20th Mar 2015 17:00
20 March 2015
Asian Growth Properties Limited
Immediate Release
Results for the year ended 31 December 2014
Asian Growth Properties Limited (the "Company") (AIM Stock Code: AGP), the Hong Kong based China property development and investment company, announces its audited consolidated results for the year ended 31 December 2014 as follows:
Financial Highlights
n Profit attributable to the Company's shareholders of HK$703.1 million (£58.3 million) (2013: HK$474.5 million (£37.0 million))
n Profit attributable to the Company's shareholders (excluding revaluation surplus net of deferred tax) was HK$102.8 million (£8.5 million) (2013: HK$205.0 million (£16.0 million))
n Earnings per share for profit attributable to the Company's shareholders of HK79.3 cents (6.6 pence) (2013: HK53.5 cents (4.2 pence))
n Net asset value per share attributable to the Company's shareholders as at 31 December 2014 of HK$14.8 (122.7 pence) (31 December 2013: HK$14.1 (110.0 pence))
n Geographical location of the Group's property assets were as follows:
31 December 2014 | 31 December 2013 | |
Hong Kong | HK$10,177.4 million (£843.7 million) | HK$9,637.8 million (£751.9 million) |
Mainland China | HK$4,635.7 million (£384.3 million) | HK$4,355.5 million (£339.8 million) |
Total | HK$14,813.1 million (£1,228.0 million) | HK$13,993.3 million (£1,091.7 million) |
n Gearing ratio of 9.3% (31 December 2013: 8.9%)
Operational Highlights
n Increased gross rental income generated from Dah Sing Financial Centre in Hong Kong and its occupancy rate remains high.
n The hotel operation results of Crowne Plaza Hong Kong Causeway Bay were satisfactory.
n Major mixed use development projects in Chengdu and Kaifeng, Mainland China are progressing. Site formation works for Phase I of Chengdu project have been completed and superstructure works for Phase I of Kaifeng project are in progress.
Notes:
1. Figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting years. The relevant exchange rates adopted are stated as follows:
For 31 December 2014: | £1 = HK$12.0627; and |
For 31 December 2013: | £1 = HK$12.8184 |
2. For Shareholders' information, the exchange rate on 19 March 2015 was £1 = HK$11.5458
Miscellaneous
The results included in this announcement are extracted from the audited consolidated financial statements of the Company for the year ended 31 December 2014, which have been approved by the Board of Directors on 20 March 2015.
The 2014 Annual Report is expected to be posted to shareholders and holders of depositary interests in late April 2015.
For further information, please contact:
Lu Wing Chi | TEL: +852 2828 6363 |
Executive Director | |
Asian Growth Properties Limited |
Richard Gray | TEL: +44 207 886 2500 |
Andrew Potts | |
Panmure Gordon (UK) Limited | |
(Nominated Advisor) |
Attached:-
1. Chairman's Review;
2. Executive Directors' Review;
3. Consolidated Statement of Profit or Loss;
4. Consolidated Statement of Profit or Loss and Other Comprehensive Income;
5. Consolidated Statement of Financial Position;
6. Consolidated Statement of Changes in Equity;
7. Consolidated Statement of Cash Flows; and
8. Notes to the Consolidated Financial Statements.
This announcement can also be viewed on the Company's website at:
http://www.asiangrowth.com/html/eng/news.asp
CHAIRMAN'S REVIEW
I am pleased to present the audited consolidated financial results of Asian Growth Properties Limited ("AGP" or the "Company", together with its subsidiaries, the "Group") for the year of 2014 to the shareholders of the Company.
Results
AGP reported a profit attributable to the Company's shareholders of HK$703.1 million (£58.3 million) for the year ended 31 December 2014 (2013: HK$474.5 million (£37.0 million)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$600.3 million (£49.8 million) (2013: HK$269.5 million (£21.0 million)). By excluding the net effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$102.8 million (£8.5 million) (2013: HK$205.0 million (£16.0 million)).
As at 31 December 2014, the Group's equity attributable to the Company's shareholders amounted to HK$13,148.1 million (£1,090.0 million) (31 December 2013: HK$12,458.7 million (£971.9 million)). The net asset value per share as at 31 December 2014 was HK$14.8 (122.7 pence) as compared with HK$14.1 (110.0 pence) as at 31 December 2013.
Figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting years.
Operations
During the year ended 31 December 2014, the Group has continued the development of various property projects in Hong Kong and Mainland China.
The rental income from investment properties situated in both Hong Kong and Mainland China continue to provide stable returns to the Group. Crowne Plaza Hong Kong Causeway Bay has also performed satisfactorily with improvements in room rate as compared to last year.
For details of the Group's operations, please refer to the Executive Directors' Review.
Outlook
In the U.S., job growth appears to be improving with interest rates forecast to rise this year. Commodity prices have dropped like a stone, the European markets are in trouble with an uncertain time in respect of the Greek economy and the ever present threat of war in various parts of the world remains omnipresent with events in the Ukraine, The Middle East and the South China Sea causing cause for concern.
At no time in the past few years has the Group had to face the challenges it currently faces in terms of geopolitical risk globally. China is experiencing a dramatic slowdown in both export and import growth with the People's Bank of China reducing capital adequacy ratios in an attempt to encourage growth.
Amidst this atmosphere, the Group has made steady progress. How many of these geopolitical risks play out in 2015 remains the subject of conjecture. However, the Group will continue to remain flexible and opportunistic in its approach to its assets and continue to hold large amount of cash in its balance sheet to weather the current prevailing conditions in global markets.
Final Dividend
The Board does not propose the payment of a final dividend for the year ended 31 December 2014 (2013: Nil).
Change of Directors
On 19 March 2014, Messrs. Lincoln Lu and Lam Sing Tai were appointed as an Executive Director and a Non-executive Director of the Company respectively and on 30 July 2014, Mr. John David Orchard Fulton was appointed as an Independent Non-executive Director of the Company. The Board would like to extend its warmest welcome to them to join the Board.
On 28 May 2014, Mr. Donald Ian Fletcher resigned as a Non-executive Director of the Company. The Board would like to express its gratitude for his valuable contribution to the Company during his tenure of service.
Acknowledgement
The Board would like to take this opportunity to thank the executive and management team for the execution of the Board's strategy and their ongoing support.
Richard Prickett
Non-Executive Chairman
Hong Kong, 20 March 2015
EXECUTIVE DIRECTORS' REVIEW
FINANCIAL SUMMARY
Turnover for the year ended 31 December 2014 amounted to HK$648.7 million (£53.8 million) (2013: HK$878.6 million (£68.5 million)). The turnover was principally attributable to the recognition of rental income from investment properties and revenue from hotel operation.
Profit attributable to the Company's shareholders for the year amounted to HK$703.1 million (£58.3 million) (2013: HK$474.5 million (£37.0 million)), equivalent to a basic earnings per share of HK79.3 cents (6.6 pence) (2013: HK53.5 cents (4.2 pence)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$600.3 million (£49.8 million) (2013: HK$269.5 million (£21.0 million)). By excluding the effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$102.8 million (£8.5 million) (2013: HK$205.0 million (£16.0 million)), equivalent to HK11.6 cents (1.0 pence) (2013: HK23.1 cents (1.8 pence)) per share.
As at 31 December 2014, the Group's equity attributable to the Company's shareholders amounted to HK$13,148.1 million (£1,090.0 million) (31 December 2013: HK$12,458.7 million (£971.9 million)). The net asset value per share attributable to the Company's shareholders as at 31 December 2014 was HK$14.8 (122.7 pence) as compared with HK$14.1 (110.0 pence) as at 31 December 2013.
For Shareholders' information, figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting years and the relevant exchange rates adopted are stated as follows:
For 31 December 2014: £1 = HK$12.0627; and
For 31 December 2013: £1 = HK$12.8184
BUSINESS REVIEW
Property Investment and Development
The Group continues to focus on its development and investment projects in Hong Kong and Mainland China. It is the Group's approach to review and optimise the project portfolios from time to time. The Group's core projects located in Hong Kong and Mainland China are listed below.
Hong Kong
The office leasing market was stable during the year. With several tenancies of Dah Sing Financial Centre, a 39-storey commercial building, being renewed at market rates, rental income received during the year increased. The occupancy rate of Dah Sing Financial Centre remains at a high level of approximately 94% as at 31 December 2014.
The negotiation of the land premium with the Government for the development project at Fo Tan remains in progress. This development project has a site area of approximately 20,000 square metres and envisages, among other facilities, residential units, car parks, educational facilities and a bus terminus. The foundation work of the project has been completed and advanced pile cap is in progress.
Mainland China
Chengdu, Sichuan Province
During the year under review, the occupancy rate for the two 30-storey office towers of Plaza Central remained at a high level and its retail podium with a gross floor area of about 29,000 square metres is fully let principally to Chengdu New World Department Store on a long-term lease. As at 31 December 2014, the aggregate occupancy rate for the two office towers and the retail podium was approximately 89%. Leasing activities for the remaining areas of Plaza Central continue.
The shopping arcade of New Century Plaza with a gross floor area of about 16,300 square metres is fully let to a hotel on a long-term lease. The previous lease to a furniture retailer expired in late 2014, and a new lease to a hotel operator was entered into in late 2014.
The master layout plan of the Longquan project (known as "Chengdu Nova City"), which has a site area of 506,000 square metres, was approved by the local government in January 2014. Preliminary site works and site formation works for Phase I of the project have been completed. Superstructure works for Phase I are now scheduled to commence in the second quarter of 2015.
Kaifeng, Henan Province
The Kaifeng project, known as "Kaifeng Nova City", is situated in Zheng-Kai District, a new town in Kaifeng and envisages a shopping mall, premium offices, exhibition hall, hotel, serviced apartments and residential towers. This project has a site area of 735,000 square metres and for providing a better living environment, the gross floor area of the development will vary from 2,000,000 to 2,500,000 square metres only. The master layout plan has been approved by the local government and foundation work for Phase I of the residential has been completed. The superstructure works for Phase IA of the residential are in progress. Pre-sale consent for Phase IA was issued and 50% of the residential units were launched into the market. The superstructure works for Phase IB of the residential units are scheduled to commence by the end of the first quarter of 2015.
Guangzhou, Guangdong Province
As at 31 December 2014, the occupancy rate of the 14-storey office tower of Westmin Plaza Phase II of about 16,100 square metres was 100% with more than one-third of the total office space being leased to AIA. Leasing activities for the 3-storey shopping arcade of Westmin Plaza Phase II with a total gross floor area of about 26,400 square metres are in progress.
Huangshan, Anhui Province
The project in Huangshan has a site area of about 337,000 square metres comprising of development land of about 117,000 square metres and landscape land of 220,000 square metres. The master layout plan for the development of the project comprising a hotel, serviced apartments and resort villas in the integrated resort site has been approved by the local government and site formation work for phase I of the project has been completed. Phase I foundation works for hotel are now scheduled to commence in the first quarter of 2015.
Chi Shan, Nanjing, Jiangsu Province
The Group has established two 51%-owned joint venture companies to participate in the tenant relocation arrangements and excavation and infrastructure works on certain pieces of land in Chi Shan. The Group intends to acquire such lands through land auctions by different stages.
Hotel Operation
Crowne Plaza Hong Kong Causeway Bay is a 29-storey five-star hotel comprising 263 guest rooms with ancillary facilities and is managed by the InterContinental Hotels Group. It has achieved satisfactory occupancy and room rates for the year under review.
AGREEMENT FOR COST-SHARING ARRANGEMENT WITH RELATED PARTY
The Company and South-East Asia Investment And Agency Company, Limited ("SEAI"), a wholly-owned subsidiary of S E A Holdings Limited (the holding company of the Company), entered into a Management Agreement on 18 September 2006 (the "Management Agreement") for the appointment of SEAI as manager for the provision of corporate, project and property management services to the Group. The Management Agreement was terminated with effect from 1 January 2014.
Subsequent to the termination of the Management Agreement and the consideration of alternative structures to provide the necessary resources to the Group, the Company and various subsidiaries of the Company (together, the "AGP Service Recipients") entered into an agreement with SEAI on 29 July 2014 whereby in consideration of SEAI making available its personnel and facilities to the Group, the AGP Service Recipients agreed to pay their proportionate share of the costs incurred by SEAI (the "Net Costs") for the use of SEAI's personnel and facilities from 1 January 2014.
The Net Costs is the proportion of staff costs and indirect costs to be borne by the AGP Service Recipients and will be calculated by reference to the time spent by SEAI's personnel on the services to each of the AGP Service Recipients (with a mark-up of 5%), plus the reimbursable costs incurred by SEAI on behalf of the AGP Service Recipients (on a dollar-for-dollar basis). Each of the AGP Service Recipients should bear and pay its proportion of the Net Costs.
WORKING CAPITAL AND LOAN FACILITIES
As at 31 December 2014, the Group's total cash balance was HK$2,646.8 million (£219.4 million) (31 December 2013: HK$1,766.4 million (£137.8 million)) and unutilised facilities were HK$845.0 million (£70.1 million) (31 December 2013: HK$855.0 million (£66.7 million)).
The gearing ratio as at 31 December 2014, calculated on the basis of net interest bearing debts minus cash and restricted and pledged deposits as a percentage of total property assets, was 9.3% (31 December 2013: 8.9%).
As at 31 December 2014, the maturity of the Group's outstanding borrowings was as follows:
| 31 December 2014 HK$' million | 31 December 2013 HK$' million |
|
|
|
Due |
|
|
Within 1 year | 438.4 | 1,291.8 |
1-2 years | 1,385.9 | 395.2 |
3-5 years | 1,139.1 | 1,082.9 |
Over 5 years | 1,078.7 | 256.6 |
| ||
| 4,042.1 | 3,026.5 |
Less: Front-end fee | (22.4) | (13.7) |
| ||
| 4,019.7 | 3,012.8 |
Pledge of Assets
For the Company's subsidiaries operating in Hong Kong and Mainland China, the total bank loans drawn as at 31 December 2014 amounted to HK$4,019.7 million (31 December 2013: HK$3,012.8 million) which comprise secured bank loans of HK$3,919.7 million (31 December 2013: HK$2,894.8 million) and unsecured bank loans of HK$100.0 million (31 December 2013: HK$118.0 million). The secured bank loans were secured by properties valued at HK$12,086.4 million (31 December 2013: HK$11,343.7 million) and note receivables of HK$54.3 million (31 December 2013: HK$54.3 million).
Treasury Policies
The Group adheres to prudent treasury policies. As at 31 December 2014, all of the Group's borrowings were raised through its wholly-owned or substantially controlled subsidiaries on a non-recourse basis.
International Financial Reporting Standards ("IFRS")
The Group has adopted IFRS and the audited consolidated financial statements accompanying this Review have been prepared in accordance with IFRS.
OUTLOOK
Mainland China's economy reported slowing growth in 2014, as 2014 GDP growth was 7.4%, which was slightly below the government's target of 7.5%, marking the weakest expansion in the past 24 years. GDP growth for 2015 has been lowered and is now targeted at around 7%. Property prices have softened over the past nine months and whilst this is difficult to predict we expect this trend to continue without new policy initiatives.
Hong Kong's economy remained relatively stable with solid demand for residential real estate continuing. The popularity of small flat sales was an emerging trend. The continuing low interest rate environment together with affordability should help maintain the property market at healthy levels of turnover despite the government imposing substantive increases in stamp duty during 2014.
The Group's investment properties remain substantially let at good rents and the hotel property in Hong Kong continues to perform in line with expectations although affected somewhat by the Occupy Central movement. Year to date occupancy rates are encouraging.
In Hong Kong, the premium on our Fo Tan development site has yet to be finally agreed with the government although we are hopeful that an acceptable figure will be agreed shortly which will enable us to move forward with the development of this asset.
Our development portfolio in Mainland China is likely to benefit from infrastructure works. In particular in Kaifeng, the light rail system between Zhengzhou and Kaifeng is completed which will enhance accessibility to our development site and already is increasing patronage. Phase 1A, comprising 444 residential units, is under construction with 50% of these units launched for pre-
sale. Due to the existing poor market sentiment, sales are slower than originally anticipated. Sales are recognizable upon obtaining an occupation permit which is expected for the end of this year. In Chengdu, our master layout plan has been approved and the site will benefit from new road connections to the area with two new major roads enhancing access.
On behalf of the Executive Directors
Lu Wing Chi
Executive Director
Hong Kong, 20 March 2015
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 December 2014
| NOTES |
| 2014 |
| 2013 |
|
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
|
Revenue | 7 |
| 648,686 |
| 878,597 |
Interest income |
|
| 24,292 |
| 24,874 |
Other income | 8 |
| 21,474 |
| 24,166 |
Costs: |
|
|
|
|
|
Property and related costs | 9 |
| (73,416) |
| (160,091) |
Staff costs |
|
| (89,742) |
| (82,291) |
Depreciation and amortisation |
|
| (73,369) |
| (80,159) |
Other expenses | 10 |
| (230,857) |
| (278,509) |
|
|
| -------------- |
| --------------- |
|
|
| (467,384) |
| (601,050) |
|
|
| --------------- |
| --------------- |
Profit from operations before fair value changes |
|
|
|
|
|
on investment properties |
|
| 227,068 |
| 326,587 |
Fair value changes on investment properties |
|
| 617,782 |
| 289,340 |
|
|
| --------------- |
| --------------- |
Profit from operations after fair value changes |
|
|
|
|
|
on investment properties |
|
| 844,850 |
| 615,927 |
Gain on disposal of assets classified as held for sale |
|
| - |
| 21,640 |
Finance costs | 11 |
| (98,522) |
| (80,994) |
|
|
| --------------- |
| --------------- |
Profit before taxation | 12 |
| 746,328 |
| 556,573 |
Income tax expense | 14 |
| (44,000) |
| (81,313) |
|
|
| --------------- |
| --------------- |
Profit for the year |
|
| 702,328 |
| 475,260 |
|
|
| ========= |
| ========= |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Company's shareholders |
|
| 703,101 |
| 474,543 |
Non-controlling interests |
|
| (773) |
| 717 |
|
|
| --------------- |
| --------------- |
|
|
| 702,328 |
| 475,260 |
|
|
| ========= |
| ========= |
|
|
|
|
|
|
|
|
| HK cents |
| HK cents |
Earnings per share for profit attributable to |
|
|
|
|
|
the Company's shareholders - Basic | 15 |
| 79.3 |
| 53.5 |
|
|
| ========= |
| ========= |
Earnings per share excluding fair value changes |
|
|
|
|
|
on investment properties net of deferred tax |
|
|
|
|
|
- Basic | 15 |
| 11.6 |
| 23.1 |
|
|
| ========= |
| ========= |
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 December 2014
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Profit for the year |
| 702,328 | 475,260 | |
--------------- |
| --------------- | ||
Other comprehensive (expense) income: | ||||
Items that may be subsequently reclassified to profit or loss: | ||||
Exchange differences arising on translation of foreign operations |
(13,836) |
126,825 | ||
Release of translation reserve upon disposal of assets classified as held for sale |
- |
(2,480) | ||
--------------- |
| --------------- | ||
(13,836) | 124,345 | |||
--------------- |
| --------------- | ||
Total comprehensive income for the year |
| 688,492 | 599,605 | |
========= |
| ========= | ||
Total comprehensive income attributable to: | ||||
Company's shareholders |
| 689,443 | 597,328 | |
Non-controlling interests | (951) | 2,277 | ||
--------------- |
| --------------- | ||
| 688,492 | 599,605 | ||
| ========= |
| ========= |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 December 2014
| NOTES | 2014 | 2013 | ||
|
| HK$'000 | HK$'000 | ||
Non-current assets |
|
|
| ||
Investment properties | 17 | 10,358,285 | 10,216,706 | ||
Property, plant and equipment | 18 | 1,437,456 | 1,016,607 | ||
Properties for development | 19 | 1,248,432 | 1,350,813 | ||
loan receivables | 20 | 4,118 | 7,072 | ||
Note receivables | 21 | 54,289 | 54,279 | ||
Other receivables | 22 | 391,173 | 384,794 | ||
Other financial assets | 23 | 7,764 | - | ||
Restricted bank deposits | 24 | 6,338 | 6,360 | ||
|
| --------------- |
| --------------- | |
|
| 13,507,855 | 13,036,631 | ||
|
| --------------- |
| --------------- | |
Current assets |
|
|
| ||
Properties held for sale |
|
|
| ||
Completed properties |
| 482,752 | 484,531 | ||
Properties under development | 25 | 1,322,290 | 966,684 | ||
Other inventories |
| 1,333 | 1,119 | ||
loan receivables | 20 | 362 | 463 | ||
Trade receivables, deposits and prepayments | 26 | 150,562 | 124,536 | ||
Tax recoverable |
| 4,548 | 940 | ||
Amounts due from non-controlling interests | 27 | 70 | 265 | ||
Bank balances and cash | 28 | 2,640,466 | 1,760,007 | ||
|
| --------------- |
| --------------- | |
|
| 4,602,383 | 3,338,545 | ||
|
| --------------- |
| --------------- | |
Current liabilities |
|
|
| ||
Payables, rental deposits and accrued charges | 29 | 301,984 | 290,079 | ||
Sales deposits |
| 64,389 | - | ||
Tax liabilities |
| 101,455 | 133,024 | ||
Amounts due to non-controlling interests | 27 | 99,505 | 96,985 | ||
bank borrowings - due within one year | 30 | 436,569 | 1,290,658 | ||
|
| --------------- |
| --------------- | |
|
| 1,003,902 | 1,810,746 | ||
|
| --------------- |
| --------------- | |
Net current assets |
| 3,598,481 | 1,527,799 | ||
|
| --------------- |
| --------------- | |
Total assets less current liabilities |
| 17,106,336 | 14,564,430 | ||
|
| ========= |
| ========= |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION - continued
AS AT 31 December 2014
| NOTES | 2014 | 2013 | ||
|
| HK$'000 | HK$'000 | ||
Capital and reserves |
|
|
| ||
Share capital | 31 | 345,204 | 345,204 | ||
Reserves |
| 12,802,924 | 12,113,481 | ||
|
| --------------- |
| --------------- | |
Equity attributable to the Company's shareholders |
| 13,148,128 | 12,458,685 | ||
Non-controlling interests |
| 55,540 | 57,706 | ||
|
| --------------- |
| --------------- | |
Total equity |
| 13,203,668 | 12,516,391 | ||
|
| --------------- |
| --------------- | |
Non-current liabilities |
|
|
| ||
Bank borrowings - due after one year | 30 | 3,583,165 | 1,722,108 | ||
Deferred taxation | 32 | 319,503 | 325,931 | ||
|
| --------------- |
| --------------- | |
|
| 3,902,668 | 2,048,039 | ||
|
| --------------- |
| --------------- | |
Total equity and non-current liabilities |
| 17,106,336 | 14,564,430 | ||
|
| ========= |
| ========= |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 December 2014
Attributable to the Company's shareholders | ||||||||
------------------------------------------------------------------------------------------------- | Non- | |||||||
Share | Share | Translation | Other | Retained | controlling | |||
capital | premium | reserve | reserves | profits | Total | interests | Total | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
At 1 January 2013 | 345,204 | 4,836,225 | 404,870 | 766,370 | 5,508,688 | 11,861,357 | 57,995 | 11,919,352 |
- - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | |
Profit for the year | - | - | - | - | 474,543 | 474,543 | 717 | 475,260 |
- - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | |
Exchange differences arising on | ||||||||
translation of foreign operations | - | - | 125,265 | - | - | 125,265 | 1,560 | 126,825 |
Release of translation reserve | ||||||||
upon disposal of assets classified | ||||||||
as held for sale | - | - | (2,480) | - | - | (2,480) | - | (2,480) |
--------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
Other comprehensive income | ||||||||
for the year | - | - | 122,785 | - | - | 122,785 | 1,560 | 124,345 |
- - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | |
Total comprehensive income | ||||||||
for the year | - | - | 122,785 | - | 474,543 | 597,328 | 2,277 | 599,605 |
Dividends paid to non-controlling | ||||||||
interests | - | - | - | - | - | - | (2,566) | (2,566) |
--------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
At 31 December 2013 | 345,204 | 4,836,225 | 527,655 | 766,370 | 5,983,231 | 12,458,685 | 57,706 | 12,516,391 |
- - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | |
Profit for the year | - | - | - | - | 703,101 | 703,101 | (773) | 702,328 |
- - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | |
Exchange differences arising on | ||||||||
translation of foreign operations | - | - | (13,658) | - | - | (13,658) | (178) | (13,836) |
--------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
Other comprehensive expense | ||||||||
for the year | - | - | (13,658) | - | - | (13,658) | (178) | (13,836) |
- - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | - - - - - - - - - | |
Total comprehensive income | ||||||||
for the year | - | - | (13,658) | - | 703,101 | 689,443 | (951) | 688,492 |
Dividends paid to non-controlling | ||||||||
interests | - | - | - | - | - | - | (1,215) | (1,215) |
--------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
At 31 December 2014 | 345,204 | 4,836,225 | 513,997 | 766,370 | 6,686,332 | 13,148,128 | 55,540 | 13,203,668 |
========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
Other reserves comprise (i) a discount on acquisition/assumption of certain assets and liabilities from the intermediate holding company, S E A Holdings Limited ("SEA"), and the excess of the consideration over the market closing price of the shares issued for the acquisition. The amounts attributable to those assets and liabilities derecognised in subsequent years will be recognised in profit or loss; and (ii) the excess of the consideration paid for acquisition of additional interest in a subsidiary from non-controlling interests over the carrying amount of non-controlling interests acquired.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 December 2014
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Operating activities |
|
|
|
|
Profit before taxation |
| 746,328 |
| 556,573 |
Adjustments for: |
|
|
|
|
Interest expenses |
| 90,544 |
| 74,711 |
Depreciation and amortisation |
| 73,369 |
| 80,159 |
Fair value changes on investment properties |
| (617,782) |
| (289,340) |
Fair value adjustment on other receivables |
| (7,636) |
| (7,435) |
Gain on disposal of assets classified as held for sale |
| - |
| (21,640) |
Interest income |
| (24,292) |
| (24,874) |
Loss on disposal of property, plant and equipment |
| 147 |
| 41 |
|
| --------------- |
| --------------- |
Operating cash flows before movements in working capital |
| 260,678 |
| 368,195 |
Increase in properties held for sale |
| (221,217) |
| (70,240) |
Increase in other inventories |
| (214) |
| (184) |
Increase in trade receivables, deposits and prepayments |
| (30,715) |
| (2,037) |
Increase in guaranteed bank balances |
| (34,468) |
| - |
increase in payables, rental deposits and accrued charges |
| 8,970 |
| 35,208 |
Increase in sales deposits |
| 64,266 |
| - |
|
| --------------- |
| --------------- |
Cash generated from operations |
| 47,300 |
| 330,942 |
Interest paid |
| (89,982) |
| (72,489) |
Tax paid |
| (84,375) |
| (31,031) |
|
| --------------- |
| --------------- |
Net cash (used in) from operating activities |
| (127,057) |
| 227,422 |
|
| --------------- |
| --------------- |
Investing activities |
|
|
|
|
Acquisition of and additional costs on properties for development |
|
(51,047) |
|
(125,038) |
Interest received |
| 28,729 |
| 17,742 |
Decrease in loan receivables |
| 3,055 |
| 2,503 |
Increase in note receivables |
| - |
| (38,785) |
Increase in bank deposits |
| (309,380) |
| (461,607) |
Pledged bank deposits refunded |
| - |
| 59,295 |
Bank deposits refunded |
| 455,340 |
| 36,999 |
Purchase of property, plant and equipment |
| (3,293) |
| (9,043) |
Net proceeds received on disposals of property, plant and equipment |
|
24 |
|
64 |
Increase in other receivables |
| (2,825) |
| (7,459) |
Purchases of other financial assets |
| (7,764) |
| - |
Consideration/deposit received on disposal of assets |
|
|
|
|
classified as held for sale |
| - |
| 21,250 |
|
| --------------- |
| --------------- |
Net cash from (used in) investing activities |
| 112,839 |
| (504,079) |
|
| --------------- |
| --------------- |
CONSOLIDATED STATEMENT OF CASH FLOWS - continued
FOR THE YEAR ENDED 31 December 2014
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Financing activities |
|
|
|
|
Draw down of bank loans |
| 2,489,315 |
| 624,656 |
Repayments of bank loans |
| (1,467,068) |
| (351,880) |
Payment of front-end fee |
| (14,102) |
| (2,100) |
Advances from non-controlling interests |
| 2,835 |
| 574 |
Repayments from non-controlling interests |
| 195 |
| 1,005 |
Dividends paid to non-controlling interests |
| (1,215) |
| (2,566) |
|
| --------------- |
| --------------- |
Net cash from financing activities |
| 1,009,960 |
| 269,689 |
|
| --------------- |
| --------------- |
Net increase (decrease) in cash and cash equivalents |
| 995,742 |
| (6,968) |
|
|
|
|
|
Cash and cash equivalents at beginning of the year |
| 1,304,667 |
| 1,293,575 |
Effect of foreign exchange rate changes |
| (3,791) |
| 18,060 |
|
| --------------- |
| --------------- |
Cash and cash equivalents at end of the year |
| 2,296,618 |
| 1,304,667 |
|
| ========= |
| ========= |
|
|
|
|
|
Represented by: |
|
|
|
|
|
|
|
|
|
Bank balances and cash (note 28) |
| 2,296,618 |
| 1,304,667 |
|
| ========= |
| ========= |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
1. GENERAL
The Company is a public company incorporated in the British Virgin Islands ("B.V.I.") with limited liability and its shares are admitted for trading on the AIM Market of London Stock Exchange plc. ("AIM Market"). The Company's immediate holding company is Charm Action Holdings Limited, a company incorporated in the B.V.I.. One of the Company's intermediate holding companies is SEA, the shares of which are listed on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The directors of the Company consider that the Company's ultimate holding company is JCS Limited. Both SEA and JCS Limited are companies incorporated in Bermuda as exempted companies with limited liability. The addresses of the registered office and principal place of business of the Company are Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, B.V.I. and 25th Floor, Dah Sing Financial Centre, 108 Gloucester Road, Wanchai, Hong Kong, respectively.
The consolidated financial statements are presented in Hong Kong dollars, which is the functional currency of the Company.
The Company acts as an investment holding company. The activities of its principal subsidiaries are set out in note 40.
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs")
In the current year, the Group has applied the following new and revised IFRSs issued by the International Accounting Standards Board (the "IASB") and the IFRS Interpretations Committee of IASB:
Amendments to IFRS 10, Investment Entities
IFRS 12 and IAS 27
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
IFRIC 21 Levies
The application of the new and revised IFRSs in the current year has had no material impact on the Group's financial performance and positions for the current and prior years and/or on the disclosures set out in these financial statements.
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs") - continued
New and revised IFRSs issued but not yet effective
The directors of the Company expect that the application of the new and revised standards, amendments or interpretations that were issued but not yet effective will have no material impact on the results and financial position of the Group. However, those which may be relevant to the Group's consolidated financial statements are disclosed as below.
IFRS 9 Financial Instruments
IFRS 9 issued in 2009 introduced new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a 'fair value through other comprehensive income' (FVTOCI) measurement category for certain simple debt instruments.
Key requirements of IFRS 9 are described below:
· All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
· With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities' credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs") - continued
IFRS 9 Financial Instruments - continued
· In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.
· The new general hedge accounting requirements retain the three types of hedge accounting. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an 'economic relationship'. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity's risk management activities have also been introduced.
The directors of the Company do not anticipate that the application of IFRS 9 in the future may have a material impact on amounts reported in respect of the Group's financial assets and financial liabilities.
IFRS 15 Revenue from Contracts with Customers
In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective.
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:
· Step 1: Identify the contract(s) with a customer
· Step 2: Identify the performance obligations in the contract
· Step 3: Determine the transaction price
· Step 4: Allocate the transaction price to the performance obligations in the contract
· Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when 'control' of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs") - continued
The directors of the Company do not anticipate that the application of IFRS 15 in the future may have a material impact on the amounts reported and disclosures made in the Group's consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 15 until the Group performs a detailed review.
The directors of the Company do not anticipate that the application of the remaining new and revised IFRSs will have a material effect on the Group's consolidated financial statements.
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared on the historical cost basis except for investment properties and derivative financial instruments, which are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for goods.
The consolidated financial statements have been prepared in accordance with IFRSs as issued by the IASB.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
· Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
· Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
· Level 3 inputs are unobservable inputs for the asset or liability.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
The principal accounting policies are set out below.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. On this basis, they continue to adopt the going concern basis of accounting in preparing the financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:
· has power over the investee;
· is exposed, or has rights, to variable returns from its involvement with the investee; and
· has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss from the date the Group gains control until the date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Basis of consolidation - continued
Changes in the Group's ownership interests in existing subsidiaries
Changes in the Group's ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
Revenue from sale of properties in the ordinary course of business is recognised when the respective properties have been completed and delivered to the buyers. Deposits and instalments received from purchasers prior to meeting the revenue recognition criteria are included in the consolidated statement of financial position under the heading of sales deposits.
Hotel operation and other service income are recognised when services are provided.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
The Group's policy for recognition of revenue from operating leases is described in the accounting policy below.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Investment properties
investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values. All of the Group's property interests held under operating leases to earn rentals or for capital appreciation purposes are accounted for as investment properties and are measured using the fair value model. Gains or losses arising from changes in the fair value of investment properties are included in profit or loss for the period in which they arise.
If an investment property becomes property, plant and equipment because its use has changed as evidenced by the commencement of owner-occupation, any difference between the carrying amount and the fair value of the property at the date of transfer is recognised in profit or loss. Subsequent to the transfer, the property is stated at deemed cost, equivalent to the fair value at the date of transfer, less subsequent accumulated depreciation and accumulated impairment losses.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which the item is derecognised.
Property, plant and equipment
Leasehold land and building held for use in the supply of services, or for administrative purpose and other property, plant and equipment other than crockery, utensils and linens are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.
Depreciation is recognised so as to write off the cost of items of property, plant and equipment, other than crockery, utensils and linen, less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Initial expenditure incurred for crockery, utensils and linen is capitalised and no depreciation is provided thereon. The cost of subsequent replacement for these items is recognised in profit or loss when incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Properties under development
When buildings are in the course of development held for use, in the supply of services or for administrative purposes, the amortisation of prepaid lease payments, where the leasehold land is classified as operating leases, provided during the construction period is included as part of the cost of the building under construction. Buildings under construction are carried at cost, less any identified impairment losses. Cost comprises development costs including attributable borrowing costs, prepaid lease payments and directly attributable costs capitalised during the development period. Depreciation of buildings commences when they are available for use (i.e. when they are in the condition necessary for them to be capable of operating in the manner intended by management).
When leasehold land is intended for sale in the ordinary course of business after completion of development, the leasehold land component is included within the carrying amount of the properties and is classified under current assets.
Properties for development
Properties for development represents consideration and other direct costs for acquisition of leasehold interest in land held for future development.
Properties for development are stated at cost and amortised to profit or loss on a straight-line basis over the term of the relevant lease until the commencement of development, upon which the remaining carrying value of the properties will be transferred to the appropriate categories according to the management's intention of use of the properties after completion of development.
Inventories
Properties held for sale
Completed properties for sale in the ordinary course of business are stated at the lower of cost and net realisable value. Net realisable value is determined by reference to estimated selling price less selling expenses.
Properties for or under development intended for sale after completion of development are stated at the lower of cost and net realisable value. Net realisable value is determined by reference to estimated selling price less anticipated costs to completion of the development and costs to be incurred in marketing and selling the completed properties.
Cost of properties comprises land cost, development costs and other direct costs attributable to the development and borrowing costs capitalised during the development period that have been incurred in bringing the properties to their present condition.
Other inventories
Other inventories comprising food and beverage are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Impairment of assets
At the end of the reporting period, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
The recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
The Group's financial assets are classified as either loans and receivables or available-for-sale ("AFS"). The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including loan receivables, note receivables, other receivables, trade receivables, amounts due from non-controlling interests, bank deposits and cash) are measured at amortised cost using the effective interest method, less any impairment.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial instruments - continued
Financial assets - continued
AFS financial assets
AFS financial assets are non-derivatives that are either designated as available-for-sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss.
Equity securities held by the Group that are classified as AFS financial assets and are traded in an active market are measured at fair value at the end of each reporting period. Changes in the carrying amount of AFS financial assets are recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment loss on financial assets below).
Dividends on AFS equity investments are recognised in profit or loss when the Group's right to receive the dividends is established.
AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of each reporting period (see the accounting policy in respect of impairment of financial assets below).
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Interest income is recognised on an effective interest basis.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial instruments - continued
Financial assets - continued
Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.
For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.
for all other financial assets, objective evidence of impairment could include:
· significant financial difficulty of the issuer or counterparty; or
· breach of contract, such as default or delinquency in interest and principal payments; or
· it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
· the disappearance of an active market for that financial asset because of financial difficulties.
Financial assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, as well as observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets that are carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. The impairment loss will not be reversed in subsequent periods (see the accounting policy below).
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of loan receivables, other receivables and trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial instruments - continued
Financial assets - continued
Impairment of financial assets - continued
For financial assets that are carried at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve.
Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct issue costs.
financial liabilities
financial liabilities including payables, amounts due to non-controlling interests and bank borrowings are subsequently measured at amortised cost, using the effective interest method.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Interest expense is recognised on an effective interest basis.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial instruments - continued
Financial liabilities and equity instruments - continued
Derivative financial instruments
Derivatives are initially recognised at fair value at the date when derivative contracts are entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through profit or loss.
Financial guarantee liabilities
Financial guarantee liabilities are recognised in respect of the financial guarantee provided by the Group for the property purchasers. Financial guarantee liabilities are recognised initially at fair value that are directly attributable to the issue of the financial guarantee liabilities. After initial recognition, such liabilities are measured at the higher of the present value of the best estimate of the expenditure required to settle the present obligation and the amount initially recognised less cumulative amortisation.
Financial guarantee liabilities are derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expired.
Derecognition
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income is recognised on a straight-line basis over the term of the relevant lease. In the event that lease incentives are provided to enter into operating leases, such incentives are recognised as an asset. The aggregate benefit of incentives is recognised as a reduction of rental income on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
The Group as lessee
Rentals payable under operating leases are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Leasehold land and building
When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.
To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as "prepaid lease payments" in the consolidated statement of financial position and is amortised over the lease term on a straight-line basis except for those that are classified and accounted for as investment properties under the fair value model.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve (attributed to non-controlling interest as appropriate).
Share-based payment transactions
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 36.
At the end of each reporting period, the Group revises its estimates of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity. At the time when the share options are exercised, forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised will continue to be held in equity.
Retirement benefit costs
Payments to defined contribution retirement benefit plans, including state-managed retirement benefit scheme and the Mandatory Provident Fund Scheme, are charged as an expense when employees have rendered service entitling them to the contributions.
3. SIGNIFICANT ACCOUNTING POLICIES - continued
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from "profit before taxation" as reported in the consolidated statement of profit or loss because of income or expenses that are taxable or deductible in other years and items that are never taxable or deductible. The Group's current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
For the purposes of measuring deferred tax liabilities for investment properties that are measured using the fair value model, the carrying amount of such properties are presumed to be recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.
Current and deferred tax is recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies which are described in note 3, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying accounting policies
The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that management has made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.
Deferred tax
For the purposes of measuring deferred tax liabilities or deferred tax assets arising from investment properties that are measured using the fair value model, the directors have determined that the Group's investment properties situated in Hong Kong are held under a business model whose objective is to recover the value through sale rather than to consume substantially all of the economic benefits embodied in the investment properties over time, whereas those situated in the People's Republic of China ("PRC") are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. Therefore, the presumption that the carrying amounts of investment properties are recovered entirely through sale is not rebutted for properties situated in Hong Kong. As a result, the Group has not recognised any deferred taxes on changes in fair value of the Group's investment properties situated in Hong Kong as the Group is not subject to any income taxes on disposal of these investment properties. The presumption that the carrying amounts of the Group's investment properties situated in the PRC are recovered entirely through sale has been rebutted and the deferred tax on the changes in fair value of these investment properties is recognised according to the relevant tax rules.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Income tax
No deferred tax asset has been recognised in respect of tax losses of HK$84,342,000 (2013: HK$41,282,000) as it is not probable that taxable profit will be available due to the unpredictability of future profit streams. The realisability of the deferred tax asset mainly depends on whether sufficient future profits will be available in the future. In cases where the actual future profits generated are more than expected, additional recognition of deferred tax assets may arise, which would be recognised in the consolidated statement of profit or loss for the period in which it takes place.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY - continued
Key sources of estimation uncertainty - continued
Fair value of investment properties
Investment properties with a carrying amount of HK$10,358,285,000 (2013: HK$10,216,706,000) are stated at fair value based on the valuation performed by independent professional valuers. In determining the fair value, the valuers have used a method of valuation which involves certain assumptions of market conditions. In relying on the valuation report or making their own valuation, the directors of the Company have exercised their judgment and are satisfied that the method of valuation is reflective of the current market conditions.
Impairment of property, plant and equipment
The Group performs a review annually to determine whether its hotel property with an aggregate carrying amount of HK$947,053,000 (2013: HK$974,569,000) has any indication of impairment by considering the recoverable amount of the hotel building which has been determined based on value in use. The calculation of value in use requires an estimation of future profit generated from the hotel's operating cash flows discounted to arrive at the present value of the asset. Where the actual future cash flows are less than expected, a material impairment loss may arise.
Valuation of properties for development
The Group performs a review annually to determine whether properties for development with an aggregate carrying amount of HK$1,248,432,000 (2013: HK$1,350,813,000) has any indication of impairment by considering the recoverable amounts of the properties which has been determined based on the current market price of properties of comparable location. In case the recoverable amounts of the properties are less than the carrying amount, a material adjustment for an impairment loss may result.
Valuation of properties held for sale
Management's assessment of properties held for sale with an aggregate carrying amount of HK$1,805,042,000 (2013: HK$1,451,215,000) is based on an estimation of the net realisable value of these properties which involves, inter-alia, considerable analyses of the recent transacted prices of the respective properties held for sale, the current market price of properties of comparable standard and location, the estimated costs to complete the development, where appropriate, and a forecast of future sales based on available market data and statistics. If the actual net realisable values of the properties held for sale are (more) less than expected as a result of change in market condition and/or significant variation in the budgeted development cost, a material adjustment for (reversal of) write-down of the properties held for sale may result.
Impairment of other receivables
In determining whether there is any impairment loss on the carrying amount of the other receivables of HK$391,173,000 (2013: HK$384,794,000) in relation to costs incurred on certain pieces of land as detailed in note 22, the Group takes into consideration objective evidence in the estimation of future cash flows. Where the actual future cash flows are less than expected, a material impairment loss, which is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, may arise.
5. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balances. The Group's overall strategy remains unchanged from the prior year.
The capital structure of the Group consists of net debt, which includes bank borrowings net of bank deposits, and bank balances and cash, and equity attributable to the Company's shareholders, comprising issued share capital, retained profits and reserves.
The directors of the Company review the capital structure periodically and maintain a low gearing. The Group's percentage of net debt to carrying value of properties (comprising investment properties, properties included in property, plant and equipment, properties for development and properties held for sale) at the end of the reporting period is as follows:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
Bank borrowings |
| 4,019,734 |
| 3,012,766 |
Restricted bank deposits |
| (6,338) |
| (6,360) |
Bank balances and cash |
| (2,640,466) |
| (1,760,007) |
-------------- |
| -------------- | ||
Net debt |
| 1,372,930 |
| 1,246,399 |
======== |
| ======== | ||
|
|
|
|
|
Total carrying value of properties |
| 14,813,127 |
| 13,993,303 |
======== |
| ======== | ||
|
|
|
|
|
Percentage of net debt to carrying value of properties |
| 9.3% |
| 8.9% |
======== |
| ======== |
6. SEGMENT INFORMATION
Information reported to the executive directors of the Company, being the chief operating decision makers, for the purposes of resource allocation and assessment of segment performance is mainly focused on the property development, property investment and hotel operation. No operating segments identified by the chief operating decision makers have been aggregated in arriving at the reportable segments of the Group.
Property development and investment activities are in Hong Kong and the PRC whereas the hotel operation is in Hong Kong.
The following is an analysis of the Group's revenue and results by reportable segment:
Segment revenues and results
For the year ended 31 December 2014
Property | Property | Hotel | |||||||
development | investment | operation | Eliminations | Consolidated | |||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |||||
SEGMENT REVENUE | |||||||||
External sales | 520 | 384,948 | 263,218 | - | 648,686 | ||||
Inter-segment sales | - | - | - | - | - | ||||
-------------- | -------------- | -------------- | -------------- | -------------- | |||||
Total | 520 | 384,948 | 263,218 | - | 648,686 | ||||
======== | ======== | ======== | ======== | ======== | |||||
SEGMENT RESULTS | |||||||||
Segment (loss) profit | (137,400) | 897,044 | 69,132 | 828,776 | |||||
======== | ======== | ======== | |||||||
Interest income | 24,292 | ||||||||
Corporate income less expenses |
(8,218) | ||||||||
Finance costs | (98,522) | ||||||||
-------------- | |||||||||
Profit before taxation | 746,328 | ||||||||
======== |
For the year ended 31 December 2013
Property | Property | Hotel | |||||||
development | investment | operation | Eliminations | Consolidated | |||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |||||
SEGMENT REVENUE | |||||||||
External sales | 235,465 | 385,983 | 257,149 | - | 878,597 | ||||
Inter-segment sales | - | 498 | - | (498) | - | ||||
-------------- | -------------- | -------------- | -------------- | -------------- | |||||
Total | 235,465 | 386,481 | 257,149 | (498) | 878,597 | ||||
======== | ======== | ======== | ======== | ======== | |||||
SEGMENT RESULTS | |||||||||
Segment profit | 57,006 | 507,768 | 50,256 | 615,030 | |||||
======== | ======== | ======== | |||||||
Interest income | 24,874 | ||||||||
Corporate income less expenses |
(2,337) | ||||||||
Finance costs | (80,994) | ||||||||
-------------- | |||||||||
Profit before taxation | 556,573 | ||||||||
======== |
6. SEGMENT INFORMATION - continued
Segment revenues and results - continued
Inter-segment sales are at mutually agreed terms.
The Group does not allocate interest income, corporate income less expenses and finance costs to individual reportable segment profit or loss for the purposes of resource allocation and performance assessment by the chief operating decision makers.
The accounting policies adopted in preparing the reportable segment information are the same as the Group's accounting policies described in note 3.
Other segment profit or loss information
The following charges (credits) are included in the measurement of segment profit or loss:
For the year ended 31 December 2014
Property | Property | Hotel | |||||
development | investment | operation | Consolidated | ||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||
Amortisation and depreciation | |||||||
- Properties for development | 23,298 | - | - | 23,298 | |||
- Depreciation of property, plant and equipment |
1,667 |
19,116 |
32,288 |
50,071 | |||
Fair value changes on investment properties |
- |
(617,782) |
- |
(617,782) | |||
Fair value adjustment on other receivables | (7,636) | - | - | (7,636) | |||
Loss on disposal of property, plant and equipment |
- |
147 |
- |
147 | |||
======== | ======== | ======== | ======== |
For the year ended 31 December 2013
Property | Property | Hotel | |||||
development | investment | operation | Consolidated | ||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||
Amortisation and depreciation | |||||||
- Properties for development | 24,124 | - | - | 24,124 | |||
- Depreciation of property, plant and equipment |
1,745 |
2,493 |
51,797 |
56,035 | |||
Fair value changes on investment properties |
- |
(289,340) |
- |
(289,340) | |||
Fair value adjustment on other receivables | (7,435) | - | - | (7,435) | |||
Loss on disposal of property, plant and equipment |
- |
41 |
- |
41 | |||
======== | ======== | ======== | ======== |
Geographical information
The Group operates in two principal geographical areas, being Hong Kong (country of domicile) and the PRC.
The Group's revenue from external customers by geographical location of properties is detailed below.
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
Hong Kong |
| 507,034 |
| 737,833 |
PRC |
| 141,652 |
| 140,764 |
|
| --------------- |
| --------------- |
|
| 648,686 |
| 878,597 |
|
| ========= |
| ========= |
6. SEGMENT INFORMATION - continued
Geographical information - continued
No single customer contributes over 10% of the total revenue of the Group for both years.
The Group's information about its non-current assets, excluding financial assets, by geographical location are detailed below.
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
Hong Kong |
| 9,288,095 |
| 8,783,264 |
PRC |
| 3,756,078 |
| 3,800,862 |
|
| --------------- |
| --------------- |
|
| 13,044,173 |
| 12,584,126 |
|
| ========= |
| ========= |
No segment assets and liabilities are presented as the information is not reportable to the chief operating decision makers in the resource allocation and assessment of performance.
7. REVENUE
The following is an analysis of the Group's revenue from its major business activities.
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
Sale of properties |
| 520 |
| 235,465 |
Renting of investment properties |
| 384,948 |
| 385,983 |
Hotel operation |
| 263,218 |
| 257,149 |
|
| -------------- |
| -------------- |
|
| 648,686 |
| 878,597 |
|
| ======== |
| ======== |
8. OTHER INCOME
|
| 2014 |
| 2013 |
| |
|
| HK$'000 |
| HK$'000 |
| |
Included in other income is: |
| |||||
| ||||||
Fair value adjustment on other receivables | 7,636 | 7,435 |
| |||
Net exchange gain | - | 6,642 |
| |||
Rental income from properties held for sale temporarily leased |
4,638 |
4,223 |
| |||
|
| ======== |
| ======== | ||
9. PROPERTY AND RELATED COSTS
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Cost of properties sold |
| 615 | 103,493 | |
Selling and marketing expenses | 21,192 | 6,472 | ||
Direct operating expenses on investment properties | 51,609 | 50,126 | ||
-------------- |
| -------------- | ||
| 73,416 | 160,091 | ||
======== |
| ======== |
10. OTHER EXPENSES
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Included in other expenses are: |
|
|
|
|
|
|
|
|
|
Management fees paid to a related company (note 38) |
| 109,324 |
| 148,087 |
Less: Amount capitalised to property development |
|
|
|
|
project |
| (17,353) |
| (3,797) |
|
| -------------- |
| -------------- |
|
| 91,971 |
| 144,290 |
|
|
|
|
|
Hotel operating expenses |
| 67,442 |
| 63,661 |
legal and professional fees |
| 7,824 |
| 6,056 |
Net exchange loss |
| 5,097 |
| - |
|
| ======== |
| ======== |
11. FINANCE COSTS
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Interest on: |
|
|
|
|
Bank borrowings wholly repayable within 5 years |
| 64,344 |
| 41,417 |
bank borrowings not wholly repayable within 5 years |
| 36,642 |
| 37,427 |
|
| -------------- |
| -------------- |
|
| 100,986 |
| 78,844 |
Less: Amount capitalised to property development project |
|
(10,442) |
|
(4,133) |
|
| -------------- |
| -------------- |
|
| 90,544 |
| 74,711 |
Front end fee |
| 5,423 |
| 4,005 |
other charges |
| 2,555 |
| 2,278 |
|
| -------------- |
| -------------- |
|
| 98,522 |
| 80,994 |
|
| ======== |
| ======== |
12. Profit before taxation
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Profit before taxation has been arrived at after charging |
|
|
|
|
(crediting): |
|
|
|
|
|
|
|
|
|
Auditor's remuneration |
| 2,464 |
| 2,359 |
Directors' emoluments (note 13) |
| 3,582 |
| 2,935 |
Loss on disposal of property, plant and equipment |
| 147 |
| 41 |
|
|
|
|
|
Depreciation and amortisation |
| 73,781 |
| 80,487 |
Less: Amount capitalised to property development |
|
|
|
|
projects |
| (412) |
| (328) |
|
| -------------- |
| ------------- |
|
| 73,369 |
| 80,159 |
-------------- | ------------- | |||
Interest income from second mortgage loans | (328) | (418) | ||
Interest earned on bank deposits | (23,964) | (24,000) | ||
Other interest income | - | (456) | ||
-------------- | ------------- | |||
(24,292) | (24,874) | |||
-------------- | ------------- | |||
Gross rental income from investment properties |
| (384,948) |
| (385,983) |
Less: Direct operating expenses |
| 51,609 |
| 50,126 |
|
| -------------- |
| ------------- |
Net rental income |
| (333,339) |
| (335,857) |
|
| -------------- |
| ------------- |
13. DIRECTORS' EMOLUMENTS
The emoluments paid or payable to each of the directors are as follows:
Mr. | Mr. John | ||||||||
Mr. | Mr. Lam | Mr. | Mr. David | Mr. | Richard | David | |||
Mr. Lu | Lambert | Sing | Lincoln | Andrew | Donald Ian | Öther | Orchard | ||
Wing Chi | Lu | Tai | Lu | Runciman | Fletcher | Prickett | Fulton | Total | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
2014 | |||||||||
Fees | 256 | 256 | 201 | 201 | - | 368 | 513 | 106 | 1,901 |
Other emoluments | |||||||||
Salaries and other benefits | - | - | - | - | 1,320 | - | - | - | 1,320 |
Retirement benefits scheme contributions |
6 |
6 |
- |
- |
132 |
- |
- |
- |
144 |
Share-based payment expenses | - | - | - | - | 217 | - | - | - | 217 |
-------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
Total emoluments | 262 | 262 | 201 | 201 | 1,669 | 368 | 513 | 106 | 3,582 |
======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | |
2013 | |||||||||
Fees | 244 | 244 | - | - | - | 244 | 486 | - | 1,218 |
Other emoluments | |||||||||
Salaries and other benefits | - | - | - | - | 1,320 | - | - | - | 1,320 |
Retirement benefits scheme contributions |
24 |
24 |
- |
- |
132 |
- |
- |
- |
180 |
Share-based payment expenses | - | - | - | - | 217 | - | - | - | 217 |
-------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
Total emoluments | 268 | 268 | - | - | 1,669 | 244 | 486 | - | 2,935 |
======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== |
14. INCOME TAX EXPENSE
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
The charge comprises: |
|
|
|
|
|
|
|
|
|
Current tax |
|
|
|
|
Hong Kong Profits Tax |
| 37,798 |
| 51,091 |
PRC Enterprise Income Tax |
| 11,809 |
| 11,232 |
|
| ------------- |
| -------------- |
|
| 49,607 |
| 62,323 |
|
| ------------- |
| -------------- |
(Over)underprovision in prior years |
|
|
|
|
Hong Kong Profits Tax |
| (70) |
| 135 |
|
| ------------- |
| -------------- |
Deferred tax |
|
|
|
|
- current year |
| 20,139 |
| 18,855 |
- overprovision in prior years |
| (25,676) |
| - |
|
| ------------- |
| -------------- |
|
| (5,537) |
| 18,855 |
|
| ------------- |
| -------------- |
|
| 44,000 |
| 81,313 |
|
| ======== |
| ======== |
Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for both years.
PRC Enterprise Income Tax is calculated at 25% of the estimated assessable profits for both years.
Details of deferred taxation are set out in note 32.
Income tax expense for the year can be reconciled to profit before taxation in the consolidated statement of profit or loss as follows:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
Profit before taxation |
| 746,328 |
| 556,573 |
|
| ======== |
| ======== |
|
|
|
|
|
Tax charge at Hong Kong income tax rate of 16.5% |
| 123,144 |
| 91,835 |
Tax effect of expenses not deductible for tax purposes |
| 32,022 |
| 25,606 |
Tax effect of income not taxable for tax purposes |
| (101,022) |
| (44,366) |
Tax effect of tax losses not recognised |
| 7,380 |
| 2,661 |
Tax effect of deductible temporary differences not recognised |
|
- |
|
224 |
Utilisation of tax losses previously not recognised |
| (307) |
| (3,753) |
Effect of different tax rates of subsidiaries operating in |
|
|
|
|
other jurisdictions |
| 9,846 |
| 10,750 |
(Over)underprovision in prior years |
| (25,746) |
| 135 |
Others |
| (1,317) |
| (1,779) |
|
| ------------- |
| ------------- |
Income tax expense for the year |
| 44,000 |
| 81,313 |
|
| ======== |
| ======== |
15. EARNINGS PER SHARE
The calculation of the basic earnings per share attributable to the Company's shareholders is based on the following data:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Earnings for the purpose of basic earnings per share: |
|
|
|
|
|
|
|
|
|
Profit for the year attributable to the Company's |
|
|
|
|
shareholders |
| 703,101 |
| 474,543 |
|
| ======== |
| ======== |
|
|
|
|
|
|
| 2014 |
| 2013 |
number of ordinary shares for the purpose of |
|
|
|
|
basic earnings per share |
| 886,347,812 |
| 886,347,812 |
|
| ========= |
| ========= |
No diluted earnings per share is presented as the Company did not have any potential ordinary shares in issue during both years.
For the purpose of assessing the performance of the Group, the directors are of the view that the profit for the year should be adjusted for the fair value changes on investment properties recognised in profit or loss and the related deferred taxation in arriving at the "adjusted profit attributable to the Company's shareholders". A reconciliation of the adjusted earnings is as follows:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Profit for the year attributable to the Company's |
|
|
|
|
shareholders as shown in the consolidated |
|
|
|
|
statement of profit or loss |
| 703,101 |
| 474,543 |
Fair value changes on investment properties |
| (617,782) |
| (289,340) |
Deferred tax thereon |
| 17,446 |
| 19,835 |
|
| --------------- |
| --------------- |
Adjusted profit attributable to the Company's shareholders |
|
102,765 |
|
205,038 |
|
| ========= |
| ========= |
Basic earnings per share excluding fair value changes |
|
|
|
|
on investment properties net of deferred tax |
| HK11.6 cents |
| HK23.1 cents |
|
| ========= |
| ========= |
The denominators used in the calculation of adjusted earnings per share are the same as those detailed above.
16. DIVIDENDS
No dividend was paid, declared or proposed during the reported period. The directors do not recommend the payment of any final dividend.
17. INVESTMENT PROPERTIES
Hong Kong | PRC | |||
-------------- | ------------------------------------- | |||
Medium- | Medium- | |||
term leases | Long leases | term leases | Total | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
At 1 January 2013 | 7,570,000 | 1,998,562 | 286,126 | 9,854,688 |
Fair value changes | 210,000 | 60,539 | 18,801 | 289,340 |
Exchange adjustments | - | 63,445 | 9,233 | 72,678 |
------------- | ------------- | ------------- | -------------- | |
At 31 December 2013 | 7,780,000 | 2,122,546 | 314,160 | 10,216,706 |
Fair value changes | 548,000 | 62,222 | 7,560 | 617,782 |
Fair value of properties reclassified | ||||
from long term lease | ||||
to medium team lease | - | (2,134,131) | 2,134,131 | - |
Transfer to property, plant and | ||||
equipment | (421,000) | (43,881) | (3,506) | (468,387) |
Exchange adjustments | - | (6,756) | (1,060) | (7,816) |
------------- | -------------- | -------------- | -------------- | |
At 31 December 2014 | 7,907,000 | - | 2,451,285 | 10,358,285 |
======== | ======== | ======== | ======== |
All of the Group's property interests are held under operating leases to earn rentals and/or for capital appreciation purposes. These properties are measured using the fair value model and are classified and accounted for as investment properties.
In estimating the fair value of investment properties, the Group uses market-observable data to the extent it is available. The Group engages third party qualified valuers to perform the valuation of the Group's investment properties. At the end of each reporting period, the Group works closely with the qualified external valuers to establish and determine the appropriate valuation techniques and inputs to the model.
The fair values of investment properties at the date of transfer and as at 31 December 2014 and 31 December 2013 were arrived at on the basis of valuations carried out at those dates by Savills Valuation and Professional Services Limited ("Savills"), a firm of Chartered Surveyors not connected to the Group, recognised by The Hong Kong Institute of Surveyors, that has appropriate qualifications and recent experience in the valuation of properties in the relevant locations.
The valuation, which conforms to the appropriate sections of both the current Practice Statements, and United Kingdom Practices Statements contained in the RICS Valuation - Professional Standards published by the Royal Institution of Chartered Surveyors in the United Kingdom (the "Red Book"), was arrived at by reference to market evidence of transaction prices or by capitalisation of future rental which is estimated by reference to comparable rental as available in the relevant markets. In the valuation, which falls under Level 3 of the fair value hierarchy, the market rentals of all lettable units as well as those of similar properties are made by reference to the rentals achieved by the Group in the lettable units as well as those of similar properties in the neighbourhood. The capitalisation rate adopted is by reference to the yield rates observed by the valuer for similar properties in the locality and adjusted for the valuer's knowledge of factors specific to the respective properties. These has been no change from the valuation technique used in the prior year.
17. INVESTMENT PROPERTIES - continued
In estimating the fair value of the properties, the highest and best use of the properties is their current use.
The key inputs used in valuing the investment properties under the income capitalisation approach were the capitalisation rates used and monthly unit rent. A slight increase in the capitalisation rate used would result in a significant decrease in the fair value measurement of the investment properties, and vice versa. The higher the monthly unit rent, the higher the fair value and vice versa.
Details of the significant unobservable input under the income capitalisation approach are as follows:
Class of property | Capitalisation rates | ||
| 2014 |
| 2013 |
|
|
|
|
Office units and shops in Hong Kong | 3.6% to 3.75% |
| 3.75% per annum |
| per annum |
|
|
Car parking spaces in Hong Kong | 5.25% per annum |
| 5.5% per annum |
Shops in the PRC | 6.75% to 9.0% |
| 6.75% to 9.0% |
| per annum |
| per annum |
Office units in the PRC | 6.0% to 6.5% |
| 6.0% to 6.5% |
| per annum |
| per annum |
Car parking spaces in the PRC were valued under the direct comparison approach. The market unit rate is one of the key inputs. The higher the market unit rate the higher the fair value, and vice versa. The adopted market unit rates range from RMB110,000 to RMB170,000 (2013: RMB115,000 to RMB150,000) per unit.
Details of the Group's investment properties which falls under Level 3 of the fair value hierarchy as at 31 December 2014 and 31 December 2013 are as follows:
|
| Fair value as at | ||
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
Commercial property located in Hong Kong |
| 7,907,000 |
| 7,780,000 |
Commercial properties located in the PRC |
| 2,451,285 |
| 2,436,706 |
|
| -------------- |
| -------------- |
|
| 10,358,285 |
| 10,216,706 |
|
| ======== |
| ======== |
There were no transfers between Level 1, 2 and 3 in both years presented.
18. PROPERTY, PLANT AND EQUIPMENT
Hotel property in Hong Kong | Other properties in Hong Kong | Properties in the PRC | Plant and machinery | Furniture, fixtures and equipment | Motor vehicles | Leasehold improvements | Crockery, utensils and linen | Total | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
COST | |||||||||
At 1 January 2013 | 1,089,672 | - | - | 39,175 | 35,893 | 7,011 | 73,658 | 5,051 | 1,250,460 |
Additions | - | - | - | 5,910 | 1,627 | 701 | 805 | - | 9,043 |
Disposals | - | - | - | - | (619) | (47) | - | - | (666) |
Exchange adjustments | - | - | - | 88 | 120 | 166 | 193 | - | 567 |
-------------- | -------------- | -------------- | -------------- | -------------- | -------------- | --------------- | --------------- | --------------- | |
At 31 December 2013 | 1,089,672 | - | - | 45,173 | 37,021 | 7,831 | 74,656 | 5,051 | 1,259,404 |
Additions | - | - | - | 408 | 1,868 | 724 | 293 | - | 3,293 |
Transfer from investment | |||||||||
properties | - | 421,000 | 47,387 | - | - | - | - | - | 468,387 |
Disposals | - | - | - | - | (46) | (31) | (1,329) | - | (1,406) |
Exchange adjustments | - | - | (115) | (18) | (12) | (20) | (27) | - | (192) |
-------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
At 31 December 2014 | 1,089,672 | 421,000 | 47,272 | 45,563 | 38,831 | 8,504 | 73,593 | 5,051 | 1,729,486 |
-------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
DEPRECIATION | |||||||||
At 1 January 2013 | 87,586 | - | - | 13,085 | 25,332 | 3,360 | 57,386 | - | 186,749 |
Provided for the year | 27,517 | - | - | 5,153 | 7,535 | 1,213 | 14,945 | - | 56,363 |
Eliminated on disposals | - | - | - | - | (557) | (4) | - | - | (561) |
Exchange adjustments | - | - | - | 19 | 40 | 76 | 111 | - | 246 |
-------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
At 31 December 2013 | 115,103 | - | - | 18,257 | 32,350 | 4,645 | 72,442 | - | 242,797 |
Provided for the year | 27,516 | 12,923 | 1,030 | 5,368 | 1,521 | 1,165 | 960 | - | 50,483 |
Eliminated on disposals | - | - | - | - | (8) | (31) | (1,196) | - | (1,235) |
Exchange adjustments | - | - | 4 | 2 | 1 | (6) | (16) | - | (15) |
-------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
At 31 December 2014 | 142,619 | 12,923 | 1,034 | 23,627 | 33,864 | 5,773 | 72,190 | - | 292,030 |
-------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
CARRYING VALUES | |||||||||
At 31 December 2014 | 947,053 | 408,077 | 46,238 | 21,936 | 4,967 | 2,731 | 1,403 | 5,051 | 1,437,456 |
======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | |
At 31 December 2013 | 974,569 | - | - | 26,916 | 4,671 | 3,186 | 2,214 | 5,051 | 1,016,607 |
======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== |
The above items of property, plant and equipment are depreciated on a straight-line basis after taking into account their estimated residual values at the following rates per annum:
Leasehold land and properties Over the lease terms ranging from 42 years to 45.5 years
Completed hotel building 40 years
Plant and machinery 10%
Furniture, fixtures and equipment 25%
Motor vehicles 25%
Leasehold improvements 25%
The carrying amounts of properties shown above comprise properties situated in:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Hotel and other properties in Hong Kong |
|
|
|
|
Medium-term leases |
| 1,355,130 |
| 974,569 |
|
| ======== |
| ======== |
Properties in the PRC |
|
|
|
|
Medium-term leases |
| 46,238 |
| - |
|
| ======== |
| ======== |
19. PROPERTIES FOR DEVELOPMENT
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
COST |
|
|
|
|
At 1 January |
| 1,417,033 |
| 1,336,169 |
Additions |
| 51,459 |
| 125,366 |
Transfer to properties held for sale |
| (133,126) |
| (86,436) |
Exchange adjustments |
| (3,254) |
| 41,934 |
|
| -------------- |
| -------------- |
At 31 December |
| 1,332,112 |
| 1,417,033 |
|
| -------------- |
| -------------- |
AMORTISATION |
|
|
|
|
At 1 January |
| 66,220 |
| 43,926 |
Provided for the year |
| 23,298 |
| 24,124 |
Transfer to properties held for sale |
| (5,695) |
| (3,455) |
Exchange adjustments |
| (143) |
| 1,625 |
|
| -------------- |
| -------------- |
At 31 December |
| 83,680 |
| 66,220 |
|
| -------------- |
| -------------- |
CARRYING VALUE |
|
|
|
|
At 31 December |
| 1,248,432 |
| 1,350,813 |
|
| ======== |
| ======== |
The carrying amount represents the Group's interest in certain pieces of land located in the PRC to be held for future development.
The carrying amount is amortised on a straight-line basis over the lease terms ranging from 40 to 70 years.
20. LOAN RECEIVABLES
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Second mortgage loans | 4,480 | 7,535 | ||
======== |
| ======== | ||
Analysed for reporting purposes: | ||||
Non-current assets | 4,118 | 7,072 | ||
Current assets | 362 | 463 | ||
-------------- |
| -------------- | ||
4,480 | 7,535 | |||
======== |
| ======== |
The loans bear interest at Hong Kong Prime Rate and are repayable by monthly installments over a period of 20 years or as stipulated in the respective agreements.
The second mortgage loans are secured by the leasehold properties of the borrowers.
The effective interest rate of the loan receivables is 5.0% (2013: 5.0%) per annum.
Loan receivables balances which are past due at the end of the reporting period are minimal and are not considered impaired. In determining the recoverability of the loan receivables, the Group considers, among other factors, any change in value of the properties securing the loans.
The concentration of credit risk is limited due to the customer base being large and unrelated. No single loan receivable is individually material.
21. NOTE RECEIVABLES
The amount represents (i) the carrying value of a five-year zero coupon principal protected index-linked note with principal amount of US$2,000,000 (equivalent to HK$15,511,000) (2013: US$2,000,000 (equivalent to HK$15,508,000)) maturing on 7 February 2017; and (ii) the carrying value of a five-year zero coupon principal protected index-linked note with a principal amount of US$5,000,000 (equivalent to HK$38,778,000) (2013: US$5,000,000 (equivalent to HK$38,771,000)) maturing on 9 August 2018. The index is a proprietary index named Forex Yield Differential Accrual Perpetual Index, which is a proprietary non-discretionary algorithm to calculate the risk filter multiple of non-discretionary trading that observes a basket of ten currencies.
The host contracts of the note are measured at amortised cost. The index-linked feature is regarded as a derivative embedded in but not closely related to the host contract in accordance with IAS 39 Financial Instruments: Recognition and Measurement. However, in the opinion of the directors, the fair values of the embedded derivatives at the end of the reporting period are insignificant and therefore they have not been accounted for as a separate component in the consolidated financial statements.
22. OTHER RECEIVABLES
At 31 December 2014, the Group had incurred a total amount of RMB321,060,000 (2013: RMB321,052,000), equivalent to HK$406,976,000 (2013: HK$408,346,000), for the tenant relocation arrangements, excavation and infrastructure work on certain pieces of land in Nanjing, the PRC. The amount, together with further costs to complete the work, are wholly refundable from the relevant PRC local government either by deduction against the consideration payable if the Group is successful in bidding for the land or out of the proceeds received by the relevant PRC local government from another successful tenderer. The directors estimate that, based on the Group's development plan, the time schedule for auction of the relevant land will be initiated before the end of 2016 and by then the full amount will be recovered.
The balance of HK$391,173,000 (2013: HK$384,794,000) represents the Hong Kong dollar equivalent of the present value of the original amount of RMB321,060,000 (2013: RMB321,052,000) expected to be recovered in 2016 discounted at the rate of 2% per annum.
23. OTHER FINANCIAL ASSETS
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Unlisted investments: | ||||
- Equity securities (Note 1) | 3,882 | - | ||
- Convertible loan (Note 2) | 3,882 | - | ||
-------------- | -------------- | |||
7,764 | - | |||
======== | ======== |
(1) At 31 December 2014, unlisted equity securities classified as available-for sale held by the Group amounting to US$500,000 (equivalent to HK$3,882,000), representing approximately 5% equity interest of the investee company, were measured at cost less impairment at the end of the reporting period because the range of reasonable fair value estimates is so significant that the directors were of the opinion that the fair value cannot be measured reliably.
(2) The Group committed and contributed an unsecured interest-free loan in the sum of US$500,000 (equivalent to HK$3,882,000) to the party set out in note (1).
The party is scheduled to repay the convertible loan at its principal amount on 14 October 2017 (the "Maturity date"). The Group has the right to convert into shares representing not more than a 5% equity interest of the investee company.
The conversion option feature is regarded as a derivative embedded in but not closely related to the convertible loan in accordance with IAS 39 Financial Instruments: Recognition and Measurement. However, in the opinion of the directors, the fair value of the embedded derivative at the end of the reporting period is insignificant and therefore it has not been accounted for it as a separate component in the consolidated financial statements.
24. RESTRICTED BANK DEPOSITS
Restricted bank deposits carry fixed interest rates ranging from 0.4% to 3.1% (2013: 0.4%) per annum and were placed with a bank in relation to long-term bank borrowings.
25. PROPERTIES HELD FOR SALE - PROPERTIES UNDER DEVELOPMENT
Except for the properties under development with a carrying value of approximately HK$281,004,000 (2013: nil) which are expected to be completed in 2015, the remaining properties are expected to be completed in more than twelve months after the end of the reporting period.
26. TRADE RECEIVABLES, DEPOSITS AND PREPAYMENTS
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Trade receivables | 10,603 | 9,114 | ||
Accrued income | 99,415 | 92,234 | ||
Deposits and prepayments | 40,544 | 23,188 | ||
-------------- | -------------- | |||
150,562 | 124,536 | |||
======== | ======== |
Trade receivables mainly represent rental receivable from tenants for the use of the Group's properties and receivables from corporate customers and travel agents for the use of hotel facilities. No credit is allowed to tenants. Rentals are payable upon presentation of demand notes. An average credit period of 30 days is allowed to corporate customers and travel agents.
The following is an aged analysis of trade receivables, presented based on the invoice date, at the end of the reporting period.
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
0 to 30 days | 8,014 | 8,178 | ||
31 to 60 days | 590 | 936 | ||
61 to 90 days | 207 | - | ||
91 to 365 days | 1,148 | - | ||
Over 365 days | 644 | - | ||
-------------- | -------------- | |||
10,603 | 9,114 | |||
======== | ======== |
Before granting credit to any customer, the Group uses an internal credit assessment policy to assess the potential customers' credit quality and defines credit limit by customer. trade receivables of HK$3,100,000 (2013: HK$940,000) at the end of the reporting period are past due but are not considered impaired as these debtors have good repayment history and the Group has assessed the creditworthiness, default history of independent customers, and considers that the amounts are still recoverable and no provision is required. The Group does not hold any collateral over these balances.
27. AMOUNTS DUE FROM/TO NON-CONTROLLING INTERESTS
The balances are unsecured, interest-free and repayable on demand.
28. Bank balances and CASH
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Cash and cash equivalents | 2,296,618 | 1,304,667 | ||
Fixed deposits with original maturity period more than 3 months |
309,380 |
455,340 | ||
Guaranteed deposits | 34,468 | - | ||
-------------- | -------------- | |||
2,640,466 | 1,760,007 | |||
======== | ======== |
Bank balances and cash comprise cash and short-term bank deposits which carry fixed interest rates ranging from 0.1% to 3.3% (2013: 0.1% to 3.3%) per annum.
Guaranteed deposits represent deposits placed by the Group with banks which can only be applied to designated property development projects of the Group. Guaranteed deposits carry interest at market rates ranging from 0.4% to 2.9% per annum.
The Group's bank balances and cash that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Hong Kong dollars | 23 | 23 | ||
======== | ======== | |||
United States dollars | 1,895 | 15,994 | ||
======== | ======== | |||
Renminbi | 226,682 | 184,118 | ||
======== | ======== |
29. PAYABLES, RENTAL DEPOSITS AND ACCRUED CHARGES
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Trade payables | 3,018 | 2,609 | ||
Rental deposits | 115,925 | 113,185 | ||
Rental received in advance | 16,399 | 12,052 | ||
Other payables, other deposits and accrued charges | 166,642 | 162,233 | ||
-------------- | -------------- | |||
301,984 | 290,079 | |||
======== | ======== |
Included in other payables is an aggregate amount of HK$91,759,000 (2013: HK$87,876,000) payable to contractors for the cost in relation to the tenant relocation arrangements, excavation and infrastructure work on certain pieces of land as detailed in note 22.
Rental deposits to be settled after twelve months from the end of the reporting period based on the respective lease terms amounted to HK$71,151,000 (2013: HK$87,302,000).
30. BANK BORROWINGS
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Secured |
| 3,942,110 | 2,908,463 | |
Unsecured | 100,000 | 118,000 | ||
-------------- | -------------- | |||
| 4,042,110 | 3,026,463 | ||
Less: Front-end fee | (22,376) | (13,697) | ||
-------------- | -------------- | |||
| 4,019,734 | 3,012,766 | ||
======== | ======== | |||
Analysed for reporting purpose as: | ||||
Current liabilities |
| 436,569 | 1,290,658 | |
Non-current liabilities |
| 3,583,165 | 1,722,108 | |
-------------- | -------------- | |||
| 4,019,734 | 3,012,766 | ||
======== | ======== |
The bank borrowings are repayable as follows:
On demand or within one year |
| 438,380 | 1,291,791 | |
More than one year, but not exceeding two years |
| 1,385,866 | 395,152 | |
More than two years, but not exceeding five years |
| 1,139,133 | 1,082,914 | |
More than five years |
| 1,078,731 | 256,606 | |
-------------- | -------------- | |||
| 4,042,110 | 3,026,463 | ||
======== | ======== |
All bank borrowings are denominated in the functional currencies of the relevant group entities and carry interest at floating rates, the principal amounts of which are analysed below:
Denominated in | Interest rates |
| 2014 |
| 2013 |
|
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
|
Hong Kong | Hong Kong Interbank Offered Rate |
|
|
|
|
dollars | ("HIBOR") plus 1.1% to 2.4% |
|
|
|
|
| (2013: HIBOR plus 1% to 2.75%) |
| 3,350,000 |
| 2,480,182 |
|
|
|
|
|
|
Renminbi | 95% to 125% of People's Bank of |
|
|
|
|
| China("PBOC") Prescribed Interest |
|
|
|
|
| Rates(2013: 95% to 125% of PBOC |
|
|
|
|
| Prescribed Interest Rates) |
| 692,110 |
| 546,281 |
|
|
| -------------- |
| -------------- |
|
|
| 4,042,110 |
| 3,026,463 |
|
|
| ======== |
| ======== |
The effective interest rates of these variable-rate borrowings range from 1.5% to 8.2% (2013: 1.5% to 8.2%) per annum.
31. SHARE CAPITAL
| 2014 and 2013 |
| US$'000 |
Authorised: |
|
1,300,000,000 ordinary shares of US$0.05 each | 65,000 |
| ========== |
Issued and fully paid: |
|
886,347,812 ordinary shares of US$0.05 each | 44,317 |
| ========== |
|
|
| HK$'000 |
|
|
Shown in the financial statements as | 345,204 |
| ========== |
32. DEFERRED TAXATION
The following are the major deferred tax liabilities (assets) recognised and movements thereon during the current and prior reporting periods:
Accelerated | Fair value of | Effective | ||||
tax | investment | rental | Tax | |||
depreciation | properties | income | losses | Others | Total | |
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
At 1 January 2013 | 14,829 | 265,283 | 19,142 | (4,474) | 3,962 | 298,742 |
Exchange adjustments | - | 7,791 | 617 | (74) | - | 8,334 |
(credit) charge to profit | ||||||
or loss | (871) | 19,835 | 1,169 | 1,774 | (3,052) | 18,855 |
--------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
At 31 December 2013 | 13,958 | 292,909 | 20,928 | (2,774) | 910 | 325,931 |
Exchange adjustments | - | (828) | (65) | 2 | - | (891) |
Charge (credit) to profit | ||||||
or loss | 2,582 | (8,230) | 1,143 | (1,599) | 567 | (5,537) |
--------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
At 31 December 2014 | 16,540 | 283,851 | 22,006 | (4,371) | 1,477 | 319,503 |
========= | ========= | ========= | ========= | ========= | ========= |
For the purpose of presentation of the consolidated statement of financial position, deferred tax assets and liabilities have been offset and shown under non-current liabilities.
At 31 December 2014, the Group has unused tax losses of HK$101,826,000 (2013: HK$52,375,000) available to offset against future profits. A deferred tax asset has been recognised in respect of HK$17,484,000 (2013: HK$11,093,000) of such losses. No deferred tax asset has been recognised in respect of the remaining HK$84,342,000 (2013: HK$41,282,000) as it is not probable that taxable profit will be available to offset against the tax losses due to the unpredictability of future profit streams. The unrecognised tax losses will expire in the following years ending 31 December:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
2014 | - | 605 | ||
2015 | 2,122 | 2,129 | ||
2016 | 1,556 | 1,562 | ||
2017 | 3,562 | 3,574 | ||
2018 | 5,093 | 5,111 | ||
2019 | 51,608 | - | ||
-------------- | -------------- | |||
63,941 | 12,981 | |||
======== | ======== |
Other tax losses may be carried forward indefinitely.
33. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
Financial assets |
|
|
|
|
Loans and receivables (including cash |
|
|
|
|
and cash equivalents) |
| 3,111,301 |
| 2,222,354 |
Available-for-sale investments |
| 3,882 |
| - |
|
| ======== |
| ======== |
Financial liabilities |
|
|
|
|
Financial liabilities at amortised cost |
| 4,267,619 |
| 3,267,050 |
|
| ======== |
| ======== |
(b) Financial risk management objectives and policies
The directors of the Company have overall responsibility for the establishment and oversight of the Group's risk management framework. The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls to monitor risks and adherence to market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a constructive control environment in which all employees understand their roles and obligations. The directors of the Company monitor and manage the financial risks relating to the operations of the Group to ensure appropriate measures are implemented on a timely and effective manner. These risks include market risk (including primarily foreign currency risk and interest rate risk), credit risk and liquidity risk.
The Group's overall strategy remains unchanged from prior year.
Market risk
(i) Foreign currency risk
Certain subsidiaries of the Company have foreign currency denominated monetary assets, which expose the Group to foreign currency risk. The Group currently does not have a policy to hedge the foreign currency exposure. However, the management monitors the related foreign currency fluctuation closely and will consider entering into foreign exchange forward contracts to hedge significant portion of the foreign currency risk should the need arise.
The carrying amounts of the foreign currency denominated monetary assets at the end of the reporting period in the respective group entities are as follows:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
Hong Kong dollars |
| 23 |
| 23 |
United States dollars |
| 63,948 |
| 70,273 |
Renminbi |
| 226,682 |
| 184,118 |
|
| ======== |
| ======== |
33. FINANCIAL INSTRUMENTS - continued
(b) Financial risk management objectives and policies - continued
Market risk - continued
(i) Foreign currency risk - continued
The loans for foreign operations within the Group that form part of the Group's net investment in foreign operations, and are denominated in foreign currency, other than the functional currency of the respective foreign entities, the Hong Kong dollars and United States dollars, at the end of the reporting period amounted to HK$208,897,000 (2013: HK$208,904,000) and HK$92,441,000 (2013: HK$92,420,000) respectively.
Sensitivity analysis
The following table details the Group's sensitivity to a 5% (2013: 5%) appreciation in the functional currencies of the relevant subsidiaries, (i.e., Renminbi and Hong Kong dollars, relative to the foreign currencies of the relevant subsidiaries, (i.e. Hong Kong dollars), United States dollars and Renminbi). There would be an equal and opposite impact where Renminbi and Hong Kong dollars weaken 5% (2013: 5%) against the relevant currencies.
| Decrease in profit for the year |
| Increase in equity | ||||
| 2014 |
| 2013 |
| 2014 |
| 2013 |
| HK$'000 |
| HK$'000 |
| HK$'000 |
| HK$'000 |
|
|
|
|
|
|
|
|
Hong Kong dollars | 1 |
| 1 |
| 10,445 |
| 10,445 |
United States dollars | 3,197 |
| 3,514 |
| 4,622 |
| 4,621 |
Renminbi | 11,334 |
| 9,206 |
| - |
| - |
| ======= |
| ======= |
| ======= |
| ======= |
In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign currency risk as the year end exposure does not reflect the exposure during the year.
Since the Hong Kong dollar is pegged to the United States dollar under the Linked Exchange Rate System, management does not expect any significant foreign currency exposure in relation to the exchange rate fluctuations between the Hong Kong dollar and the United States dollar.
33. FINANCIAL INSTRUMENTS - continued
(b) Financial risk management objectives and policies - continued
Market risk - continued
(ii) Interest rate risk
The Group is exposed to cash flow interest rate risk in relation to variable-rate borrowings, loan receivables, bank balances and deposits. The directors consider that the interest rate risk on bank balances and deposits are insignificant as they are subject to minimal interest rate fluctuation, accordingly, no sensitivity analysis is presented. The Group's cash flow interest rate risk is mainly concentrated on the fluctuation of HIBOR and the PBOC Prescribed Interest Rates on the bank borrowings, and Hong Kong Prime Rate on the loan receivables.
The Group currently does not have an interest rate swap hedging policy. However, management monitors the interest exposure and will consider hedging interest rate risk exposure should the need arise.
Sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates in relation to the Group's variable-rate bank borrowings and loan receivables at the end of the reporting period. The analysis is prepared assuming the amount of asset and liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis points increase or decrease represents management's assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group's profit for the year ended 31 December 2014 would decrease/increase by HK$18,487,000 (2013: HK$15,095,000).
Credit risk
The Group's maximum exposure to credit risk in the event of the counterparties' failure to perform their obligations at the end of the reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated statement of financial position, which is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position; and the amount of contingent liabilities in relation to the financial guarantees provided by the Group as disclosed in note 39. In order to minimise the credit risk, management of the Group has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group's credit risk is significantly reduced.
At 31 December 2014, the Group has concentration of credit risk on other receivables from two counterparties. The management of the Group has periodic communication with the counterparties and has monitored the progress of the project as set out in note 22, continuously.
Although the placing of deposits and notes subscribed are concentrated on certain banks, the credit risk on these financial assets is limited because the counterparties are licensed banks.
33. FINANCIAL INSTRUMENTS - continued
(b) Financial risk management objectives and policies - continued
Credit risk - continued
The Group has no other significant concentration of credit risk with exposure spread over a number of counterparties and customers.
For properties under development which are held for sales, subject to pre-sales agreements, the Group generally provides guarantees to banks in connection with the purchasers' borrowing of mortgage loans to finance their purchase of the properties. Pursuant to the guarantees, upon default in mortgage payments by these property purchasers, the Group is responsible to repay the outstanding mortgage principals together with the accrued interest thereon. Under such circumstances, the Group is entitled to retain the purchasers' deposit and to take over the legal title and possession of the relevant property. In this regard, the directors of the Company consider that the Group's credit risk is significantly reduced.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the directors of the Company, which have built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities, and by continuously monitoring forecast and actual cash flows. As at 31 December 2014, the Group has available unutilised bank loan facilities of approximately HK$845,000,000 (2013: HK$855,000,000).
The following table details the Group's remaining contractual maturity for its financial liabilities based on the agreed repayment terms. The table has been drawn up based on the undiscounted cash flows of financial liabilities and on the earliest date on which the Group can be required to pay. The table includes both interest, estimated based on interest rate at the end of the reporting period, and principal cash flows.
Weighted | ||||||||
average | 3 months | 6 months | 9 months | Total | ||||
effective | Within | to | to | to | Over | undiscounted | Carrying | |
interest rate | 3 months | 6 months | 9 months | 12 months | 1 year | cash flows | amount | |
% | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |
At 31.12.2014 | ||||||||
Payables and rental deposits | ||||||||
received | - | 157,284 | 3,707 | 4,906 | 27,257 | 71,151 | 264,305 | 264,305 |
Amounts due to non-controlling | ||||||||
interests | - | 99,505 | - | - | - | - | 99,505 | 99,505 |
Variable rates bank borrowings | 2.9 | 327,781 | 77,774 | 59,562 | 81,766 | 3,915,321 | 4,462,204 | 4,019,734 |
Financial guarantees liabilities | 17,432 | - | - | - | - | 17,432 | - | |
------------ | ------------ | ------------ | ------------ | ------------ | ------------ | ------------ | ||
602,002 | 81,481 | 64,468 | 109,023 | 3,986,472 | 4,843,446 | 4,383,544 | ||
======= | ======= | ======= | ======= | ======= | ======= | ======= | ||
At 31.12.2013 | ||||||||
Payables and rental deposits | ||||||||
Received | - | 167,597 | 8,478 | 3,743 | 3,364 | 87,302 | 270,484 | 270,484 |
Amounts due to non-controlling | ||||||||
interests | - | 96,985 | - | - | - | - | 96,985 | 96,985 |
Variable rates bank borrowings | 2.6 | 351,334 | 395,361 | 42,965 | 568,450 | 1,911,451 | 3,269,561 | 3,012,766 |
------------ | ------------ | ------------ | ------------ | ------------ | ------------ | ------------ | ||
615,916 | 403,839 | 46,708 | 571,814 | 1,998,753 | 3,637,030 | 3,380,235 | ||
======= | ======= | ======= | ======= | ======= | ======= | ======= |
33. FINANCIAL INSTRUMENTS - continued
(b) Financial risk management objectives and policies - continued
Liquidity risk - continued
The amounts of financial guarantee liabilities, as set out in note 39, are the maximum amounts the Group could be required to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Group considers that it is more likely than not that such an amount will not be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.
The amounts included above for variable rate bank borrowings are subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.
(c) Fair value measurement of financial instruments
the fair value of financial assets and financial liabilities are determined in accordance with generally accepted pricing models which is based on discounted cash flows analysis using the relevant prevailing market rates as input.
The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.
34. OPERATING LEASE ARRANGEMENTS
The Group as lessee
Minimum lease payments paid under operating leases during the year are HK$1,325,000 (2013: HK$1,045,000).
At the end of the reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
Within one year |
| 977 |
| 477 |
In the second to fifth years inclusive |
| 834 |
| 993 |
|
| --------------- |
| --------------- |
|
| 1,811 |
| 1,470 |
|
| ======== |
| ======== |
Leases are negotiated for the range of 1 to 2 years (2013: 1 to 2 years) with fixed monthly rentals.
34. OPERATING LEASE ARRANGEMENTS - continued
The Group as lessor
The majority of the Group's investment properties were leased out under operating leases.
At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments:
|
| 2014 |
| 2013 |
|
| HK$'000 |
| HK$'000 |
|
|
|
|
|
Within one year |
| 370,462 |
| 365,017 |
In the second to fifth years inclusive |
| 553,512 |
| 636,653 |
Over five years |
| 512,189 |
| 489,571 |
|
| --------------- |
| --------------- |
|
| 1,436,163 |
| 1,491,241 |
|
| ======== |
| ======== |
In addition to the annual minimum lease payments, the Group is entitled to, in respect of leases, in addition to committed rent, additional rental based on a specified percentage of revenue, if achieved, earned by the tenant. No such additional rental was received during the year and the preceding year.
The lease terms of the remaining leased properties range from 1 to 17 years (2013: 1 to 18 years).
35. PLEDGE OF ASSETS
At the end of the reporting period, the Group had pledged the following assets to secure banking facilities granted to the Group:
(a) Fixed charges on investment properties and property, plant and equipment with an aggregate carrying value of HK$10,058,375,000 (2013: HK$9,486,635,000) together with a floating charge over all the assets of the properties owning subsidiaries and benefits accrued to the relevant properties.
(b) Fixed charges on hotel properties with aggregate carrying values of HK$947,053,000 (2013: HK$974,569,000) together with a floating charge over all the assets of the properties owning subsidiaries and benefits accrued to the relevant properties.
(c) Fixed charges on properties under development held for sale with an aggregate carrying value of HK$961,301,000 (2013: HK$882,479,000).
(d) Fixed charge on properties for development with an aggregate carrying value of HK$119,689,000 (2013: nil).
(e) Note receivables of HK$54,289,000 (2013: HK$54,279,000).
36. SHARE-BASED PAYMENTS
Share Option Scheme of the Company
The share option scheme of the Company (the "Share Option Scheme") was approved by the shareholders of SEA on 27 May 2010 and by the board of directors of the Company (the "Board") on 28 May 2010. The Share Option Scheme came into effect on 16 August 2010 (the "Adoption Date") upon fulfillment of the conditions contained in the Share Option Scheme. Unless terminated earlier by the Board, the Share Option Scheme shall be valid and effective for a term of 10 years until 15 August 2020.
The purpose of the Share Option Scheme is to provide a flexible means to recognise and acknowledge the performance and/or contribution of any (i) director or employee of the Company or any of its affiliates; (ii) representative, manager, agent, contractor, advisor, consultant, distributor or supplier engaged by the Company or any of its affiliates; (iii) customer, promoter, business ally or joint-venture partner of the Company or any of its affiliates; or (iv) trustee of any trust established for the benefit of employees of the Company or any of its affiliates.
Under the Share Option Scheme, the Board (or any committee delegated by the Board) may offer to the eligible participants options to subscribe for shares of the Company at a price at least the highest of (i) the closing price of the share of the Company on the AIM Market on the date of grant of the option; (ii) the average of the closing price of the share of the Company on the AIM Market for the five business days immediately preceding the date of grant of the option; and (iii) the par value of the share of the Company.
Without prior approval of the shareholders of SEA in general meetings, no option may be granted to (a) an eligible participant which, if exercised in full, would result in the total number of shares issued and to be issued upon exercise of all options already granted or to be granted to such eligible participant in any 12-month period, exceeding 1% of the shares of the Company then in issue; and (b) a substantial shareholder and/or an independent non-executive director of the Company or SEA or any of their respective associates which, if exercised in full, would result in the total number of shares issued and to be issued upon exercise of all options granted or to be granted to such person in any 12-month period, exceeding 0.1% of the shares of the Company then in issue and with an aggregate value exceeding HK$5 million (or its equivalent amount in British Pound).
Options granted must be taken up within 28 days from the date of grant upon payment of HK$10 (or its equivalent amount in British Pound or United States dollars). The period during which an option may be exercised is determined by the Board (or any committee delegated by the Board) at its absolute discretion, save that no option may be exercised more than 10 years after it has been granted. Unless otherwise determined by the Board (or any committee delegated by the Board) at its sole discretion, there is no minimum period for which an option must be held before it can be exercised.
No option was granted since the Adoption Date of the Share Option Scheme.
36. SHARE-BASED PAYMENTS - continued
Share Award Scheme of the Company
The share award scheme of the Company (the "Share Award Scheme") was approved by the shareholders of SEA on 27 May 2010 and by the Board on 28 May 2010 and came into effect on the Adoption Date. Unless terminated earlier by the Board, the Share Award Scheme shall be valid and effective for a term of 15 years until 15 August 2025.
The purpose of the Share Award Scheme is to provide a flexible means to recognise and acknowledge the performance and/or contribution of the eligible participants. Under the Share Award Scheme, the Board (or any committee delegated by the Board) may at its absolute discretion grant awards, which may comprise (a) new shares of the Company; (b) existing shares of the Company in issue and is listed on the AIM Market from time to time; (c) cash in lieu of the shares of the Company; or (d) a combination of (a), (b) and (c), to any eligible participants as it thinks fit and appropriate and subject to the terms and conditions of the Share Award Scheme. No award may be granted under the Share Award Scheme if the aggregate number of shares which may be issued and/or transferred upon vesting of all outstanding awards granted under the Share Award Scheme and any other share award scheme of the Company and which may be issued upon exercise of all outstanding options granted and yet to be exercised under any share option scheme of the Company exceed 30% of the shares of the Company in issue from time to time.
No award was granted since the Adoption Date of the Share Award Scheme.
Share OptionScheme of SEA
SEA approved and adopted an employee share option scheme (the "SEA Share Option Scheme") on 19 August 2005 for the primary purpose of providing incentive to directors and eligible employees. The SEA Share Option Scheme shall be valid and effective for a term of 10 years until 24 August 2015.
Under the SEA Share Option Scheme, the board of directors of SEA may offer to any director or full time employee/chief executive of SEA, or any of its subsidiaries, options to subscribe for shares in SEA at a price at least the highest of (i) the nominal value of the share of SEA; (ii) the average of the closing price of the share of SEA on the Stock Exchange for the five business days immediately preceding the date of grant of the option; and (iii) the closing price of the share of SEA on the Stock Exchange on the date of grant of the option.
Without prior approval of the shareholders of SEA in general meeting, no option may be granted to (a) an eligible participant which, if exercised in full, would result in the total number of shares issued and to be issued upon exercise of all options already granted or to be granted to such eligible participant in any 12-month period, exceeding 1% of the shares of SEA then in issue; and (b) a substantial shareholder and/or an independent non-executive director of SEA or its subsidiaries or any of their respective associates which, if exercised in full, would result in the total number of shares issued and to be issued upon exercise of all options granted or to be granted to such person in any 12-month period, exceeding 0.1% of the shares of SEA then in issue and with an aggregate value exceeding HK$5 million.
36. SHARE-BASED PAYMENTS - continued
Share OptionScheme of SEA - continued
Options granted must be taken up within 28 days from the date of grant upon payment of HK$10. The period during which an option may be exercised is determined by the board of directors of SEA at its absolute discretion, save that no option may be exercised more than 10 years after it has been granted. Unless otherwise determined by the board of directors of SEA at its sole discretion, there is no minimum period for which an option must be held before it can be exercised.
On 12 July 2012, SEA granted share options to a director of the Company entitling the holder to subscribe for 1,000,000 shares of SEA at an exercise price of HK$3.454 per share with an exercise period of 2 years from 1 July 2015 to 30 June 2017. The directors determined the fair value of the share options with reference to the calculation made by an independent professional valuer to be HK$643,300. None of the options were lapsed or exercised up to the end of the reporting period.
Share Award Scheme of SEA
The share award scheme of SEA (the "SEA Share Award Scheme") was approved by the shareholders of SEA on 27 May 2010. The SEA Share Award Scheme came into effect on 15 June 2010 upon fulfillment of the conditions contained in the SEA Share Award Scheme. Unless terminated earlier by the board of directors of SEA, the SEA Share Award Scheme shall be valid and effective for a term of 15 years until 14 June 2025.
The purpose of the SEA Share Award Scheme is to provide a flexible means to recognise and acknowledge the performance and/or contribution of the eligible participants. Under the SEA Share Award Scheme, the board of directors of SEA (or any committee delegated by the board of directors of SEA) may at its absolute discretion grant awards, which may comprise (a) new shares of SEA; (b) existing shares of SEA in issue and is listed on the Stock Exchange from time to time; (c) cash in lieu of the shares of SEA; or (d) a combination of (a), (b) and (c), to any eligible participants as it thinks fit and appropriate and subject to the terms and conditions of the SEA Share Award Scheme. No award may be granted under the SEA Share Award Scheme if the aggregate number of shares which may be issued and/or transferred upon vesting of all outstanding awards granted under the SEA Share Award Scheme and any other share award scheme of SEA and which may be issued upon exercise of all outstanding options granted and yet to be exercised under any share option scheme of SEA exceed 30% of the shares of SEA in issue from time to time.
SEA has appointed trustee to acquire shares of SEA in the open market with funds provided by the SEA group and to hold the shares of SEA before they are vested and transferred to the selected participants.
37. RETIREMENT BENEFIT PLANS
The Group participates in a defined contribution scheme which is registered under a Mandatory Provident Fund Scheme (the "MPF Scheme") established under the Mandatory Provident Fund Schemes Ordinance of Hong Kong in December 2000 for eligible employees in Hong Kong. The assets of the MPF Scheme are held separately from those of the Group, in funds under the control of trustees. The Group contributes 5% to 15% of relevant payroll costs per month to the scheme for members of the MPF Scheme, depending on the length of service with the Group.
The employees of the Group's subsidiaries in the PRC are members of state-managed retirement benefit scheme operated by the government of the PRC.
The total contribution paid to the retirement benefit schemes by the Group charged to profit or loss for the year amounted to HK$3,951,000 (2013: HK$3,474,000).
38. RELATED PARTY TRANSACTIONS
(a) The Group had the following transactions with fellow subsidiaries, which are wholly-owned subsidiaries of SEA:
(i) Management fees of HK$109,324,000 (2013: HK$148,087,000) in respect of the provision of property development and management services to the Group on the Group's property portfolio; and
(ii) Rental income of HK$14,304,000 from renting of the Group's premises for the year ended 31 December 2013.
(b) The remuneration of directors who are the Group's key management was set out in note 13.
39. CONTINGENT LIABILITIES
The Group has given guarantees to banks in respect of mortgages loans provided to the Group's customers for the purchases of the Group's properties located in the PRC. At 31 December 2014, the total outstanding mortgage loans which are under the guarantee were HK$17,432,000 (2013: nil). The directors considered that the fair values of these guarantees at their initial recognition and the end of the reporting period are insignificant and accordingly, the fair value of these guarantees were not accounted for in the consolidated financial statements. The amounts as at 31 December 2014 where to be discharged upon the issuance of the real estate ownership certificate which is then pledged with the banks.
40. PRINCIPAL SUBSIDIARIES
Effective % of | |||||
issued share | |||||
Place/country of | Issued and paid | capital/registered | |||
incorporation/ | up share capital/ | capital held | |||
Name of subsidiary | operation | registered capital | by the Company | Principal activities | |
2014 | 2013 | ||||
Direct subsidiary | |||||
Benefit Strong Group Limited | B.V.I./Hong Kong | 1 ordinary share | 100 | 100 | Investment holding |
of HK$1 | |||||
Indirect subsidiaries | |||||
AGP (Diamond Hill) Limited | Hong Kong | 2 ordinary shares | 100 | 100 | Property development |
of HK$1 each | |||||
AGP (Sha Tin) Limited | Hong Kong | 1 ordinary share | 100 | 100 | Property development |
of HK$1 | |||||
Chengdu Huashang House | PRC | RMB200,000,000 | 100 | 100 | Property investment |
Development Co., Ltd.* | registered capital | ||||
Chengdu Yulong No. 1 Property | PRC | RMB345,000,000 | 100 | 100 | Property development |
Development Company Limited* | registered capital | ||||
Chengdu Yulong No. 2 Property | PRC | RMB80,000,000 | 100 | 100 | Property development |
Development Company Limited* | registered capital | ||||
Chengdu Yulong No. 3 Property | PRC | RMB450,000,000 | 100 | 100 | Property development |
Development Company Limited* | registered capital | ||||
Concord Way Limited | Hong Kong | 100 ordinary shares | 100 | 100 | Hotel operation |
of HK$1 each | |||||
Giant Well Enterprises Limited | B.V.I./Hong Kong | 1 ordinary share | 100 | 100 | Investment holding |
of US$1 | |||||
Grace Art Development Limited | Hong Kong | 1 ordinary share | 100 | 100 | Treasury services |
of HK$1 | |||||
Guangzhou Yingfat House | PRC | US$20,110,000 | 100 | 100 | Property development |
Property Development Co., Ltd.* | registered capital | and investment | |||
Harvest Hill Limited | Hong Kong | 2 ordinary shares | 100 | 100 | Financing |
of HK$1 each | |||||
Huangshan City Huizhou District | PRC | RMB35,000,000 | 100 | 100 | Property and tourist |
Feng Dan Bailu Investment and | registered capital | leisure facilities | |||
Development Company Limited* | development | ||||
Kaifeng International City No. 1 | PRC | US$105,700,000 | 100 | 100 | Property development |
Realty Development Company | registered capital | ||||
Limited* | |||||
Kaifeng International City No. 5 | PRC | US$42,450,000 | 100 | 100 | Property development |
Realty Development Company | registered capital | ||||
Limited* | |||||
Kingston Pacific Investment | B.V.I./Hong Kong | 100 ordinary shares | 55 | 55 | Property development |
Limited | of US$1 each |
40. PRINCIPAL SUBSIDIARIES - continued
Effective % of | |||||
issued share | |||||
Place/country of | Issued and paid | capital/registered | |||
incorporation/ | up share capital/ | capital held | |||
Name of subsidiary | operation | registered capital | by the Company | Principal activities | |
2014 | 2013 | ||||
Indirect subsidiaries - continued | |||||
Leighton Road Hotel | Hong Kong | 1 ordinary share | 100 | 100 | Hotel operation |
Management Services Limited | of HK$1 | ||||
Nanjing Hushu Ecology | PRC | RMB100,000,000 | 51 | 51 | Property, cultural and |
Travel Development Co., Ltd.@ | registered capital | tourism development | |||
Nanjing Taligang Tourist Leisure | PRC | RMB35,000,000 | 51 | 51 | Property, cultural and |
Facilities Company Limited@ | registered capital | tourism development | |||
Shine Concord Investments | Hong Kong | 1 ordinary share of | 100 | 100 | Hotel operation |
Limited | HK$1 | ||||
Sino Harvest Real Estate | PRC | US$3,000,000 | 100 | 100 | Property investment |
Development (Chengdu) Company Limited* | registered capital | ||||
Sky Trend Investments Limited | Hong Kong | 2 ordinary shares of HK$1 each | 100 | 100 | Hotel operation |
Sunfold Development Limited | Hong Kong | 1 ordinary share of | 100 | 100 | Hotel operation |
HK$1 | |||||
Wing Siu Company Limited | Hong Kong | 2 ordinary shares | 100 | 100 | Property investment |
of HK$1 each |
* Wholly foreign owned enterprise
@ Sino-foreign equity joint venture
The directors of the Company are of the opinion that a complete list of the particulars of all subsidiaries of the Company will be of excessive length and therefore the above list contains only the particulars of subsidiaries which principally affect the results or assets of the Group.
Related Shares:
AGP.L