ORIENTAL_CITY_GROUP_PLC - Accounts
ORIENTAL_CITY_GROUP_PLC - Accounts
The directors present the strategic report for the year ended 31 March 2017.
The Group continued to be engaged in investment holding during the year ended 31 March 2017.
The income for the year ended 31 March 2017 was generated solely from the Group's investment trading business.
Overall earnings from investment business was reduced from £216,935 in 2016 to £71,908 in 2017. The Group's loss attributable to its equity shareholders for the year ended 31 March 2017 was £431,556 compared to £408,248 in the previous year. The increase in the Group's loss was due to a reduction in net investment income despite a significant decrease in administrative expenses.
The full results for the group for the year ended 31 March 2017 are set out in the consolidated profit and loss account on page 7.
The Group's operations expose it to financial risks that include liquidity risk, interest rate risk, credit risk, foreign exchange risk and equity price risk.
Given the small size of the Group and of its Board, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The Group's finance department implements the policies set by the Board.
Liquidity risk:
Management of the Group aims at maintaining a sufficient level of cash and cash equivalents to finance the Group's operations and expected expansion. The Group's primary cash requirement includes payments for operating expenses and investments. The Group finances its working capital requirements mainly by the funds generated from operations and bank borrowings.
Interest rate risk:
The Group's exposure to market risk for changes in interest rates is related primarily to interest-bearing financial assets of bank balances and interest-bearing financial liabilities of bank borrowings. At the end of the year, the Group held £1,162,055 (2016: £256,126) in interest bearing cash deposits and owed £941,548 (2016: £654,199) in bank borrowings subject to varying rates of interest. Management estimates that a general increase/decrease of 100 basis point in interest rates, with all other variables held constant, would have no significant effect to the Group's loss for the year.
Credit risk:
The group's principal financial assets are available-for-sale financial assets, financial assets at fair value through profit and loss and bank deposits. The maximum credit risk attributable to these assets amounted to £1,390,668 (2016: £2,379,768). The credit risk on the liquid funds is limited because of the close involvement of management in overseeing the recovery of the assets. Management considers the credit risk in respect of bank deposits is minimal because the counter parties are authorised financial institutions with high credit ratings. other financial assets were issued by reputable large corporations with satisfactory credit ratings for either the issuers or the notes.
Foreign exchange risk:
The Group operates in Hong Kong with a majority of business transactions being denominated and settled in Hong Kong dollars, which is the functional currency of the operating subsidiary. The Group's debt and equity instruments, bank balances and other debtors are denominated in US dollars, Euros, Japanese yen, Swiss franc and Renminbi. The functional presentation currency of the parent company is the UK Pound.
Equity Price risk:
The Group is exposed to equity price changes arising from equity instruments classified as trading securities and stock options. Other than unquoted securities held for strategic purposes, all of these investments are listed. The Group's listed equity investments are listed on the stock exchanges of Hong Kong, Amsterdam, Euronext Paris, Brussels, Tokyo, London and Frankfurt. The Group's stock options have underlying listed securities which are listed on the stock exchange of Hong Kong. The decisions to buy or sell listed investments are based on monitoring of the performance of individual securities compared to that of the Hang Seng Index and other listed investments within the same industry and other industry indicators, as well as the Group's liquidity needs.
The Group continues to identify and explore opportunities for enhancing its income on a stable and long term basis. The Board of Directors will continue to seek new business opportunities which are in the best interest of the shareholders of the Company.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2017.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 7.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
In accordance with the company's articles, a resolution proposing that Clarkson Hyde LLP be reappointed as auditor of the group will be put at a General Meeting.
• select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.
We have audited the financial statements of Oriental City Group Plc for the year ended 31 March 2017 set out on pages 7 to 24. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland".
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
• give a true and fair view of the state of the group's and the parent company's affairs as at 31 March 2017 and of its loss for the year then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006.
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors' remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit.
The Profit And Loss Account has been prepared on the basis that all operations are continuing operations.
Oriental City Group Plc (“the company”) is a limited company domiciled and incorporated in England and Wales. The registered office is c/o Clarkson Hyde, 3rd Floor Chancery House, St Nicholas Way, Sutton, Surrey, SM1 1JH.
The group consists of Oriental City Group Plc and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’ – Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The consolidated financial statements incorporate those of Oriental City Group Plc and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.
All financial statements are made up to 31 March 2017. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised as follows:
Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit and loss as follows:
(i) Dividend income from listed investments is recognised when the share price of the dividend goes ex- dividend.
(ii) Interest income is recognised as it accrues using the effective interest method.
(iii) Net gains/losses on financial assets at fair value through profit or loss and those held for trading include realised gains/losses which are recognised on the transaction dates when the relevant contract notes are executed and entered, and unrealised fair value gains/losses are recognised in the period in which they arise.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible 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). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where 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 have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value though profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the profit and loss account for the period.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount 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 where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
An analysis of the group's turnover is as follows:
Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £13,760 (2016 - £212,057).
The average monthly number of persons (including directors under employments contracts) employed by the group and company during the year was:
Their aggregate remuneration comprised:
During the year, no directors received any remuneration or benefits (2016: £nil).
The actual charge for the year can be reconciled to the expected charge based on the profit or loss and the standard rate of tax as follows:
Available-for-sale financial assets are classified as non-current and the fair value of the Company's investments in listed debt securities were determined directly by reference to their published price quotations in active markets at 31 March 2017 and 31 March 2016.
The debt securities bore interest at coupon rates in the range between 4.375% and 8.75% (2016: 4.375% and 11.875%) per annum.
All the issuers are corporate entities.
Details of the company's subsidiaries at 31 March 2017 are as follows:
The investment in Able Wise Limited is held by Oriental City Group Asia Limited.
The fair value of the above investments were determined directly by reference to their published price quotations in active markets. Equity securities listed in Hong Kong amounted to £75,800 (2016: £119,695), and equity securities listed outside Hong Kong amounted to £142,401 (2016: £239,465).
The group held three margin securities trading accounts with licensed exchange participants. At 31 March 2017, two of the accounts were guaranteed by a director of Able Wise Limited, Mr Cheng Nga Ming, Vincent, and the ultimate parent company respectively and the remaining was secured by the group's listed equity with market value of £13,054 (2016 £58,486).
Cash at bank and in hand includes restricted cash of £959,013 (2016: £113,422) mainly denominated in United States Dollars. Restricted cash represents a cash deposit pledged to secure the bank borrowings (note 17).
At 31 March 2017, 28% (2016: 39%) of bank borrowings were denominated in Euros, 22% (2016: 28%) were denominated in Japanese Yen, 28% (2016: 33%) were denominated in Swiss Franc, and 22% (2016: nil) were denominated in Hong Kong Dollars. The bank borrowings are repayable on demand.
Bank borrowings were interest-bearing at certain percentage rates per annum which were the sum of: (a) the advances margin 1% (2016: 1%), (b) the applicable base rate, and (c) the costs of complying with any reserve, deposit, monetary or liquidity requirement imposed by any authority, if applicable.
These borrowings were secured by the group's restricted cash (note 15, listed equity securities of £218,201 (2016: £359,160) and available-for-sale financial assets of £1,129,442 (2016: £1,764,484) and guaranteed in full by Mr Cheng Nga Ming, Vincent, a director of Able Wise Limited.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The company has one class of ordinary share which carries no right to fixed income.
Deferred shares carry (i) no rights to receive notice of, attend and vote at general meetings; and (ii) no rights of redemption. The holders of deferred shares are not entitled to the company's dividends and have a right to a return of capital equal to the paid up nominal value only after the holders of ordinary shares have received an aggregate capital repayment of £10,000,000.
Other reserves comprise a Merger Reserve - this represents the difference between the nominal value of the share capital and share premium of the subsidiaries acquired in a group reorganisation carried out in prior years and the nominal value of the share capital of the company issued in exchange thereof.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: