28 Sep 2010 14:00
28 September 2010
Speymill Macau Property Company plc
("Speymill Macau" or the "Company")
Interim Results for the period ended 30 June 2010
Speymill Macau Property Company plc (MCAU.L), the Macau focused property investment company listed on AIM, announces preliminary results for the period ended 30 June 2010.
Highlights of the period
| Balance Sheet | 30-Jun-10 | 31-Dec-09 |
|
| (US$'000) | (US$'000) |
| Net assets | 136,295 | 142,704 |
| Net asset per share (US$) | 1.24 | 1.22 |
| Headline* net assets | 137,395 | 143,828 |
| Headline* net assets per share (US$) | 1.25 | 1.23 |
| Total assets | 229,225 | 328,057 |
| Property assets | 171,575 | 282,104 |
| *excluding provision for deferred taxation and goodwill | ||
| Income Statement | 30-Jun-10 | 30-Jun-09 |
|
| (US$'000) | (US$'000) |
| Rent and related income | 3,936 | 4,199 |
| Valuation gain | 1,656 | 861 |
| Loss after tax | (97) | (1,450) |
| Basic loss per share (US cents) | 0.08 | 1.24 |
| Diluted loss per share (US cents) | 0.08 | 1.24 |
Business highlights
·; Small valuation increase of 1.5% on December 2009 on a like-for-like basis
·; NAV of US$ 1.24 per share as of June 2009, up 1.6 % on the December 2009 value of US$1.22 per share
·; Further improvements in operations, with a small loss of US$ 0.1m (0.08 US cents per share) for the six months to June 2010, vs. a loss of US $ 1.4m (1.24 US cents per share) for the same period in 2009
·; Overall loan-to-value ratio of 31% (including cash), with AIA Tower, the only property with covenants on its debt, reporting an LTV of 48%, well short of the 70% covenant level
·; Sale of Riviera development commenced with 234 out of a total of 259 units sold with total proceeds of US$113.9m.
·; 7,609,693 shares purchased and placed in treasury with resultant increase in NAV as part of programme to manage discount to NAV.
·; Notice given to the Investment Manager under terms of the management agreement
For more information, please visit www.speymillmacau.com or contact:
| Speymill Property Group Limited | Speymill Property Group (Far East) Limited |
| (Manager) | (Investment Adviser) |
| Gloria Padi | Terri Tsang |
| +44 1624 640 860 | +852 2514 6104 |
|
|
|
| Matrix Corporate Capital LLP | Fairfax I.S. PLC |
| (Nominated Adviser/Broker) | (Broker) |
| Paul Fincham | Andrew Cox |
| Jonathan Becher |
|
| +44 20 7131 4000 | +44 20 7598 5368 |
|
|
|
| Galileo Fund Services |
|
| (Administrator) |
|
| Ian Dungate |
|
| +44 1624 692600 |
|
Chairman's Statement
Immediately following installation, your new Board began to work closely with the Investment Manager ("IM") both to supervise its activities and to de-leverage the property portfolio to ensure that the $93 million USD forward funding commitment the Company owed in connection with the Riviera (formerly Lorcha) investment would be timely paid.
During the short period that the new Board has been in charge of supervising the IM and the Company's portfolio, among other things, the Board:
1. Decided to begin marketing the Riviera apartments and directed the manager to prepare a sales program. As a result, the Company sold over 90% of the apartments it owned in the Riviera project which enabled your Company to repay the entire debt to the contractor with sufficient surplus to put cash in the bank.
2. Supervised the successful disposition of the few remaining Van Nam apartments.
3. Following a personal visit to Macau, decided to liquidate the Joint Venture and sell out its property portfolio.
4. Bought back 7,609,693 shares in order to;
a. distribute money to shareholders who wished to exit;
b. raise the NAV per share for the remaining shareholders; and
c. decrease the discount the Company's shares trade at.
All the Board members travelled to Macau in June and met with the IM, Avilla (the Property Consultant) and other investment professionals in Macau concerning current investment opportunities on the island. We also visited each property in the general portfolio, in addition to each property in the Joint Venture portfolio. After meeting with real estate professionals concerning the near term prospects for residential property in Macau the Board decided to terminate the Joint Venture in an orderly fashion. The conclusion was that, at least for the time being, there were no appropriate opportunities for re-investing the cash in the Company's portfolio.
The Company currently has three assets:
1. The few remaining apartments in the Riviera Project;
2. The four properties in the Joint Venture (about 4% of NAV);
3. The AIA Tower.
The board reasonably expected that the JV Properties and the remaining Riviera properties can be disposed of during the tenure of the current Investment Manager. In view of this limited portfolio, and the belief that working with the IM we can narrow it to one asset, the Board felt that paying an IM over $2.5 Million USD annually to oversee the third party property manager of the AIA Tower (which we expect to be the last remaining asset) was not justified. As a result of that decision, the Board sent the IM a one year termination notice as provided for in the Investment Management contract.
During the next year we expect to work closely with the IM and the Board has received assurances from the IM that it will do all in its power to provide all the services necessary in order to fulfil its contractual obligations. We will, of course, spend the necessary time and effort to make certain that this is the case.
We have retained a bit less than 20% of the Company's assets in cash to be certain that when the re-financing of the AIA Tower comes due early next year there will be sufficient funds on hand in the event the Loan To Value (LTV) requirements of the local banks drops to 50% or possibly less. The LTV ratio in Macau is more a political issue than a business one and although the AIA property is considered one of the best office buildings in Macau, it is difficult to predict the cash requirement for the re-financing.
In the near future the Board anticipates addressing shareholders through an EGM where you can vote on whether or not the Board should continue to seek out new investments or work toward liquidation in an orderly fashion. We will present shareholders with the case for both possibilities and the recommendation of the Board in the EGM documents which will be sent to shareholders. In the event the decision is to liquidate, we see no problem in managing the Company with only the AIA Tower in its portfolio if that remains after the contract with the current IM expires.
The current IM report sets out information about the Macau economy and the financials speak for themselves as to the benefits this board continues to bring to shareholders.
Sincerely yours,
Howard Golden
Interim Chairman
Report of the Investment Manager and the Investment Adviser
Macau Market Overview
The first half of 2010 has been a positive period for Macau. Gaming revenues from the first six months of 2010 were up 67% over the corresponding period in 2009, with monthly gaming revenues for every single month in 2010 surpassing the previous record set in October 2009. Visitor arrivals were up 9% in the first half of 2010 compared to the same period in 2009, suggesting an average increase in visitor per-capita gambling spending of 53%. Visitor per-capita non-gambling spending increased by 9% y-o-y and 3% y-o-y in 1Q2010 and 2Q2010 respectively, according to DSEC.
Embedded image removed - please refer to the Company's website www.speymillmacau.com for a chart depicting visitor arrival numbers and gross gaming revenues.
The first quarter of 2010 saw an increase in real estate transaction volumes as overall sentiment in the region improved. Transaction volumes peaked in April, before softening again amidst growing uncertainty over the effects on Macau from Beijing's measures to curb property prices.
Embedded image removed - please refer to the Company's website www.speymillmacau.com for a chart depicting real estate transaction volumes.
Residential transactions fell 14.6% q-o-q in 1Q2010 as the effect of the government stimulus programme from 2009 wore off. This is demonstrated in the reduction in transactions within MOP1.0 million to MOP2.0 million. The number of transactions in the other price ranges remained stable in 1Q2010.
Embedded image removed - please refer to the Company's website www.speymillmacau.com for charts depicting residential real estate transaction values.
While transaction volumes in residential property declined in 1Q2010, residential capital values continued its upward trend in 1Q2010 with a 4.6% increase, non-annualised, over the previous quarter.
Business Overview
The Company's NAV has grown from US$1.22 per share to US$1.24 per share, a result of the share buyback that took place during the first six months of 2010. During the course of the reporting period, the Board of directors repurchased 7,609,673 MCAU shares with cash on the Company balance sheet. These shares are currently held in treasury.
The first six months of 2010 saw the Company launch sales of its units at the Riviera development. As of 30 June 2010, 234 out of a total 259 units at the Riviera were sold with total sales proceeds of US$113.9m. US$22.4m of this amount is receivable within 45 days of Riviera being granted the Occupation Permit ("OP"). The sales proceeds received to date are held by the developer until the US$93m payable on the development as previously reported in the Company's 2009 Annual Report is fully paid down. As of the period end, US$91.5m of cash, from sales proceeds and deposits, has been received by the developer.
As of 30 June 2010, the Company's portfolio had an overall LTV of 47%, excluding cash. Including cash, the LTV was 31%.
The Company has a 70% LTV covenant on one of its properties, AIA Tower, which had an LTV ratio of 48% at the time of reporting. All of Speymill Macau's debts are secured non-recourse to the Company.
Property Market Overview
The Company's total remaining investment portfolio was valued at US$171.6m as of 30 June 2010. On a like-for-like basis, the Company's portfolio increased in value by 1.5% in the first six months of 2010.
| Investments held as of 30 Jun 2010 | ||||||
| Investment Properties | Sector | Type | Status | Valuation as of 31 Dec 091 (US$m) | Valuation as of 30 Jun 101 (US$m) | Valuation Increase / (Reduction) |
| AIA Tower | Office / Retail | Grade A | Operating | 154.2 | 154.2 | - |
| "Pink Palace" | Commercial / Residential | Mid Market | Operating / Marketing | 1.9 | 1.9 | - |
| Houston Court | Commercial / Residential | Mid Market | Operating / Marketing | 2.8 | 2.8 | - |
| "Wan Keng" | Residential | Mid Market | Marketing | 0.77 | 0.85 | 10.4% |
| "Ribas 5B" | Residential | Entry Market | Marketing | 0.18 | 0.18 | - |
| Sub-Total |
|
|
| 159.9 | 160.0 | 0.06% |
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| Investment Properties Acquired or Divested in the period | Sector | Type | Status | Valuation as of 31 Dec 09 (US$m) | Valuation as of 30 Jun 10 (US$m) | Valuation Increase / (Reduction) |
| Riviera | Residential | High End | Divested2 | 121.3 | 113.9 | 3.5% |
| Held for Sale | 11.6 | |||||
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| Total |
|
|
| 281.2 | 285.5 | 1.5% |
| 1: Independent valuation by Jones Lang LaSalle |
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| |
| 2: Actual sales price achieved for units sold as of 30 Jun 2010 shown |
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No new investments were made in the first six months of 2010 as the Company focused on the sale of its Riviera apartment units and on de-risking the Company's exposure to the US$93m outstanding payable on that development. As of 30 June 2010, total sales proceeds amounted to US$113.9m, with US$91.5m of cash received by the developer from sales proceeds and deposits and the remaining US$22.4m due within 45 days of OP.
All of the Company's properties are independently valued by Jones Lang LaSalle ("JLL") in accordance with the standards published by the Hong Kong Institute of Surveyors and the Royal Institute of Chartered Surveyors in the United Kingdom. The properties were last valued as at 30 June 2010 and the fair value adjustments of these properties are stated in note 7 of this report.
AIA Tower
The AIA Tower was valued at HK$1.2 billion (US$154.2m) as of 30 June 2010, unchanged from the previous valuation as of 31 December 2009. The capitalization rate adopted for the valuation was 5.5% on passing rents, which was unchanged from December 2009. This compares to a capitalization rate of 3.9%, on a reversionary yield basis, on what was viewed as a comparable transaction within Macau, according to JLL. Capitalization rates of recent comparable Grade-A en-bloc transactions in Hong Kong, according to JLL, were in the 4% region, on a reversionary yield basis. Details of assumptions used by JLL can be found in note 7 of this report.
As of 30 June 2010, the overall occupancy rate of the building stood at 81%, unchanged from December 2009. In the first half of 2010, VIVA Macau, a significant tenant that operates a budget airline in Macau, went into administration. As of the time of writing, VIVA Macau has 10 months of outstanding arrears in rent and service charges. The occupied space is in the process of being repossessed and we expect to re-let this space in the second half of the year.
Separately, we have successfully secured a gym operator to take up the entire fourth floor in the building. The gym operator is expected to start operations in the second half of 2010 once fit-out works have been completed.
Since the acquisition of AIA Tower in September 2008 to 30 June 2010, overall rents have grown by 9.2% due to the successful asset management programme introduced to the building. To date, the building management has signed a total of 15 new leases covering 48,384 sq ft, or 13.0% of space, while also renewing or reviewing 135,919 sq ft, 36.4% of space, at an average rent reversion increase of 26%.
Tenants at AIA Tower include AIA, Bank of Communications, Starbucks, Toni & Guy, Circle K, Prada and Pfizer, amongst other globally recognised names. This robust tenant roster is headed by AIA, the successful Asian arm of AIG.
Embedded image removed - please refer to the Company's website www.speymillmacau.com for a pie chart depicting the AIA tenant mix by sector.
The Company obtained a HK$600m, 30-month term loan facility with Banco Weng Hang for the purchase of AIA Tower on 5 September 2008. The Company paid back HK$20m of this in the first half of the year. The loan carries a 70% loan to value covenant. As of 30 June 2010, AIA Tower had an LTV ratio of 48%, comfortably within the covenant level. The existing debt matures in the first quarter of 2011. The Company is confident about the ability to refinance and is in active communication with local banks to negotiate terms of financing/refinancing.
Riviera
The Riviera development is a forward funding arrangement to acquire 259 high-end residential units in two towers. Riviera overlooks the Inner Harbour, Zhuhai, Penha Hill, Nam Van Lake and downtown Macau and is adjacent to a planned Light Rail Transport station. The Company paid 30% of the US$132m acquisition price upon signing of the Promise Agreement of Sales and Purchase, with the remaining 70% (US$93.0m) payable within one month of the completion of the development, defined as when the development is granted its Occupation Permit.
On 1 February 2010, the Company announced that it had signed an agreement with the developer of Riviera which grants the Company a six-month extension option to the final stage commitment in relation to Riviera. The Company is unlikely to have to exercise this option.
A sales programme was launched for units at the Riviera development in March 2010. As of 30 June 2010, the Company had sold 234 out of a total 259 units that it owned at the development, at an average price of HK$3,595 psf (Dec 09: HK$3,483 psf). The remaining units, on the high floor zones, were valued at an average HK$3,711 psf as of 30 June 2010.
As of period end, the sales proceeds from units at Riviera amounted to US$113.9m, with US$91.5m of physical cash received from the deposits and completion of sales. The remaining US$22.4m receivable is due within 45 days of OP.
The outstanding payable on Riviera after deduction of 3% retained by the Company for payment of sales expenses and brokerage fees was US$3.5m, as of 30 June 2010.
On a like-for-like basis, the Riviera development is up 3.5% on the December 2009 valuation.
Rafael
The Company has an 87% stake in Rafael (Macau) Limitada following an agreement with a Macau-based boutique property advisory firm. The enterprise was formed with the aim of acquiring and repositioning existing residential and commercial properties in the older, historical parts of Macau, allowing the Company to gain exposure to the more affordable end of the markets. The venture currently has four assets; Pink Palace, Houston Court, Ribas 5b and Wan Keng.
The Rafael JV properties were unchanged in value during the first six months of 2010 with the exception of Wan Keng, which has risen 10% over the previous value, reflecting the completion of the renovation works that have taken place. The overall value of the JV has remained stable.
The Board of directors decided in June 2010 to liquidate the Rafael JV. This process is underway as of the time of writing.
Strategic Objectives
On 28 June 2010, Speymill Property Group Limited ("SPG"), the Manager, was served a 12-month notice from Speymill Macau Property Company plc ("Speymill Macau") to terminate the investment management agreement dated 26 November 2006 between Speymill Macau and SPG.
To date, no announcement has been made on the appointment of a replacement manager. No new announcement regarding any changes to strategy has been made by the Board. The Manager, SPG, will continue to provide services to the Company under the terms of the investment management agreement until 28 June 2011.
Summary
The AIA Tower is the largest remaining asset held by the Company. The Manager will continue to manage the Company's assets under ongoing instruction from the Board.
| Huang Khoo | Terri Tsang |
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|
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| For the Manager | For the Investment Adviser |
| Speymill Property Group Limited | Speymill Property Group (Far East) Limited |
28 September 2010
Review report by KPMG Audit LLC to Speymill Macau Property Company plc
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly report for the six months ended 30 June 2010, which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.
As disclosed in note 2 the annual financial statements are prepared in accordance with IFRS. The condensed set of financial statements included in this half yearly report have been prepared in accordance with IAS 34 Interim Financial Reporting.
The accounting policies that have been adopted in preparing the condensed set of financial statements are consistent with those that the Directors currently intend to use in the next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with IAS 34 and the AIM Rules.
KPMG Audit LLC
Chartered Accountants
Douglas
Isle of Man
28 September 2010
Unaudited consolidated income statement
|
| Note | For the period from 1 January 2010 to 30 June 2010 | For the period from 1 January 2009 to 30 June 2009 |
|
|
| US$'000 | US$'000 |
| Rent and related income |
| 3,936 | 4,199 |
| Direct expenses |
| (1,347) | (2,168) |
| Net rent and related income |
| 2,589 | 2,031 |
|
|
|
|
|
| Net gain on investment property | 7 | 1,656 | 861 |
|
|
|
|
|
| Loss on disposal of assets held for sale |
| (1,154) | (782) |
| Manager's fees |
| (1,366) | (1,373) |
| Audit and professional fees |
| (172) | (184) |
| Other expenses |
| (544) | (641) |
| Administrative expenses |
| (3,236) | (2,980) |
|
|
|
|
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| Net operating profit/(loss) before net financing expenses |
| 1,009 | (88) |
|
|
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| Finance income | 4 | 30 | 260 |
| Finance costs | 4 | (841) | (1,249) |
| Net financing expense |
| (811) | (989) |
|
|
|
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| Profit/(loss) before tax |
| 198 | (1,077) |
|
|
|
|
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| Taxation |
| (292) | (356) |
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| Loss for the period |
| (94) | (1,433) |
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| Attributable to: |
|
|
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| Equity holders of the Company |
| (97) | (1,450) |
| Non-controlling interest |
| 3 | 17 |
|
|
| (94) | (1,433) |
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| Basic loss per share (cent per share) for the equity holders of the Company during the period | 9 | (0.08) | (1.24) |
| Diluted loss per share (cent per share) for the equity holders of the Company during the period | 9 | (0.08) | (1.24) |
Unaudited consolidated statement of comprehensive income
|
|
| Period 1 January 2010 to 30 June 2010 | Period 1 January 2009 to 30 June 2009 |
|
|
| US$'000 | US$'000 |
| Loss for the period |
| (94) | (1,433) |
| Other comprehensive (loss)/income |
|
|
|
| Foreign exchange differences |
| (664) | 44 |
| Total comprehensive loss for the period |
| (758) | (1,389) |
| Total comprehensive loss attributable to: |
|
|
|
| - owners of the company |
| (761) | (1,406) |
| - non-controlling interests |
| 3 | 17 |
Unaudited consolidated balance sheet
|
| Note | Unaudited At 30 June 2010 | Audited At 31 December 2009 |
|
|
| US$'000 | US$'000 |
|
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|
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| Intangible assets |
| 6,451 | 6,451 |
| Investment property | 7 | 159,962 | 282,104 |
| Plant and equipment |
| 1,071 | 1,277 |
| Total non-current assets |
| 167,484 | 289,832 |
| Trade and other receivables | 8 | 23,525 | 1,627 |
| Cash and cash equivalents |
| 26,603 | 36,598 |
| Assets classified as held for sale | 14 | 11,613 | - |
| Total current assets |
| 61,741 | 38,225 |
| Total assets |
| 229,225 | 328,057 |
| Issued share capital | 10 | 11,682 | 11,682 |
| Share premium |
| 62,356 | 62,356 |
| Other reserves |
| 1,654 | 1,654 |
| Foreign currency translation reserve |
| (556) | 108 |
| Retained earnings |
| 61,159 | 66,904 |
| Total equity attributable to equity holders of the Company |
| 136,295 | 142,704 |
| Non-controlling interest |
| 1,230 | 1,227 |
| Total equity |
| 137,525 | 143,931 |
| Interest-bearing loans and borrowings | 11 | 1,307 | 76,249 |
| Deferred income tax |
| 7,551 | 7,575 |
| Total non-current liabilities |
| 8,858 | 83,824 |
| Interest-bearing loans and borrowings | 11 | 74,850 | 2,880 |
| Trade and other payables | 12 | 4,519 | 97,422 |
| Liabilities directly associated with assets classified as held for sale | 14 | 3,473 | - |
| Total current liabilities |
| 82,842 | 100,302 |
| Total liabilities |
| 91,700 | 184,126 |
| Total equity and liabilities |
| 229,225 | 328,057 |
| Net Asset Value per share | 5 | 1.24 | 1.22 |
Approved by the Board of Directors on 28 September 2010
Howard Golden Harald Wengust
Director Director
Unaudited consolidated statement of changes in equity
for the six months ended 30 June 2010
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| Share capital | Share premium | Retained earnings | Other reserves | Foreign currency translation reserve | Total
| Non-controlling interest | Total equity
|
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Balance at 1 January 2010 | 11,682 | 62,356 | 66,904 | 1,654 | 108 |
142,704
| 1,227 | 143,931 |
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| Loss for the period | - | - | (97) | - | - | (97) | 3 | (94) |
| Other comprehensive income |
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| Foreign exchange translation differences | - | - | - | - | (664) | (664) | - | (664) |
| Total comprehensive loss | - | - | (97) | - | (664) | (761) | 3 | (758) |
| Contributions by and distributions to owners |
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| Shares repurchased to be held in treasury | - | - | (5,648) | - | - | (5,648) | - | (5,648) |
| Total contributions by and distributions to owners | - | - | (5,648) | - | - | (5,648) | - | (5,648) |
|
Balance at 30 June 2010 | 11,682 | 62,356 | 61,159 | 1,654 | (556) | 136,295 | 1,230 | 137,525 |
for the six months ended 30 June 2009
|
| Share capital | Share premium | Retained earnings | Other reserves | Foreign currency translation reserve | Total
| Non-controlling interests | Total equity
|
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Balance at 1 January 2009 | 11,682 | 62,356 | 51,653 | 1,654 | 103 |
127,448
| 1,162 | 128,610 |
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| Loss for the period | - | - | (1,450) | - | - | (1,450) | 17 | (1,433) |
| Other comprehensive income |
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| Foreign exchange translation differences | - | - | - | - | 44 | 44 | - | 44 |
| Total comprehensive loss | - | - | (1,450) | - | 44 | (1,406) | 17 | (1,389) |
|
Balance at 30 June 2009 | 11,682 | 62,356 | 50,203 | 1,654 | 147 | 126,042 | 1,179 | 127,221 |
Other reserves represent the fair value of options granted to the broker on admission to trading on AIM ($336,000) and a capital redemption reserve established on cancellation of shares purchased in the market ($1,318,000).
Unaudited consolidated statement of cash flows
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| For the period from 1 January 2010 to 30 June 2010 | For the period from 1 January 2009 to 30 June 2009 |
|
|
| US$'000 | US$'000 |
|
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|
|
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| Operating activities |
|
|
|
| Profit/(Loss) before tax |
| 198 | (1,077) |
| Adjustments for: |
|
|
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| Net gain on investment property |
| (1,656) | (861) |
| Net loss on disposal of assets held for sale |
| 1,154 | 782 |
| Depreciation |
| 361 | 224 |
| Finance income |
| (30) | (260) |
| Finance expenses |
| 841 | 1,249 |
| Impairment of goodwill |
| - | 13 |
| Operating (loss)/profit before changes in working capital |
| 868 | 70 |
|
|
|
|
|
| Decrease in trade and other receivables |
| 563 | 281 |
| (Decrease)/increase in trade and other payables |
| (310) | 794 |
|
|
| 1,121 | 1,145 |
| Taxation paid |
| (625) | - |
| Net finance expenses paid |
| (841) | (1,249) |
| Interest received |
| 30 | 260 |
| Cash flows (used in)/generated from operating activities |
| (315) | 156 |
|
|
|
|
|
| Investing activities |
|
|
|
| Acquisition of investment property |
| (88,787) | (283) |
| Disposal of investment property |
| 88,055 | 3,652 |
| Purchase of fixed assets |
| (157) | (294) |
| Acquisition of subsidiary |
| - | (697) |
| Cash flows generated from investing activities |
| (889) | 2,378 |
|
|
|
|
|
| Financing activities |
|
|
|
| Purchase of shares |
| (5,648) | - |
| Repayment of interest bearing loans |
| (2,718) | (4,159) |
| New interest bearing loans |
| - | 1,892 |
| Cash flows used in financing activities |
| (8,366) | (2,267) |
|
|
|
|
|
| Net (decrease)/increase in cash and cash equivalents |
| (9,570) | 267 |
| Adjustment for foreign exchange |
| (425) | 58 |
| Cash and cash equivalents at beginning of period |
| 36,598 | 30,457 |
| Cash and cash equivalents at end of period |
| 26,603 | 30,782 |
Notes to the consolidated financial statements
1. The Company
Speymill Macau Property Company plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 31 October 2006 as a public company with registered number 118202C.
The interim consolidated financial statements of Speymill Macau Property Company plc as at and for the six months ended 30 June 2010 comprise the Company and its subsidiaries (together referred to as the "Group").
The consolidated financial statements of the Group as at and for the year ended 31 December 2009 are available upon request from the Company's registered office at Third Floor, Britannia House, St. George's Street, Douglas, Isle of Man, IM1 1JE or at www.speymillmacau.com.
The principal activity of the Group is investment in the high quality residential and commercial property market in Macau. The Company's agents and the Manager perform all significant functions. Accordingly, the Company itself has no employees.
2. Statement of compliance and significant accounting policies
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2009.
These condensed consolidated interim financial statements were approved by the Board of Directors on 23 September 2010.
The Group has one segment focusing on achieving capital growth through investing in the property market in Macau. No additional disclosure is included in relation to segment reporting as the Group's activities are limited to one business and geographic segment.
The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 31 December 2009.
Except as disclosed below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2009.
Assets classified as held for sale
Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
3. Use of estimates and judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
Except as described below, in preparing these interim consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2009.
During the six months ended 30 June 2010 management reassessed its estimates in respect of the valuation of investment property (see note 7).
4 Finance income and costs
|
| Period ended 30 June 2010 | Period ended 30 June 2009 |
|
| US$'000 | US$'000 |
| Bank interest income | 30 | 260 |
| Finance income | 30 | 260 |
| Interest expense | (835) | (1,135) |
| Bank charges | (6) | (114) |
| Finance costs | (841) | (1,249) |
| Net finance costs | (811) | (989) |
5 Net asset value per share
The net asset value per share as at 30 June 2010 is US$1.25 based on 109,211,908 ordinary shares in issue as at that date (excluding 7,609,673 shares held in treasury) (31 December 2009: US$1.22 based on 116,821,581 ordinary shares).
6 Related party transactions
Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the party making financial or operational decisions.
No director had any interest during the period in any material contract for the provision of services which was significant to the business of the Group.
The Investment Manager, Investment Adviser and Property Adviser are considered to be related parties.
The Investment Manager held 1,055,118 Ordinary Shares in the Company as at 30 June 2010 (31 December 2009: 1,055,118 Ordinary Shares). The shares were acquired in order to satisfy the terms of the Investment Management Agreement following payment of the performance fee for the year ended 31 December 2007. In addition, key personnel of the Manager and closely related companies held an additional 78,000 Ordinary Shares in the Company as at 30 June 2010 (31 December 2009: 3,078,000 Ordinary Shares).
The Investment Manager receives a management fee of 2% per annum of the net asset value of the Company from admission, payable monthly in arrears.
Management fees payable for the period ended 30 June 2010, amounted to US$1,366,068 (period ended 30 June 2009: US$1,372,641)
The Investment Manager pays 40% of the management fee to the Property Adviser. The Investment Manager is also responsible for paying fees to the Investment Adviser.
Performance fees accrued for the period ended 30 June 2010 amounted to US$ nil (period ended 30 June 2009: US$ nil).
7 Investment Property at valuation
| Group | Riviera
| AIA
| Other
| Period ended 30 June 2010 Total | Year ended 31 December 2009 |
|
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Balance at beginning of period | 121,704 | 154,739 | 5,661 | 282,104 | 288,455 |
| Additions | - | - | - | - | 1,214 |
| Disposal | (111,670) | - | - | (111,670) | (29,695) |
| Revaluation gain/(loss) in period | 1,579 | - | 77 | 1,656 | 22,219 |
| Exchange difference | - | (497) | (18) | (515) | (89) |
| Transfer to assets held for sale | (11,613) | - | - | (11,613) | - |
| Balance at end of period | - | 154,242 | 5,720 | 159,962 | 282,104 |
All properties were revalued at 30 June 2010 by independent professionally qualified valuers, Jones Lang LaSalle ("JLL"), based on current prices in an active market.
The fair values are based on market values, being the estimated amount for which property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after property marketing wherein parties had each acted knowledgeably, prudently and without compulsion.
In the course of preparing the valuation JLL have adopted one or a combination of the Direct Comparison Approach and Income Capitalisation.
The Direct Comparison Approach is based on comparing the property to be valued directly with other comparable properties, which have recently been subject to transfer of legal ownership. However, given differences between individual real estate properties, appropriate adjustments are usually required to allow for any qualitative and quantitative differences that may affect the price likely to be achieved for the property under consideration.
The Income Capitalisation Approach is based on the capitalization of the fully leased, current passing rental income and potential reversionary income of the property from the date of valuation at appropriate investment yields to arrive at the capital value. The rental value and capitalisation rate adopted for the valuation are derived from analysis of market transactions and/or our interpretation of investors' requirements or expectations.
| Property | Valuation Method(s) adopted |
| Riviera | Direct Comparison Approach |
| AIA Tower | Income Capitalization Approach |
| Pink Palace | Income Capitalization Approach |
| Houston Court | Income Capitalization Approach |
| Ribas | Direct Comparison Approach |
| Wan Keng | Direct Comparison Approach |
Specific assumptions adopted in the valuation of AIA are as follows
·; that the design, layout, construction, user and gross floor area of the property are in compliance with the local laws and regulations and have been approved by relevant Government departments.
·; that no onerous conditions are contained within the Government land lease for the lot on which AIA is erected.
·; that good title is held to the property and there is no outstanding land premium payable for the property (if any).
·; that the property is free of encumbrance and can be freely assigned in the market and if any consent to sell or consent to assign is required, such consent is assumed to be available as at the date of valuation.
8 Trade and other receivables
|
| 30 June 2010 | 31 December 2009 |
|
| US$'000 | US$'000 |
| Prepayments and other receivables | 1,064 | 1,627 |
| Amounts receivable on completion of property sales contracted | 22,461 | - |
|
| 23,525 | 1,627 |
9 Basic and diluted loss per share
Basic loss per share is calculated by dividing the loss for the period attributable to equity holders of the Company by the weighted-average number of ordinary shares in issue during the period.
|
| Period ended 30 June 2010 | Period ended 30 June 2009 |
|
|
|
|
|
|
|
|
| Loss attributable to equity holders of the Company (US$'000) | (97) | (1,450) |
| Weighted average number of ordinary shares in issue (thousands) (excluding 7,609,673 shares purchased and placed in treasury) | 115,233 | 116,822 |
| Basic loss per share (cent per share) | (0.08) | (1.24) |
| Fully diluted loss per share (cent per share) | (0.08) | (1.24) |
There is no difference between the basic and diluted loss per share for the current or preceding period as the exercise of options would be anti-dilutive.
10 Share capital
|
| 30 June 2010 US$'000 | 31 December 2009 US$'000 |
| Authorised: |
|
|
| 400,000,000 Ordinary shares of US$0.10 each | 40,000,000 | 40,000,000 |
| Allotted, Called-up and Fully-Paid: |
|
|
| 109,821,581 (2009: 116,821,581) Ordinary shares of US$0.10 each in issue, with full voting rights | 10,921 | 11,682 |
| 7,609,673 (2009: nil) Ordinary shares of US$0.10 each held in Treasury | 761 | - |
|
| 11,682 | 11,682 |
During the period to 30 June 2010 the Company repurchased 7,609,673 (2009: nil) Ordinary shares, to be held in treasury, at a cost of US$761,000 (2009: nil). The Ordinary shares held in treasury have no voting rights and are not entitled to dividends.
11 Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings.
|
| 30 June 2010 | 31 December 2009 |
|
| US$'000 | US$'000 |
| Non-Current Liabilities |
|
|
| Secured bank loan | 1,307 | 76,249 |
| Current Liabilities |
|
|
| Secured bank loan | 74,850 | 2,880 |
The Group has a term loan facility of HKD 580,000,000 (initially HKD 600,000,000) with Banco Weng Hang SA which is secured by way of a first legal mortgage against the AIA Tower property in Macau. Under the terms of the financing agreement, following the audit of the annual accounts, any surplus cash is swept up to the lender. The loan is repayable at final maturity in March 2011. The loan bears 1.85% interest per annum over the 3 month Hong Kong Inter Bank Offered Rate (HIBOR).
The Group has a term loan facility of HKD 6,194,000 (initially HKD 7,200,000) with Citic Ka Wah Bank Limited in Macau which is secured by way of a first legal mortgage against the Houston Court property in Macau. The loan is repayable by instalments with a final payment of HKD 3,994,000 payable in October 2011. The loan bears 2.6% interest per annum over the 3 month Hong Kong Inter Bank Offered Rate (HIBOR).
The Group has a term loan facility of HKD 3,220,000 (initially HKD 4,500,000) with Banco Weng Hang S.A in Macau which is secured by way of a first legal mortgage against the Pink Palace property in Macau. The loan is repayable by instalments with a final payment of HKD 1,440,000 payable in September 2013. The loan bears 2.5% interest per annum over the 1 month Hong Kong Inter Bank Offered Rate (HIBOR).
The Group has a term loan facility of HKD 3,085,000 (initially HKD 3,700,000) with China Construction Bank in Macau which is secured by way of a first legal mortgage against the Wan Keng property in Macau. The loan will be repaid by instalments with the final instalment payable in September 2022. The loan bears 0.7% interest per annum over the 1 month Hong Kong Inter Bank Offered Rate (HIBOR). On 5 March 2010, the Company repaid US$2.6m (HK$20m) of the loan principal under the terms of the cash sweep facility.
12 Trade and other payables
|
| 30 June 2010 | 31 December 2009 |
|
| US$'000 | US$'000 |
|
|
|
|
| Payable on acquisition of investment property | - | 92,260 |
| Property taxes payable | 335 | 668 |
| Other accruals | 4,184 | 4,494 |
| Total | 4,519 | 97,422 |
13 Capital commitments
The Company is committed to a final payment on the Riviera property of US$3.5m (HK$27.0m). This amount, which is expected to be payable in the second half of 2010, has been included in assets held for sale.
14 Assets held for sale and associated liabilities
25 Units in Riviera were available for sale at 30 June 2010 and classified as assets held for sale.
As at 30 June 2010, the disposal group comprised assets of US$11.6m less liabilities of US$3.5m detailed as follows:
|
|
| US$'000 |
| Property carried at expected net realisable proceeds (note 7) |
| 11,613 |
| Amounts payable to developer |
| (3,473) |
15 Post Balance Sheet Events
Riviera:
Of 25 units held at 30 June 2010 with a value of US$11.6 m, sales have been agreed for 4 units for proceeds of US$1.56m (HK$12.17M).
Management agreement:
On 28 June, 2010, the Board served notice on Speymill Property Group Limited (the "Manager") to terminate the Investment Management Agreement between the Company and the Manager dated 13 November 2006 with effect from 28 June 2011.
Transactions in own shares
On 1 July, 2010 the Company purchased 100,000 of its own ordinary shares of US$0.10 nominal value at a price of US$ 0.76 per share, such shares to be held in treasury.
On 14 July 2010, the Company purchased 1,055,118 of its own ordinary shares of US$0.10 nominal value at a price of US$ 0.75 per share in the market, such shares to be held in treasury. This purchase represents all the shares formerly held by the investment manager. Speymill Property Group Limited has therefore no equity interest in the Company, following this transaction.