TIDMASPL
RNS Number : 0810U
Aseana Properties Limited
27 July 2020
27 July, 2020
Aseana Properties Limited
("Aseana" or the "Company")
Full Year Results
Aseana Properties Limited (LSE: ASPL LN), a property developer
in both Malaysia and Vietnam which is listed on the Main Market of
the London Stock Exchange, announces its audited full year results
for the year ended 31 December 2019.
For further information:
Aseana Properties Limited Tel: 020 7920 3150
(via Tavistock)
Liberum Capital Tel: 020 3100 2000
Gillian Martin / Owen Matthews
Tavistock Tel: 020 7920 3150/07836 734 625
Jeremy Carey / James Verstringhe jeremy.carey@tavistock.co.uk
CHAIRMAN'S STATEMENT
The period under review has been the most turbulent and
momentous period for our Company to date. Our assets have
experienced huge challenges arising from the COVID-19 pandemic that
have been exacerbated by the economic and political conditions
unique to Malaysia. This has coincided with upheavals to the Board
of Directors and the resignation of our Development Manager on 21
March 2019. While we have managed to successfully obtain the
mandate from our shareholders on 30 (th) December 2019 to extend
the life of the Company by another 17 months until May 2021, we
have been struck by the adverse economic effects of COVID-19
resulting in a forced hiatus to our asset divestment efforts which
had until then looked promising.
We would also like to take this opportunity to once again
apologise for the delay of this Annual Report and correspondingly
our Annual General Meeting. The finalisation of the Annual Report
and completion of the audit have been delayed primarily due to the
impact of the Covid-19 pandemic which led to the imposition of
movement restrictions in Malaysia and Vietnam. These restrictions
resulted in an approximately 3-week delay in the completion of the
accounts and Annual Report.
OVERVIEW
In 2019, the Malaysian economy expanded at a low rate of 4.3%
beset by lower output of commodities including palm oil crude oil
and natural gas. Exports were hampered by US - China trade tensions
while Foreign Direct Investments were constrained by political
uncertainty and tensions with China.
The Malaysian economy expanded at its slowest pace in over a
decade in Q1 2020 as the country reeled from the COVID-19 fallout.
The pandemic is set to push the economy into recession this year
with rising unemployment and the Malaysian Government Movement
Control Orders (MCO) expected to hamper private consumption.
Exports are expected to shrink amid plummeting demand for oil and a
complete cessation of tourist arrivals. This has been exacerbated
by the rise in political risk with elevated in-fighting within the
major political parties and uncertainty over leadership of the
country. Economists have estimated a GDP contraction of between 2.6
- 3.6% for 2020. Given that the vast majority of the assets of our
Company are located in Malaysia, the financial impact of COVID-19
has been and is expected to continue to be severely negative.
Vietnam as a country and economy has performed significantly
better with tremendous success in the fight against the COVID-19
pandemic with a very low number of coronavirus cases and no
COVID-19 deaths. In 2019 Vietnam continued to show fundamental
strength and resilience, supported by robust domestic demand and
export orientated manufacturing. The country announced a GDP growth
rate of 7.0%, which is among the fastest in the region. While Q1
2020 saw the inevitable impact of the COVID-19 lockdown, the
Vietnamese government acted early in the fight against the pandemic
and as a consequence they have started lifting restrictions on
certain activity. Most non-essential businesses are operating and
domestic flights have resumed. However international travel has yet
to resume as of this date. GDP growth is estimated at 2.8% for
2020
PERFORMANCE REVIEW
For FY 2019, our Company recorded a net loss before taxation of
US$28.7 million compared to a net loss before taxation of US$6.8
million for the previous financial year. The loss was largely due
to net realisable value adjustments of 30% or approximately
(US$23m) to our two Sandakan properties arising from more realistic
valuations reflecting their trading history and prospects and the
operating and finance expenses of various projects in our
portfolio. The Net Loss attributable to equity holders was US$27.1
million for FY 2019 and the loss per share was US cents 13.64
cents. A more detailed description of the financial performance of
our Company is outlined in the Financial Review section of this
Annual Report.
OUR ASSET DIVESTMENT PROGRAM
The Company has been in divestment mode for some time now. As
part of the process of expediting the divestment of the remaining
assets of ASPL, Ms Helen Siu Ming Wong was appointed to the Board
on 17 June 2019 and subsequently appointed Divestment Director with
a specific focus on selling the Company's remaining assets.
The Company had realized gross proceeds of US$250 Million since
it went into realisation mode in June 2015 but we had achieved
little or no progress in divesting the remaining 6 assets except
that in 2020 we received a Letter of Intent to purchase The RuMa
Hotel and in July we agreed the sale of two plots of development
land in Kota Kinabalu for approximately US$4 million in cash. Our
divestment efforts have unfortunately been impeded by the
increasingly difficult real estate market and economic conditions
in Malaysia and from February 2020, the regional lock down and
travel restrictions imposed by both Vietnam and Malaysia in their
efforts to combat the COVID-19 pandemic. Until that point in time,
there had been a lot of preliminary sales interest leading to
multiple signings of Non-Disclosure Agreements by prospective
buyers and several promising leads and negotiations had commenced
on more than one of our assets.
Although we continue to be in discussions with several potential
purchasers of our assets, many of the promising leads had been
halted by the lockdown and travel restrictions imposed as a result
of this pandemic. We are of course re-establishing communications
and negotiations with these parties and will intensify efforts now
that the said travel restrictions are lifted.
THE DEMERGER TRANSACTION
On 7 May 2020, our Company announced that the Board is
considering proposals to de-merge certain assets held by the
Company in exchange for the buyback and cancellation of a
significant percentage of the issued ordinary shares in the capital
of the Company (De-Merger). The De-Merger would involve buying back
shares owned by Ireka Corporation Berhad (Ireka) and its concert
party Legacy Essence Limited (Legacy) along with certain other
shareholders who in aggregate own approximately 50% of the
outstanding shares of the Company.
The consideration would be an in-specie distribution of certain
assets to the participating shareholders (principally The RuMa
Hotel & Residences in Kuala Lumpur) together with a balancing
cash payment from said shareholders to our Company. In addition,
adjustments will be made to reflect the settlement of potential
claims that our Company may have against Ireka or its group
companies in connection with various Company projects including the
settlement of amounts owing by a subsidiary of Ireka to our Company
relating to the development and construction of The RuMa Hotel and
Residences. Following the De-Merger, there will be a complete and
total separation of the interests of Ireka and Legacy from our
Company.
On 16 July 2020, our Company announced that a Share Buyback
Agreement (SBA) and a Global Settlement Agreement (GSA) have been
executed with Ireka and Legacy. A circular will soon be sent to our
shareholders and an EGM convened during August to seek approval for
the De-merger from those shareholders who are not seeking to
demerge from our company. It should be noted that the De-Merger
resolutions would require the passing of a special resolution of
Shareholder and the approval of 66.66% of the voting at the EGM.
The De-Merger is further conditional upon the approval of various
other parties including the shareholders of Ireka at their own EGM
which is yet to be convened and the bankers/ guarantors and holders
of Medium Term Notes to our Company. With the completion of the
De-Merger exercise, our Company would emerge leaner and fitter with
better cash flows and a significantly lower level of liabilities,
putting ourselves in a better position to survive these
unprecedented and perilous economic times. Critically it is the
strong belief of the Board that the De-Merger will result in our
Company achieving a stronger financial position and hence improved
negotiating power vis-à-vis potential purchasers of our remaining
assets.
While your Board remains cautiously optimistic that all
conditions precedent of the SBA and GSA will be met, it is
important for shareholders to note that there is no certainty that
the proposed De-Merger will be successfully completed as the
approval of several external parties is yet to be obtained.
ACKNOWLEDGEMENTS
After nearly 11 years as a Non-Executive and Independent
Director and a year as Chairman, I will be retiring from the Board
shortly. Nicholas John Paris, who re-joined the Board on 7 (th)
September 2019 will assume the role of Chairman upon my retirement.
It has been my privilege to serve our Company and its shareholders
throughout my tenure. These past months have been extremely
frustrating with our refocussed divestment efforts led by our new
Divestment Director, having been effectively forced into hiatus. It
is anticipated that once regional travel restrictions are lifted
and the De-Merger completed, our team will re-engage fully with the
various interested purchasers and the Divestment Program will once
again be of top priority.
I would like to take this opportunity to thank my colleagues on
the Board and in our Company and our external advisors and service
providers for their tireless efforts on behalf of the Company and
its shareholders. This has been the most challenging period in the
corporate life of our Company and the proposed De-Merger will mark
a major watershed point. Assuming that the resolutions are passed
and the conditions-precedent to the SBA and GSA are met, the
De-Merger will happen and our Company will undergo a significant
transformation for the better - leaner and with significantly
improved cash-flows. I continue to remain a shareholder of our
Company and have the utmost confidence in the Board to execute the
aforementioned divestment plans and to act in the best interests of
the shareholders of our Company.
Thank you.
Gerald Ong Chong Keng
Chairman
24 July 2020
PROPERTY PORTFOLIO AS AT 31 DECEMBER 2019
Project Type Effective Approximate
Ownership Gross
Floor Approximate
Area Land Area
(sq m) (sq m)
----------------------------- --------------------- ----------- ------------ ------------
Completed projects
----------------------------- --------------------- ----------- ------------ ------------
The RuMa Hotel and Luxury residential
Residences tower and bespoke
Kuala Lumpur, Malaysia hotel 70.0% 40,000 4,000
----------------------------- --------------------- ----------- ------------ ------------
Sandakan Harbour
Square Retail lots,
Sandakan, Sabah, hotel and retail
Malaysia mall 100.0% 126,000 48,000
----------------------------- --------------------- ----------- ------------ ------------
Phase 1: City International
Hospital, International
Healthcare Park,
Ho Chi Minh City, Private general
Vietnam hospital 72.4%* 48,000 25,000
----------------------------- --------------------- ----------- ------------ ------------
Undeveloped projects
----------------------------- --------------------- ----------- ------------ ------------
Other developments
in International
Healthcare Park,
Ho Chi Minh City, Commercial
Vietnam (formerly development
International Hi-Tech with healthcare
Healthcare Park) theme 72.4%* 972,000 351,000
----------------------------- --------------------- ----------- ------------ ------------
(i) Boutique
resort hotel
Kota Kinabalu Seafront and resort
resort & residences villas 100.0%
Kota Kinabalu, Sabah, (ii) Resort
Malaysia homes 80.0% n/a 327,000
----------------------------- --------------------- ----------- ------------ ------------
Divested projects
----------------------------- --------------------- ----------- ------------ ------------
SENI Mont' Kiara
Kuala Lumpur, Malaysia Luxury condominiums 100.0% 225,000 36,000
----------------------------- --------------------- ----------- ------------ ------------
Tiffani by i-ZEN
Kuala Lumpur, Malaysia Luxury condominiums 100.0% 81,000 15,000
----------------------------- --------------------- ----------- ------------ ------------
Office suites,
1 Mont' Kiara by office tower
i-ZEN and retail
Kuala Lumpur, Malaysia mall 100.0% 96,000 14,000
----------------------------- --------------------- ----------- ------------ ------------
Waterside Estates
Ho Chi Minh City, Villa and high-rise
Vietnam apartments 55.0% 94,000 57,000
----------------------------- --------------------- ----------- ------------ ------------
Kuala Lumpur Sentral
Office Towers & Office towers
Hotel and a business
Kuala Lumpur, Malaysia hotel 40.0% 107,000 8,000
----------------------------- --------------------- ----------- ------------ ------------
Business-class
Aloft Kuala Lumpur hotel
Sentral Hotel (a Starwood
Kuala Lumpur, Malaysia Hotel) 100.0% 28,000 5,000
----------------------------- --------------------- ----------- ------------ ------------
Listed equity investment Listed equity 6.9% n/a n/a
in Nam Long Investment investment
Corporation,
an established developer
in
Ho Chi Minh City,
Vietnam
----------------------------- --------------------- ----------- ------------ ------------
* - shareholding as at 31 December 2019
PERFORMANCE SUMMARY
Year ended Year ended
31 December 2019 31 December 2018
--------------------------------------- ------------------ ------------------
Total Returns since listing
Ordinary share price -52.77% -45.75%
FTSE All-share index 35.53% 10.30%
FTSE 350 Real Estate Index 19.30% -50.03%
One Year Returns
Ordinary share price -15.21% 2.36%
FTSE All-share index 23.92% -12.95%
FTSE 350 Real Estate Index 38.78% -17.49%
Capital Values
Total assets less current liabilities
(US$ million) 164.02 186.60
Net asset value per share (US$) 0.55 0.69
Ordinary share price (US$) 0.46 0.54
FTSE 350 Real Estate Index 602.06 468.71
Debt-to-equity ratio
Debt-to-equity ratio (1) 122.00% 90.82%
Net debt-to-equity ratio (2) 114.80% 81.54%
(Loss)/ Earnings Per Share
Earnings per ordinary share - basic
(US cents) -13.64 -2.46
- diluted (US cents) -13.64 -2.46
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 a consolidated comprehensive loss of US$29.4,
million for the financial year ended 31 December 2019 , largely due
to net realisable value adjustments of the Four Points by Sheraton
Sandakan Hotel and Harbour Mall Sandak an, and operating and
finance costs of City International Hospital, The RuMa Hotel &
Residences, Four Points by Sheraton Sandakan Hotel and Harbour Mall
Sandakan .
STATEMENT OF COMPREHENSIVE INCOME
The Group recognised revenue of US$9.7 million, compared to
US$33.1 million for the previous financial year. The revenue was
mainly attributable to the sale of completed units at SENI Mont'
Kiara and The RuMa Residences. In respect of the revenue from the
sale of The RuMa Hotel Suites, the Group also has a contractual
arrangement with the buyers for the leaseback of the hotel suites
to operate for the hotel operation. Under this sale and leaseback
arrangement, which prescribes that control of the hotel suites has
yet to be transferred to the buyers of the hotel suites. Hence,
revenue of US$39.3 million is deferred until such time that control
is passed to the buyers of the hotel suites.
The Group recorded a net loss before taxation of US$28.7 million
compared to a net loss before taxation of US$6.8 million for the
previous financial year. The loss was largely due to net realisable
value adjustments of the Four Points by Sheraton Sandakan Hotel and
Harbour Mall Sandakan, and operating and finance costs of its four
operating assets.
Net loss attributable to equity holders of the parent company
was US$27.1 million, compared to a net loss of US$4.9 million for
the previous financial year. Tax expenses for the year at US$1.3
million (2018: Tax income of US$0.4 million).
The consolidated comprehensive loss was US$29.4 million (2018:
US$7.5 million), which included a gain of US$0.6 million (2018:
loss of US$1.1 million) arising from foreign currency translation
differences for foreign operations due to a weakening of the US
Dollar against the Ringgit, during the year.
Basic and diluted loss per share were both US cents 13.64 (2018:
US cents 2.46).
STATEMENT OF FINANCIAL POSITION
Total assets were US$270.2 million, compared to US$307.5 million
for the previous year, representing a decrease of US$37.3 million.
This was mainly due to a decrease in inventories of US$28.2million,
mainly attributable to Four Points by Sheraton Sandakan Hotel and
Harbour Mall Sandakan with net realisable value adjustments on
goodwill and cost of acquisition in relation to both assets
totalling US$22.4million.
Total liabilities were US$164.4 million, compared to US$172.1
million for the previous year, representing a decrease of US$7.7
million. This was mainly due to a decrease of US$9.3 million in
trade and other payables.
Net Asset Value per share was US$ 0.55 (31 December 2018: US$
0.69).
CASH FLOW AND FUNDING
Cash flow from operations before interest and tax paid was
US$2.2 million, compared to cash flow from operation of US$1.9
million for the previous year.
The Group generated net cash flow of US$5.7 million from
investing activities, compared to US$1.1 million in the previous
year.
The borrowings of the Group undertakings were used to fund
property development projects and for working capital. As at 31
December 2019, the Group's gross borrowings stood at US$89.8
million (31 December 2018: US$85 million). Net debt-to-equity ratio
was 78% (31 December 2018: 53%).
Finance income was US$5.79 million for financial year ended 31
December 2019 (2018: US$1.24 million) and it included accrued
income of US$3.6m (2018: US$0 million). Finance costs were US$9.5
million (2018: US$7.0 million), which were mostly incurred by its
operating assets.
eventS after statement of financial position date
On 9 January 2020, the Company announced the resignation of Chan
Say Yeong as the Chief Executive Officer of the Company, with
effect from 17 January 2020. Mr. Chan is not a member of the Board.
Following this, his responsibilities were assumed by the Chairman
and the Board.
The Covid virus in early 2020 and the resulting movement
restrictions in Malaysia led to the closure of the Company's two
hotels in Kuala Lumpur and Sandakan and the partial closure of the
shopping mall in Sandakan. We are planning to re-open The RuMa
hotel in Kuala Lumpur on 28 August 2020 but are not currently
planning to re-open The Four Points Sheraton Hotel in Sandakan as
Marriott International, our hotel operator has terminated their
management agreement with us. This severely reduced revenues from
these assets whilst the Company continued to incur costs on them.
In addition, revenues at the Hospital in Ho Chi Minh City declined
as patients deferred non-urgent medical procedures fearing that
attendance at the hospital could expose them to the virus. The
impact of the movement restrictions and the reduced revenues on the
Company's operating assets will have affected the valuations of the
Company's property assets which are based on discounted cash flow
calculations. It is not possible to put an accurate figure to the
fall in the value. However, the Directors do believe that the value
can be increased in time once the assets are re-opened and revenue
can be built up again.
On 31 May 2020 we terminated the Services Agreement and also
terminated the staff secondment arrangements from Ireka to the
Company and have engaged a few staff directly to run our finances
and operations.
On 15 July 2020 we signed agreements to de-merge certain of our
assets in exchange for the buyback and cancellation of the shares
of those shareholders who wished to de-merge.
On 16 July 2020, we signed the Sale and Purchase Agreements for
the sale of two plots of land in Kota Kinabalu for approximately
US$4 million in cash.
DIVID
No dividend was declared or paid in the financial years 2019 and
2018.
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 has
been managed by the Board of Directors since the Development
Manager resigned as of 30 June 2019 and the Board are closely
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.
GERALD ONG CHONG KENG
Director
24 July 2020
CORPORATE SOCIAL RESPONSIBILITY ("CSR")
Aseana Properties is committed to making a positive difference
in the world, whether it is for the local community or whether it
is building a better working environment. The Company believes that
being socially and environmentally responsible is good for people,
the planet and for business. The following six core principles
define the essence of corporate citizenship for the Company.
Managing Corporate Responsibility
The Board of Directors at Aseana Properties has oversight
mechanisms, through corporate-level policies and standards to
ensure an effective CSR programme is delivered in the interest of
its employees, shareholders and the community at large. It is
determined to ensure that its CSR programme acts legally and
responsibly on all matters and that the highest ethical standards
are maintained. The Board recognises this as a key part of its
risk, management strategy to protect the reputation of Aseana
Properties and shareholders values are enhanced.
Employees
In the current changing economic environment, with competing
demands and stress, the welfare of employees is critical in order
to ensure they are productive, creative and innovative. This is
also in order to achieve the highest standard in the workplace. The
Board works hard to ensure that employees are treated fairly and
with dignity because it is the right thing to do and also to get
the best out of them.
Health and Safety
Aseana Properties considers Health and Safety to be important
because it protects the well-being of employees, visitors and
clients. Looking after Health and Safety makes good business sense
and the Company works hard to provide a healthy workplace
environment for its staff, contractors and visitors.
Some of the organized efforts and procedures for reducing
workplace accidents, risks and hazards, exposure to harmful
solutions include:
-- Paying particular attention to the regular maintenance of
equipment, plant and systems to ensure a safe working
environment.
-- Providing sufficient information, instruction, training and
supervision to enable all employees to avoid hazards and to
contribute positively to their own safety and safe performance at
work.
Stakeholders
Aseana Properties works collaboratively with its stakeholders to
improve services and to ensure client satisfaction. The Company is
committed to meaningful diaIogue and encourages stakeholder
participation through stakeholder events, roadshows, briefings,
conference calls and timely release of annual reports. Aseana
Properties also maintains an updated and informative website,
www.aseanaproperties.com that is accessible to stakeholders and
members of the public.
Environmental Management
Aseana Properties believes that any commitment to a more
environmentally sustainable world has to start at home, and to this
end, it challenges itself to work in an environmentally responsible
manner and to find new ways to reduce its carbon footprint. It also
works with consultants such as architects to look at how they can
be more environmentally friendly by incorporating natural elements
such as water, greenery, light and air into its projects.
Maintaining and sustaining local Malaysian heritage is the essence
of the RuMa Hotel so decorative elements like batik prints
throughout are recycled from a local batik factory. The Kelelai (a
type of bamboo) ornaments and ceiling panels at the pool area of
Level 6 are cultivated from a dying weaving art by Kelantanese
women.
The RuMa Hotel and Residences have both been separately awarded
the Green Building Index (GBI) Provisional Gold Rating having
successfully met all the GBI Criteria under each category for
Energy Efficiency, Indoor Environment Quality, Sustainable Site
Planning & Management, Materials & Resources, Water
Efficiency and Innovation. The GBI is Malaysia's industry
recognised green rating tool for buildings to promote
sustainability in the building industry.
Community
Aseana Properties understands the importance of community
engagement both for the communities themselves but also for giving
staff more meaningful experiences by tapping into their
professional skills and capabilities.
BOARD OF DIRECTORS
GERALD ONG CHONG KENG
NON-EXECUTIVE CHAIRMAN
Gerald Ong was appointed as Director (Non-Executive) of Aseana
Properties in September 2009 and assumed the role of Chairman with
effect from 1 June 2019. Gerald is Deputy Chairman and Executive
Director of PrimePartners Corporate Finance Group, has over 25
years of corporate finance related experience at various financial
institutions providing a wide variety of services from advisory,
M&A activities and fund raising exercises incorporating various
structures such as equity, equity-linked and derivative-enhanced
issues. In June 2007, he was appointed a Director of Metro Holdings
Limited which is listed on the Singapore Exchange Securities
Trading Limited.
Gerald has been granted The Institute of Banking and Finance
(IBF) - Distinguished Fellow status and is an alumnus of the
National University of Singapore, University of British Columbia
and Harvard Business School.
CHRISTOPHER HENRY LOVELL
NON-EXECUTIVE DIRECTOR
Christopher Henry Lovell was appointed as Director
(Non-Executive) of Aseana Properties in June 2019. Christopher was
first appointed as an independent non-executive director of Aseana
Properties in March 2007. He retired as a director at the 2018
Annual General Meeting as part of the Company's strategy to reduce
its ongoing costs and bring the size of the Board in line with the
objectives of the realisation process.
Christopher practised as an English Solicitor in Jersey between
1979 and 2008: he was a partner in the law firm Theodore Goddard
from 1983 until 1993 when he set up his own practice. In 2000, he
was one of the founding partners of Channel House Trustees Limited,
a Jersey regulated trust company which was acquired by Capita Group
plc in 2005. He was subsequently appointed as a director of
Capita's regulated trust company.
Christopher has acted as an independent non-executive director
for over 20 years and specialises in property holding groups. He is
personally registered with the Jersey Financial Services Commission
to act as a non-executive director.
HELEN WONG SIU MING
NON-EXECUTIVE DIRECTOR
Helen Wong Siu Ming was appointed as Director (Non-Executive) of
Aseana Properties in June 2019. Helen brings to Aseana Properties
over 27 years of financial and operational experience in the United
States and Asia. She is Chief Executive Officer and founder of
LAPIS Global Limited, a Hong Kong based investment management and
advisory firm. She was formerly the CEO of Cushman & Wakefield
Capital Asia where she established the Asia Investment Management
and Investment Banking platform.
In addition, Helen has held numerous executive positions
including Chief Operating Officer of Bravia Capital Hong Kong
Limited, Managing Director of IFIL Asia (renamed EXOR S.p.A), where
she was responsible for the Asian direct investment activities and
Chief Financial Officer of the listed investment vehicle, Pacific
Century Regional Developments Limited.
Helen also has extensive experience in infrastructure and
transport through her prior roles at the Provisional Airport
Authority, Hong Kong and the Port Authority of New York & New
Jersey.
MONICA LAI VOON HUEY
NON-EXECUTIVE NON-INDEPENT DIRECTOR
Monica Lai was appointed as Director (Non-Executive) of Aseana
Properties Limited in September 2019.
Monica Lai is the Group Deputy Managing Director of Ireka
Corporation Berhad, listed on the Main Board of Bursa Malaysia. She
graduated from City University, London with a Bachelor of Science
(Hons) Degree in Accountancy and Economics. Monica worked for EY
London and KPMG Hong Kong before joining Ireka in 1993. Her
professional qualifications include The Institute of Chartered
Accountants England & Wales, The Malaysian Institute of
Accountants and the Malaysian Institute of Taxation.
NICHOLAS JOHN PARIS
NON-EXECUTIVE NON-INDEPENT DIRECTOR
Nicholas (Nick) John Paris was appointed as Director
(Non-Executive) of Aseana Properties Limited in September 2019.
Nick is a director and portfolio manager for LIM Advisors
Limited, an Asian-focused investment management firm, headquartered
in Hong Kong. Based in London, he specialises in investing in
closed ended investment funds. He graduated from Newcastle
University with a Bachelor of Science (Hons) Degree in Agricultural
Economics. He is a fellow of the Institute of Chartered Accountants
England & Wales and a Chartered Alternative Investment Analyst.
He worked with Rothschild Asset Management from 1986 until 1994,
launching specialist investment products before becoming a
corporate adviser and broker in closed ended investment funds with
a particular focus on those investing in emerging markets. In this
role, between 1994 and 2001 he worked at Baring Securities,
Peregrine Securities and then Credit Lyonnais Asia Securities. Nick
then joined the hedge fund industry in a series of sales roles
before founding Purbeck Advisers in 2006, which is his own advisory
and sales business. He has been advising LIM on investing in Asian
closed end funds for ten years and is a director of their
London-based investment management subsidiary.
Nick is currently Managing Director of Myanmar Investments
International Limited (a fund investing in private equity in
Myanmar which is traded on the main market of the London Stock
Exchange) and he has previously been a non-executive director of
Aseana (22 June 2015 to 20 March 2019), Global Resources Investment
Trust plc (a fund investing in a diverse portfolio of primarily
small and mid-capitalisation natural resources and mining companies
which is traded on the main market of the London Stock Exchange),
RDL Realisation PLC (a London listed fund investing in US loan
platforms which is traded on the main market of the London Stock
Exchange), The India IT Fund Limited (a fund investing in Indian
software companies which was listed on the Channel Islands Stock
Exchange) and TAU Capital Plc (a fund investing in public and
private equity in Kazakhstan which was traded on AIM).
DIRECTORS' REPORT
The Directors present their report together with the audited
financial statements of Aseana Properties Limited (the "Company")
and its subsidiary undertakings (together with the "Group") for the
year ended 31 December 2019.
Principal Activities
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 assets in Malaysia
and Vietnam.
Business Review and Future Developments
The consolidated statement of comprehensive income for the year
is set out in this report. A review of the development and
performance of the business has been set out in the Chairman's
Statement, the Director's Review and the Financial Review
reports.
Objectives and Strategy
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.
At a general meeting of the Company held on 30 December 2019,
Shareholders again voted in favour of the Board's proposals to
continue with the Company's divestment investment policy 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. Shareholders also
supported the Board's recommendation to vote against the
Discontinuation Resolution proposed at the general meeting, in
order to allow a policy of orderly realisation of the Company's
assets over the period up to May 2021 in order to 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 May 2021, Shareholders will be provided with a further
opportunity to review the future of the Company, which would
include the option for shareholders to vote for the continuation of
the Company. The Board shall procure that, at a general meeting of
the Company, an ordinary resolution will be proposed to the effect
that the Company shall cease to continue as presently constituted.
If, at any such meeting, such resolution is passed, the Board shall
within four months of such meeting, convene a general meeting of
the Company at which a special resolution shall be proposed
requiring the Company to be wound up voluntarily. In connection
with, or at the same time as, the proposal that the Company be
wound up voluntarily the Board shall be entitled to make proposals
for the reconstruction of the Company.
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 Note 4 to the
financial statements.
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 regulations Changes in laws and regulations relating
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 and control Changes that cause the management 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 The COVID-19 virus led to movement controls
in both Malaysia and Vietnam from March
2020 onwards which affected our key properties
as our two hotels had to be closed, only
food operations were permissible at our
shopping mall and patient bookings at our
hospital decreased. There can be no certainty
as to how quickly operations at these properties
can be resumed and what overall effect
this will have on our revenues, costs and
valuations. Failure of the Company's accounting
system and disruption to the business,
or to that of 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 Company or third
party service providers could lead to a
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.
Results and Dividends
The results for the year ended 31 December 2019 are set out in
the attached financial statements.
No dividends were declared nor paid during the financial year
under review.
Share Capital
No shares were issued in 2019. Further details on share capital
are stated in Note 24 to the financial statements.
Directors
The following were Directors of Aseana who held office
throughout the financial year and up to the date of this
report:
-- Gerald Ong Chong Keng - Chairman
-- Monica Lai Voon Huey
-- Christopher Henry Lovell
-- Nicholas John Paris
-- Helen Wong Siu Ming
On 31 May 2019, Mohammed Azlan Hashim resigned as Board Chairman
of Aseana and Gerald Ong assumed the role with effect from 1 June
2019. The Company also appointed Christopher Henry Lovell and Helen
Siu Ming Wong as non-executive Director, with effect from 1 June
2019 and 17 June 2019 respectively. On 17 June 2019, the Company
announced the appointment of Richard Boleat as a non-executive
Director with immediate effect. On 9 September 2019, the Company
further announced the resignation of Richard Boleat and Ferheen
Mahomed as non-executive Directors with effect from 5 and 7
September 2019 respectively. On the same day, the Company announced
that Monica Lai and Nicholas Paris have been appointed as
non-independent and non-executive Directors with effect from 7
September 2019.
Directors' Interests
The interests of the directors in the Company's shares as at 31
December 2019 and as at the date of this report were as
follows:
DIRECTOR ORDINARY SHARES OF US$0.05 EACH
As at 31 Dec 2019 As at 30 June 2020
Gerald Ong Chong Keng 2,108,467 2,108,467
Nicholas John Paris 36,654,192 36,654,192
Christopher Henry Lovell 48,000 48,000
Monica Lai Voon Huey 82,465,876 82,465,876
Notes: Nicholas Paris is associated with the holdings of clients
of LIM Advisors Limited. Monica Lai is associated with the holdings
of Ireka Corporation Berhad and Legacy Essence Limited.
None of the other directors in office at the end of the
financial year had any interest in shares in the Company during the
financial year.
Management
The Board had contractually delegated the development management
of the property development portfolio to Ireka Development
Management Sdn. Bhd. (the "Development Manager" or "IDM"). The
Development Manager is a wholly-owned subsidiary of Ireka
Corporation Berhad, a company listed on Bursa Malaysia since 1993
which has 52 years of experience in construction and property
development. Under the management contract, the Development Manager
was principally responsible for, inter alia, implementing the real
estate strategy for the Company, engaging, managing and
coordinating third parties in relation to the development and
management of properties to be acquired and lead the negotiation
for the acquisition or disposal of assets and the financing of such
assets.
On 22 March 2019, the Company announced that IDM had, on 21
March 2019, submitted a notice to terminate its appointment under
the Management Agreement. IDM's resignation was subject to a three
month notice period to enable the orderly transition of operations
currently carried out by IDM to the Company itself or to third
parties. IDM eventually ceased to act as the Development Manager on
30 June 2019.
Following the termination of the Development Manager, the Board
decided to internalise the management of the Company. The Board
identified and appointed a Chief Executive Officer to strengthen
the capability and capacity of the Board to oversee and manage the
operations of the Company. Certain IDM employees were seconded to
the Company to assist with the operation of the assets, and certain
services were out-sourced to IDM to carry out the day-to-day
administration of the Company. Helen Wong was nominated as the
Divestment Director with a specific focus to sell the Company's
remaining assets, in line with its Divestment Investment Policy.
Following the resignation of the Chief Executive Office on 17
January 2020, all of his responsibilities were assumed by the
Chairman and the Board.
Substantial Shareholders
The Board was aware of the following direct and indirect
interests comprising a significant amount of more than 3% issued
share capital of the Company at the latest practicable date before
the publication of this Report at 20 March 2020:
NUMBER OF ORDINARY PERCENTAGE OF
SHARES HELD ISSUED SHARE CAPITAL
Ireka Corporation Berhad. 45,837,504 23.07%
Legacy Essence Limited and its
related parties 36,628,282 18.43%
LIM Advisors 36,654,192 18.45%
SIX SIS 18,366,118 9.24%
Progressive Capital Partners 14,393,372 7.24%
Dr. Thong Kok Cheong 12,775,532 6.43%
Credit Suisse 12,024,891 6.05%
Employees
The Company had no executive Directors or employees during the
year. The subsidiaries of the Group had a total of 887 employees as
at 31 December 2019, of which 179, 459 and 232 were employed by
Four Points Sheraton Hotel and Harbour Mall in Sandakan, City
International Hospital in Ho Chi Minh and The RuMa Hotel and
Residences in Kuala Lumpur respectively and 17 were seconded from
Ireka Corporation Berhad. On 31 May 2020 we terminated the Services
Agreement and also terminated the staff secondment arrangements
from Ireka to the Company and have engaged a few staff directly to
run our finances and operations.
going concern
To the extent that the Group has not disposed of all of its
assets by May 2021, shareholders will be provided a further
opportunity to review the future of the Group, which would include
the option for shareholders to vote for the continuation of the
Company. The Board shall procure that, at a general meeting of the
Company to be held in May 2021, an ordinary resolution will be
proposed to the effect that the Company shall cease to continue as
presently constituted. If at such meeting, such resolution is
passed, the Board shall, within four months of such meeting,
convene a general meeting of the Company at which a special
resolution shall be proposed requiring the Company to be wound up
voluntarily. In connection with, or at the same time as, the
proposal that the Company be wound up voluntarily the Board shall
be entitled to make proposals for the reconstruction of the
Company. Until then, the Company will continue to seek to dispose
of its assets in a measured manner.
The outcome of the discontinuation vote would be uncertain and
may impact on the going concern status of the Group. These
conditions indicate the existence of a material uncertainty which
may cast significant doubt about the Group and the Company's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the Group and
Company were unable to continue as a going concern.
As disclosed in note 2.1 to the financial statements, it refers
to the assumptions made by the Directors including the uncertainty
regarding the De-Merger transaction and the divestment of certain
assets will be completed as planned and the loans and borrowing can
be discharged in a timely manner when concluding that it remains
appropriate to prepare the financial statements on the going
concern basis.
Creditors Payment Policy
The Group's operating companies are responsible for agreeing on
the terms and conditions under which business transactions with
their suppliers are conducted. It is the Group's policy that
payments to suppliers are made in accordance with all relevant
terms and conditions. Trade creditors at 31 December 2019 amounted
to 199 days (2018: 69 days) of property development cost incurred
during the year.
Financial Instruments
The Group's principal financial instruments comprise cash
balances, balances with related parties, other payables,
receivables and loans and borrowings that arise in the normal
course of business. The Group's Financial and Capital Risk
Management Objectives and Policies are set out in Note 4 to the
financial statements.
Directors' Liabilities
Subject to the conditions set out in the Companies (Jersey) Law
1991 (as amended), the Company has arranged appropriate Directors'
and Officers' liability insurance to indemnify the Directors
against liability in respect of proceedings brought by third
parties. Such provisions remain in force at the date of this
report.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations. Companies (Jersey) Law 1991 requires the Directors to
prepare financial statements for each financial year. Under that
law the Directors are required to prepare the financial statements
in accordance with International Financial Reporting Standards as
adopted by European Union ("IFRSs").
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and of the profit or loss
of the Group for that year. In preparing these financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- ensure that the financial statements comply with IFRSs; and
-- prepare the financial statements on the going concern basis,
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and to enable them to ensure that
the financial statements comply with the Companies (Jersey) Law
1991. The Directors are also responsible for safeguarding the
assets of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are also responsible for the maintenance and
integrity of the Company's website on the internet. However,
information is accessible in many different countries where
legislation governing the preparation and dissemination of
financial statements may differ from that applicable in the United
Kingdom and Jersey.
The Directors of the Company confirm that to the best of their
knowledge that:
-- the financial statements have been prepared in accordance
with International Financial Reporting Standards, including
International Accounting Standards and Interpretations adopted by
the International Accounting Standards Board, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Group; and
-- the sections of this Report, including the Chairman's
Statement, Director'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.
Disclosure of Information to Auditor
So far as each person who was a Director at the date of
approving this report is aware, there is no relevant audit
information, being information needed by the auditor in connection
with preparing its report, of which the auditor is unaware. Having
made enquiries of fellow Directors, each Director has taken all the
steps that he is obliged to take as a Director in order to have
made himself aware of any relevant audit information and to
establish that the auditor is aware of that information.
Re-appointment of Auditor
The auditor, Crowe U.K. LLP, has expressed their willingness to
continue in office. A resolution proposing their re-appointment
will be tabled at the forthcoming Annual General Meeting.
Board Committees
Information on the Audit Committee and Nomination &
Remuneration Committee is included in the Corporate Governance
section of the Annual Report.
Annual General Meeting
The tabling of the 2019 Annual Report and Financial Statements
to shareholders will be at an Annual General Meeting ("AGM") to be
held on 18 August 2020.
During the AGM, investors will be given the opportunity to
question the board and to meet with them thereafter. They will be
encouraged to participate in the meeting.
On behalf of the Board
GERALD ONG CHONG KENG
Director
24 July 2020
REPORT OF DIRECTORS' REMUNERATION
Directors' Emoluments
The Company has no executive Directors or employees. The
Nomination & Remuneration Committee ("NRC") of the Board of
Directors is responsible for setting the framework and reviewing
compensation arrangements for all non-executive Directors before
recommending the same to the Board for approval. The NRC assesses
the appropriateness of the emoluments on an annual basis by
reference to comparable market conditions with the overall
objective of ensuring maximum stakeholder benefit from the
retention of a high calibre Board.
During the year, the Directors received the following emoluments
in the form of fees from the Company:
Year ended Year ended
31 December 2019 31 December 2018
Directors (US$) (US$)
------------------------------------ ------------------ ------------------
Gerald Ong Chong Keng
(Chairman of the Board)(1, 2) 53,288 36,000
Mohammed Azlan Hashim(1) 21,875 52,500
Helen Wong Siu Ming(2) 40,197 -
(Chairman of the Audit Committee)
Christopher Henry Lovell(3) 28,142 20,624
Nicholas John Paris(4) 15,255 -
Monica Lai Voon Huey(5) 15,255 -
Richard Michael Boleat(6) 12,033 -
Ferheen Mahomed(7) - -
David Harris - 18,000
John Lynton Jones - 18,000
Total 186,045 145,124
------------------------------------ ------------------ ------------------
(1) Mohammed Azlan Hashim was Chairman of the Board before
his resignation on 31 May 2019.
Gerald Ong Chong Keng was appointed Chairman of the Board
w.e.f. 1 June 2019.
(2) Gerald Ong Chong Keng was Chairman of the Audit Committee.
Helen Wong Siu Ming was appointed Chairman of the Audit
Committee w.e.f. 7 September 2019.
(3) Christopher Henry Lovell resigned on 2 July 2018 and was
re-appointed on 1 June 2019.
(4) Nicholas John Paris resigned on 19 March 2019 and was
re-appointed on 7 September 2019.
(5) Monica Lai Voon Huey was appointed on 7 September 2019.
(6) Richard Michael Boleat was appointed on 17 June 2019 and
resigned on 5 September 2019.
(7) Ferheen Mahomed has waived her entitlement for director's
fee since her appointment in 2015 and she resigned on
7 September 2019
Share Options
The Company did not operate any share option schemes during the
years ended 31 December 2019 and 2018.
Share Price Information
-- High for the year - US$0.54
-- Low for the year - US$0.46
-- Close for the year - US$0.46
Pension SchemeS
In view of the non-executive nature of the directorships, no
pension schemes exist in the Company.
Service Contracts
In view of the non-executive nature of the directorships, there
are no service contracts in existence between the Company and any
of the Directors. Each Director was appointed by a letter of
appointment that states his appointment subject to the Articles of
Association of the Company which set out the main terms of his
appointment.
CHRISTOPHER LOVELL
Chairman of the Nomination & Remuneration Committee
24 July 2020
CORPORATE GOVERNANCE STATEMENT
The Financial Conduct Authority requires all companies with a
Premium Listing to comply with The UK Corporate Governance Code
(the "Code"). Aseana Properties is a Jersey incorporated company
with a Standard Listing on the UK Listing Authority's Official List
and is therefore not subject to the Code. The following explains
how the principles of governance are applied to the Company.
THE BOARD
The Company currently has a Board of five non-executive
directors, including the non-executive Chairman.
The brief biographies of the following Directors appear in this
report:
-- Gerald Ong Chong Keng (Non-Executive Chairman)
-- Monica Lai Voon Huey
-- Christopher Lovell
-- Nicholas John Paris
-- Helen Wong Siu Ming
Nicholas John Paris resigned as a non -- executive Director on
19 March 2019. Mohammad Azlan Hashim resigned as non-executive
Chairman on 31 May 2019. Christopher Lovell was re-appointed as a
non-executive Director on 1 June 2019. Richard Boleat and Helen
Wong were appointed as non-executive Directors on 17 June 2019.
Richard Boleat and Ferheen Mahomed resigned as non-executive
Directors and Monica Lai and Nicholas Paris were appointed as
non-executive Directors on 7 September 2019.
The Board did not appoint a Chief Executive or a Senior
Independent Director from its incorporation as it did not consider
it appropriate given the nature of the Company's business and that
the Company's property portfolio was externally managed by Ireka
Development Management Sdn. Bhd. (the "Development Manager"). On 21
March 2019, the Development Manager submitted a notice to terminate
its appointment under the Management Agreement. The termination was
subject to a three (3)-month notice period. Following the notice of
termination, the Development Manager indicated that it would be
prepared to work with the Board to facilitate a smooth and orderly
transition of the operations of Aseana Properties, currently
carried out by the Development Manager, to Aseana Properties itself
or to third parties. The Board decided to self-manage the
operations of Aseana Properties, and also nominated Helen Wong as
the Divestment Director to lead the orderly disposal of the
assets.
Role of the Board of Directors
The Board's role is to provide entrepreneurial leadership to the
Company, within a framework of prudent and effective controls,
enabling risks to be assessed and managed. The Board sets the
Company's strategic objectives, monitors and reviews the Company's
operational and financial performance, ensures the Company has
sufficient funding, and examines and approves disposal of the
Company's assets in a controlled, orderly and timely manner. The
Board also sets the Company's values and standards and ensures that
its obligations to its shareholders and other stakeholders are met.
The implementation of the Company's strategy was delegated to the
Development Manager and its performance was regularly assessed by
the Board.
Appropriate level of directors' and officers' liability
insurance is maintained by the Company.
Meetings of the Board of Directors
The Board meets at least four (4) times a year and at such other
times as the Chairman shall require. During the year ended 31
December 2019, the Board met twelve (12) times and their respective
attendance are as follows:
Name of Directors Attendance
Gerald Ong Chong Keng 12/12
Helen Wong Siu Ming (appointed w.e.f. 17
June 2019) 6/6
Christopher Henry Lovell (appointed w.e.f.
1 June 2019) 6/6
Nicholas John Paris (reappointed w.e.f.
7 September 2019) 3/3
Monica Lai Voon Huey (appointed w.e.f.
7 September 2019) 2/2
Mohammed Azlan Hashim (resigned w.e.f.
31 May 2019) 5/6
Ferheen Mahomed (resigned w.e.f. 7 September
2019) 8/10
Richard Michael Boleat (appointed w.e.f.
17 June 2019 and resigned w.e.f. 5 September
2019) 3/3
To enable the Board to discharge its duties effectively, all
Directors receive accurate, timely and clear information, in an
appropriate form and quality, including Board papers distributed in
advance of Board meetings. The Board periodically will receive
presentations at Board meetings relating to the Company's business
and operations, significant financial, accounting and risk
management issues. All Directors have access to the advice and
services of the Company Secretary and advisers, who are responsible
to the Board on matters of corporate governance, board procedures
and regulatory compliance.
Board Balance and Independence
Following the resignation of our Development Manager as of 30
June 2019, ASEANA has been a self-managed company. The Board
consists solely of non-executive directors of which Gerald Ong is
the non-executive Chairman. Notwithstanding that Ferheen Mahomed
and following her resignation, Monica Lai are the representatives
of Legacy Essence Limited and Nicholas Paris is the representative
of LIM Advisors Limited, and they were therefore classified as
Non-Independent Non-Executive Directors of the Company, the Board
considers the majority of Directors to be independent, being
independent of management and also having no business relationships
which could interfere materially with the exercise of their
judgement.
The Chairman is responsible for leadership of the Board,
ensuring effectiveness in all aspects of its role and setting its
agenda. Matters referred to the Board are considered by the Board
as a whole and no individual has unrestricted powers of decision.
Together, the Directors bring a wide range of experience and
expertise in business, law, finance and accountancy, which are
required to successfully direct and supervise the business
activities of the Company.
Performance Appraisal
The Board undertakes an annual evaluation of its own performance
and that of its Committees and individual Directors. In November
2019, the evaluation concluded that the performance of the Board,
its Committees and each individual Director was and remains
effective and that all Directors demonstrate full commitment in
their respective roles. The Directors are encouraged to continually
attend training courses at the Company's expense to enhance their
skills and knowledge in matters that are relevant to their role on
the Board. The Directors also receive updates on developments of
corporate governance, the state of economy, management strategies
and practices, laws and regulations, to enable effective
functioning of their roles as Directors.
Re-election of Directors
The Company's Articles of Association states that all Directors
shall submit themselves for election at the first opportunity after
their appointment, and shall not remain in office for longer than
three years since their last election or re-election without
submitting themselves for re-election. At the Annual General
Meeting held on 8 July 2019, Ferheen Mahomed and Gerald Ong retired
by rotation and offered themselves for re-election and Richard
Boleat, Christopher Lovell and Helen Wong having recently been
appointed offered themselves for re-election by the shareholders.
All of these Directors were re-elected at the AGM.
At the forthcoming Annual General Meeting, Monica Lai and
Nicholas Paris will be offering themselves for re-election having
recently been appointed and Christopher Lovell will be retiring by
rotation and offering himself for re-election.
Board Committees
The Board has established Audit and Nomination &
Remuneration which deal with specific aspects of the Company's
affairs, each of which has written terms of reference which are
reviewed annually. Necessary recommendations are then made to the
Board for its consideration and decision-making. No one, other than
the committee chairman and members of the relevant committee, is
entitled to be present at a meeting of board committees, but others
may attend at the invitation of the board committees for presenting
information concerning their areas of responsibility. Copies of the
terms of reference are kept by the Company Secretary and are
available on request at the Company's registered office at 12
Castle Street, St. Helier, Jersey, JE2 3RT, Channel Islands.
Audit Committee
The Audit Committee consists of three members and is currently
chaired by Helen Wong, who replaces Gerald Ong following his
elevation to Chairman of the Board during the year. The other
members are Christopher Lovell and Nicholas Paris. The Committee
members have no links with the Company's external auditor and Helen
Wong and Christopher Lovell are independent Directors. The Board
considers that collectively the Audit Committee has sufficient
recent and relevant financial experience with the ability to
discharge its duties properly, through extensive service on the
Boards and Audit Committees of other listed companies.
Meetings of THE AUDIT COMMITTEE
The Committee meets at least twice a year and at such other
times as the Chairman of the Audit Committee shall require. Any
member of the Audit Committee or the auditor may request a meeting
if they consider that one is necessary. The Committee met four (4)
times during the year and their respective attendance are as
follows:
Name Attendance
Helen Wong Siu Ming 2/2
Christopher Henry Lovell 2/2
Nicholas John Paris 2/2
Gerald Ong Chong Keng 3/3
Mohammed Azlan Hashim 2/2
Richard Michael Boleat 1/1
Representatives of the auditor may attend by invitation.
The Committee is responsible for:
-- monitoring, in discussion with the auditor, the integrity of
the financial statements of the Company, any formal announcements
relating to the Company's financial performance and reviewing
significant financial reporting judgements contained in them;
-- reviewing the Company's internal financial controls and risk management systems;
-- making recommendations to the Board in relation to the
appointment, re-appointment and removal of the external auditor and
approving the remuneration and terms of engagement of the external
auditor to be put to the shareholders for their approval in general
meetings;
-- reviewing and monitoring the external auditor's independence
and objectivity and effectiveness of the audit process, taking into
consideration relevant UK professional and regulatory
requirements;
-- developing and implementing policy on engagement of the
external auditor to supply non-audit services; and
-- reporting to the Board any matters in respect of which it
considers that action or improvement is needed and making
recommendations as to the steps to be taken.
Since the start of the financial year ended 31 December 2019,
the Audit Committee performed its duties as set out in the terms of
reference. The main activities carried out by the Audit Committee
encompassed the following:
-- reviewing the audit plan with the Group's Auditor;
-- reviewing and discussing the Audit Committee Report with the Group's Auditor;
-- reviewing the draft Audited Financial Statements as contained
in the draft Annual Report together with the Group's Auditor before
tabling to the Board for consideration and approval;
-- reviewing other published financial information including the
half year results and results announcements before tabling to the
Board for consideration and approval;
-- considering the independence of the auditor; and
-- reviewing the auditor's performance and made a recommendation
for the reappointment of the Group's auditor by shareholders.
Nomination & REMUNERATION Committee
The Nomination & Remuneration Committee is chaired by
Christopher Lovell. The other committee members are Monica Lai and
Helen Wong. The Committee meets annually and at any such times as
the Chairman of the Nomination & Remuneration Committee shall
require. The Committee met once during the year and the meeting was
attended by all committee members and other Board members at the
invitation of the Nomination & Remuneration Committee.
During the year ended 31 December 2019, the Nomination &
Remuneration Committee carried out its functions as set out in its
terms of reference which are summarised below:
-- regularly reviewing the structure, size and composition
(including skills, knowledge and experience) of the Board and
making recommendations to the Board with regard to any change;
-- considering the re-appointment or re-election of any
Directors at the conclusion of their specified term of office or
retiring in accordance with the Company's Articles of
Association;
-- identifying and nominating for the approval of the Board,
candidates to fill Board vacancies as and when they arise;
-- considering any matter relating to the continuation in office
of any Director at any time;
-- determining and agreeing with the Board the framework for the
remuneration of the Directors; and
-- setting the remuneration for all Directors.
Financial Reporting
The Board aims to present a fair, balanced and understandable
assessment of the Company's position and prospects in all reports
to shareholders, investors and regulatory authorities. This
assessment is primarily provided in the half-yearly report and the
Annual Report through the Chairman's Statement, Financial Review
Statement and Directors' Report.
The Audit Committee has reviewed the significant reporting
issues and judgements made in connection with the preparation of
the Group's financial statements including significant accounting
policies, significant estimates and judgements. The Audit Committee
has also reviewed the clarity, appropriateness and completeness of
disclosures in the financial statements.
Internal Audit
The Board has confirmed that the systems and procedures
employed, provide sufficient assurance that a sound system of risk
management and internal control is maintained. An internal audit
function specific to the Company is therefore considered not
necessary. However, the Directors will continue to monitor if such
need is required.
Auditor
The Audit Committee's responsibilities include monitoring and
reviewing the performance and independence of the Company's
Auditor, Crowe U.K. LLP who had been appointed in December
2018.
Pursuant to audit and ethical standards, the auditor is required
to assess and confirm to the Board their independence, integrity
and objectivity. The Auditor had carried out this assessment and
considered themselves to be independent, objective and in
compliance with the Ethical Standard for Auditors published by the
UK Financial Reporting Council and the Code of Ethics issued by the
Institute of Chartered Accountants in England and Wales.
RISK MANAGEMENT AND Internal Control
The Board is responsible for the effectiveness of the Company's
risk management and internal control systems and is supplied with
information to enable it to discharge its duties. Such systems are
designed to meet the particular needs of the Company and to manage
rather than eliminate the risk of failure to meet business
objectives and can only provide reasonable, and not absolute,
assurance against material misstatement or loss.
During the year, the Board discharged its responsibility for
risk management and internal control through the following key
procedures:
-- clearly defined delegation of responsibilities to employees
of the Company, including authorisation levels for all aspects of
the business;
-- regular and comprehensive information provided to the Board
covering financial performance and key business indicators;
-- a detailed system of budgeting, planning and reporting which
is approved by the Board and monitoring of results against budget
with variances being followed up and action taken, where necessary;
and
-- regular visits to operating units and projects by the Board.
The Board has established frameworks, policies and procedures to
comply with the requirement of the Bribery Act 2010 (the "Bribery
Act") and Market Abuse Regulation ("MAR"). In respect of the
former, the Development Manager had set up a legal and compliance
function for the purposes of implementing the anti-corruption and
anti-bribery policy. Training and briefing sessions were conducted
for the senior management and employees. Compliance reviews are
carried out as and when required to ensure the effectiveness of the
policy. In respect of dealing by employees and Directors of the
Company, the Company has a Dealing Code which imposes restrictions
on dealings in its securities by Persons Discharging Managerial
Responsibilities ("PDMR") and certain employees who have been told
the clearance procedures apply to them. The Company also has a
Group-Wide Dealing Policy and a Dealing Procedures Manual. These
policies have been designed to ensure that the PDMR and other
employees of the Company and its subsidiaries do not misuse or
place themselves under suspicion of misusing information about the
Group which they have and which is not public.
Relationship with Shareholders
The Board is committed to maintaining good communications with
shareholders and has designated the Chairman and designated members
of its senior management as the principal spokespersons with
investors, analysts, fund managers, the press and other interested
parties. The Board is informed of material information provided to
shareholders and is advised on their feedback. The Board has also
developed an understanding of the views of major shareholders about
the Company through meetings and teleconferences conducted by the
financial adviser. In addition, the Company seeks to regularly
update shareholders through stock exchange announcements, press
releases and participation in roadshows.
To promote effective communication, the Company has a website,
www.aseanaproperties.com through which shareholders and investors
can access relevant information.
Annual General Meeting ("AGM")
The AGM is the principal forum for dialogue with shareholders.
At and after the AGM, investors are given the opportunity to
question the Board and seek clarification on the business and
affairs of the Group. All Directors attended the 2019 AGM, held on
8 July 2019 at the Company's registered office.
Notices of the AGM and related papers are sent out to
shareholders in good time to allow for full consideration prior to
the AGM. Each item of special business included is accompanied by
an explanation of the purpose and effect of a proposed resolution.
The Chairman declares the number of votes received for, against and
withheld in respect of each resolution after the shareholders and
proxies present have voted on each resolution. An announcement
confirming whether all the resolutions have been passed at the AGM
is made through the London Stock Exchange.
On behalf of the Board
GERALD ONG CHONG KENG
Director
24 July 2020
AUDITOR'S REPORT
Opinion
We have audited the financial statements of Aseana Properties
Limited and its subsidiaries (the "Group") for the year ended 31
December 2019, which comprise:
-- the Group statement of comprehensive income for the year ended 31 December 2019;
-- the Group statement of financial position as at 31 December 2019;
-- the Group statement of changes in equity for the year then ended;
-- the Group statement of cashflows for the year then ended; and
-- the notes to the financial statements, including a summary of
significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
-- give a true and fair view of the state of the Group's affairs
as at 31 December 2019 and of its loss for the year then ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to notes 2.1 and 2.1.1 in the financial
statements.
As described in Note 2.1 the Group holds loans and borrowings
along with medium term notes which are due for repayment in the
next 12 months. The settlement of these amounts is dependent upon
the sales of the remaining assets, this includes those which would
be transferred as part of the proposed De-Merger transaction. There
is no certainty the De-Merger transaction and the divestment of
certain assets will be completed, as planned, and that therefore
the loans and borrowings can be discharged in accordance with the
repayment terms and may impact on the going concern status of the
Group.
Note 2.1.1 is concerning the general meeting (the
'Discontinuation Resolution') of the Company to be held if the
Group has not disposed of all of its assets by May 2021.
Shareholders will be provided an opportunity to review the future
of the Group, which would include the option for shareholders to
vote for the continuation of the Company. The Board shall procure
that, at a general meeting of the Company to be held in May 2021,
an ordinary resolution will be proposed to the effect that the
Company shall cease to continue as presently constituted. If at the
meeting this resolution is passed the Board shall, within four
months of such meeting, convene a general meeting of the Company at
which a special resolution shall be proposed requiring the Company
to be wound up voluntarily. The outcome of the discontinuation vote
would be uncertain and may impact on the going concern status of
the Group.
The matters explained in notes 2.1 and 2.1.1 indicate the
existence of a material uncertainty which may cast significant
doubt about the Group's ability to continue as a going concern. The
financial statements do not include the adjustments that would
result if the Group were unable to continue as a going concern. Our
opinion is not modified in respect of this matter.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of
materiality. An item is considered material if it could reasonably
be expected to change the economic decisions of a user of the
financial statements. We used the concept of materiality to both
focus our testing and to evaluate the impact of misstatements
identified.
Based on our professional judgement, we determined overall
materiality for the financial statements as a whole to be
US$2,800,000 (2018 US$3,500,000), based on 1.06% (2018 1.15%) of
the Group's total assets which we have considered to be the
appropriate benchmark for a property development company.
We use a different level of materiality ('performance
materiality') to determine the extent of our testing for the audit
of the financial statements. Performance materiality is set based
on the audit materiality as adjusted for the judgements made as to
the entity risk and our evaluation of the specific risk of each
audit area having regard to the internal control environment.
Where considered appropriate performance materiality may be
reduced to a lower level, such as, for related party transactions
and directors' remuneration.
We agreed with the Audit Committee to report to it all
identified errors in excess of US$85,000 (2018: US$105,000). Errors
below that threshold would also be reported to it if, in our
opinion as auditor, disclosure was required on qualitative
grounds.
Overview of the scope of our audit
We carried out a full scope audit. Our audit approach was
developed by obtaining an understanding of the Group's activities
and the overall control environment. Based on this understanding we
assessed those aspects of the Group's transactions and balances
which were most likely to give rise to a material misstatement.
As part of designing our audit, we determine materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made
subjective judgements, for example in respect of the valuation of
inventories which a high level of estimation uncertainty is
involved in determining its net realisable value.
Whilst the Group's accounting is centralised in Kuala Lumpur,
Malaysia, the main activities of the Group are accounted for from
two operating locations in Malaysia and Vietnam.
In establishing out overall approach to the Group audit, we
determined the type of work that needed to be undertaken at each of
the components by us, as the primary audit engagement team. For the
full scope components in Malaysia and Vietnam, where the work was
performed by member firms of the Crowe Global network, we
determined the appropriate level of involvement to enable us to
determine that sufficient audit evidence had been obtained as a
basis for our opinion on the Group as a whole. We issued
instructions to the component auditors which included details of
the significant areas to be covered, including the key audit
matters detailed below, and the information required to be reported
back. We reviewed the audit work performed by the component
auditors, communicated our findings therefrom and any further work
required by us was then performed by the component auditor.
The primary team led by the senior statutory auditor was
ultimately responsible for the scope and direction of the audit
process. This, together with the additional procedures performed at
Group level, gave us appropriate evidence for our opinion on the
Group financial statements.
We designed out audit procedures to respond to the risk,
recognising that the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion.
We focused on laws and regulations that could give rise to a
material misstatement in the financial statements. Our tests
included, but were not limited to:
-- Agreement of the financial statement disclosures to underlying supporting documentation;
-- Enquiries of management;
-- Review of minutes of board meetings throughout the period
-- Considering the effectiveness of control environment in
monitoring compliance with laws and regulations.
There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we would become aware of it.
As in all of our audits we also addressed the risk of management
override of internal controls, including testing journals and
evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
In addition to the matter described in the "Material uncertainty
related to going concern", we have determined the following key
audit matter and this is not a complete list of all risks
identified by our audit.
Key audit matter How the scope of our audit addressed
the key audit matter
==================================== =================================================================
Carrying value of inventory The Group uses external valuers to
The Group's inventories comprise provide a valuation of their inventories
land held for property development to support the Group's assessment
and stock of completed units. of net realisable value ("NRV").
At 31 December 2019, the carrying We focused on this area due to the
value of inventories were significance of the carrying value
US$238.8 million. of the assets, the risk of impairment
was considered likely to be highly
sensitive to assumptions and estimates
about the forecast occupancy rate,
average daily room rates, average
rent rates, capitalisation rate and
discount rate, as described in Note
21.
We evaluated management's NRV assessment
for the Group's inventories. To assist
with this we have appointed our own
expert in assessing and challenge
the assumptions used by management's
valuers. Our procedures included:
* assessing the competence and capabilities of the
valuers and verified their qualifications;
* tested average rent rate and daily room rate
assumptions by comparing to the latest market
evidence available and benchmarking the rate to the
risks faced by the Group or risk exposed to the
property developments;
* tested forecast cash flows by comparing the
assumptions used within the cash flow projection
models. We assessed the historical accuracy of
management's budgets and forecasts by comparing them
to actual performance; and
* Discussions were held with the Group's valuers and
management to determine whether the valuation
methodologies used are appropriate and acceptable
within real estate sector.
We tested significant property development
expenditure and capitalised borrowing
costs incurred during the year to
supporting documents.
Evaluated the adequacy of the financial
statement disclosures in relation
to management's NRV assessment.
==================================== =================================================================
Our audit procedures in relation to these matters were designed
in the context of our audit opinion as a whole. They were not
designed to enable us to express an opinion on these matters
individually and we express no such opinion.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon. In connection with our audit of the
financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this
regard.
Matters on which we are required to report by exception
We have nothing to report to you in respect of the following
matters where the Companies (Jersey) Law 1991 requires us to report
to you if, in our opinion:
-- proper accounting records have not been kept by the Group, or
proper returns adequate for our audit have not been received from
branches not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial
statements
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements. A further description of our responsibilities for the
audit of the financial statements is located on the Financial
Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor's report.
Other matters which we are required to address
We were appointed by the Audit Committee on 8 June 2019 to audit
the financial statements for the period ending 31 December 2019.
Our total uninterrupted period of engagement is two years, covering
the periods ending 31 December 2018 to date.
The non-audit services prohibited by the FRC's Ethical Standard
were not provided to the Group and we remain independent of the
Group in conducting our audit.
Our audit opinion is consistent with the additional report to
the audit committee.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Article 113A of the Companies (Jersey) Law 1991.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Stacy Eden (Senior Statutory Auditor)
For and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
24 July 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2019
2019 2018
Continuing activities Notes US$'000 US$'000
----------------------------------------- ------- ------------ -----------
Revenue 5 9,725 33,054
Cost of sales 6 (29,799) (24,601)
----------------------------------------- ------- ------------ -----------
Gross (loss)/profit (20,074) 8,453
Other income 7 26,989 19,149
Administrative expenses (1,122) (1,027)
Foreign exchange gain/(loss) 8 287 (1,353)
Management fees 9 (1,157) (1,460)
Marketing expenses (171) (671)
Other operating expenses (29,688) (24,095)
----------------------------------------- ------- ------------ -----------
Operating loss (24,936) (1,004)
------------ -----------
Finance income 5,793 1,242
Finance costs (9,514) (7,034)
------------ -----------
Net finance costs 11 ( 3,721 ) (5,792)
Net loss before taxation 12 (28,657) (6,796)
Taxation 13 (1,349) 390
----------------------------------------- ------- ------------ -----------
Loss for the year (30,006) (6,406)
----------------------------------------- ------- ------------ -----------
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 14 615 (1,082)
Total other comprehensive
income/(loss) for the year 14 615 (1,082)
Total comprehensive loss
for the year (29,391) (7,488)
----------------------------------------- ------- ------------ -----------
Loss attributable to:
Equity holders of the parent
company 15 (27,106) (4,885)
Non-controlling interests 16 (2,900) (1,521)
----------------------------------------- ------- ------------ -----------
Loss for the year (30,006) (6,406)
----------------------------------------- ------- ------------ -----------
Total comprehensive loss attributable to:
Equity holders of the parent
company (26,485) (6,154)
Non-controlling interests (2,906) (1,334)
----------------------------------------- ------- ------------ -----------
Total comprehensive loss for the year (29,391) (7,488)
-------------------------------------------------- ------------ -----------
Loss per share
Basic and diluted (US cents) 15 (13.64) (2.46)
----------------------------------------- ------- ------------ -----------
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER
2019
2019 2018
------------------------------- -------
US$'000 US$'000
Notes
------------------------------- ------- ------------------ ----------
Non-current assets
Property, plant and equipment 17 620 678
Intangible assets 18 4,097 4,148
Right of use 19 544 -
Deferred tax assets 20 5,066 5,186
------------------------------- ------- ------------------ ----------
Total non-current assets 10,327 10,012
------------------------------- ------- ------------------ ----------
Current assets
Inventories 21 238,863 267,160
Trade and other receivables 22 12,902 16,991
Prepayments 524 635
Current tax assets 3 157
Cash and cash equivalents 23 7,615 12,573
------------------------------- ------- ------------------ ----------
Total current assets 259,907 297,516
------------------------------- ------- ------------------ ----------
TOTAL ASSETS 270,234 307,528
------------------------------- ------- ------------------ ----------
Equity
Share capital 24 10,601 10,601
Share premium 25 208,925 208,925
Capital redemption reserve 26 1,899 1,899
Translation reserve 27 (21,644) (22,265)
Accumulated losses (90,135) (62,786)
------------------------------- ------- ------------------ ----------
Shareholders' equity 109,646 136,374
Non-controlling interests 16 (3,848) (937)
------------------------------- ------- ------------------ ----------
Total equity 105,798 135,437
------------------------------- ------- ------------------ ----------
Non-current liabilities
Trade and other payable 28 39,253 37,976
Loans and borrowings 30 18,968 13,188
Total non-current liabilities 58,221 51,164
------------------------------- ------- ------------------ ----------
Current liabilities
Trade and other payables 28 23,549 34,128
Amount due to non-controlling
interests 29 10,587 13,194
Loans and borrowings 30 34,713 48,084
Medium term notes 31 36,142 23,761
Current tax liabilities 1,224 1,760
------------------------------- ------- ------------------ ----------
Total current liabilities 106,215 120,927
------------------------------- ------- ------------------ ----------
Total liabilities 164,436 172,091
------------------------------- ------- ------------------ ----------
TOTAL EQUITY AND LIABILITIES 270,234 307,528
------------------------------- ------- ------------------ ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended
31 december 2019
Total
Equity
Attributable
to Equity
Redeemable Capital Holders Non-
Ordinary Management Share Redemption Translation Accumulated of the Controlling Total
Shares Shares Premium Reserve Reserve Losses Parent Interests Equity
Consolidated US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------- ------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- ---------
Balance at 1
January 2018 10,601 - 208,925 1,899 (20,996) (57,898) 142,531 331 142,862
Changes in
ownership
interests
in subsidiaries
(Note 32) - - - - - (3) (3) 3 -
Non-controlling
interests
contribution - - - - - - - 63 63
------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- ---------
Loss for the
year - - - - - (4,885) (4,885) (1,521) (6,406)
Total other
comprehensive
loss for the
year - - - - (1,269) - (1,269) 187 (1,082)
------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- ---------
Total
comprehensive
loss for
the year - - - - (1,269) (4,885) (6,154) (1,334) (7,488)
----------------- ------------
As at 31
December 2018/
1
January 2019 10,601 - 208,925 1,899 (22,265) (62,786) 136,374 (937) 135,437
Impact of change
in accounting
policy (Note
36) - - - - - (219) (219) (29) (248)
Adjusted balance
at 31 December
2018/ 1 January
2019 10,601 -# 208,925 1,899 (22,265) (63,005) 136,155 (966) 135,189
Changes in
ownership
interests
in subsidiaries
(Note 32) - - - - - (24) (24) 24 -
Non-controlling
interests
contribution - - - - - - - - -
------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- ---------
Loss for the
year - - - - - (27,106) (27,106) (2,900) (30,006)
Total other
comprehensive
loss for the
year - - - - 621 - 621 (6) 615
------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- ---------
Total
comprehensive
loss for
the year - - - - 621 (27,106) (26,485) (2,906) (29,391)
Shareholders'
equity at 31
December 2019 10,601 -# 208,925 1,899 (21,644) (90,135) 109,646 (3,848) 105,798
================= ============ =========== ========= ============ ============= ============= ============= ============= =========
#represents 2 management shares at US$0.05 each
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 december 2019
2019 2018
US$'000 US$'000
Cash Flows from Operating Activities
Net loss before taxation (28,657) (6,796)
Finance income (5,793) (1,242)
Finance costs 9,514 7,034
Unrealised foreign exchange (gain)/loss (292) 1,382
Write down/Impairment of goodwill 51 53
Depreciation of property, plant
and equipment 105 92
Net realisation value adjustments
of inventory 23,287 -
Operating (loss)/profit before changes
in working capital (1,785) 523
Changes in working capital:
Decrease/(Increase) in inventories 6,931 (22,243)
Decrease/(Increase) in trade and
other receivables and prepayments 7,949 (987)
(Decrease)/Increase in trade and
other payables (10,794) 20,768
---------------------------------------------- --- ------------------- --------------------
Cash generated from/(used in) operations 2,294 (1,939)
Interest paid (9,514) (7,034)
Tax paid (1,568) (1,955)
---------------------------------------------- --- ------------------- --------------------
Net cash used in operating activities (8,788) (10,928)
---------------------------------------------- --- ------------------- --------------------
Cash Flows From Investing Activities
Purchase of property, plant and
equipment (54) (121)
Proceeds from disposal property,
plant and equipment 6 -
Finance income received 2,221 1,242
---------------------------------------------- --- ------------------- --------------------
Net cash from investing activities 2,173 1,121
---------------------------------------------- --- ------------------- --------------------
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
For the year ended 31 december 2019
2019 2018
US$'000 US$'000
---------------------------------------------- --- ------------------- ----------------------
Cash Flows From Financing Activities
Advances from non-controlling interests (2,666) 82
Issuance of ordinary shares of subsidiaries
to non-controlling interests (ii) - 63
Finance lease liabilities (873) -
Repayment of loans and borrowings (12,162) (24,197)
Drawdown of loans and borrowings
and Medium Term Notes 17,448 20,308
Net (decrease)/increase in pledged
deposits for loans and borrowings
and Medium Term Notes (1,651) 13,623
Net cash generated from financing
activities 96 9,879
---------------------------------------------- --- ------------------- ----------------------
Net changes in cash and cash equivalents
during the year (6,519) 72
Effect of changes in exchange rates (109) 497
Cash and cash equivalents at the
beginning of the year 9,863 9,294
--------------------------------------------------- ------------------- ----------------------
Cash and cash equivalents at the
end of the year (i) 3,235 9,863
--------------------------------------------------- ------------------- ----------------------
(i) Cash and Cash Equivalents
Cash and cash equivalents included in the consolidated statement of
cash flows comprise the following consolidated statement of financial
position amounts:
2019 2018
US$'000 US$'000
--------------------------------------------- ---- ------------------- ----------------------
Cash and bank balances 2,380 9,372
Short term bank deposits 5,235 3,201
--------------------------------------------------- ------------------- ----------------------
7,615 12,573
Less: Deposits pledged (iii) (4,380) (2,710)
--------------------------------------------------- ------------------- ----------------------
Cash and cash equivalents 3,235 9,863
--------------------------------------------------- ------------------- ----------------------
The notes to the financial statements form an integral part of
the financial statements.
(ii) In 2018, US$63,000 of ordinary shares of subsidiaries were
issued to non-controlling shareholders which was satisfied via cash
consideration.
(iii) Included in short term bank deposits and cash and bank
balance is US$4,380,000 (2018: US$2,710,000) pledged for loans and
borrowings and Medium Term Notes of the Group.
Notes to the Financial Statements
1 General Information
Aseana Properties Limited (the "Company") was incorporated in
Jersey as a limited liability par value company. The Company's
registered office is 12 Castle Street, St Helier, Jersey JE2
3RT.
The consolidated financial statements comprise the financial
information of the Company and its subsidiary undertakings
(together the "Group"). Detail of the entities of the Group are
described in Note 34.
The principal activities of the Group are development of upscale
residential and hospitality projects, sale of development land and
operation of hotel, mall and hospital in Malaysia and Vietnam.
The financial statements are presented in US Dollar (US$), which
is the Group's presentation currency. All financial information is
presented in US$ and has been rounded to the nearest thousand
(US$'000), unless otherwise stated.
2 BASIS OF PREPARATION
The financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards
("IFRSs") as adopted by European Union ("EU"), and IFRIC
interpretations issued, and effective, or issued and early adopted,
at the date of these financial statements.
As permitted by Companies (Jersey) Law 1991 only the
consolidated financial statements are presented.
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.
2.1 Going concern
The financial statements have been prepared on the historical
cost basis and on the assumption that the Group is a going
concern.
The Directors expect to raise sufficient funds to finance the
operation of the Group's existing projects via the disposal of its
development lands in Vietnam and East Malaysia, its existing units
of condominium inventories at The RuMa Residences in West Malaysia,
and through the disposals of the City International Hospital, the
Four Points Sheraton Sandakan Hotel and the Harbour Mall Sandakan
and The RuMa Hotel and re-focused these disposal efforts by
nominating a Divestment Director at the Board level in June 2019.
Significant new interest was then generated from prospective
buyers. However the impact of the COVID-19 meant that movement
restrictions were imposed throughout Malaysia from March 2020 and
foreign travel into and out of Vietnam was also prohibited.
Operations at our two hotels and our shopping mall in Malaysia were
severely constrained and income fell considerably. Patient
admissions at our hospital in Ho Chi Minh also fell as patients
avoided attending the premises fearing that they might expose
themselves to the virus. In addition, detailed due diligence and
site visits by prospective buyers became impossible and sales
interest therefore stalled. The Directors intend to revive that
interest as the movement restrictions ease.
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$58 million as at 31 December
2019. 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 December 2021
which is their final expiry date and if they have not been repaid
by then the Directors intend to re-finance the notes with other
bank borrowings.
The Group also has significant borrowings in Vietnam secured by
the City International Hospital and adjacent development lands. The
Directors expect to repay the borrowings via the sale of the
hospital and the adjacent land in Vietnam, or to re-structure the
repayment dates of the borrowings; they have successfully
restructured a loan repayment that was due on the hospital in June
2020 with a revised schedule of instalments due between from June
2021 to 2023.
As at 31 December 2019, one of the Group's subsidiary
undertakings had not complied with the Debt to Equity ratio
covenant in respect of a loan of US$23.4 million, in accordance
with the terms set out in the facility agreement. In the event of a
breach of this covenant, the loan shall be immediately due and
payable together with accrued interest thereon upon notification by
the lenders. The Group's subsidiary undertaking requested a
non-compliance waiver from the lenders in respect of this
non-compliance with approval of the waiver received on 5 June 2020.
Subsequently the loan was restructured and its maturity date is now
12 months from 22 July 2020 or upon completion of the hospital
disposal, whichever is the earlier.
The Group has prepared and considered prospective financial
information based on assumptions and events (including COVID-19
effect) 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 30 and 31). The cash flow forecasts also
incorporate current payables, committed expenditure and other
future expected expenditure, along with the potential sale of two
plots of development land in East Malaysia to an entity associated
with Legacy Essence Limited. 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.
On 7 May 2020, the Group announced that it is considering
proposals to demerge certain assets held by the Group in exchange
for the buyback and cancellation of a significant percentage of the
issued ordinary shares of US$0.05 each in the capital of the
Company ("De-Merger"). The De-Merger transaction should result in
approximately 50% in aggregate of the outstanding shares in the
Company being bought back from Ireka Corporation Berhad ("ICB") and
its concert party Legacy Essence Limited ("Legacy Essence") along
with certain other shareholders (the "Participating Shareholders").
The consideration would be an in specie distribution of certain
assets owned by the Group to the Participating Shareholders
together with a balancing cash payment from Participating
Shareholders to the Group to reflect the relative value of the
assets to be distributed and the value of the shareholding of the
Participating Shareholders as at the date of the buyback. The Group
will assess the net book value of the Group's assets for the
purposes of the transaction based on the unaudited net asset value
as at 31 December 2019 and has agreed with Ireka that adjustments
should be made, where appropriate, to reflect the settlement of
potential claims that the Group may have against Ireka or its group
companies in connection with the Group's projects, including the
settlement of amounts owing by a subsidiary of Ireka to the Group
relating to the construction of The RuMa Hotel and Residences in
Kuala Lumpur ("RuMa"). It is presently expected the assets that
will be distributed in specie will comprise RuMa, a portion of the
land owned by the Group in Kota Kinabalu and the residual projects
from past developments. Any shares re-acquired by the Company would
be cancelled.
Following the Demerger Transaction the business plan remains
unchanged and the Directors anticipate the sale of the Group's
remaining assets, comprising of the hospital and adjacent
development lands in Ho Chi Minh, the hotel and shopping mall in
Sandakan and two plots of development land in Kota Kinabalu, can be
made as COVID-19 related movement restrictions are lifted in both
Malaysia and Vietnam and are already seeking to revive previous
interest from prospective buyers. These asset sales will
collectively enable the repayment of the Group's bank debts as or
before they fall due.
As described in the Chairman's Statement, this De-Merger
transaction would require the passing of a special resolution of
Shareholders (including the Participating Shareholders) which will
require the approval of 66 2/3% of those voting at an Extraordinary
General Meeting ("EGM"). The De-Merger is also conditional upon of
the approval of various other parties including the shareholders of
Ireka at their own EGM which is yet to be convened and the bankers/
guarantors and holders of Medium Term Notes to the Group. There is
no certainty that the proposed De-Merger will be successfully
completed as the approval of several external parties is yet to be
obtained.
After considering the forecasts and the business risks, there is
no certainty the De-Merger transaction and the divestment of
certain assets will be completed as planned and the loans and
borrowing can be discharged at the timely manner. These conditions
indicate the existence of a material uncertainty which may cast
significant doubt about the Group and the Company's ability to
continue as a going concern.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. For these reasons, they continue to adopt the
going concern basis of accounting in preparing the annual financial
statements.
2.1.1 December 2019 Resolution
At a general meeting of the Company held on 30 December 2019,
Shareholders supported the Board's recommendations to vote against
the ordinary resolution that the Company shall cease to continue as
presently constituted and voted in favour of the special resolution
to amend the Company's Articles which extended the life of the
Company to May 2021.
To the extent that the Group has not disposed of all of its
assets by May 2021, shareholders will be provided with a further
opportunity to review the future of the Group, which is likely to
include the option for shareholders to vote for another
continuation of the Company but t he Board shall also procure that,
at a general meeting of the Company to be held in May 2021, an
ordinary resolution will be proposed to the effect that the Company
shall cease to continue as presently constituted. If at such
meeting, such resolution is passed, the Board shall, within four
months of such meeting, convene a general meeting of the Company at
which a special resolution shall be proposed requiring the Company
to be wound up voluntarily. In connection with, or at the same time
as, the proposal that the Company be wound up voluntarily the Board
shall be entitled to make proposals for the reconstruction of the
Company. Until then, the Company will continue to seek to dispose
of its assets in a measured manner.
The outcome of the discontinuation vote would be uncertain and
may impact on the going concern status of the Group. These
conditions indicate the existence of a material uncertainty which
may cast significant doubt about the Group and the Company's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the Group and
Company were unable to continue as a going concern.
2.2 Statement of Compliance
A number of new standards and amendments to standards and
interpretations have been issued by International Accounting
Standards Board but are not yet effective and in some cases have
not yet been adopted by the EU. The Directors do not expect that
the adoption of these standards will have a material impact on the
financial statements of the Group in future periods.
Initial application of IFRS 16
The Group has adopted IFRS 16 using the modified retrospective
approach under which the cumulative effect of initial application
is recognised as an adjustment to the retained profits as at 1
January 2019 (date of initial application) without restating any
comparative information.
The Group has applied IFRS 16 only to contracts that were
previously identified as leases under IAS 17 "leases" and IC
Interpretation 4 "Determining Whether an Arrangement Contains a
Lease". Therefore, IFRS 16 has been applied only to contracts
entered into or changed on or after 1 January 2019.
Lessee Accounting
At 1 January 2019, for leases that were classified as operating
leases under IFRS 17, the Group measured the lease liabilities at
the present value of the remaining lease payments, discounted using
the Group's incremental borrowing rate at that date of ranging from
6.6% to 7.0%. The right-of-use assets were measured at the amount
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease.
The Group has used the following practical expedients in
applying IFRS 16 for the first time:-
-- Applied a single discount rate to a portfolio of leases with
reasonably similar characteristics;
-- Applied for the exemption not to recognise operating leases
with a remaining lease term of less than 12 months as at 1 January
2019;
-- Excluded initial direct costs for the measurement of the
right-of-use asset at the date of initial application; and
-- Used hindsight in determining the lease term where the lease
contract contains options to extend or terminate the lease.
For leases that were classified as finance leases, the Group has
recognised the carrying amount of the leased asset and lease
liability immediately before 1 January 2019 as the carrying amount
of the right-of-use asset and the lease liability as at the date of
initial application.
There was no difference between the operating lease commitments
disclosed in the last financial year (determined under IFRS 117)
and the lease liabilities recognised at 1 January 2019.
Lessor Accounting
The Group did not make any adjustments to the accounting for
assets held as lessor under operating leases as a result of the
adoption of IFRS 16.
Leases
The Group assesses whether a contract is or contains a lease, at
the inception of the contract. The Group recognises a right-of-use
asset and corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for low-value assets
and short-term leases with 12 months or less. For these leases, the
Group recognises the lease payments as an operating expense on a
straight-line method over the term of the lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are consumed.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use assets and the
associated lease liabilities are presented as a separate line item
in the statement of financial position.
The right-of-use asset is initially measured at cost. Cost
includes the initial amount of the corresponding lease liability
adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred less any incentives
received.
The right-of-use asset is subsequently measured at cost less
accumulated depreciation and any impairment losses, and adjustment
for any re-measurement of the lease liability. The depreciation
starts from the commencement date of the lease. If the lease
transfers ownership of the underlying asset to the Group or the
cost of the right-of-use asset reflects that the Group expects to
exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset.
Otherwise, the Group depreciates the right-of-use asset to the
earlier of the end of the useful life of the right-of-use asset or
the end of the lease term.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate.
The lease liability is subsequently measured at amortised cost
using the effective interest method. It is re-measured when there
is a change in the future lease payments (other than lease
modification that is not accounted for as a separate lease) with
the corresponding adjustment is made to the carrying amount of the
right-of-use asset or is recognised in profit or loss if the
carrying amount has been reduced to zero.
The impacts of adopting IFRS 16 on the Group's consolidated
financial statement are disclosed in the following tables:
US$'000
Operating lease commitments disclosed on 31
December 2018 (restated) (2,729)
Discounted using weighted average of Group's
incremental borrowing rate 1,238
--------
Lease liability recognised as at 1 January
2019 (1,491)
--------
Consolidated Statement
of Financial Position Audited
as at 31 December 2018/1 Previously Effect of
January 2019 Reported adoption
Amounts of IFRS 16 Amounts
US$'000 US$'000 US$'000
Right of use (ROU) - 1,272 1,272
Finance lease liabilities - 1,491 1,491
Accumulated losses (62,786) (219) (63,005)
Non-controlling interest (937) (29) (966)
Trade and other payables 34,128 29 34,157
The financial impacts arising from the change are summarised as
follows:-
The group applied IFRS 16 by recognising the cumulative effect
of initially applying IFRS 16 as an adjustment of US$248,000 to the
opening balance of equity as at 1 January 2019.
2.3 Use of estimates and judgements
The preparation of the consolidated financial statements in
conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
Information about critical judgements in applying accounting
policies that have the most significant effect on the amounts
recognised in the consolidated financial statements are discussed
below:
(a) Going concern
The Extraordinary General Meeting that was held in December 2019
extended the Company's life until May 2021 and the Directors
anticipate holding a similar vote at that time. It is too early to
be able to forecast how the Company's shareholders will vote on a
continuation resolution which would be a special resolution needing
to be passed by two-third majority of those voting. The Company and
the Group continue to adopt the going concern basis in preparing
the financial statements.
As described in Note 2.1 the Directors consider the company to
be a going concern while the Directors continue with the agreed
divestment and realisation process in an orderly manner under their
control and they expect to be able to continue to meet all finance
obligations as they fall due.
(b) Net realisable value of inventories
The Group assesses the net realisable value of inventories under
development, land held for development and completed properties
held for sale according to their recoverable amounts based on the
realisability of these properties, taking into account estimated
costs to completion based on past experience and committed
contracts and estimated net sales based on prevailing market
conditions supported by external valuations. Provision is made when
events or changes in circumstances indicate that the carrying
amounts at completion of development may exceed net realisable
value. The assessment requires the use of judgement and estimates
in relation to factors such as sales prices, comparable market
transactions, occupancy levels, projected growth rates, and
discount rates.
As described in Note 21, the methods and key assumptions in
relation to the calculation of the net realisable value of
inventories. At 31 December 2019, the carrying value of inventories
were approximately US$239million (31 December 2018: US$267million)
During the year, a net realisable value adjustment in relation to
both Four Points by Sheraton Sandakan Hotel and Harbour Mall
Sandakan assets totalling US$23.3million was recognised within cost
of sales in the Consolidated Statement of Comprehensive Income.
(c) Revenue - sale and leaseback arrangements
The Group entered into agreements with the buyers of The RuMa
Hotel Suites for a sale and leaseback arrangement. The sold hotel
suites will be leased back to the Group for the hotel operation
over the lease term period of 10 years.
The Group considers that the control of the sold hotel suites,
under the sale and leaseback arrangement, has yet to be transferred
to the buyer and the transfer of the asset is therefore not a sale.
No revenue is recognised in the financial statements.
The nature of this leaseback transaction represents, in
substance, a temporary financing arrangement. Any contractual
payment made to the buyer was recognised as finance costs. The
proceeds of the revenue received from these buyers were recognised
as amounts owed to contract buyers, amounted to US$39million and
was disclosed in Note 28.
(d) Classification of assets as inventory
The Directors apply judgements in determining the classification
of the properties held by the Group. As the Group's principal
activity is property development, the Group continues to classify
its completed developments, namely the hotel, mall and hospital as
inventories, in line with the Group's intention to dispose of these
assets rather than hold them for rentals or capital appreciation.
The Group operates these inventories temporarily to stabilise its
operation while seeking a potential buyer.
As described in the note 3.3(c) and (d), as a result of this
classification all income generating from the operations of these
developments is recognised as other income in note 6.
(e) Impairment of licence contracts and related relationships
Licence contracts and related relationships represent the rights
to develop the International Healthcare Park venture with the lease
period ending on 9 July 2077.
The Group assesses the recoverable amount of licence contracts
and related relationships by reference to the realisability of the
properties of which the licence contracts and related relationships
is attached (refer to Note 2.3(b) and Note 18). The assessment
requires the use of judgement and estimates in relation to factors
such as sales prices and comparable market transactions.
The Group derecognises licence contracts and related
relationships when a component of the venture is disposed of.
(f) Coronavirus Disease 2019 (COVID-19)
The current outbreak of COVID-19 has resulted in the occurrence
of a multitude of associated events such as temporary closing of
businesses, travel restrictions and quarantine measures across the
globe. These measures and policies affect supply chains and the
production of goods and services and lower economic activity which
is likely to result in reduced demand for the Group's goods and
services. The Group exercises judgement, in light of all facts and
circumstances, to assess what event in this series of events
provides additional evidence about the condition that existed at
the reporting date and therefore affects the recognition and
measurement of the Group's assets and liabilities at 31 December
2019.
3 SIGNIFICANT ACCOUNTING POLICIES
3.1 Basis of Consolidation
(a) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial
information of subsidiaries are included in the consolidated
financial statements from the date that control commences until the
date that control ceases.
The accounting policies of subsidiaries have been changed when
necessary to align them with the policies adopted by the Group.
The Group controls an entity when it is exposed, or has rights,
to variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity. Potential voting rights are considered when assessing
control only when such rights are substantive. The Group also
considers it has de facto power over an investee when, despite not
having the majority of voting rights, it has the current ability to
direct the activities of the investee that significantly affect the
investee's return.
(b) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements. Unrealised
gains arising from transactions with equity-accounted investees are
eliminated against the investment to the extent of the Group's
interest in the investee. Unrealised losses are eliminated in the
same way as unrealised gains, but to the extent that there is no
evidence of impairment.
(c) Acquisition of non-controlling interests
Acquisitions of non-controlling interests are accounted for as
transactions with owners in their capacity as owners and therefore
no goodwill is recognised as a result. Adjustments to
non-controlling interests arising from transactions that do not
involve the loss of control are based on a proportionate amount of
the net assets of the subsidiary.
3.2 Foreign Currencies
(a) Foreign currency transactions
The consolidated financial statements are presented in United
States Dollar ("US$"), which is the Group's presentation currency.
Each entity in the Group determines its own functional currency and
items included in the financial statements of each entity are
measured using that functional currency. Transactions in foreign
currencies are translated to the respective functional currencies
of the Group entities at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are retranslated to the
functional currency at the exchange rate at that date.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are retranslated to the
functional currency at the exchange rate at the date that the fair
value was determined. Non-monetary items in a foreign currency that
are measured in terms of historical cost are translated using the
exchange rate at the date of the transaction. Foreign currency
differences arising on retranslation are recognised in profit or
loss, except for differences arising on the retranslation of
available-for-sale equity investments, which are recognised in
other comprehensive income.
(b) Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are
translated to US$ at exchange rates at the reporting date. The
income and expenses of foreign operations are translated to US$ at
exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other
comprehensive income and presented in the foreign currency
translation reserve ("translation reserve") in equity. However, if
the foreign operation is a non-wholly owned subsidiary, then the
relevant proportionate share of the translation difference is
allocated to the non-controlling interest. When a foreign operation
is disposed of such that control, significant influence or joint
control is lost, the cumulative amount in the translation reserve
related to that foreign operation is reclassified to profit or loss
as part of the gain or loss on disposal. When the Group disposes of
only part of its interest in a subsidiary that includes a foreign
operation while retaining control, the relevant proportion of the
cumulative amount is reattributed to non-controlling interest. When
the Group disposes of only part of its investment in an associate
that includes a foreign operation while retaining significant
influence or joint control, the relevant proportion of the
cumulative amount is reclassified to profit or loss.
When the settlement of a monetary item receivable from or
payable to a foreign operation is neither planned nor likely in the
foreseeable future, foreign exchange gains and losses arising from
such a monetary item are considered to form part of a net
investment in a foreign operation and are recognised in other
comprehensive income, and presented in the translation reserve in
equity.
3.3 Revenue Recognition and Other Income
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognised:
(a) Sale of completed properties
Revenue from sale of completed properties is recognised when
effective control of ownership of the properties is transferred to
the purchasers which is when the completion certificate or
occupancy permit has been issued.
(b) Sale of development properties
Revenue from sale of development properties is recognised as and
when the control of the asset is transferred to the buyer 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 buyer. 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 is recognised over the period of the contract by
reference to the progress towards complete satisfaction of that
performance obligation. This is determined based on the actual cost
incurred to date to estimated total cost for each contract.
Where the outcome of a contract cannot be reliably estimated,
revenue is recognised to the extent of contract costs incurred that
are likely to be recoverable. Contract costs are recognised as
expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognised as an expense
immediately.
(c) Rental income
Rental income is recognised in profit or loss on a straight-line
basis over the lease term. Lease incentives granted are recognised
as an integral part of the total rental income, over the term of
the lease. Rental income is recognised as other income.
(d) Income from hotel, hospital and mall operations
Income from hospital operations which include healthcare support
services and medicine and medical services is recognised in the
profit or loss net of service tax and discounts as and when
services are rendered. Income from hospital operations is
recognised as other income.
Income from the hotel operations, which include provision of
rooms, food and beverage, other departments sales and laundry
service fees are recognised when services are rendered. Income from
hotel operations is recognised as other income.
Income from mall operations is recognised in profit or loss on a
straight-line basis over the term of the lease. Lease incentives
granted are recognised as an integral part of the total rental
income, over the term of the lease. Where a rent-free period is
included in a lease, the rental income foregone is allocated evenly
over the period from the date the lease commencement to the
earliest termination date. Income from mall operations is
recognised as other income.
(e) Interest income
Interest income is recognised as it accrues using the effective
interest method in profit or loss except for interest income
arising from temporary investment of borrowings taken specifically
for the purpose of obtaining a qualifying asset which is accounted
for in accordance with the accounting policy on borrowing
costs.
3.4 Property, Plant and Equipment
All property, plant and equipment are stated at cost less
depreciation unless otherwise stated. Cost includes all relevant
external expenditure incurred in acquiring the asset.
The estimates for the residual values, useful lives and related
depreciation charges for the property and equipment are based on
commercial factors which could change significantly as a result of
technical innovations and competitors' actions in response to the
market conditions. The Group anticipates that the residual values
of its property and equipment will be insignificant. As a result,
residual values are not being taken into consideration for the
computation of the depreciable amount. Changes in the expected
level of usage and technological development could impact the
economic useful lives and the residual values of these assets,
therefore future depreciation charges could be revised. The
carrying amount of property and equipment as at the reporting date
is disclosed in Note 17 to the financial statements.
The cost of property, plant and equipment recognised as a result
of a business combination is based on fair value at acquisition
date. The fair value of property is the estimates amount for which
a property could be exchanged between knowledgeable willing parties
in an arm's length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without
compulsion. The fair value of other items of plant and equipment is
based on the quoted market prices for similar items when available
and replacement cost when appropriate.
The gain or loss on disposal of an item of property, plant and
equipment is determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment and is
recognised net within "other income" and "other operating expenses"
respectively in profit or loss.
3.5 Income Tax
Income tax expense comprises current tax and deferred tax.
Current tax and deferred tax is recognised in profit or loss except
to the extent that it relates to a business combination, or items
recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted by
the end of the reporting period, and any adjustment to tax payable
in respect of previous years.
Deferred tax is recognised using the liability method, providing
for temporary differences between the carrying amounts of assets
and liabilities in the statement of financial position and their
tax bases. Deferred tax is not recognised for the following
temporary differences: the initial recognition of goodwill, and the
initial recognition of assets or liabilities in a transaction that
is not a business combination and that affects neither accounting
nor taxable profit or loss. Deferred tax is measured at the tax
rates that are expected to be applied to the temporary differences
when they reverse, based on the laws that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to taxes levied by the same tax authority
on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis
or their tax assets and liabilities will be realised
simultaneously.
A deferred tax asset is recognised to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised. Deferred tax assets
are reviewed at the end of each reporting date and are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
3.6 Financial Instruments
(a) Non-derivative financial assets
The Group initially recognises loans and receivables and
deposits on the date that they are originated. All other financial
assets are recognised initially on the trade date, which is the
date that the Group becomes a party to the contractual provisions
of the instrument.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends
either to settle on a net basis or to realise the asset and settle
the liability simultaneously.
The Group classifies non-derivative financial assets into the
following categories: loans and receivables.
(i) Loans and receivables
Loans and receivables are held with an objective to collect
contractual cash flows which are solely payments of principal and
interest on the principal amount outstanding. Such assets are
recognised initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, loans and
receivables are measured at amortised cost using the effective
interest method, less any impairment losses Loans and receivables
comprise cash and cash equivalents and other receivables.
Trade receivables are recognised initially at the transaction
price and subsequently measured at amortised cost, less any
impairment losses.
(b) Non-derivative financial liabilities
All financial liabilities are recognised initially on the trade
date, which is the date that the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial liability when the
contractual obligations are discharged, cancelled or expire.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends
either to settle on a net basis or to realise the asset and settle
the liability simultaneously.
The Group classifies non-derivative financial liabilities into
other financial liability category. Such financial liabilities are
recognised initially at fair value plus any directly attributable
transaction costs.
Subsequent to initial recognition, these financial liabilities
are measured at amortised cost using the effective interest
method.
Other financial liabilities comprise loans and borrowings, bank
overdrafts, and trade and other payables.
Accounting for interest income and finance cost are discussed in
Note 3.3 (e) and 3.12 respectively.
(c) De-recognition
A financial asset or part of it is derecognised when, and only
when, the contractual rights to the cash flows from the financial
asset expire or the financial asset is transferred to another party
without retaining control or substantially all risks and rewards of
the asset. On de-recognition of a financial asset, the difference
between the carrying amount and the sum of the consideration
received (including any new asset obtained less any new liability
assumed) and any cumulative gain or loss that had been recognised
in equity is recognised in profit or loss.
A financial liability or a part of it is derecognised when, and
only when, the obligation specified in the contract is discharged
or cancelled or expire. On de-recognition of a financial liability,
the difference between the carrying amount of the financial
liability extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in profit or loss.
3.7 Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and at bank,
deposits held at call and short term highly liquid investments that
are subject to an insignificant risk of changes in value and are
used by the Group in the management of their short term
commitments. Bank overdrafts are included within borrowings in the
current liabilities section on the statement of financial position.
For the purpose of the statement of cash flows, cash and cash
equivalents are presented net of bank overdrafts and pledged
deposits.
3.8 Intangible Assets
Intangible assets comprise licence contracts and related
relationships and goodwill.
(a) Licence Contracts and Related Relationships
On acquisition, value is attributable to non-contractual
relationships and other contracts of long-standing to the extent
that future economic benefits are expected to flow from the
relationships. Licence contracts and related relationships
represent the rights to develop the International Healthcare Park
venture with the lease period ending on 9 July 2077. Acquired
licence contracts and related relationships have finite useful
lives.
Subsequent measurement
When a component of the project to which the licence contracts
and related relationships is disposed of, the part of the carrying
amount of the licence contracts and related relationships that has
been allocated to the component is recognised in profit or loss.
The licence contracts and related relationships are tested for
impairment when there is an indicator of impairment. The Group
assesses the recoverable amount of licence contracts and related
relationships by reference to the realisability of the properties
of which the licence contracts and related relationship is attached
to (refer to Notes 2.3(b), 18 and 21).
(b) Goodwill
Goodwill that arises upon the acquisition of subsidiaries is
included in intangible assets. For the measurement of goodwill at
initial recognition. Goodwill is tested for impairment when there
is an indicator of impairment. The Group assesses the recoverable
amount of goodwill by reference to the realisability of the
properties of which the goodwill is attached to (refer to Note
2.3(e), 18 and 21).
Where it is not possible to estimate the recoverable amount of
an intangible asset, the impairment test is carried out on the
smallest Group of assets to which it belongs for which there are
separately identifiable cash flows; its Cash Generating Units
('CGUs'). Goodwill is allocated on initial recognition to each of
the Group's CGUs that are expected to benefit from a business
combination that gives rise to the goodwill. Impairment charges
would be included in profit or loss, except to the extent they
reverse gains previously recognised in other comprehensive income.
An impairment loss recognised for goodwill is not reversed.
The carrying values of assets, other than those to which IAS
36-Impairment of Assets does not apply, are reviewed at the end of
each reporting period for impairment when an annual impairment
assessment is compulsory or there is an indication that the assets
might be impaired. Impairment is measured by comparing the carrying
values of the assets with their recoverable amounts. When the
carrying amount of an asset exceeds its recoverable amount, the
asset is written down to its recoverable amount and an impairment
loss shall be recognised. The recoverable amount of an asset is the
higher of the asset's fair value less costs to sell and its value
in use, which is measured by reference to discounted future cash
flows using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. Where it is not possible to estimate the recoverable
amount of an individual asset, the Group determines the recoverable
amount of the cash-generating unit to which the asset belongs.
An impairment loss is recognised in profit or loss immediately
unless the asset is carried at its revalued amount. Any impairment
loss of a revalued asset is treated as a revaluation decrease to
the extent of a previously recognised revaluation surplus for the
same asset. Any impairment loss recognised in respect of a
cash-generating unit is allocated first to reduce the carrying
amounts of the other assets in the cash-generating unit on a pro
rata basis.
3.9 Inventories
Inventories comprise land held for property development,
work-in-progress and stock of completed units.
Inventories are stated at the lower of cost and net realisable
value. Net realisable value represents the estimated net selling
price in the ordinary course of business, less estimated total
costs of completion and the estimated costs necessary to make the
sale (refer to Note 2.3(b)).
Land held for property development consists of reclaimed land,
freehold land, leasehold land and land use rights on which
development work has not been commenced along with related costs on
activities that are necessary to prepare the land for its intended
use. Land held for property development is transferred to
work-in-progress when development activities have commenced.
Work-in-progress comprises all costs directly attributable to
property development activities or that can be allocated on a
reasonable basis to these activities.
Upon completion of development, unsold completed development
properties are transferred to stock of completed units.
3.10 Impairment
(a) Loans and receivables
The Group considers evidence of impairment for loans and
receivables at a specific asset level. All individually significant
receivables are assessed for specific impairment.
An impairment loss in respect of loans and receivables is
recognised in profit or loss and is measured as the difference
between the asset's carrying amount and the present value of
estimated future cash flows (excluding future credit losses that
had not been incurred) discounted at the asset's original effective
interest rate. The carrying amount of the asset is reduced and the
loss is recognised in the statement of comprehensive income within
administrative expenses.
When a subsequent event (e.g. repayment by a debtor) causes the
amount of impairment loss to decrease, the decrease in impairment
loss is reversed through profit or loss. The impairment loss is
reversed, to the extent that the debtor's carrying amount does not
exceed what the carrying amount would have been had the impairment
not been recognised at the date the impairment is reversed.
(b) Non-financial assets
The carrying amounts of non-financial assets (except for
inventories and deferred tax asset) are reviewed at the end of each
reporting date to determine whether there is any indication of
impairment.
If any such indication exists, then the asset's recoverable
amount is estimated. For the purpose of impairment testing, assets
are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets
(the "cash-generating unit"). The goodwill acquired in a business
combination, for the purpose of impairment testing, is allocated to
cash-generating units that are expected to benefit from the
synergies of the combination. Goodwill is tested for impairment on
an annual basis.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset.
An impairment loss is recognised if the carrying amount of an
asset or its cash-generating unit exceeds its recoverable
amount.
Impairment losses are recognised in profit or loss. Impairment
losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to
the units and then to reduce the carrying amount of the other
assets in the unit (groups of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For
other assets, impairment losses recognised in prior periods are
assessed at the end of each reporting period for any indications
that the loss has decreased or no longer exists. An impairment loss
is reversed if there has been a change in the estimates used to
determine the recoverable amount since the last impairment loss was
recognised. An impairment loss is reversed only to the extent that
the asset's carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised. Reversals
of impairment losses are credited to profit or loss in the year in
which the reversals are recognised.
(c) Equity instruments
Instruments classified as equity are measured at cost on initial
recognition and are not re-measured subsequently.
(i) Ordinary shares
Ordinary shares are redeemable only at the Company's options and
are classified as equity. Distributions thereon are recognised as
distributions within equity.
(ii) Management shares
Management shares are classified as equity and are
non-redeemable.
3.11 Employee Benefits
(a) Short-term employee benefits
Short-term employee benefit obligations in respect of salaries,
annual bonuses, paid annual leave and sick leave are measured on an
undiscounted basis and are expensed as the related service is
provided.
A liability is recognised for the amount expected to be paid
under short-term cash bonus or profit-sharing plans if the Group
has a present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and the
obligation can be estimated reliably.
(b) State plans
Certain companies in the Group maintain a defined contribution
plan in Malaysia and Vietnam for providing employee benefits, which
is required by laws in Malaysia and Vietnam respectively. The
retirement benefit plan is funded by contributions from both the
employees and the companies to the employees' provident fund. The
Group's contributions to employees' provident fund are charged to
profit or loss in the year to which they relate.
3.12 Finance Costs
Finance costs directly attributable to the acquisition,
construction or production of qualifying assets, are capitalised to
the cost of those assets. Investment income earned on the temporary
investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
Any unsold unit is not a qualifying asset because the asset is
ready for its intended sale in its current condition. The unsold
unit fails to meet the definition of qualifying asset under IAS 23
and accordingly, no capitalisation of borrowing costs.
All sold units are not a qualifying asset to the developer as
the control of the asset has been transferred to customers over
time. No capitalisation borrowing costs relating to assets that it
no longer controls and recognises.
All other finance costs are recognised in profit or loss in the
period in which they are incurred using the effective interest
method.
3.13 Commitments and Contingencies
Commitments and contingent liabilities are disclosed in the
financial statements and described in Note 35. They are disclosed
unless the possibility of an outflow of resources embodying
economic benefits is remote. A contingent asset is not recognised
in the financial statements but disclosed when an inflow of
economic benefits is probable.
3.14 Segment Reporting
Segmental information represents the level at which financial
information is reported to the Board of Directors, being the chief
operating decision makers as defined in IFRS 8. The Directors
determine the operating segments based on reports prepared by their
staff for strategic decision making and resource allocation. For
management purposes, the Group is organised into project units as
operation segments set out in Note 5.2.
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components
Segment capital expenditure is the total cost incurred during
the year to acquire property, plant and equipment, and intangible
assets other than goodwill.
3.15 Lease
During the year, the Group has changed its accounting policy for
leases where the group is the lessee. The new policy is set out
below and the impact of the change is described in note 2.2.
Until 31 December 2018, leases of property, plant and equipment
where the Group, as lessee, had substantially all the risks and
rewards of ownership were classified as finance leases. Finance
leases were capitalised at the lease's inception at the fair value
of the leased property or, if lower, the present value of the
minimum lease payments. The corresponding rental obligations, net
of finance charges, were included in other short-term and long-term
payables.
Leases in which a significant portion of the risks and rewards
of ownership were not transferred to the Group as lessee were
classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were
charged to profit or loss on a straight-line basis over the period
of the lease.
Under the new policy, on initial application, the Group has
performed the following:
-- Recognised right of use assets and lease liabilities in the
consolidated statement of financial position, measured at the
present value of future lease payments, discounted using the rate
implicit in the lease or the lessee's incremental borrowing rate if
this is not stated. These are included within right-of-use assets
and lease liabilities respectively;
-- Recognised depreciation of right of use assets and interest
on lease liabilities in the consolidated income statement;
-- The incremental borrowing rate is calculated on a lease by lease basis.
4 Financial INSTRUMENTS
The Group's principal financial instruments comprise cash and
cash equivalents, trade and other receivables, trade and other
payable, amount due to non-controlling interest, medium term notes,
loan and borrowings. The Group's accounting policies and method
adopted, including the criteria for recognition, the basis on which
income and expenses are recognised in respect of each class of
financial assets, financial liability and equity instrument are set
out in Note 3.6.
4.1 Financial Risk Management Objectives and Policies
The Group's international operations and debt financing
arrangements expose it to a variety of financial risks: credit
risk, liquidity risk and market risk (including foreign exchange
risk, interest rate risk and price risk). The Group's financial
risk management policies and their implementation on a group-wide
basis are under the direction of the Board of Aseana Properties
Limited.
The Group's treasury policies are formulated to manage the
financial impact of fluctuations in interest rates and foreign
exchange rates to minimise the Group's financial risks. The Group
has not used derivative financial instruments, principally interest
rate swaps and forward foreign exchange contracts for hedging
transactions. The Group does not envisage using these derivative
hedging instruments in the short term as it is the Group's policy
to borrow in the currency to match the revenue stream to give it a
natural hedge against foreign currency fluctuation. The derivative
financial instruments will only be used under the strict direction
of the Board. It is also the Group's policy not to enter into
derivative transactions for speculative purposes.
4.2 Credit Risk
The Group's credit risk is primarily attributable to deposits
with banks and credit exposures to customers. The Group has credit
policies in place and the exposures to these credit risks are
monitored on an ongoing basis. The Group manages its deposits with
banks and financial institutions by monitoring credit ratings and
limiting the aggregate risk to any individual counterparty. At 31
December 2019, 97.60% (2018: 98.07%) of deposits and cash balances
were placed at banks and financial institutions with credit ratings
of no less than A (Moody's/ Rating Agency Malaysia) and 2.40%
(2018: 1.93%) with local banks, in the case of Vietnam. Management
does not expect any counterparty to fail to meet its
obligations.
The group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables and
contract assets have been grouped based on shared credit risk
characteristics and the days past due. The contract assets relate
to unbilled work in progress and have substantially the same risk
characteristics as the trade receivables for the same types of
contracts. The Group has therefore concluded that the expected loss
rates for trade receivables are a reasonable approximation of the
loss rates for the contract assets.
In respect of credit exposures to customers, the Group receives
progress payments from sales of commercial and residential
properties to individual customers prior to the completion of
transactions. In the event of default by customers, the Group
companies undertake legal proceedings to recover the properties.
The Group has limited its credit exposure to customers due to
secured bank loans taken by the purchasers. At 31 December 2019,
there was no significant concentration of credit risk within the
Group.
The Group's exposure to credit risk arising from total debtors
was set out in Note 22 and totals US$12.9 million (2018: US$17.0
million). The Group's exposure to credit risk arising from deposits
and balances with banks is set out in Note 23 and totals US$7.6
million (2018: US$12.6 million).
Financial guarantees
The Company provides unsecured financial guarantee to banks in
respect of banking facilities granted to certain subsidiaries, as
set out in Notes 31.
At the end of the reporting period, the maximum exposure to
credit risk as represented by the outstanding banking and credit
facilities of the subsidiaries is as follows:
2019 2018
Company US$'000 US$'000
----------------------------- --------- ---------
Financial institutions for
bank facilities granted to
its subsidiaries 76,010 70,809
------------------------------ --------- ---------
At the end of the reporting period there was no indication that
any subsidiary would default on repayment.
4.3 Liquidity Risk
The Group raises funds as required on the basis of budgeted
expenditure and inflows for the next twelve months with the
objective of ensuring adequate funds to meet commitments associated
with its financial liabilities. When funds are sought, the Group
balances the costs and benefits of equity and debt financing
against the developments to be undertaken. At 31 December 2019 the
Group's borrowings to fund the developments had terms of less than
ten years.
Cash flows are monitored on an on-going basis. The Group manages
its liquidity needs by monitoring scheduled debt servicing payments
for long term and short term financial liabilities as well as cash
out flows due in its day-to-day operations while ensuring
sufficient headroom on its undrawn committed borrowing facilities
at all times so that borrowing limits and covenants are not
breached. Capital investments are committed only after confirming
the source of funds, e.g. securing financial liabilities.
Management is of the opinion that most of the bank borrowings
can be renewed or re-financed based on the strength of the Group's
earnings, cash flow and asset base.
It is not expected that the cash flows included in the maturity
analysis could occur significantly earlier, or at a significantly
different amount.
The maturity profile of the Group's financial liabilities at the
statement of financial position date, based on the contracted
undiscounted payments, were as follows:
Contractual
Carrying interest Contractual More than 5
amount rate cash flows Under 1 year 1 - 2 years 2 - 5 years years
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
At 31 December
2019
Finance lease 2.50% -
liabilities 611 3.50% 637 456 181
Interest bearing
loans and 5.55% -
borrowings 89,212 11.3% 99,959 44,925 35,022 20,012 -
Trade and other
payables 23,549 - 23,549 23,549 - - -
Amount due to
non-controlling
interests 10,587 - 10,587 10,587 - - -
----------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
123,959 - 134,706 79,493 35,201 20,012 -
----------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
At 31 December
2018
Interest bearing
loans and 5.55% -
borrowings 85,033 11.3% 101,506 50,817 30,087 20,602 -
Trade and other
payables 31,324 - 31,324 31,324 - - -
Amount due to
non-controlling
interests 13,194 - 13,194 13,194 - - -
129,551 - 146,024 95,335 30,087 20,602 -
----------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
The above table excludes current tax liabilities and contract
liabilities
4.4 Market Risk
(a) Foreign Exchange Risk
Entities within the Group are exposed to foreign exchange risk
from future commercial transactions and net monetary assets and
liabilities that are denominated in a currency that is not the
entity's functional currency. The foreign currency exposure is not
hedged.
The Group maintains a natural hedge, whenever possible, by
borrowing in the currency of the country in which the property or
investment is located or by borrowing in currencies that match the
future revenue stream to be generated from its investments.
Management monitors the foreign currency exposure closely and
takes necessary actions in consultation with the bankers to avoid
unfavourable exposure.
The Group is exposed to foreign currency risk on cash and cash
equivalents which are denominated in currencies other than the
functional currencies of the relevant Group entities.
The Group's exposure to foreign currency risk on cash and cash
equivalents in currencies other than the functional currencies of
the relevant Group entities at year end are as follows:
2019 2018
US$'000 US$'000
------------------ -------- --------
US Dollar 320 44
Ringgit Malaysia 74 41
Others - 4
------------------- -------- --------
394 89
------------------ -------- --------
At 31 December 2019, if cash and cash equivalents denominated in
a currency other than the functional currencies of the Group
entities strengthened/ (weakened) by 10% and all other variables
were held constant, the effects on the Group's profit or loss and
equity expressed in US$ would have been US$39,400/ (US$39,400)
(2018: US$8,900/ (US$8,900) ).
Currency risks as defined by IFRS 7 arise on account of monetary
assets and liabilities being denominated in a currency that is not
the functional currency. Differences resulting from the translation
of financial statements into the Group's presentation currency are
not taken into consideration.
Subsequent to year end, there are no significant monetary
balances held by group companies that are denominated in a
non-functional currency.
(b) Interest Rate Risk
The Group's policy is to minimise interest rate risk on bank
loans and borrowings using a mix of fixed and variable rate debts
that represent market rates. The Group prefers to maintain
flexibility on the desired mix of fixed and variable interest rates
as this will depend on the economic environment, the type of
borrowings available and the funding requirements of the project
when a decision is to be made.
The interest rate profile of the Group's significant
interest-bearing financial instrument, based on carrying amounts at
the end of the reporting period was:
2019 2018
US$'000 US$'000
---------------------------- --- -------- --------
Fixed rate instruments:
Financial assets 5,235 3,201
Financial liabilities 36,753 23,761
Floating rate instruments:
Financial liabilities 53,070 61,272
---------------------------------- -------- --------
The Group's exposure to the risk of changes in market interest
rates relates primarily to the Group's liabilities with a floating
interest rate. The fixed and floating interest rates were not
hedged and would therefore expose the Group to cash flow interest
rate risk. Borrowings at fixed rate represent 41% (2018: 28%) of
the Group's total borrowings at 31 December 2019.
Interest rate risk is reported internally to key management
personnel via a sensitivity analysis, which is prepared based on
the exposure to variable interest rates for non-derivative
instruments at the statement of financial position date. For
variable rate borrowings, the analysis is prepared assuming that
the amount of liabilities outstanding at the statement of financial
position date will be outstanding for the whole year. A 100 basis
point increase or decrease is used and represents the management's
assessment of the reasonable possible change in interest rate.
Sensitivity analysis for floating rate instrument
At 31 December 2019, if the interest rate had been 100 basis
point lower/ higher and all other variables were held constant,
this would (decrease)/increase the Group loss for the year by
approximately (US$530,700)/US$530,700 ((2018: would
(decrease)/increase the Group loss for the year by approximately
(US$613,000)/US$613,000).
4.5 Fair Values
The carrying amount of trade and other receivables, deposits,
cash and cash equivalents, trade and other payables and accruals of
the Group approximate their fair values in the current and prior
years due to relatively short term nature of these financial
instruments.
The table below analyses financial instruments carried at fair
value and those not carried at fair value, along with their
carrying amounts shown in the statement of financial position:
2019
Fair value of financial
instruments carried at Fair value of financial instruments Total
fair value not carried at fair value fair Carrying
Level Level Level Level Level
US$'000 1 2 3 Total 1 2 Level 3 Total value amount
------------------ ------- ------- ------- ------- ------- -------- ---------- ----------- ---------- ----------
Financial
liabilities
Amount due to
non-controlling
interests - - - - - - (10,587) (10,587) (10,587) (10,587)
Bank loans and
borrowings - - - - - - (53,070) (53,070) (53,070) (53,070)
Finance lease
liabilities - - - - - - (611) (611) (611) (611)
Medium term notes - - - - - - (35,734) (35,734) (35,734) (36,142)
------- ------- ------- ------- ------- -------- ---------- ----------- ---------- ----------
- - - - - - (100,002) (100,002) (100,002) (100,410)
======= ======= ======= ======= ======= ========================== ========== =========== ========== ==========
2018
Fair value of financial
instruments carried at Fair value of financial instruments Total
fair value not carried at fair value fair Carrying
Level Level Level Level Level Level
US$'000 1 2 3 Total 1 2 3 Total value amount
------------------ ------- ------- ------- ------- --------- --------- ---------- ---------- --------- ---------
Financial
liabilities
Amount due to
non-controlling
interests - - - - - - (13,194) (13,194) (13,194) (13,194)
Bank loans and
borrowings - - - - - - (61,272) (61,272) (61,272) (61,272)
Medium term notes - - - - - - (23,723) (23,723) (23,723) (23,761)
------- ------- ------- ------- --------- --------- ---------- ---------- --------- ---------
- - - - - - (98,189) (98,189) (98,189) (98,227)
======= ======= ======= ======= ========= =========================== ========== ========== ========= =========
Policy on transfer between levels
The fair value on an asset to be transferred between levels is
determined as of the date of the event or change in circumstances
that caused the transfer.
Level 1 fair value
Level 1 fair value is derived from quoted price (unadjusted) in
an active market for identical financial assets or liabilities that
the entity can access at the measurement date.
Level 2 fair value
Level 2 fair value is estimated using inputs other than quoted
prices included within Level 1 that are observable for the
financial assets or liabilities, either directly or indirectly.
Level 3 fair value
Level 3 fair value is estimated using unobservable inputs for
the financial assets and liabilities.
Transfers between Level 1 and Level 2 fair values
There has been no transfer between Level 1 and 2 fair values
during the financial year (2018: no transfer in either
direction).
Transfers between Level 2 and Level 3 fair values
There has been no transfer in either direction during the
financial year (2018: no transfer in either direction).
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest at
the end of the reporting period. At 31 December 2019, the interest
rate used to discount estimated cash flows of the medium term notes
is 7.90% (2018: 8.30%).
4.6 Capital Management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns to shareholders and benefits to other stakeholders
and to maintain an optimal capital structure to reduce cost of
capital.
The capital structure of the Group consisted of cash and cash
equivalents, loans and borrowings, medium term notes and equity
attributable to equity holders of the parent, comprising issued
share capital and reserves, were as follows:
2019 2018
US$'000 US$'000
---------- ----------
Cash and cash equivalents 7,615 12,573
---------- ----------
Loans and borrowings and finance lease
liabilities (53,681) (61,272)
---------- ----------
Medium term notes (36,142) (23,761)
---------- ----------
Equity attributable to equity holders
of the parent (109,646) (136,374)
---------- ----------
Total capital (191,854) (208,834)
---------- ----------
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce
debts.
Consistent with others in the industry, the Group monitors
capital on the basis of net debt-to-equity ratio.
Net debt-to-equity ratio is calculated as a total of
interest-bearing borrowings less held-for-trading financial
instrument and cash and cash equivalents to the total equity.
The net debt-to-equity ratios at 31 December 2019 and 31
December 2018 were as follows:
2019 2018
US$'000 US$'000
--------- ----------
Total borrowings and finance lease
liabilities 89,823 85,033
Less: Cash and cash equivalents (Note
23) (7,615) (12,573)
--------- ----------
Net debt 82,208 72,460
--------- ----------
Total equity 105,798 135,437
--------- ----------
Net debt-to-equity ratio 0.78 0.53
--------- ----------
5 revenue AND SEGmeNTAL information
The Group's operating revenue for the year was mainly
attributable to the sale of completed units in Malaysia.
Income earned from hotel, mall and hospital operations are
included in other income in line with management's intention to
dispose of the properties.
5.1 Revenue recognised during the year as follows:
2019 2018
US$'000 US$'000
------------------------------- ------------- -----------
Sale of completed units 9,725 33,054
9,725 33,054
------------------------------- ------------- -----------
Segmental Information
Timing of revenue recognition
Properties transferred
at a point in time 9,725 5,404
Properties transferred
over time - 27,650
--------------------------------- ------------- -----------
9,725 33,054
------------------------------- ------------- -----------
5.2
The Group's assets and business activities were managed by Ireka
Development Management Sdn. Bhd. ("IDM") as the Development Manager
under a Management Agreement dated 27 March 2007 until they
resigned as of 30 June 2019. Following that date, the Company has
been managed by its Board of Directors with the assistance of
certain staff seconded to the Company by Ireka and a Chief
Executive Officer who resigned in January 2020, On 31 May 2020 we
terminated the Services Agreement and also the staff secondment
arrangements with Ireka and have engaged a few staff directly to
run our finances and operations.
Segmental information represents the level at which financial
information is reported to the Board of Directors, being the chief
operating decision makers as defined in IFRS 8. The Directors
determine the operating segments based on reports reviewed and used
by their staff 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) Urban DNA Sdn. Bhd.- develops The RuMa Hotel and Residences ("The RuMa"); and
(vi) 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 2019 and
2018.
Information regarding the operations of each reportable segment
is in Notes 5.3. The Directors monitor 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 and liabilities are presented 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.
5.3 Analysis of the group's reportable operating segments is as follows:-
Operating Segments - ended 31 December 2019
Hoa Lam
Investment Ireka ICSD Amatir The Urban Shangri-La
Holding Land Sdn. Ventures Resources RuMa DNA Healthcare
Companies Bhd. Sdn. Sdn. Bhd. Hotel Sdn. Group Total
Bhd. KL Bhd.
Sdn.
Bhd.
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ------------ --------------- ---------- ----------- -------- ---------- ----------- ----------
Segment
(loss)/profit
before
taxation 1,354 94 (23,929) 1,205 (3,962) 491 (3,862) (28,609)
=============== ============ =============== ========== =========== ======== ========== =========== ==========
Included in
the measure
of segment
(loss)/profit
are:
Revenue - - - 6,427 - 3,298 - 9,725
Other income
from hotel
operations - - 3,909 - 3,882 - - 7,791
Other income
from mall
operations - - 1,880 - - - - 1,880
Other income
from hospital
operations - - - - - - 15,092 15,092
Provision for
allowance
of inventory - - (22,355) (932) - - - (23,287)
Disposal of
intangible
assets - - - (50) - - - (50)
Marketing
expenses - - - (1) - (170) - (171)
Expenses from
hotel
operations - - (3,879) - (6,970) - - (10,849)
Expenses from
mall
operations - - (1,326) - - - - (1,326)
Expenses from
hospital
operations - - - - - - (13,454) (13,454)
Depreciation
of property,
plant and
equipment - - - - (35) - (70) (105)
Finance costs (180) (14) (1,634) (678) (40) (1,009) (5,960) (9,515)
Finance income - 1 104 708 - 45 969 1,827
=============== ============ =============== ========== =========== ======== ========== =========== ==========
Segment assets 3,973 481 60,217 6,318 1,085 85,571 86,511 244,156
=============== ============ =============== ========== =========== ======== ========== =========== ==========
Segment
liabilities 251 196 2,735 4,099 1,626 5,379 65,222 79,508
=============== ============ =============== ========== =========== ======== ========== =========== ==========
Reconciliation of reportable segment revenues, profit or loss,
assets and liabilities and other material items
Profit or loss US$'000
------------------------------------ ---------
Total loss for reportable segments (28,609)
Other non-reportable segments (441)
Finance income 393
Consolidated loss before taxation (28,657)
==================================== =========
Operating Segments - ended 31 December 2018
Hoa Lam
Investment Ireka ICSD Amatir The RuMa Urban Shangri-La
Holding Land Sdn. Ventures Resources Hotel KL DNA Healthcare
Companies Bhd. Sdn. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Group Total
Bhd.
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ------------ ----------- ---------- ----------- ----------- ----------- ----------- ----------
Segment
(loss)/profit
before
taxation (2,475) (32) (1,339) 820 (4,199) 6,118 (4,107) (5,214)
=============== ============ =========== ========== =========== =========== =========== =========== ==========
Included in
the measure
of segment
(loss)/profit
are:
Revenue - - - 5,404 - 27,650 - 33,054
Other income
from hotel
operations - - 3,727 - 109 - - 3,836
Other income
from mall
operations - - 1,767 - - - - 1,767
Other income
from hospital
operations - - - - - - 12,695 12,695
Disposal of
intangible
assets - - - (53) - - - (53)
Marketing
expenses - - - - - (671) - (671)
Expenses from
hotel
operations - - (4,169) - (593) - - (4,762)
Expenses from
mall
operations - - (1,395) - - - - (1,395)
Expenses from
hospital
operations - - - - - - (12,989) (12,989)
Depreciation
of property,
plant and
equipment - - - - (14) - (78) (92)
Finance costs - - (1,494) (135) - (156) (5,249) (7,034)
Finance income - 1 80 158 - 18 985 1,242
=============== ============ =========== ========== =========== =========== =========== =========== ==========
Segment assets 275 501 82,219 16,987 737 104,498 88,531 293,748
=============== ============ =========== ========== =========== =========== =========== =========== ==========
Segment
liabilities 450 182 2,400 9,513 659 23,240 64,793 101,237
=============== ============ =========== ========== =========== =========== =========== =========== ==========
Reconciliation of reportable segment revenues, profit or loss,
assets and liabilities and other material items
Profit or loss US$'000
------------------------------------ --------
Total loss for reportable segments (5,214)
Other non-reportable segments (1,582)
Consolidated loss before taxation (6,796)
==================================== ========
Additions
2019 Finance Segment to non-current
US$'000 Revenue Depreciation costs Finance income Segment assets liabilities assets
---------------- -------- ------------- -------- --------------- --------------- -------------- ---------------
Total
reportable
segment 9,725 (105) (9,514) 1,827 244,156 79,508 -
Other
non-reportable
segments - - - 394 26,078 84,928 54
---------------- -------- ------------- -------- --------------- --------------- -------------- ---------------
Consolidated
total 9,725 (105) (9,514) 2,221 270,234 164,436 54
================ ======== ============= ======== =============== =============== ============== ===============
Additions
2018 Finance Segment to non-current
US$'000 Revenue Depreciation costs Finance income Segment assets liabilities assets
---------------- -------- ------------- -------- --------------- --------------- -------------- ---------------
Total
reportable
segment 33,054 (92) (7,034) 1,242 293,748 101,237 -
Other
non-reportable
segments - - - - 13,780 70,854 121
---------------- -------- ------------- -------- --------------- --------------- -------------- ---------------
Consolidated
total 33,054 (92) (7,034) 1,242 307,528 172,091 121
================ ======== ============= ======== =============== =============== ============== ===============
Geographical Information - ended 31 December 2019
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 9,725 - 9,725
6,319
Non-current assets 19 4,008 10,327
==================== ========= ======== =============
In the financial year ended 31 December 2019, no single customer
exceeded 10% of the Group's total revenue.
Geographical Information - ended 31 December 2018
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 33,054 - 33,054
Non-current assets 5,925 4,087 10,012
==================== ========= ======== =============
In the financial year ended 31 December 2018, no single customer
exceeded 10% of the Group's total revenue.
6 Cost of Sales
2019 2018
US$'000 US$'000
Direct costs attributable
to: Completed units
(Note 21) 6,461 24,548
Disposal/impairment
of intangible assets
(Note 18)
Net realisable value 51 53
adjustment of inventories
(Note 21) 23,287 -
29.799 24,601
-------------------------------- ------------------ -------------
7 Other Income
2019 2018
US$'000 US$'000
Rental income 525 236
Other income from hotel operations (a) 7,791 3,836
Other income from mall operations (b) 1,880 1,767
Other income from hospital operations
(c) 15,092 12,695
Sundry income 1,701 615
26,989 19,149
---------------------------------------- -------- ---------
(a) Other income from hotel operations
The income in 2019 and 2018 relates to the hotel operations of
FPSS which is owned by a subsidiary of the Company, ICSD Ventures
Sdn. Bhd. The income earned from hotel operations is included in
other income in line with management's intention to dispose of the
hotel.
(b) Other income from mall operations
The income relates to the operation of HMS which is owned by a
subsidiary of the Company, ICSD Ventures Sdn. Bhd. The income
earned from mall operations is included in other income in line
with management's intention to dispose of the mall.
(c) Other income from hospital operations
The income relates to the operation of CIH which is owned by a
subsidiary of the Company, City International Hospital Company
Limited. The income earned from hospital operations is included in
other income in line with management's intention to dispose of the
hospital.
8 Foreign exchange GAIN/(LOSS)
2019 2018
US$'000 US$'000
----------------------------------------- --- ----------------- --------
Foreign exchange gain/(loss) comprises:
Realised foreign exchange
(loss)/gain (6) 29
Unrealised foreign
exchange gain/(loss) 293 (1,382)
----------------------------------------------- ----------------- --------
287 (1,353)
--------------------------------------------- ----------------- --------
9 Management Fees
2019 2018
US$'000 US$'000
------------------- --- -------- --------
Management fees 1,157 1,460
------------------------- -------- --------
From 1 January 2019 to 30 April 2019, the management fees paid
to the Development Manager were US$75,000 per month, payable in
advance, following which the base fee payable to the Manager
reduced to US$50,000 per month, again payable in advance. The
Manager resigned with effect from 30 June 2019. The management fees
have been allocated to the subsidiaries and the Company based on
where the relevant service was provided.
10 Staff Costs
2019 2018
US$'000 US$'000
-------------------------------------------- -------- --------
Wages, salaries and others (including key
management personnel) 8,683 8,387
Employees' provident fund, social security
and other pension costs 382 337
-------------------------------------------- -------- --------
9,065 8,724
-------------------------------------------- -------- --------
The Company has no executive Directors or employees under its
employment. As of year ended 2019, the subsidiaries of the Group
have a total of 887 (2018: 816) employees.
11 Finance (Costs)/ INCOME
2019 2018
US$'000 US$'000
------------------------------- --- -------- --------
Interest income from banks 2,221 1,242
Accrued interest 3,572 -
Agency fees (695) (59)
Interest on bank loans (7,038) (5,540)
Lease interest (59) -
Interest on medium term notes (1,722) (1,435)
(3,721) (5,792)
----------------------------------- -------- --------
Accrued interest represents interest on equity contributions due
from Ireka Corporation Berhad. relating to the development and
construction of The RuMa Hotel and Residences. For more detailed
information see note 33.
12 net Loss BEFORE TAXATION
2019 2018
US$'000 US$'000
-------------------------------------------- --- ---------- ----------
Net loss before taxation is stated after charging/(crediting):
Auditor's remuneration 202 190
Directors' fees/emoluments 186 145
Depreciation of property,
plant and equipment 105 92
Expenses of hotel operations 10,849 4,763
Expenses of mall operations 1,326 1,395
Expenses of hospital operations 13,454 12,989
Unrealised foreign exchange
(gain)/loss (293) 1,382
Realised foreign exchange
loss/(gain) 6 (29)
Disposal/impairment of
intangible assets 51 53
-------------------------------------------------- ---------- ----------
13 TAXATION
2019 2018
US$'000 US$'000
Current tax expense - Current
year 172 2,275
- Prior year - (2,422)
Deferred tax credit - Current
year 1,177 (243)
- Prior year - -
---------------------------------------------- -------- ------------------
Total tax expense/(income) for
the year 1,349 (390)
---------------------------------------------- -------- ------------------
The numerical reconciliation between the income tax
(income)/expense and the product of accounting results multiplied
by the applicable tax rate is computed as follows:
2019 2018
US$'000 US$'000
Net loss before taxation (28,657) (6,796)
-------------------------------------------- ---------- ---------
Income tax at a rate of 24% (2018:
24%) (6,878) (1,631)
Add :
Tax effect of expenses not deductible
in determining taxable profit 1,327 4,137
Current year losses and other tax benefits
for which no deferred tax asset was
recognised 4,911 1,927
Tax effect of different tax rates in
subsidiaries 713 948
Less :
Tax effect of income not taxable in
determining taxable profit (2,997) (3,348)
Under provision in respect of prior
period/year 4,273 (2,423)
-------------------------------------------- ---------- ---------
Total tax expense/(income) for the
year 1,349 (390)
-------------------------------------------- ---------- ---------
The applicable corporate tax rate in Malaysia is 24% (2018:
24%).
The Company is treated as a tax resident of Jersey for the
purpose of Jersey tax laws and is subject to a tax rate of 0%.
The applicable corporate tax rates in Singapore and Vietnam are
17% and 20% (2018: 17% and 20%) respectively.
A subsidiary of the Group, CIH is granted preferential corporate
tax rate of 10% for the results of the hospital operations. The
preferential income tax is given by the government of Vietnam due
to the subsidiary's involvement in the healthcare industry.
A Goods and Services Tax was introduced in Jersey in May 2008.
The Company has been registered as an International Services Entity
so it does not have to charge or pay local GST. The cost for this
registration is GBP200 per annum.
14 OTHER COMPREHENSIVE (LOSS)/income
Items that are or may be reclassified 2019 2018
subsequently to profit or loss, net of US$'000 US$'000
tax
------------------------------------------ --------- ---------
Foreign currency translation differences
for foreign operations
Gain/(losses)/arising during the year 615 (1,082)
615 (1,082)
------------------------------------------ --------- ---------
15 LOSS Per Share
Basic and diluted loss per ordinary share
The calculation of basic and diluted loss per ordinary share for
the year ended 31 December 2019 was based on the loss attributable
to equity holders of the parent and a weighted average number of
ordinary shares outstanding, calculated as below:
2019 2018
US$'000 US$'000
---------------------------------------- --------- ---------
Loss attributable to equity holders of
the parent (27,106) (4,885)
Weighted average number of shares 198,691 198,691
Loss per share
Basic and diluted (US cents) (13.64) (2.46)
---------------------------------------- --------- ---------
The diluted loss per share was not applicable as there were no
dilutive potential ordinary shares outstanding at the end of the
reporting period.
16 NON-CONTROLLING INTERESTS
Non-controlling interests in subsidiaries
The Group's subsidiaries that have material non-controlling
interests ("NCI") are as follows:
Shangri-La Other individually
Hoa Lam Healthcare Urban immaterial
Services Investment DNA subsidiaries
Co Ltd Pte Ltd Sdn. Bhd. RuMa Total
2019 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------------ ----------- ------------- ------------ --------- --------------------- --------
NCI percentage
of ownership interest
and voting interest 49% 18.34% 30% 30%
Carrying amount
of NCI (5,475) 1,409 2,611 (2,588) 195 (3,848)
Loss allocated
to NCI (908) (794) (2) (1,188) (8) (2,900)
------------------------ ----------- ------------- ------------ --------- --------------------- --------
Summarised financial information before intra-group elimination
Shangri-La
Hoa Lam Healthcare Urban
Services Investment DNA The RuMa
Co Ltd Pte Ltd Sdn. Bhd.
US$'000 US$'000 US$'000 US$'000
As at 31 December 2019
Non-current assets 33,764 76,375 5,066 577
Current assets 38,409 87,152 80,503 508
Non-current liabilities (5,677) (13,246) (39,253) (134)
Current liabilities (53,562) (86,062) (37,613) (9,577)
-------------------------------- ---------- ------------ -----------
Net assets 12,934 64,219 8,703 (8,626)
-------------------------------- ---------- ------------ ----------- ---------------
Year ended 31 December
2019
Revenue - - -
Loss for the year (1,854) (4,331) (4) (3,962)
Total comprehensive loss (1,862) (4,350) 85 (3,962)
Cash flows used in operating
activities (1,584) (3,270) (4,299)
Cash flows from investing
activities 934 3,910 -
Cash flows from financing
activities 4,250 9,953 3,399
-------------------------------- ---------- ------------ ----------- -----------
Net increase /(decrease)
in cash and cash equivalents 3,600 10,593 (900)
-------------------------------- ---------- ------------ ----------- -----------
Shangri-La Urban DNA Other individually
Healthcare Sdn. Bhd. immaterial
Hoa Lam Investment subsidiaries Total
Services Pte Ltd
Co Ltd
2018 US$'000 US$'000 US$'000 US$'000 US$'000
------------------ ----------- ------------- ------------ --------------------- --------
NCI percentage
of ownership
interest and
voting interest 49% 18.42% 30%
Carrying amount
of NCI (4,555) 2,185 2,585 (1,152) (937)
Loss allocated
to NCI (1,280) (1,048) 2,074 (1,267) (1,521)
------------------ ----------- ------------- ------------ --------------------- --------
Summarised financial information before intra-group elimination
Shangri-La
Hoa Lam Healthcare
Services Investment Urban DNA
Co Ltd Pte Ltd Sdn. Bhd.
US$'000 US$'000 US$'000
As at 31 December 2018
Non-current assets 33,567 75,919 4,745
Current assets 37,865 86,153 99,751
Non-current liabilities (3,956) (9,231) (37,975)
Current liabilities (50,090) (79,261) (57,904)
----------------------------------- ---------- ------------ -----------
Net assets 17,386 73,580 8,617
----------------------------------- ---------- ------------ -----------
Year ended 31 December
2018
Revenue - - -
(Loss)/profit for the
year (2,611) (5,691) 6,912
Total comprehensive (loss)/profit (2,317) (5,277) 6,915
Cash flows used in operating
activities (1,582) (3,265) (4,255)
Cash flows from investing
activities 933 3,905 -
Cash flows from financing
activities 4,244 9,940 3,364
----------------------------------- ---------- ------------ -----------
Net increase /(decrease)
in cash and cash equivalents 3,595 10,580 (891)
----------------------------------- ---------- ------------ -----------
17 Property, Plant and Equipment
Leasehold
Furniture, Building Total
Fittings Motor
& Equipment Vehicles
US$'000 US$'000 US$'000 US$'000
-------------------------- -------------- ---------- ---------- --------
Cost
At 1 January 2019 462 203 788 1,453
Exchange adjustments (9) 10 (16) (15)
Addition 54 - - 54
Disposal (72) (7) (21) (100)
At 31 December 2019 435 206 751 1,392
-------------------------- -------------- ---------- ---------- --------
Accumulated Depreciation
At 1 January 2019 312 143 320 775
Exchange adjustments (6) (3) (6) (15)
Charge for the year 63 10 32 105
Disposal (72) - (21) (93)
At 31 December 2019 297 150 325 772
-------------------------- -------------- ---------- ---------- --------
Net carrying amount
at 31 December 2019 138 56 426 620
-------------------------- -------------- ---------- ---------- --------
Cost
At 1 January 2018 350 207 797 1,354
Exchange adjustments (8) (4) (9) (21)
Addition 120 - - 120
At 31 December 2018 462 203 788 1,453
-------------------------- -------------- ---------- ---------- --------
Accumulated Depreciation
At 1 January 2018 280 126 285 691
Exchange adjustments (8) (3) 3 (8)
Charge for the year 40 20 32 92
At 31 December 2018 312 143 320 775
-------------------------- -------------- ---------- ---------- --------
Net carrying amount
at 31 December 2018 150 60 468 678
-------------------------- -------------- ---------- ---------- --------
18 Intangible Assets
Licence Contracts
and Related
Relationships Goodwill Total
US$'000 US$'000 US$'000
-------------------------------- ------------------
Cost
At 1 January 2018/ 31 December
2018 / 31 December 2019 10,695 6,479 17,174
Accumulated impairment
At 1 January 2018 7,176 5,797 12,973
Disposals - 53 53
At 31 December 2018 / 1 January
2019 7,176 5,850 13,026
Disposals - 51 51
At 31 December 2019 7,176 5,901 13,077
Carrying amounts
At 31 December 2018 3,519 629 4,148
At 31 December 2019 3,519 578 4,097
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 2018, the Group disposed of its
undeveloped land in the IHP Lot D2 and D3 to third party
purchasers.
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:
2019 2018
US$'000 US$'000
Licence contracts and related relationships
International Healthcare Park 3,519 3,519
Goodwill
SENI Mont' Kiara 28 79
Sandakan Harbour Square 550 550
578 629
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
21).
19 RIGHT OF USE
2019
Cost US$'000
Right-of-use assets recognised at 1 January
2019 4,498
-
Initial Application of IFRS 16
At 1 January 2019 4,498
Exchange adjustments (62)
At 31 December 2019 4,436
Depreciation charges
Charge for the year (3,892)
At 31 December 2019 (3,892)
NET BOOK VALUE
At 31 December 2019 544
Lease liabilities include in the consolidated statement
of financial position
As at 31.12.2019
US$'000
Current 432
Non-Current 179
Total 611
Amount recognised in the consolidated income
statement
As at 31.12.2019
US$'000
Depreciation charges on right-of-use 3,892
Interest on lease liabilities 59
Total 3,951
An increase in depreciation charges of right-of-use assets and
interest charges of Lease liabilities by US$0.6million and
US$0.59million respectively, for the financial year ended 31
December 2019.
20 Deferred Tax Assets
2019 2018
US$'000 US$'000
At 1 January 5,186 5,058
Exchange adjustments 52 (114)
Deferred tax credit relating
to origination of
temporary differences during
the year (172) 242
At 31 December 5,066 5,186
The deferred tax assets comprise:
2019 2018
US$'000 US$'000
Taxable temporary differences
between accounting profit
and taxable profit of property
development units sold 5,066 5,186
At 31 December 5,066 5,186
Deferred tax assets have not been recognised in respect of
unused tax losses of US$82m (31 December 2018: US$63m) 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$5,980,000 (31 December 2018:
US$5,410,000) which are available for offset against future taxable
profits. The unrecognised deferred tax asset at effective tax rates
of the group would be approximately US$10.6m (31 December 2018:
US$8.2m)
21 INVENTORIES
2019 2018
Notes US$'000 US$'000
Land held for property
development (a) 18,950 18,674
Stock of completed units,
at cost (b) 219,334 247,937
Consumables 579 549
At 31 December 238,863 267,160
Carrying amount of inventories
pledged as security for Loans
and borrowings and Medium Term
Notes 132,599 154,168
(a) Land held for property development
2019 2018
US$'000 US$'000
At 1 January 18,674 19,021
Add :
Exchange adjustments 123 (418)
Additions 153 71
At 31 December 18,950 18,674
Less: Costs recognised
as expenses in the consolidated
statement of comprehensive - -
income during the year
(Note 6)
At 31 December 18,950 18,674
(b) Stock of completed units, at cost
2019 2018
US$'000 US$'000
At 1 January 247,937 163,880
Work in progress (2,501) 71,683
Less :
Exchange adjustments 3,646 36,922
Costs recognised as expenses
in the consolidated statement
of comprehensive income during
the year (Note 6) (6,461) (24,548)
Net realisable value adjustments
of inventories (Note 6) (23,287) -
At 31 December 219,334 247,937
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. A net realisable value adjustment of US$23,287,000 was
recognised predominantly against the carrying amount of FPSS and
HMS.
Included in the stock of completed units are SENI units as well
as the following completed units:
Four Points by Sheraton Sandakan Hotel ("FPSS")
The recoverable amount of FPSS was determined based on a
valuation by an external, independent valuer with appropriate
recognised professional qualification. The recoverable amount
US$27,606,000 (RM113,000,000) of FPSS was determined to approximate
with its carrying amount.
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 2019 and the 10 years budget of FPSS;
(2) The occupancy rate of FPSS will improve to 78% in 2029 which
is when the hotel's operations are expected to stabilise;
(3) Average daily rates of the hotel will improve to US$102.61
(RM420) in 2029 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 8% was applied in discounting the
cash flows. The discount rates takes 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
increased/ (decreased) the recoverable amount by approximately
US$2,443,000/(US$2,199,000);
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$489,000/ (US$489,000);
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$977,000/
(US$977,000).
Harbour Mall Sandakan ("HMS")
The recoverable amount of HMS was determined based on a
valuation by an external, independent valuer with appropriate
recognised professional qualification. The recoverable amount
US$30,537,000 (RM125,000,000) of HMS was determined to approximate
with its carrying amount. .
The valuation of HMS was determined by the capitalisation of net
income expected to be generated from the continuing operations of
HMS ("income approach by discounted cash flow method") when the
mall operates at an optimum occupancy rate and was based on the
following key assumptions:
(1) Occupancy rate will improve to an optimum level of 95%;
(2) Capitalisation rate assumed at 6%; and
(3) Capitalisation period of 82 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$977,000)/ US$733,000;
b) an increase/(decrease) of 1% in optimum occupancy rate
throughout the entire projection term would have
increased/(decreased) the recoverable amount by approximately
US$Nil/ (US$244,000); and
c) an increase/(decrease) of 5% in average rental rate used
would have increased /(decreased) the recoverable amount by
approximately US$2,443,000/ (US$2,687,000).
City International Hospital ("CIH")
The recoverable amount US$75,000,000 (2018: US$75,000,000) 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.
The valuation of CIH was adopted from the results of discounted
cash flow approach as calculated 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 actual operating
results from 2015 to 2019 and references to the 5 years budget of
CIH, as 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 14.8% from
2025 to 2029;
(3) Pre-tax discount rate of 12% was applied in discounting the
cash flows. The discount rates take into the prevailing market
condition of the hospital industry in Vietnam, development time
frame and scale of the property; and
(4) Terminal yield rate of 10% was applied to reflect the
uncertainty and risk associated with remaining lease term of the
asset.
The RuMa Hotel and Residences ("The RuMa")
The recoverable amount of The RuMa was determined based on a
valuation by an external, independent valuer with appropriate
recognised professional qualification. The recoverable amount
US$103,095,000 (RM422,000,000) of The RuMa was determined to be
higher than its carrying amount.
The valuation of The RuMa Hotel was determined by discounting
the future cash flows expected to be generated from the continuing
operations of The RuMa and was based on the following key
assumptions:
(1) Cash flows were projected based on the 10 years projection
of The RuMa Hotel;
(2) The occupancy rate of The RuMa Hotel will improve to 78% in
2029 which is when the hotel's operations are expected to
stabilise;
(3) Average daily rates of the hotel will improve to US$252.36
(RM1,033) in 2029 which is when the hotel's operations are expected
to stabilise;
(4) Projected gross margin reflects the industry average
historical gross margin, adjusted for projected market and economic
conditions and internal resources efficiency; and
(5) Pre-tax discount rate of 9% was applied in discounting the
cash flows. The discount rate takes into the prevailing trend of
the hotel industry in Malaysia.
The valuation of The RuMa Residences was determined based on the
Comparison Approach as the sole method of valuation.
22 Trade and Other Receivables
2019 2018
US$'000 US$'000
Trade receivables 3,867 8,418
Other receivables 8,475 7,754
Contract assets - 397
Sundry deposits 560 422
12,902 16,991
Trade receivables represent progress billings receivable from
the sale of completed units and land held for property development.
Progress billings receivable from the sale of completed units are
generally due for settlement within 30 days from the date of
invoice and are recognised and carried at the original invoice
amount less allowance for any uncollectible amounts. They are
recognised at their original invoice amounts on initial recognition
less provision for impairment where it is required.
The loss allowance as at 31 December 2019 and 31 December 2018
(on adoption of IFRS 9) was determined as follows for both trade
receivables and contract assets:
Trade receivable Contract Loss Total
asset allowance
31 December 2019 US$'000 US$'000 US$'000 US$'000
----------- ----------- -----------
Current 3,045 - - 3,045
Past due
0 - 60 days - - - -
61 -120 days - - - -
More than 120 days 822 - - 822
----------- ----------- -----------
3,867 - - 3,867
----------- ----------- -----------
Trade receivable Contract Loss Total
asset allowance
31 December 2018 US$'000 US$'000 US$'000 US$'000
----------- ----------- -----------
Current 3,064 - - 3,064
Past due
0 - 60 days 3,428 - (3) 3,425
61 -120 days 880 - (3) 877
More than 120 days 1,183 397 (131) 1,449
----------- ----------- -----------
8,555 397 (137) 8,815
----------- ----------- -----------
The group uses the simplified approach to estimate credit loss
allowance for all trade receivables and contract assets, which will
be based on the past payment trends, existing market conditions and
adjusts for qualitative and quantitative reasonable and supportable
forward-looking information. The loss allowances are also based on
assumptions about risk of default. The quantum of any probability
of an expected credit loss will occur to be low or not material. No
provision is recognised in these financial statements.
Included in trade receivables is US$1,760,000 representing 25%
of the Group's trade receivables which are due from a subsidiary of
Ireka Corporation Berhad. for the acquisition of SENI units (31
December 2018: US$1,910,000, representing 25% of the Group's trade
receivables, for the acquisition of SENI units and expenses paid on
behalf). Other than the abovementioned customers, the Group has a
large number of customers whose property purchases are mainly
secured by personal bank financing.
Included in other receivables are sums of US$1,582,000 (31
December 2018: US$2,427,000) due from a subsidiary of Ireka
Corporation Berhad. for advance payments made to its contractors
and US$235,000 (31 December 2018: US$126,000) due from Ireka
Corporation Berhad for rental expenses paid on its behalf.
Furthermore, there was an amount due from Ireka Corporation Berhad
in relation to the interest on equity contributions to the
construction of The RuMa Hotel and Residences, as described in note
11.
Contracts assets primarily relate to the Group's rights to
consideration for work completed on construction contracts but not
yet billed at the reporting date.
The maximum exposure to credit risk is represented by the
carrying amount in the statement of financial position. The Group
monitors the repayment of the customers regularly and are confident
of the ability of the customers to repay the balance
outstanding.
23 Cash and Cash Equivalents
2019 2018
US$'000 US$'000
Cash and bank balances 2,380 9,372
Short term bank deposits 5,235 3,201
7,615 12,573
Less: Deposits pledged (4,380) (2,710)
Cash and cash equivalents 3,235 9,863
Included in short term bank deposits and cash and bank balance
is US4,380,000 (31 December 2018: US$2,710,000) pledged for loans
and borrowings and Medium Term Notes of the Group.
The interest rate on cash and cash equivalents, excluding
deposit pledged with licensed bank of US$4,380,000 (31 December
2018: US$2,710,000) pledged for loans and borrowings and Medium
Term Notes of the Group, ranges from 1.20% to 2.80% per annum (31
December 2018: 1.20% to 2.80% per annum).
The interest rate on short term bank deposits and cash and bank
balance pledged for loans and borrowings and Medium Term Notes of
the Group, ranges from 2.50% to 4.50% per annum (31 December 2018:
2.50% to 4.50% per annum).
24 Share Capital
Number Number
of shares Amount of shares Amount
2019 2019 2018 2018
'000 US$'000 '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 subject 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.
25 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.
In 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.
26 CAPITAL REDEMPTION RESERVE
The capital redemption reserve was incurred after the Company
cancelled its 37,475,000 and 500,000 ordinary shares of US$0.05 per
share in 2009 and 2013 respectively.
27 TRANSLATION reserve
The translation reserve comprises foreign currency differences
arising from the translation of the financial statements of foreign
operations.
28 Trade and Other Payables
2019 2018
US$'000 US$'000
Non-current
Amount owed to contract
buyers 39,253 37,976
39,253 37,976
Current
Trade payables 1,283 6,544
Other payables 11,980 19,394
Contract liabilities - 2,804
Deposits refundable 8,750 3,091
Accruals 1,536 2,295
23,549 34,128
62,802 72,104
Trade payables represent trade purchases and services rendered
by suppliers as part of the normal business transactions of the
Group. The credit terms granted by trade suppliers range from 30 to
90 days.
Included in the other payable comprise of the accrued costs to
the development of the RuMa project amounted to US$ 4.4 million (31
December 2018: US$14.6 million).
Contract liabilities represent proceeds received from purchasers
of development properties i.e. SENI and The RuMa Residences which
are pending transfer of vacant possession.
2019 2018
US$'000 US$'000
Revenue recognised in the period
from:
Amounts included in contract
liability at
the beginning of the period 9,725 28,270
Performance obligations satisfied
in
previous period - 4,784
Amount owed to contract buyer is of funding received, by way of
non-refundable deposits, in advance of completion of the hotel
suites which are at 31 December 2019 still controlled by the
Group.
Deposits and accruals are from normal business transactions of
the Group.
29 AMOUNT DUE TO NON-CONTROLLING INTERESTS
2019 2018
US$'000 US$'000
Minority Shareholder of Bumiraya Impian
Sdn. Bhd.:
* Global Evergroup Sdn. Bhd. 1,211 1,199
Minority Shareholders of Hoa Lam Services
Co Ltd:
* Tran Thi Lam 1,720 1,718
* Tri Hanh Consultancy Co Ltd 4,018 3,869
* Hoa Lam Development Investment Joint Stock Company 2,755 2,586
* Duong Ngoc Hoa 222 222
Minority Shareholder of The RuMa Hotel
KL Sdn. Bhd.:
* Ireka Corporation Berhad 2 2
Minority Shareholder of Urban DNA Sdn.
Bhd.:
* Ireka Corporation Berhad 659 3,598
10,587 13,194
The current amount due to non-controlling interests amounting to
US$10,587,000 (31 December 2018: US$13,194,000) is unsecured,
interest free and repayable on demand.
30 Loans AND BORROWINGS
2019 2018
US$'000 US$'000
Non-current
Bank loans 18,789 13,188
Lease liabilities 179 -
18,968 13,188
Current
Bank loans 34,281 48,084
Lease liabilities 432 -
34,713 48,084
53,681 61,272
Future minimum
lease payment
2019
2019 US$'000
Within one year 432
Between one and five years 179
611
LEASE LIABILITIES
The effective interest rates on the bank loans for the year
ranged from 5.55% to 11.30% (31 December 2018: 5.55% to 11.30%) per
annum.
Borrowings are denominated in Ringgit Malaysia, United States
Dollars and Vietnam Dong.
Bank loans are repayable by monthly, quarterly or semi-annual
instalments.
Bank loans are secured by land held for property development,
work-in-progress, operating assets of the Group, pledged deposits
and some are secured by the corporate guarantee of the Company.
At 31 December 2019, one of the Group's subsidiary undertakings
had not complied with the Debt to Equity ratio covenant in respect
of a loan of US$23.5 million. In accordance with the terms set out
in the Facility Agreement, in the event of the breach of this
financial covenant, the loan shall be immediately due and payable
together with accrued interest thereon upon notification by the
lenders. In June 2020, the group's subsidiary received a
non-compliance waiver from the lenders in respect of this
non-compliance. Subsequently, the loan was restructured and
extended a further 12 months from 22 July 2020, the initial
maturity date.
Reconciliation of movement of loan and borrowings to cash flows
arising from financing activities:
As at Foreign As at 31
1 January Drawdown Repayment exchange December
2019 of loan of loan movements 2019
US$'000 US$'000 US$'000 US$'000 US$'000
Bank loans 61,272 5,343 (12,162) (1,383) 53,070
Total 61,272 5,343 (12,162) (1,383) 53,070
As at Foreign As at 31
1 January Drawdown Repayment exchange December
2018 of loan of loan movements 2018
US$'000 US$'000 US$'000 US$'000 US$'000
Bank loans 67,454 20,308 (24,197) (2,293) 61,272
Total 67,454 20,308 (24,197) (2,293) 61,272
As at Repayment Foreign As at
1 January Initial of lease Interest exchange 31 December
2019 Application payment expenses movements 2019
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Lease
Liabilities - 1,491 (873) 59 (66) 611
Total - 1,491 (873) 59 (66) 611
31 MEDIUM TERM NOTES
2019 2018
US$'000 US$'000
Outstanding medium term notes 36,535 24,180
Net transaction costs (393) (419)
Less:
Repayment due within twelve
months * (36,142) (23,761)
Repayment due after twelve months - -
Reconciliation of movement of medium term notes to cash flows
arising from financing activities:
As at Foreign As at 31
1 January Drawdown Repayment exchange December
2019 of loan of loan movements 2019
US$'000 US$'000 US$'000 US$'000 US$'000
Medium Term Notes 23,761 12,105 - 276 36,142
As at Foreign As at 31
1 January Drawdown Repayment exchange December
2018 of loan of loan movements 2018
US$'000 US$'000 US$'000 US$'000 US$'000
Medium Term Notes 24,324 - - (563) 23,761
* Includes net transaction costs in relation to medium term
notes due within twelve months of US$0.39 million (31 December
2018: US$0.42 million).
The medium term notes ("MTNs") were issued pursuant to a
programme with a tenor 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 2016, 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$96.25 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.
In 2017, Silver Sparrow Berhad ("SSB") obtained consent from the
lenders to utilise proceeds of US$4.64 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$24.43mil which is due on 10 December
2019 (now repayable on 10 December 2020). The MTNs are rated
AAA.
The weighted average interest rate of the MTN was 5.85% per
annum at the statement of financial position date. The effective
interest rates of the MTN and their outstanding amounts are as
follows:
Interest rate
Maturity Dates % per annum US$'000
----------
Series 1 Tranche FG 10 Jun 2020 5.85 10,505
Series 1 Tranche BG 10 Jun 2020 5.85 13,925
24,430
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 the Company;
(vi) letter of undertaking from the Company 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 favour 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.
Potensi Angkasa Sdn Bhd ("PASB"), a subsidiary incorporated on
25 February 2019, has secured a commercial paper and/or medium term
notes programme of not exceeding US$21.99 mil (RM90.0 million)
("CP/MTN Programme") to fund a project known as The RuMa Hotel and
Residences. PASB may, from time to time, issue commercial paper
and/or medium term notes ("Notes") whereby the nominal value of
outstanding Notes shall not exceed US$21.99 mil (RM90.0 million) at
any one time. As at 31 December 2019, a total of US$12.12mil
(RM49.6 million) was issued. Subsequently an additional of
US$3.75mil (RM15.35 million) was issued on 25 February 2020.
As at 10 June 2020, the initial tranches of US5.59mil (RM22.9
million) matured and two tranches amounting to US$0.46mil (RM1.90
million) were redeemed. The remaining tranches of US$5.13 (RM21.0
million) are subsequently rolled-over for another one year.
The weighted average interest rate of the loan was 6.0% per
annum at the statement of financial position date. The effective
interest rates of the medium term notes and their outstanding
amounts were as follows:
Interest rate
Maturity Dates % per annum US$'000
Tranche 1 - 23 9 June 2020 6.0 5,594
29 September
Tranche 24 -31 2020 6.0 2,153
Tranche 32-49 6 October 2020 6.0 4,358
12,105
Security for CP/MTN Programme
(a) A legal charge over the Designated Accounts by the PASB
and/or the Security Party (as defined below) (as the case may be)
and assignment of the rights, titles, benefits and interests of the
PASB and/or the Security Party (as the case may be) thereto and the
credit balances therein on a pari passu basis among all Notes,
subject to the following:
(b)
(i) In respect of the 75% of the sale proceeds of a Secured
Asset ("Net Sale Proceeds") arising from the disposal of a Secured
Asset, the Noteholders of the relevant Tranche secured by such
Secured Asset shall have the first ranking security over such Net
Sale Proceeds;
(ii) In respect of the insurance proceeds from the Secured
Assets ("Insurance Proceeds"), the Noteholders of the relevant
Tranche secured by such Secured Asset shall have the first ranking
security over such Insurance Proceeds;
(iii) In respect of the sale deposits from the Secured Assets
("Sale Deposits"), the Noteholders of the relevant Tranche secured
by such Secured Asset shall have the first ranking security over
such Sale Deposits;
(iv) In respect of the amount at least equivalent to an amount
payable in respect of any coupon payment of that particular Tranche
for the next six (6) months to be maintained by the Issuer
("Issuer's DSRA Minimum Required Balance"), the Noteholders of the
relevant Tranche shall have the first ranking security over such
Issuer's DSRA Minimum Required Balance;
(v) In respect of the proceeds from the Collection Account ("CA
Proceeds"), the Noteholders of the relevant Tranche shall have the
first ranking security over such CA Proceeds; and
(vi) In respect of any amount deposited by the Guarantor which
are earmarked for the purposes of an early redemption of a
particular Tranche of the Notes and/or principal payment of a
particular Tranche of the Notes ("Deposited Amount"), the
Noteholders of the relevant Tranche shall have the first ranking
security over such Deposited Amount;
(c) An irrevocable and unconditional guarantee provided by the
Urban DNA Sdn Bhd for all payments due and payable under the CP/MTN
Programme ("Guarantee"); and
(d) Any other security deemed appropriate and mutually agreed
between the PASB and the Principal Adviser/Lead Arranger ("PA/LA"),
the latter being Kenanga Investment Bank Berhad.
Security for each medium term note:
Each Tranche shall be secured by assets ("Secured Assets") to be
identified prior to the issue date of the respective Tranche.
Such Secured Assets may be provided by third party(ies), (which,
together with the Guarantor, shall collectively be referred to as
"Security Parties" and each a "Security Party") and/or by the PASB.
Subject always to final identification of the Secured Asset prior
to the issue date of the respective Tranche, the security for any
particular Tranche may include but not limited to the
following:
(a) Legal assignment and/or charge by the PASB and/or the
Security Party (as the case may be) of the Secured Assets;
(b) An assignment over all the rights, titles, benefits and
interests of the PASB and/or the Security Party (as the case may
be) under all the sale and purchase agreements executed by
end-purchasers and any subsequent sale and purchase agreement to be
executed in the future by end-purchaser (if any), in relation to
the Secured Assets;
(c) A letter of undertaking from Aseana Properties Limited to,
amongst others, purchase the Secured Assets ("Letter of
Undertaking"); and/or
(d) Any other security deemed appropriate and mutually agreed
between the Issuer and the PA/LA and/or Lead Manager prior to the
issuance of the relevant Tranche.
The security for each Tranche is referred to as "Tranche
Security".
32 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
81.59% to 81.66% (2018: 81.58% to 81.59%) arising from an issue of
new shares in the subsidiary for cash consideration of US$1.034
million (2018: US$0.525 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 72.46% (2018: 72.413%). The Group recognised an
increase in non-controlling interests of US$24,000 (2018: US$3,000)
and an increase in accumulated losses of US$24,000 (2018: US$3,000)
resulting from the increase in equity interest in the above
subsidiaries.
33 Related Party Transactions
Transactions between the Group 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.
ICB's relationship with the Group is also mentioned in the
Directors' Report under the headings of 'Management'.
In 2009, the Group entered into a Joint Venture Agreement (JVA)
with Ireka Corporation Berhad (ICB) for the construction of The
RuMa Hotel and Residences ("RuMa"). Under the term of that JVA, the
joint venture partners are required to make equity contribution in
the proportion to their participating interest for the purpose of
the development and construction of the RuMa. In the opinion of the
directors, they have considered the JVA allows for the equity
contribution to be deferred and paid upon the conclusion of
construction. At 31 December 2019, the total amount of equity
contribution owed by ICB was US$13.1million. The recognition of
these amount owed by ICB would be offset by the corresponding entry
of the amount owed to ICB, which therefore has no net impact to the
consolidated financial statements.
The equity contributions are non-trade in nature and are
unsecured and interest bearing.
Furthermore, the Group was entitled to interest receivable from
ICB. The interest receivable was calculated based on an annual
interest rate of 2% above the Malaysia lending rate and applied to
the deferred equity contributions.
As described in note 11, the total interest receivable at 31
December 2019 was US$3.5million of which US$0.9million and
US$1.6million were attributed to the prior year periods ended 31
December 2018 and 2017 respectively. The Directors considered the
quantum of the accumulated interest receivables at 31 December 2018
was immaterial to merit a prior year adjustment. Accordingly, no
restatement to the comparative financial information.
Related parties also include key management personnel defined as
those persons having authority and responsibility for planning,
directing and controlling the activities of the Group either
directly or indirectly. The key management personnel include all
the Directors of the Group, and certain members of senior
management of the Group.
2019 2018
US$'000 US$'000
ICB Group of Companies
Accounting and financial reporting services
fee charged by an ICB subsidiary 96 50
Accrued interest on shareholders advance
payable by ICB 3,572 -
Hosting and IT support services charged by
an ICB subsidiary 66 76
Construction progress claims charged by an
ICB subsidiary 4,733 27,812
Reversal of liquidated ascertained damages
("LAD") claims (1,209) -
Provisions for construction delay claims
by ICB subsidiary (2,052) -
Management fees charged by an ICB subsidiary 1,157 1,460
Marketing commission charged by an ICB subsidiary 139 106
Project staff cost reimbursed to an ICB subsidiary 280 288
Rental expenses charged by an ICB subsidiary 16 3
Rental expenses paid on behalf of ICB 489 529
Secretarial and administrative services fee
charged by an ICB subsidiary 85 50
Key management personnel
Remuneration of key management personnel
- Directors' fees 186 145
Remuneration of key management personnel
- Salaries 95 94
Transactions between the Group with other significant related
parties are as follows:
2019 2018
US$'000 US$'000
Non-controlling interests
Advances - non-interest bearing
(Note 29) (2,666) 82
The above transactions have been entered into in the normal
course of business and have been established under negotiated
terms.
The outstanding amounts due from/(to) ICB and its group of
companies as at 31 December 2019 and 31 December 2018 are as
follows:
2019 2018
US$'000 US$'000
Net amount due from an ICB subsidiary 5,159 2,516
Net amount due from ICB 3,768 106
The outstanding amounts due to the other significant related
parties as at 31 December 2019 and 31 December 2018 are as
follows:
2019 2018
US$'000 US$'000
Non-controlling interests
Advances - non-interest bearing
(Note 29) (10,587) (13,194)
Transactions between the parent company and its subsidiaries are
eliminated in these consolidated financial statements. A list of
subsidiaries is provided in Note 34.
34 Investment in Subsidiaries
Effective
Country of ownership
Name incorporation Principal activities interest
2019 2018
Subsidiaries
Ireka Land Sdn. Bhd. Malaysia Property development 100% 100%
Bumijaya Mawar Sdn. Bhd. Malaysia Property development 100% 100%
Bumijaya Mahligai Sdn.
Bhd. Malaysia Property development 100% 100%
Amatir Resources Sdn.
Bhd. Malaysia Property development 100% 100%
Hotel and mall
ownership and
ICSD Ventures Sdn. Bhd. Malaysia operation 100% 100%
Project management
Priority Elite Sdn. Bhd. Malaysia services 100% 100%
Participating
Potensi Angkasa Sdn. Bhd Malaysia in the transactions 100% -
contemplated under
the Guaranteed
MTNs Programme
Participating
in the transactions
contemplated under
the Guaranteed
Silver Sparrow Berhad Malaysia MTNs Programme 100% 100%
Bumiraya Impian Sdn. Bhd. Malaysia Property development 80% 80%
The RuMa Hotel KL Sdn.
Bhd. Malaysia Investment holding 70% 70%
Urban DNA Sdn. Bhd. Malaysia Property development 70% 70%
Aseana-BDC Co Ltd Vietnam Investment holding 65% 65%
Hoa Lam Services Co Ltd Vietnam Investment holding 51% 51%
Shangri-La Healthcare
Investment Pte Ltd and
its subsidiaries Singapore Investment holding 82% 82%
Hoa Lam-Shangri-La Healthcare
Ltd Liability Co Vietnam Property development 72% 72%
City International Hospital Hospital ownership
Co Ltd Vietnam and operation 72% 72%
35 cOMMITMENTS AND Contingencies
Debt service reserve account
In 2017, Silver Sparrow Berhad obtained consent from the lenders
to utilise proceeds of US$4.89million in the Sales Proceeds Account
and Debt Service Reserve Account ("DSRA") to partially redeem the
MTNs. Thereafter, amount equivalent to RM10.0 million (US$2.41
million) (the "Minimum Deposit") is maintained in the DSRA at all
times and the amount is disclosed as deposit pledged (refer to Note
23).
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.
36 event after statement of financial position date
On 9 January 2020, the Company announced that the resignation of
Chan Say Yeong as the Chief Executive Officer of the Company, with
effect from 17 January 2020. Mr. Chan is not a member of the Board.
Following this, his responsibilities were assumed by the Chairman
and the Board.
On 23 March 2020, the Company announced an update on the impact
of the COVID-19 virus on the Company. T he Board of Directors of
Aseana has been closely following events related to the COVID-19
virus and has been actively planning how to mitigate the impact of
it as much as possible. The impact of the COVID-19 was material as
it led to successive Movement Control Orders being issued by the
government in Malaysia from March 2020 onwards which prevented
domestic and foreign tourism and the use of hotels, restaurants and
non-food shops. The demand for travel by both leisure and corporate
segments were impacted subsequent to the year ended 31 December
2019. This has affected the financial performance of the ASPL after
the reporting period. The impact of the movement restrictions and
the reduced revenues on the Company's operating assets will have
affected the valuations of the Company's property assets which are
based on discounted cash flow calculations. It is not possible to
put an accurate figure to the fall in the value. However the
Directors do believe that the value can be increased in time once
the assets are re-opened and revenue can be built up again. The
impact of the Movement Control Orders has delayed divestment
discussions and negotiations on our assets but these are being
re-kindled by the Directors now that the restrictions are starting
to be relaxed.
On 31 May 2020 we terminated the Services Agreement and also
terminated staff secondment arrangements from Ireka to the Company
and have engaged a few staff directly to run our finances and
operations.
On 15 July 2020 we signed agreements to de-merge certain of our
assets in exchange for the buyback and cancellation of the shares
of those shareholders who wished to de-merge.
On 16 July 2020, we signed the Sale and Purchase Agreements for
the sale of two plots of land in Kota Kinabalu for approximately
US$4 million in cash.
Copies of the Annual Report
Copies of the annual report will be available on the Company's
website at and from the Company's registered office, 12 Castle
Street, St. Helier, Jersey, JE2 3RT, Channel Islands.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR PPURCMUPUGQC
(END) Dow Jones Newswires
July 27, 2020 02:00 ET (06:00 GMT)
Aseana Prop (AQSE:ASPL.GB)
Historical Stock Chart
From Oct 2024 to Nov 2024
Aseana Prop (AQSE:ASPL.GB)
Historical Stock Chart
From Nov 2023 to Nov 2024
