------- --------- ---------
Reconciliation of movement of medium term notes to cash flows arising from financing activities:
As at Foreign As at
1 January Drawdown Repayment exchange 31 December
2017 of loan of loan movements 2017
US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ----------- --------- ---------- ----------- -------------
Medium Term
Notes 26,343 - (4,615) 2,596 24,324
----------- --------- ---------- ----------- -------------
* Includes net transaction costs in relation to medium term notes due within twelve months of US$0.39 million (2016: US$0.40 million).
The medium term notes ("MTNs") were issued pursuant to a programme with a tenure of ten (10) years from the first issue date of the notes. The MTNs were issued by a subsidiary, to fund two development projects known as Sandakan Harbour Square and Aloft Kuala Lumpur Sentral ("AKLS") in Malaysia.
In the previous financial year, the Group completed the sale of the AKLS. The net adjusted price value for the sale of AKLS, which included the sale of the entire issued share capital of ASPL M3B Limited and Iringan Flora Sdn. Bhd. (the "Aloft Companies") were used to redeem the MTN Series 2 and Series 3. Following the completion of the disposal of AKLS, US$97.35 million (RM394.0 million) of MTN associated with the AKLS (Series 3) and the Four Points Sheraton Sandakan (Series 2) were repaid on 19 August 2016. The charges in relation to AKLS was also discharged following the completion of the disposal.
During the year, Silver Sparrow Berhad ("SSB") obtained consent from the lenders to utilise proceeds of US$4.94 million in the Sales Proceeds Account and Debt Service Reserve Account to partially redeem the MTNs in November 2017. SSB also secured a "roll-over" for the remaining MTNs of US$24.3mil which is due on 8 December 2017 (now repayable on 10 December 2018). The MTNs are rated AAA.
The weighted average interest rate of the MTN was 6.00% per annum at the statement of financial position date. The effective interest rates of the MTN and their outstanding amounts are as follows:
Interest
Maturity rate % per US$'000
Dates annum
------------------ ------------- ------------ -----------
Series 1 Tranche 10 December
FGI 2018 6.00 10,625
Series 1 Tranche 10 December
BG 2018 6.00 14,085
24,710
-------------------------------- ------------ -----------
The medium term notes are secured by way of:
(i) bank guarantee from two financial institutions in respect of the BG Tranches;
(ii) financial guarantee insurance policy from Danajamin Nasional Berhad ("Danajamin") in respect to the FG Tranches;
(iii) a first fixed and floating charge over the present and future assets and properties of Silver Sparrow Berhad and ICSD Ventures Sdn. Bhd. by way of a debenture;
(iv) a third party first legal fixed charge over ICSD Ventures Sdn. Bhd.'s assets and land; (v) a corporate guarantee by Aseana Properties Limited;
(vi) letter of undertaking from Aseana Properties Limited to provide financial and other forms of support to ICSD Ventures Sdn. Bhd. to finance any cost overruns associated with the development of the Sandakan Harbour Square;
(vii) assignment of all its present and future rights, interest and benefits under the ICSD Ventures Sdn. Bhd.'s Put Option Agreements in favor of Danajamin, Malayan Banking Berhad and OCBC Bank (Malaysia) Berhad (collectively as "the guarantors") where once exercised, the sale and purchase of HMS and FPSS shall take place in accordance with the provision of the Put Option Agreement; and the proceeds
from HMS and FPSS will be utilised to repay the MTNs;
(viii) assignment over the disbursement account, revenue account, operating account, sale proceed account, debt service reserve account and sinking fund account of Silver Sparrow Berhad, revenue account of ICSD Ventures Sdn. Bhd. and escrow account of Ireka Land Sdn. Bhd.;
(ix) assignment of all ICSD Ventures Sdn. Bhd.'s present and future rights, title, interest and benefits in and under the insurance policies; and
(x) a first legal charge over all the shares of Silver Sparrow Berhad, ICSD Ventures Sdn. Bhd. and any dividends, distributions and entitlements.
23 DISPOSAL OF AN INDIRECTLY HELD SUBSIDIARY
During the financial year, the Group disposed Hoa Lam Shangri-La 3 Limited Liability Co. ("HLSL 3"), an indirectly held subsidiary of the Group. The condition precedent for the completion of the disposal was met on 25 December 2017 when the shares were transferred to the purchaser.
Details of disposal of the financial position of the Group
2017
US$'000
---------------------------------------------- ---------
Trade and other receivables 16,326
Current tax assets 392
Cash and cash equivalents 198
Exchange fluctuation reserve 1,142
Trade and other payable (15,762)
---------------------------------------------- ---------
Net assets and liabilities 2,296
Net disposal proceeds (998)
---------------------------------------------- ---------
Loss on disposal to the Group 1,298
---------------------------------------------- ---------
The net cash flow on disposal was determined
as follow:
Consideration received, satisfied in
cash 998
Cash and cash equivalent disposed of (198)
---------------------------------------------- ---------
Net cash inflow 800
---------------------------------------------- ---------
Loss on disposal of an indirectly held subsidiary amounting to US$1,298,000 has been included in other operating expense in the consolidated statement of other comprehensive income.
24 change in equity interest in subsidiaries
During the financial year, the Group increased its equity interest in Shangri-La Healthcare Investment Pte Ltd ("SHIPL") from 81.50% to 81.58% (2016: 79.76% to 81.50%) arising from an issue of new shares in the subsidiary for cash consideration of US$1.5 million.(2016: US$4.3 million.) Consequently, the Company's effective equity interest in Hoa Lam - Shangri-La Healthcare Ltd Liability Co, City International Hospital Co Ltd, subsidiaries of SHIPL, increased to 72.41% (2016: 72.35%). The Group recognised an decrease/increase in non-controlling interests of US$484,000 (2016: US$477,000) and an decrease/increase in accumulated losses of US$484,000 (2016: US$477,000) resulting from the decrease/increase in equity interest in the above subsidiaries. The transaction was accounted for using the acquisition method of accounting.
25 Related Party Transactions
Transactions between the Group and the Company with Ireka Corporation Berhad ("ICB") and its group of companies are classified as related party transactions based on ICB's 23.07% shareholding in the Company.
Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel includes all the Directors of the Group, and certain members of senior management of the Group.
2017 2016
US$'000 US$'000
-------------------------------------- --------- ---------
ICB Group of Companies
Accounting and financial reporting
services fee charged by an ICB
subsidiary 50 50
Advance payment to the contractors
of an ICB subsidiary 732 1,591
Construction progress claims charged
by an ICB subsidiary 21,099 9,960
Management fees charged by an ICB
subsidiary 3,129 3,331
Marketing commission charged by
an ICB subsidiary 114 248
Project staff cost reimbursed to
an ICB subsidiary 311 2
Rental expenses charged by an ICB 4 -
subsidiary
Rental expenses paid on behalf
of ICB 516 493
Secretarial and administrative
services fee charged by an ICB
subsidiary 50 50
Key management personnel
Remuneration of key management
personnel - Directors' fees 235 297
Remuneration of key management
personnel - Salaries 143 123
-------------------------------------- --------- ---------
Liquidated and Ascertained Damages ("LADs")
Ireka Engineering & Construction Sdn. Bhd. ("IECSB"), a subsidiary of ICB, is the project contrator of The RuMa Hotel and Residences ("The RuMa"). The expected completion date of the RuMa development has been deferred to 15 June 2018, with vacant possession expected to be issued from 15 June 2018. Based on the Sale and Purchase Agreements ("SPAs") signed, the contractual date of issuance of vacant possession to purchasers starts from June 2017 (48 months from date of signed SPAs). For hotel suites, Urban DNA Sdn. Bhd ("the Developer") is given three months from the date of delivery of vacant possession letter for installation of the furniture and fittings as stipulated in the respective buyers' SPA for hotel suites. The delay will potentially result in Liquidated Ascertained Damages ("LADs") being imposed to the Developer. However, the Developer is entitled to recover these LADs from the project contractor, IECSB.
Transactions between the Group with other significant related parties are as follows:
2017 2016
US$'000 US$'000
--------------------------- -------- --------
Non-controlling interests
Advances - non-interest
bearing (Note 20) 327 2,819
---------------------------- -------- --------
The above transactions have been entered into in the normal course of business and have been established under negotiated terms.
The outstanding amounts due from/ (to) ICB and its group of companies as at 31 December 2017 and 31 December 2016 are as follows:
2017 2016
Notes US$'000 US$'000
Amount due from an ICB subsidiary
for advance payment to its
contractors (ii) 3,993 2,903
Amount due to an ICB subsidiary
for construction progress
claims charged (i) (2,046) (928)
Amount due from an ICB subsidiary
for acquisition of SENI Mont'
Kiara units (i) 1,952 1,760
Amount due to an ICB subsidiary
for management fees (ii) - (22)
Amount due to an ICB subsidiary
for marketing commissions (ii) (15) (13)
Amount due to an ICB subsidiary
for reimbursement of project
staff costs (ii) (55) -
Amount due to an ICB subsidiary
for rental expenses (ii) (5) -
Amount due from ICB for rental
expenses paid on behalf (ii) 137 114
Amount due to an ICB subsidiary
for staff cost paid on behalf (ii) (4) -
----------------------------------- ------- --------- ---------
(i) These amounts are trade in nature and subject to normal trade terms.
(ii) These amounts are non-trade in nature and are unsecured, interest-free and repayable on demand.
The outstanding amounts due to the other significant related parties as at 31 December 2017 and 31 December 2016 are as follows:
2017 2016
US$'000 US$'000
--------------------------- --------- ---------
Non-controlling interests
Advances - non-interest
bearing (Note 20) (13,400) (12,573)
---------------------------- --------- ---------
Transactions between the parent company and its subsidiaries are eliminated in these consolidated financial statements.
26 DIVID
The Company has not paid or declared any dividends during the financial year ended 31 December 2017.
27 cOMMITMENTS AND Contingencies
The Group and Company do not have any contingencies at the statement of financial position date except as follows:
Debt service reserve account
During the year, Silver Sparrow Berhad obtained consent from the lenders to utilise proceeds of US$4.94 million in the Sales Proceeds Account and Debt Service Reserve Account ("DSRA") to partially redeem the MTNs. Thereafter, amount equivalent to RM10.0 million (US$2.47 million) (the "Minimum Deposit") is maintained in the DSRA at all times and the amount is disclosed as deposit pledged.
In the event the funds in the DSRA falls below the Minimum Deposit, SSB shall within five (5) Business Days from the date of receipt of written notice from the facility agent or upon SSB becoming aware of the shortfall, whichever is earlier, deposit such sums of money into the DSRA to ensure the Minimum Deposit is maintained.
28 event after statement of financial position date
At a general meeting of the Company held on 23 April 2018, Shareholders voted in favour of the Board's proposals to reject the 2018 Discontinuation Resolution and to continue with the Company's investment policy, for a period of 18 months from the expected date of the 2018 AGM, to enable a realisation of the Company's assets in a controlled, orderly and timely manner, with the objective of achieving a balance between periodically returning cash to Shareholders and maximising the realisation value of the Company's investments. The Board believes this will maximise the value of the Company's assets and returns to Shareholders, both up to and upon the eventual liquidation of the Company.
To the extent that the Company has not disposed of all of its assets by 31 December 2019, Shareholders will be provided with an opportunity to review the future of the Company, which would include the option for shareholders to vote for the continuation of the Company.
30 REPORT CIRCULATION
Copies of the Annual Report and Financial Statements will be sent to shareholders for approval at the Annual General Meeting ("AGM") to be held on 2 July 2018.
Principal Risks and Uncertainties
The Group's business is property development in Malaysia and Vietnam. Its principal risks are therefore related to the property market in these countries in general, and also the particular circumstances of the property development projects it is undertaking. More detailed explanations of these risks and the way they are managed are contained under the heading of Financial and Capital Risk Management Objectives and Policies in the Annual Report.
Other risks faced by the Group in Malaysia and Vietnam include the following:
Economic Inflation, economic recessions and
movements in interest rates could
affect property development activities.
-------------- ---------------------------------------------
Strategic Incorrect strategy, including sector
and geographical allocations and use
of gearing, could lead to poor returns
for shareholders.
-------------- ---------------------------------------------
Regulatory Breach of regulatory rules could lead
to suspension of the Company's Stock
Exchange listing and financial penalties.
-------------- ---------------------------------------------
Law and Changes in laws and regulations relating
regulations to planning, land use, development
standards and ownership of land could
have adverse effects on the business
and returns for the shareholders.
-------------- ---------------------------------------------
Tax regimes Changes in the tax regimes could affect
the tax treatment of the Company and/or
its subsidiaries in these jurisdictions.
-------------- ---------------------------------------------
Management Changes that cause the management
and control and control of the Company to be exercised
in the United Kingdom could lead to
the Company becoming liable to United
Kingdom taxation on income and capital
gains.
-------------- ---------------------------------------------
Operational Failure of the Development Manager's
accounting system and disruption to
the Development Manager's business,
or that of a third party service providers,
could lead to an inability to provide
accurate reporting and monitoring
leading to a loss of shareholders'
confidence.
-------------- ---------------------------------------------
Financial Inadequate controls by the Development
Manager or third party service providers
could lead to misappropriation of
assets. Inappropriate accounting policies
or failure to comply with accounting
standards could lead to misreporting
or breaches of regulations or a qualified
audit report.
-------------- ---------------------------------------------
Going Concern Failure of property development projects
due to poor sales and collection,
construction delay, inability to secure
financing from banks may result in
inadequate financial resources to
continue operational existence and
to meet financial liabilities and
commitments.
-------------- ---------------------------------------------
The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual rights and obligations. It also regularly monitors the economic and investment environment in countries that it operates in and the management of the Group's property development portfolio. Details of the Group's internal controls are described in the Annual Report.
RESPONSIBILITY STATEMENT
The Directors of the Group and the Company confirm that to the best of their knowledge that:
(a) the consolidated financial statement has been prepared in accordance with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board; and
(b) the sections of this Report, including the Chairman's Statement, Development Manager's Review, Financial Review and Principal Risks and Uncertainties, which constitute the management report include a fair review of all information required to be disclosed by the Disclosure and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Services Authority of the United Kingdom.
On behalf of the Board
Mohammed Azlan Hashim Christopher Henry Lovell
Director Director
26 April 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
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