Alpha Returns Group plc
("Alpha Returns" or the "Company")
Financial statements for the year ended 31 December 2016
30 June 2017
Alpha Returns today announces its audited results for the year ended 31 December 2016.
Copies of the Group's Annual Report and Accounts will be posted to shareholders shortly and will be available on the Company's website http://alpharet.com later today. Further copies may be obtained directly from the Company's Registered Office at Alpha Returns Group plc, 27/28 Eastcastle Street, London W1W 8DH.
The Directors of Alpha Returns are also pleased to announce that the notice of Annual General Meeting ("AGM") is today being posted to shareholders. The AGM will be held at 3rd Floor, New Liverpool House, 15 Eldon Street, London EC2M 7LD on 26 July 2017, 10am.
Copies of the Notice of AGM and Proxy Form will be available for download on the Company website at http://alpharet.com.
For further information:
Alpha Returns Group plc | Christopher Neo Executive Director | 020 3286 6388 |
ZAI Corporate Finance Ltd (NOMAD) | Peter Trevelyan-Clark / Tim Cofman | 020 7060 2220 |
Peterhouse Corporate Finance (Broker) | Duncan Vasey / Lucy Williams | 020 7220 9797 |
Chairman's Statement
I am pleased to announce the results for the year 2016 for Alpha Returns. We made good progress in the year with the completion of the disposal of Riche Bright Securities Limited ("RBSL"). The Company now has significant investable cash balances and continues to explore new investment opportunities in the Asia Pacific region,
The year under review was remembered for UK's historic Brexit vote and the election of President Trump in the US. In Asia, we watched these political developments with interest. Closer to home, China's economy continued to undergo a momentous transformation from an export-driven manufacturer to a consumer-oriented economy.
Despite the deceleration in growth within the Asia Pacific Region ("APAC"), the region still remains the growth engine of the global economy with broadly positive outlook for the next few years. The IMF is projecting China to grow at 6.6% in 2017 (2016: 6.7%) compared to the World growth of 3.5% (2016: 3.1%).
The Company's investment portfolio presently includes a 52.5% interest in Singapore based Telistar, a 30% investment in PRC based Maxlife, and a 6.67% investment in Singapore based New Trend Lifestyle Group plc (AIM: NTLG).
Review of 2016
The figures presented have consolidated the results of our subsidiaries. Whilst the investment in RBSL was realised for a significant gain, the other investments in our portfolio are in growth phase, so any profits generated are ploughed back in to the individual businesses.
The final results for the year ended 31 December 2016 show a consolidated loss on continuing operations after taxation of £660,640 (2015: loss £522,351). After a profit from discontinued operations of £476,097 and foreign currency translation gains of £383,468, the profit after tax and total comprehensive income was £203,498 (2015: loss £473,292). The loss on operations after taxation attributable to the equity holders of the Company (before the gain on translation of foreign subsidiaries) was £420,824 (2015: £574,009). Losses of the parent company were £209,996 (2015: £474,941).
Total assets amounted to £4,551,160 (2015: £5,050,763) with £3,757,225 (2015: £3,049,490) net assets attributable to equity holders of the Company and net cash of £2,149,378 (2015: £394,963). The net cash position for 2015 is after excluding £1,287,573 of cash relating to RBSL following its reclassification as a disposal group (see Note 6 for further details). The Group has benefited from the weakness in sterling as much of our assets are held in foreign currencies.
On 31 March 2016, the Company completed the acquisition of a 30% interest in Oriental Ventures Limited ("OVL") with the issue of 32,142,857 new ordinary shares in addition to the first tranche cash consideration of HK$5.8 million (£450,000) paid in April 2014. OVL is the BVI registered holding company of Shenzhen Maxlife Lifestyle Commerce Co., Ltd. Maxlife continues to operate in the e-commerce space seeking to expand its product and service offerings. However the Board acknowledges that its progress had been slower than expected and therefore made an impairment of £281,250 following a review. Despite this, the Directors remain positive about Maxlife's prospects and continue to work with its management to develop its business.
On 31 May 2016 the Company, through Riche Bright Group Limited ("RBG"), completed the disposal of its shareholding in RBSL for a total cash consideration of HK$33,173,459. RBG subsequently repurchased its own shares from its 30% minority shareholders for cash at attributable net asset value of HK$9 million, thereby becoming a wholly owned subsidiary available for use as an intermediate bare holding company for future investments in accordance with the Company's investing policy.
On 31 August 2016, the Company acquired a 6.67% interest in New Trend Lifestyle Group Plc (AIM: NTLG) for £100,000. The investment in NTLG had a market value of £187,500 at year end.
On 13 December 2016 the Company terminated its conditional 50% investment in Jesoft International Limited and received HK$928,125 (£94,200) as repayment of the initial consideration of 17,394,054 ARGP ordinary shares issued to the vendor. This compares to the book value of the conditional investment of £295,700 and the market value of those shares of £69,600 at the time of termination.
During the year, Eric Leung resigned to focus on other business commitments and Tony Drury retired following the AGM. We thank the both of them for their contributions to the Company.
As an investment company the Directors are not involved in the day-to-day operations of its investee companies. The Company's Investing Policy is set out in full in the Strategic Report and on the Company's website at http://alpharet.com/rule26.
2017
On 3 January 2017, the Board granted options over a total of 15,000,000 ordinary shares, representing 2.16 per cent of the Company's current issued ordinary share capital at an exercise price of 0.5 pence per share accordance with the terms of the Company's share option scheme.
At the start of 2017 we were pleased to welcome Brent Fitzpatrick to the Board as a Non-executive Director. Brent has considerable quoted company experience and brings a wealth of valuable experience to the Board.
Outlook
The Company has held most of its cash proceeds from the sale of RBSL to year end and continues to hold significant investable cash balances. The Directors now seek new investment opportunities and look to revise the Company's Investing Policy at the next Annual General Meeting.
Finally, I would like to take this opportunity to thank shareholders for their continued support for the Company. We look forward to update on developments in the near future.
Quattro Chan
Interim Chairman
Date: 30 June 2017
Strategic Report
The Directors present their results and report for Alpha Returns Group plc (the "Company") for the year ended 31 December 2016, which has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (the "Act"). The purpose of this report is to inform Shareholders and provide them with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with section 172 of the Act.
The Company's independent Auditor is required to report on whether information given in the Strategic report is consistent with the Financial Statements. The independent Auditor's report can be found on page 10.
BUSINESS REVIEW
During the year the Directors divested the investment in Riche Bright Securities Limited ("RBSL") and focussed their attention to develop the Company's other investments. The Group closed the year with cash balances of £2,149,378 (2015: £394,963 excluding cash held by RBSL), an investment portfolio of £1,686,348 (2015: £1,686,348) and equity shareholders' funds of £3,757,225 (2015: £3,049,490).
In March 2016, the Company completed the 30% investment in Oriental Ventures Limited, the BVI registered holding company of Shenzhen Maxlife Lifestyle Commerce Co., Ltd. ("Maxlife"). Maxlife is a Shenzhen based company that operates e-commerce platforms targeting mid-to-high end consumers in the PRC.
In May 2016, the Company through Riche Bright Group Limited ("RBG") completed the disposal of the entire equity interest of Riche Bright Securities Limited. In June 2016, RBG repurchased its own shares from its 30% minority shareholders with proceeds from the disposal, thereby becoming a wholly owned subsidiary of the Company.
In August 2016, the Company made a 6.67% investment in AIM-listed New Trend Lifestyle Group Plc.
In December 2016, the Company terminated the conditional 50% investment in Jesoft International Limited and received a cash repayment in lieu of the consideration shares issued to the vendor.
KEY PERFORMANCE INDICATORS
The Directors measure the performance of the Company and wider Group of investments using the following indicators:
GROUP STATISTICS | 31 December 2016 | 31 December 2015 | Change % |
Net asset value attributable to equity holders | £3,757,225 | £3,049,490 | 23.2% |
Net asset value per share attributable to equity holders | 0.55p | 0.46p | 19.6% |
Closing share price | 0.40p | 0.60p | (33.33%) |
Cash | £2,149,378 | £394,963* | 444.2% |
*The net cash position for 2015 is after reclassifying £1,287,573 of cash and cash equivalents relating to the disposal group. See Note 6 for further details.
INVESTING POLICY
With its Asia-centric focus, Alpha Returns Group Plc will actively seek to acquire and consolidate holdings in companies operating in high-growth Asian economies, with the intention to create and sustain long-term value. The Company may invest in any business sector within its targeted geographic focus.
The Directors see Asia-Pacific as having considerable growth potential for the foreseeable future and many of its prospects they have identified are in the region. The Directors will focus on investments and opportunities which would generally have some or all of the following characteristics, namely:
- a majority of their revenue derived from the Asia-Pacific region, and strongly positioned to benefit from the region's growth;
- a trading history which reflects past profitability or potential for significant capital growth going forward; and
- where all or part of the consideration could be satisfied by the issuance of new Ordinary Shares or other securities in the Company. The Company does not currently intend to fund any investments with debt or other borrowings but may do so if appropriate.
It is anticipated that the main driver of success for the Company will be its focus, during the investment screening process, on the management involved in the potential investee companies and the potential value creation that the team of people is capable of realising. The Company will identify and assess potential investment targets and where it believes further investigation is required, intends to appoint appropriately qualified advisers to assist in the due diligence process.
The Company intends to be an active investor, and the Directors will seek representation on the board of the investee company where they feel that an investee company would benefit from their skill and expertise.
The Company intends to deliver shareholder returns principally through capital growth rather than capital distribution via dividends.
FUTURE DEVELOPMENTS
As explained in the Chairman's Statement the Company has made good progress with its investments in the Asia-Pacific region, and with the completion of the disposal of RBSL in 2016, the Company is now well positioned to explore new investment opportunities in the region.
PRINCIPAL BUSINESS RISKS AND UNCERTAINTIES
The management of the business and the nature of the Company's strategy are subject to a number of risks. The key risk facing Alpha Returns shareholders is that the value of the investments falls and that future returns to shareholder are therefore lower than they could have been. As the Company has 2 key investments at present any deterioration in trading of Telistar or Maxlife and a consequential fall in investment value is the biggest single risk faced. Similarly performance in excess of expectations on the 2 key investments is the single biggest upside adjustment factor that the Company faces.
The Group operates a system of internal control and risk management in order to provide assurance that the Board is managing risk whilst achieving its business objectives. No system can fully eliminate risk and, therefore, the understanding of operational risk is central to the management process.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's policy in respect of financial instruments and its risk profile is set out in Note 16 to the financial statements.
ASSESSMENT OF BUSINESS RISK
The Board regularly reviews operating and strategic risks. The Group's operating procedures include a system for reporting financial and non-financial information to the Board including:
- reports from management with a review of the business at each Board meeting, focusing on any new decisions/risks arising;
· reports on the performance of investments;
· reports on selection criteria of new investments;
· discussion with senior personnel; and
· consideration of reports prepared by third parties.
Christopher Neo
Executive Director
Date: 30 June 2017
Consolidated statement of comprehensive income | 12 months to Dec 2016 | 12 months to Dec 2015 | |
Note | £ | £ | |
Continuing operations | |||
Revenue | 2,691,071 | 2,256,770 | |
Cost of sales | (1,759,809) | (1,388,507) | |
931,262 | 868,263 | ||
Administration costs | (1,307,943) | (1,251,988) | |
Share based payments | 17 | (6,242) | (134,000) |
Other income | 88,924 | 28,880 | |
Other losses | 14 | (201,499) | (37,000) |
Operating loss | (495,498) | (525,845) | |
Finance cost | (26) | (1) | |
Finance income | 1,144 | 6 | |
Investment income | 58 | 6,515 | |
Gain on foreign exchange | 38,710 | 3,167 | |
Impairment loss | (193,750) | - | |
Loss on continuing operations before taxation | 2 | (649,362) | (516,158) |
Taxation | 5 | (11,278) | (6,193) |
Loss on continuing operations after taxation | (660,640) | (522,351) | |
Profit from operations reclassified as held for sale | 7 | - | 5,258 |
Profit from discontinued operations | 7 | 476,097 | - |
Loss on operations after taxation | (184,543) | (517,093) | |
Other comprehensive income | |||
Items that may be reclassified subsequently to profit or loss: | |||
Gain on translation of foreign subsidiaries | 383,468 | 35,526 | |
Available for sale financial assets | 4,573 | 8,275 | |
Other comprehensive income for the year | 388,041 | 43,801 | |
Profit/(loss) after taxation and total comprehensive income/(expense) | 203,498 | (473,292) | |
Profit attributable to: | |||
Equity holders of the company | (420,824) | (574,009) | |
Non- controlling interests | 236,281 | 56,916 | |
(184,543) | (517,093) | ||
Total comprehensive income attributable to: | |||
Equity holders of the company | 567,419 | 30,380 | |
Non- controlling interests | (179,378) | 13,421 | |
388,041 | 43,801 | ||
Basic and diluted profit/(loss) per share | 7 | ||
Basic and diluted - continuing operations | (0.10p) | (0.09p) | |
Basic and diluted - operations reclassified as held for sale | 0.07p | 0.00p | |
Total basic and diluted loss per share | (0.03p) | (0.09p) | |
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company profit and loss account. The loss for the parent company for the year was £209,996 (2015: 474,941).
The accompanying accounting policies and notes form an integral part of these financial statements.
Consolidated statement of financial position
| Note | 31 December 2016 | 31 December 2015 |
£ | £ | ||
Assets | |||
Non-Current Assets | |||
Property, plant and equipment | 8 | 86,793 | 107,477 |
Intangible assets | 9 | 638,780 | 638,780 |
Investments - Available for sale | 14 | 856,008 | 790,883 |
1,581,581 | 1,537,140 | ||
Current Assets | |||
Assets of disposal group classified as held for sale | 6 | - | 2,498,400 |
Trade and other receivables | 11 | 820,201 | 620,260 |
Cash and cash equivalents | 12 | 2,149,378 | 394,963 |
2,969,579 | 3,513,623 | ||
Total Assets | 4,551,160 | 5,050,763 | |
Liabilities | |||
Liabilities of disposal group classified as held for sale | 6 | - | 107,926 |
Trade and other payables | 13 | 503,681 | 720,402 |
Total Liabilities | 503,681 | 828,328 | |
Net Assets | 4,047,479 | 4,222,435 | |
Equity | |||
Share capital | 16 | 1,354,839 | 1,351,624 |
Share premium | 16 | 7,516,009 | 7,069,224 |
Revaluation reserve | 12,848 | 8,275 | |
Share option reserve | 268,000 | 261,758 | |
Foreign currency translation reserve | 33,571 | 109,975 | |
Profit and loss account | (5,428,042) | (5,751,366) | |
Attributable to equity shareholders of the company | 3,757,225 | 3,049,490 | |
Non-controlling interests | 290,254 | 1,172,945 | |
Total equity | 4,047,479 | 4,222,435 |
The financial statements were approved by the Board of Directors on 30 June 2017.
C Neo
Director
Company registration number: 05212388
The accompanying accounting policies and notes form an integral part of these financial statements
Company statement of financial position
31 December 2016 | 31 December 2015 | |||
Note | £ | £ | ||
Fixed assets | ||||
Investments | 10 | 1,686,348 | 1,686,348 | |
Current assets | ||||
Trade and other receivables | 11 | 2,005,932 | 1,759,706 | |
Cash and cash equivalents | 12 | 7,130 | 7,130 | |
2,013,062 | 1,766,836 | |||
Total Assets | 3,699,410 | 3,453,184 | ||
Current liabilities | ||||
Trade and other payables | 13 | 68,365 | 68,385 | |
Total liabilities | 68,365 | 68,385 | ||
Net assets | 3,631,045 | 3,384,799 | ||
Capital and reserves | ||||
Called up share capital | 16 | 1,354,839 | 1,351,624 | |
Share premium | 16 | 7,516,009 | 7,069,224 | |
Share option reserve | 268,000 | 261,758 | ||
Profit and loss account | (5,507,803) | (5,297,807) | ||
Equity shareholders' funds | 3,631,045 | 3,384,799 |
The financial statements were approved by the Board of Directors on 30 June 2017.
C Neo
Director
Company registration number: 05212388
The accompanying accounting policies and notes form an integral part of these financial statements
Consolidated statement of changes in equity
Share capital | Share premium | Share option reserve | Revaluation reserve | Foreign currency reserve | Profit and loss account | Total equity | Non- controlling interest | Total | |
£ | £ | £ | £ | £ | £ | £ | £ | £ | |
Balance at 1 January 2015 | 1,348,580 | 6,525,522 | 127,758 | - | 87,870 | (5,242,994) | 2,846,736 | 1,421,708 | 4,268,444 |
Shares issued in year | 3,044 | 543,702 | - | - | - | - | 546,746 | - | 546,746 |
Share based payment charge | - | - | 134,000 | - | - | - | 134,000 | - | 134,000 |
Acquisitions during the year | - | - | - | - | - | 65,637 | 65,637 | (319,100) | (253,463) |
Loss for the year and total comprehensive expense | - | - | - | 8,275 | 22,105 | (574,009) | (543,629) | 70,337 | (473,292) |
Balance at 31 December 2015 | 1,351,624 | 7,069,224 | 261,758 | 8,275 | 109,975 | (5,751,366) | 3,049,490 | 1,172,945 | 4,222,435 |
Shares issued in year | 3,215 | 446,785 | - | - | - | - | 450,000 | - | 450,000 |
Share based payment charge | - | - | 6,242 | - | - | - | 6,242 | - | 6,242 |
Change in minority interest | - | - | - | - | (639,250) | 744,148 | 104,898 | (939,594) | (834,696) |
Loss for the year and total comprehensive expense | - | - | - | 4,573 | 562,846 | (420,824) | 146,595 | 56,903 | 203,498 |
Balance at 31 December 2016 | 1,354,839 | 7,516,009 | 268,000 | 12,848 | 33,571 | (5,428,042) | 3,757,225 | 290,254 | 4,047,479 |
Company statement of changes in equity
Share capital | Share premium | Merger reserve | Profit and loss account | Total equity | |
£ | £ | £ | £ | £ | |
Balance at 1 January 2015 | 1,348,580 | 6,525,523 | 127,758 | (4,822,866) | 3,178,995 |
Shares issued in year | 3,044 | 543,701 | - | - | 546,745 |
Share based payment charge | - | - | 134,000 | - | 134,000 |
Loss for the year and total comprehensive expense | - | - | - | (474,941) | (474,941) |
Balance at 31 December 2015 | 1,351,624 | 7,069,224 | 261,758 | (5,297,807) | 3,384,799 |
Shares issued in year | 3,215 | 446,785 | - | - | 450,000 |
Share based payment charge | - | - | 6,242 | - | 6,242 |
Loss for the year and total comprehensive expense | - | - | - | (209,996) | (209,996) |
Balance at 31 December 2016 | 1,354,839 | 7,516,009 | 268,000 | (5,507,803) | 3,631,045 |
Consolidated statement of cash flows
12 months to Dec 2016 | 12 months to Dec 2015 | ||
£ | £ | ||
Cash flows from operating activities | |||
Loss after taxation | (184,543) | (435,100) | |
Adjustments for: | |||
Depreciation and amortisation | 52,430 | 20,451 | |
(Profit)/Loss on disposal of investments | (495,170) | 37,000 | |
Profit/(Loss) on sale of property, plant and equipment | (3,478) | 3,854 | |
Share based payments | 6,242 | 134,000 | |
Impairment provision | 193,750 | - | |
Dividend income | (58) | (88,383) | |
Increase/(decrease) in trade and other receivables | (309,841) | 951,826 | |
Increase in trade and other payables | (27,317) | (815,618) | |
Foreign exchange differences | (76,892) | (24,982) | |
Interest received | (111) | - | |
Taxation | 16,646 | 43,293 | |
Income tax paid | (43,870) | (14,844) | |
Net cash used in operating activities | (872,212) | (188,503) | |
Cash flows from investing activities | |||
Purchase of investments, net of cash acquired | (550,000) | (75,617) | |
Disposal of subsidiary | 3,366,820 | - | |
Purchase of property, plant and equipment | (16,286) | (80,576) | |
Disposal of property, plant and equipment | 5,738 | 102,221 | |
Investment income | 58 | - | |
Interest income | 111 | - | |
Net cash generated from/ (used in) investing activities | 2,806,441 | (53,972) | |
Cash flows from financing activities | |||
Net proceeds from issue of share capital | 450,000 | - | |
Share buy back | (858,663) | - | |
Net cash used in financing activities | (408,663) | - | |
Net increase/(decrease) in cash and cash equivalents | 1,525,566 | (242,475) | |
Cash and cash equivalents at beginning of period | 394,963 | 1,848,183 | |
Cash and cash equivalents in disposal group | - | (1,287,573) | |
Effect of foreign exchange rate changes on cash and cash equivalents | 228,849 | 76,828 | |
Cash and cash equivalents at end of period | 2,149,378 | 394,963 |
Company statement of cash flows
12 months to 31 December 2016 | 12 months to 31 December 2015 | ||
£ | £ | ||
Cash flows from operating activities | |||
Loss after taxation | (209,996) | (474,941) | |
Adjustments for: | |||
Loss on disposal of investment | - | 87,000 | |
Share based payment | 6,242 | 134,000 | |
Increase in trade and other receivables | (268) | (1,147,224) | |
Decrease in trade and other payables | (19) | (2,015) | |
(Increase)/decrease in amounts due from related parties | (245,959) | 1,403,180 | |
Net cash used in operating activities | (450,000) | - | |
Cash flows from investing activities | |||
Purchase of investments | - | - | |
Net cash used in investing activities | - | - | |
Cash flows from financing activities | |||
Net proceeds from issue of share capital | 450,000 | - | |
Net cash generated from financing activities | 450,000 | - | |
Net increase/(decrease) increase in cash and cash equivalents | - | - | |
Cash and cash equivalents at beginning of period | 7,130 | 7,130 | |
Cash and cash equivalents at end of period | 7,130 | 7,130 | |
NATURE OF FINANCIAL INFORMATION AND BASIS OF PREPARATION
The financial information contained in this announcement does not constitute statutory accounts as defined under section 434 of the Companies Act 2006 but has been extracted from the Group's 2016 statutory financial statements. The auditors have reported on the 2016 financial statements; their report was unqualified and contained no statement under sections 498(2) or (3) of the Companies Act 2006. The financial statements for 2016 will be delivered to the Registrar of Companies after adoption at the Company's Annual General Meeting.
As in prior periods, the Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies below.
These consolidated financial statements have been prepared under the historical cost convention.
The presentational currency of the Group is £GBP. The functional currency of the entities within the Group is HKD$.
1 GOING CONCERN
The financial statements have been prepared on the going concern basis.
In determining the appropriate basis of preparation of the financial statements, the Directors have considered whether the Group can continue in operational existence for the foreseeable future. At 31 December 2016 although the Group had adequate cash, the Company had cash resources of only £7,130 (2015: £7,130) along with net assets of £3,631,045 (2015: £3,384,799). The directors have prepared cash flow forecasts through to December 2017, which show that the Group will have sufficient available cash resources to provide for its future requirements. In preparing their forecasts they have given due regard to the risks and uncertainties affecting the business as set out in the Strategic Report and the liquidity risk disclosed in note 15, and they have made the following key assumptions:
- that additional funds will be raised; and
- that no new investment will be undertaken by the Group unless sufficient additional funding is in place.
After making enquiries, the Directors have formed a judgement that there is a reasonable expectation that the Company can secure further adequate resources when needed, to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group's financial statements.
2 LOSS BEFORE TAXATION
Loss on continuing operations before taxation is stated after charging:
Year to Dec 2016 | Year to Dec 2015 | |
£ | £ | |
Depreciation of plant, property and equipment | ||
- owned by the group | 52,430 | 49,031 |
Auditors' remuneration: | ||
Fees payable to the Group's auditors for the audit of the Company's annual accounts | 10,000 | 10,000 |
Fees payable to the Group's auditors for other services: | ||
- The audit of the Company's subsidiaries, pursuant to legislation | 15,000 | 15,000 |
- Taxation services | 1,500 | 1,500 |
Operating lease rentals | ||
- other operating leases of the group | 44,576 | 56,472 |
3 DIRECTORS AND EMPLOYEES
Staff costs for the Group during the period were as follows: | ||
Year to 31 December 2016 | Year to 31 December 2015 | |
£ | £ | |
Wages and salaries | 587,745 | 319,322 |
Share based payment charge | 2,340 | 50,250 |
Social security costs | 53,726 | 9,423 |
643,811 | 378,995 |
The average number of employees (including directors) of the Company during the period was as follows: | ||
Year to 31 December 2016 | Year to 31 December 2015 | |
Number | Number | |
Administration | 4 | 5 |
4 DIRECTORS
Key management are considered to be the Directors. Remuneration in respect of directors is disclosed as follows.
Name | Fees | Share based payment charge | Total 2016 | Total 2015 |
£ | £ | £ | £ | |
C Y Chan | 19,672 | 780 | 20,452 | 36,422 |
C Neo | 20,984 | 780 | 21,764 | 28,225 |
H K Leung (resigned 30 April 2016) | 2,623 | - | 2,623 | 7,869 |
A C Drury (retired on 22 July 2016) | 23,570 | - | 23,570 | 30,000 |
F C Tsang | 7,869 | - | 7,869 | 7,869 |
74,718 | 1,560 | 76,278 | 110,385 |
There were no pension contributions made or payable during the year and no cash or non-cash benefits were paid or payable.
5 TAXATION
No provision has been made for corporation tax due to Group trading losses being available for relief against the future profits of the Group at 31 December 2016. No deferred tax has been recognised in respect of the losses as recoverability is uncertain.
Analysis of the charge for the period;
Year to Dec 2016 | Year to Dec 2015 | |
£ | £ | |
Current tax | 11,278 | 6,193 |
The tax assessed for the period differs from that calculated at the standard rate of corporation tax in the UK. The difference is explained below:
Year to Dec 2016 | Year to Dec 2015 | |
£ | £ | |
Loss on continuing activities before taxation | (649,362) | (517,093) |
Loss on ordinary activities multiplied by the relevant standard rate of corporation | ||
tax in the UK of 20% (Dec 2015: 20%) | (129,872) | (103,419) |
Effects of: | ||
Expenses not deductible for tax purposes | 3,833 | 2,257 |
Excess of depreciation and amortisation over capital allowances | 11,552 | 12,984 |
Unutilised tax losses carried forward | 114,487 | 88,178 |
UK Tax charge for the period | - | - |
The current tax charge of £11,278 (2015: £6,193) relates to the Singapore and Malaysia corporation tax on the profits on the Telistar Group.
6 ASSETS RECLASSIFIED AS HELD FOR SALE
During 2015 the Group announced the conditional sale by its 70 per cent owned joint venture investment vehicle Riche Bright Group Limited of Riche Bright Securities Limited ("RBSL"). On 31 May 2016 the Group announced the completion of the disposal of RBSL.
The results of the activities related to Riche Bright Securities Limited are as follows:
2016 | 2015 | |
£ | £ | |
Revenue | 19,052 | 686,664 |
Administrative expenses | (250,955) | (708,375) |
Other income | 11,331 | 64,070 |
Tax expense | - | (37,101) |
Net profit/(loss) attributable to activities associated with assets held for sale | (220,572) | 5,258 |
The assets and liabilities related to RBSL have been presented as held for sale, in 2015, following the agreement dated 30 October 2015 to sell RBSL. The completion date is 31 May 2016.
Group
2016 | 2015 | |
£ | £ | |
Operating cash flows | 201,424 | (116,473) |
Investing cash flows | (1,984) | (100,000) |
Financing cash flows | - | (84,383) |
Total cash flows | 199,440 | (300,859) |
Assets of disposal group classified as held for sale:
2016 | 2015 | |
£ | £ | |
Property, plant and equipment | 7,731 | 9,402 |
Intangible assets | 44,216 | 43,579 |
Investments | 17,687 | 17,431 |
Cash and cash equivalents | 1,502,673 | 1,287,573 |
Other current assets | 630,254 | 502,788 |
Total assets | 2,202,561 | 1,860,773 |
Liabilities of disposal group classified as held for sale:
2016 | 2015 | |
£ | £ | |
Trade and other payables | 103,103 | 105,816 |
Other current liabilities | 396,188 | 2,110 |
Total liabilities | 499,291 | 107,926 |
The profit on disposal is calculated as follows:
£ | |
Consideration | 3,161,906 |
Original cost of investment | (2,465,237) |
Profit on disposal | 696,669 |
The profit on disposal together with the net loss attributable to discontinued operations gives a profit from discontinued operations of £476,058.
7 PROFIT/(LOSS) PER SHARE
2016 | 2015 | |
£ | £ | |
Loss attributable to equity holders of the Group: | ||
Loss from continuing operations | (660,640) | (579,267) |
(Loss)/profit from discontinuing operations | 476,097 | 5,258 |
Profit/(loss) for the period attributable to equity holders of the Group | (184,543) | (574,009) |
Weighted average number of ordinary shares in issue for basic and fully diluted earnings | 685,394,277 | 654,029,897 |
Earnings per share attributable to equity holders of the Group: | ||
Basic and diluted loss per share from continuing operations | (0.10p) | (0.09p) |
Basic and diluted loss per share from discontinuing operations | (0.07p) | 0.00p |
Basic and diluted loss per share for the period | 0.03p | (0.09p) |
For the current year and for the prior period the loss attributable to ordinary shareholders and the weighted average number of ordinary shares for the purpose of calculating the diluted earnings per share are identical to those used for the basic loss per share. This is because the exercise of share options and warrants would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.
8 PROPERTY, PLANT AND EQUIPMENT
Furniture, fittings and equipment | Leasehold improvements | Motor Vehicles | Total | |
£ | £ | £ | £ | |
Cost | ||||
As at 1 January 2015 | 248,886 | 16,772 | 58,362 | 324,020 |
Purchases during the year | 77,444 | 3,846 | 50,110 | 131,400 |
Disposal in period | (13,074) | (7,569) | (61,359) | (82,002) |
Impairment | (658) | - | - | (658) |
Foreign exchange adjustment | 6,055 | 324 | 2,997 | 9,376 |
Disposal group classified as held for sale | (186,123) | (9,527) | - | (195,650) |
At 31 December 2015 | 132,530 | 3,846 | 50,110 | 186,486 |
Depreciation | ||||
As at 1 January 2015 | 204,031 | 14,201 | 973 | 219,205 |
Depreciation charge for the year | 49,490 | 1,282 | 11,897 | 62,669 |
Disposal in period | (7,376) | (5,046) | (11,249) | (23,671) |
Impairment | (658) | - | - | (658) |
Foreign exchange adjustment | 7,290 | 371 | 50 | 7,711 |
Disposal group classified as held for sale | (176,720) | (9,527) | - | (186,247) |
At 31 December 2015 | 76,057 | 1,281 | 1,671 | 79,009 |
Net Book Value as at 31 December 2015 | 56,473 | 2,565 | 48,439 | 107,477 |
Furniture, fittings and equipment | Leasehold improvements | Motor Vehicles | Total | |
£ | £ | £ | £ | |
Cost | ||||
As at 1 January 2016 | 132,530 | 3,846 | 50,110 | 186,486 |
Purchases during the year | 14,301 | - | - | 14,301 |
Disposal in period | (4,727) | - | - | (4,727) |
Foreign exchange adjustment | 16,202 | 473 | 9,929 | 26,604 |
At 31 December 2016 | 158,306 | 4,319 | 60,039 | 222,664 |
Depreciation | ||||
As at 1 January 2016 | 76,057 | 1,281 | 1,671 | 79,009 |
Depreciation charge for the year | 36,268 | 1,440 | 12,008 | 49,716 |
Disposal in period | (2,669) | - | - | (2,669) |
Foreign exchange adjustment | 9,327 | 158 | 330 | 9,815 |
At 31 December 2016 | 118,983 | 2,879 | 14,009 | 135,871 |
Net Book Value as at 31 December 2016 | 39,323 | 1,440 | 46,030 | 86,793 |
The Directors consider the carrying amount of property, plant and equipment to be a reasonable approximation of fair value.
9 INTANGIBLE ASSETS
Stock exchange trading rights | Goodwill | Total | |
£ | £ | £ | |
Cost | |||
As at 1 January 2015 | 41,450 | 1,276,407 | 1,317,857 |
Reclassified to the Disposal group | (41,450) | (637,627) | (679,077) |
As at 1 January 2016 | - | 638,780 | 638,780 |
Foreign exchange adjustment | 2,766 | - | 2,766 |
Disposal in period | (2,766) | - | (2,766) |
At 31 December 2016 | - | 638,780 | 638,780 |
Accumulated amortisation and impairment | |||
At 1 January and 31 December 2015 | - | - | - |
At 1 January and 31 December 2016 | - | - | - |
Net Book Value as at 31 December 2016 | - | 638,780 | 638,780 |
Net Book Value as at 31 December 2015 | - | 638,780 | 638,780 |
The stock exchange trading rights were related to Riche Bright Securities Limited. Following the disposal the Group no longer retains these trading rights.
The Directors consider the carrying amount of intangible assets to be a reasonable approximation of fair value.
10 INVESTMENTS IN SUBSIDIARIES
The Company investments in subsidiaries and associated undertaking were as follows:
Company | ||
2016 | 2015 | |
£ | £ | |
As at 1 January | 1,686,348 | 2,919,130 |
Purchases during the year | - | 257,398 |
Disposals during the year | - | (1,490,180) |
At 31 December | 1,686,348 | 1,686,348 |
The Group's principal subsidiary undertakings during the year were as follows:
Principal subsidiaries | Country of Incorporation | Percentage of ordinary shares held | Principal activity |
AVVA Group Limited | BVI | 100% | Dormant |
Alpha Returns Hong Kong Limited | Hong Kong | 100% | Dormant |
ARGP Investments Limited | BVI | 100% | Investment holding company |
Riche Bright Group Limited* | BVI | 100% | Investment holding company |
Riche Bright Limited** | Republic of Vanuatu | 100% | Dormant |
Riche Bright Investments Limited** | Hong Kong | 100% | Investment holding company |
Telistar Solutions Pte Limited*** | Singapore | 52.5% | IT Solutions |
Telistar Solutions SDN BHD**** | Malaysia | 47.25% | IT Solutions |
*On 30 June 2016, Riche Bright Group Limited bought the 30% minority shares increasing the company's holding from 70% to 100%.
**100% owned by Riche Bright Group Limited.
***Investment held indirectly through ARGP Investments Limited.
****90% owned by Telistar Solutions Pte. Limited.
11 TRADE AND OTHER RECEIVABLES
Group | Company | |||||
2016 | 2015 | 2016 | 2015 | |||
£ | £ | £ | £ | |||
Trade receivables | 510,370 | 442,881 | - | - | ||
Amounts owed by group undertakings | - | - | 1,999,064 | 1,753,106 | ||
Other receivables | 121,893 | 72,126 | 5,037 | 5,037 | ||
Prepayments and accrued income | 187,938 | 105,253 | 1,831 | 1,563 | ||
820,201 | 620,260 | 2,005,932 | 1,759,706 |
No receivables were past due or provided for at the year-end or at the previous year end.
The Directors consider the carrying amount of trade and other receivables a reasonable approximation of their fair value. All of the Group's trade and other receivables have been reviewed for indicators of impairment.
12 CASH AND CASH EQUIVALENTS
Group | Company | |||||
2016 | 2015 | 2016 | 2015 | |||
£ | £ | £ | £ | |||
Cash at Bank | 2,149,378 | 394,963 | 7,130 | 7,130 |
The Directors consider that the carrying value of cash and cash equivalents represents their fair value.
13 TRADE AND OTHER PAYABLES
Group | Company | |||||
2016 | 2015 | 2016 | 2015 | |||
£ | £ | £ | £ | |||
Current | ||||||
Trade payables | 192,261 | 21,944 | 11,122 | 11,123 | ||
Trade payables - factored | 165,714 | 63,221 | - | - | ||
Taxes and social security | 7,430 | 57,421 | - | - | ||
Other payables | 57,868 | 420,652 | - | 19 | ||
Accruals and deferred income | 80,408 | 157,164 | 57,243 | 57,243 | ||
503,681 | 720,402 | 68,365 | 68,385 |
All trade and other payables are short term. The Directors consider the carrying amount of trade and other payables to be a reasonable approximation of fair value.
14 INVESTMENTS - AVAILABLE FOR SALE
Group | Company | |||
2016 | 2015 | 2016 | 2015 | |
£ | £ | £ | £ | |
At 1 January - fair value | 790,883 | 583,721 | - | - |
Acquisitions | 550,000 | 301,894 | - | - |
Disposal | (295,699) | (16,580) | - | - |
Movement in fair value of investments | 92,074 | - | - | - |
Impairment | (281,250) | (78,152) | - | - |
At 31 December - fair value | 856,008 | 790,883 | - | - |
Categorised as: | ||||
Level 1 - quoted investments | 210,824 | 18,750 | - | - |
Level 3 - Unquoted investments | 645,184 | 772,133 | - | - |
The table of investments sets out the fair value measurements using the IFRS 7 fair value hierarchy. Categorisation within the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair value measurement of the relevant asset as follows: Level 1 - valued using quoted prices in active markets for identical assets. Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1. Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data. The valuation techniques used by the company are explained in the accounting policy note, "Investments held for trading". | ||
LEVEL 3 FINANCIAL ASSETS Reconciliation of Level 3 fair value measurement of financial assets: | ||
2016 | 2015 | |
£ | £ | |
Brought forward | 772,133 | 513,434 |
Purchases | 450,000 | 295,699 |
Disposal* | (295,699) | - |
Impairment | (281,250) | (37,000) |
Carried forward | 645,184 | 772,133 |
Included above are amounts of £476,434 and £295,699 that relate to the initial investments by the Company in Oriental Ventures Limited and Jesoft International Limited, respectively. On 5 April 2016 the Company issued 32,142,857 new ordinary shares of 0.01p at 1.4p each as settlement for the second and final tranche consideration for the acquisition of 30 per cent. interest in Oriental Ventures Limited which amounted to £450,000. The Group recognised an impairment provision against the value of the investment in Oriental Ventures Limited during the year of £281,250. *On 20 December 2016 the Company terminated the sales and purchase agreement of shares of Jesoft International Limited. This resulted in a loss on disposal of £201,499 to the Group. Level 3 valuation techniques used by the Group are explained on page 21 (Fair value of financial instruments). All Level 3 investments are included at cost given the difficulty in obtaining a reasonable fair value for each of the investments. |
15 FINANCIAL INSTRUMENTS
The Group's financial instruments comprise borrowings, cash and various items, such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group's operations.
The main risks arising from its financial instruments are interest rate, liquidity, foreign currency and credit risk. The board reviews and agrees policies for managing each of these risks and they are summarised below together with a sensitivity analysis. These policies have remained unchanged from previous years.
Foreign currency risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the functional currency of the Group entities.
Interest rate risk
The Group finances its operations through a mixture of loans and equity capital. The Group does not enter into any interest rate derivative transactions to manage interest rate risk. The Group had no interest bearing loans at the year-end or the prior period end and hence no interest rate exposure.
Liquidity risk
The Group seeks to manage financial risk by ensuring liquidity is available to meet foreseeable needs and by investing cash assets safely and profitably.
As at 31 December 2016 the Group's liabilities have contractual maturities which are summarised below:
31 December 2016 | Current | Non-current | ||
Within 6 months | 6 to 12 months | 1 to 5 years | later than 5 years | |
£ | £ | £ | £ | |
Other loans | - | - | - | - |
Trade and other payables | 421,436 | - | - | - |
421,436 | - | - | - |
This compares to the maturity of the Group's financial liabilities in the previous reporting period as follows:
31 December 2015 | Current | Non-current | ||
Within 6 months | 6 to 12 months | 1 to 5 years | later than 5 years | |
£ | £ | £ | £ | |
Other loans | - | - | - | - |
Trade and other payables | 561,139 | - | - | - |
561,139 | - | - | - |
Credit risk
The Group's exposure to credit risk is limited to the carrying amounts of financial assets recognised at the balance sheet date, as follows:
2016 | 2015 | ||
£ | £ | ||
Trade and other receivables | 632,263 | 515,007 | |
Cash and cash equivalents | 2,149,378 | 394,963 | |
2,781,641 | 909,970 |
The key management of the subsidiaries continuously monitor defaults of customers and other counterparties, identified either individually, or by group, and incorporates this information into its credit controls. Where available at reasonable cost external credit ratings and/or reports on customers and other counter parties are obtained and used. The Group's policy is to deal only with creditworthy counterparties.
The Group's management considers that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due.
None of the Group's financial assets are secured by collateral or other credit enhancements.
In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any counterparties having similar characteristics. The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
Financial instruments measured at fair value
The fair value hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair values of the financial assets and liabilities. The fair value hierarchy has the following levels; Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) and Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs). No financial assets or liabilities are measured at fair value in the statement of financial position.
Categories of financial instruments
The carrying amounts of the Group's financial assets and liabilities as recognised at the balance sheet date of the reporting periods under review may also be categorised as follows:
2016 | 2015 | ||
£ | £ | ||
Financial assets: | |||
Investments - Available for sale | 856,008 | 790,883 | |
Cash and bank balances | 2,149,378 | 394,963 | |
Loans and receivables | 632,263 | 72,126 | |
3,637,649 | 1,257,972 | ||
Financial liabilities at amortised cost: | |||
Trade and other payables | 496,250 | 563,238 | |
496,250 | 563,238 | ||
Capital management policies and procedures
The Group's management objectives are:
- To ensure the Group's ability to continue as a going concern, and
- To provide an adequate return to shareholders
by pricing services commensurately with the levels of risk.
The Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on the face of the balance sheet. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets or reduce debt.
16 SHARE CAPITAL
The issued share capital of the Company is shown below:
Number of shares | Share Capital | Share | ||||
Ordinary | Deferred | Ordinary | Deferred | Total | Premium | |
£ | £ | £ | £ | |||
Ordinary shares of 0.01p | 661,594,511 | - | 66,160 | - | 66,160 | 7069,224 |
Deferred shares of 0.45p | - | 166,313,349 | - | 748,410 | 748,410 | - |
Deferred shares of 24.99p | - | 2,149,077 | - | 537,054 | 537,054 | - |
At 31 December 2015 | 661,594,511 | 168,462,426 | 66,160 | 1,285,464 | 1,351,624 | 7,069,224 |
Issue of shares 5 April 2016 | 32,142,857 | - | 3,215 | - | 3,215 | 446,785 |
At 31 December 2016 | 693,737,368 | 168,462,426 | 69,375 | 1,285,464 | 1,354,839 | 7,516,009 |
The Company has one class of ordinary shares which carry no right of fixed income.
On 5 April 2016 the Company issued 32,142,857 new ordinary shares of 0.01p each as settlement for the second and final tranche consideration for the acquisition of 30 per cent. interest in Oriental Ventures Limited.
The deferred shares carry no right to payment of dividend or on a return of capital.
17 EQUITY- SETTLED SHARE BASED PAYMENTS
During 2014 the Company issued options over 40,000,000 ordinary shares with an exercise price of 2.2p per share.
The share options are exercisable between 17 January 2016 and 17 January 2021.
At the date of grant, the options were valued using the Black- Scholes option pricing model. The fair value per option granted and the assumptions used in the calculation were as follows:
Date of grant | 17 January 2014 | |
Expected volatility | 136% | |
Expected life | 3 years | |
Risk- free interest rate | 1.36% | |
Expected dividend yield | - | |
Fair value of option | £0.0067 |
The charge to the income statement for share passed payments for the year ended 31 December 2016 was £6,242 (2015: £134,000).
Movements in the number of options outstanding and their related weighted average exercise prices are as follows:
Number of options | Weighted average exercise price per share | ||
At 1 January 2016 | 40,000,000 | 2.2 | |
Granted | - | - | |
Forfeited | - | - | |
Exercised | - | - | |
Expired | - | - | |
At 31 December 2016 | 40,000,000 | 2.2 |
At 31 December 2016 all options are exercisable (2015: none).
The weighted average remaining contractual life of options as at 31 December 2016 was 4.05 years (2015: 5.05 years).
18 RELATED PARTY TRANSACTIONS
Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not required to be disclosed. The remuneration of the Directors, who are key management personnel of the Group, is set out in note 4.
During the year an amount of £118,033 (2015: £108,197) was paid to GAEA Resources Limited for management and administration fees for the Company. GAEA is connected to Sze Thye Group Limited, a substantial shareholder of the Company. An amount of £nil (2015: £nil) was due as at the year end.
During the year a payment of £nil (2015: £4,145) was paid to C&T Associates CPA Limited for audit services. Ellen Tsang, a Director, is a partner of C&T Associates CPA Limited. An amount of £nil (2015: £nil) was due as at the year end.
Under a share repurchase agreement dated 30 June 2017, Riche Bright Group Limited ("RBG") repurchased for cancellation a total of 300,000 shares, representing 30% RBG's then issued share capital, for a total consideration of HK$9 million. Included in the sellers was Miss Tong Shyn Leng with 13 per cent of RBG's then issued share capital who is a related party to the transaction as she was a significant shareholder of RBG.
19 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
At the balance sheet date, the Group had no known contingent liabilities and capital commitments other than those shown in the financial statements.
20 OPERATING LEASES
At 31 December the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:
Group | ||
2016 | 2015 | |
Land & buildings: | £ | £ |
Less than one year | 44,576 | 56,472 |
Between one and five years | - | - |
More than five years | - | - |
44,576 | 56,472 |
21 POST YEAR END EVENTS
On 3 January 2017 the Company granted options over a total 15,000,000 ordinary shares, representing 2.16 per cent. of the Company's current issued ordinary share capital at an exercise price of 0.5p per share in accordance with the terms of the share option scheme. Share option details are as follows:
No. of options | Exercise price | Exercise dates | |
Christopher Neo | 3,000,000 | 0.5p | 3/1/2019 - 3/1/2024 |
Chan Cheong Yee (Quattro) | 1,000,000 | 0.5p | 3/1/2019 - 3/1/2024 |
Tsang Fung Chu (Ellen) | 1,000,000 | 0.5p | 3/1/2019 - 3/1/2024 |
Group employees (including employees of Telistar Solutions Pte Ltd) and consultants to the Company | 10,000,000 | 0.5p | 3/1/2019 - 3/1/2024 |
Total | 15,000,000 |
22 ULTIMATE CONTROLLING PARTY
There was no single controlling party.