U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE
13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of December, 2022
Commission File No.: 001-04192
(Translation of Registrant's name into English)
Unit 803, Dina House, Ruttonjee Centre, 11 Duddell
Street, Central, Hong Kong SAR, China
(Address of office)
Indicate by check mark whether
the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Indicate by check mark whether
the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Note: Regulation S-T
Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to
security holders.
Indicate by check mark whether
the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Note: Regulation S-T
Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated,
domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on
which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to
be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the
subject of a Form 6-K submission or other Commission filing on EDGAR.
Report for the Six Months Ended June 30,
2022
(December 1, 2022)
All references in this document to "$"
and "dollars" are to Canadian dollars, all references to "US$" are to United States dollars and all references to
"Euro" or "€" are to the European Union Euro, unless otherwise indicated.
Unless the context otherwise indicates, references
herein to "we", "us", "our", the "Company" or "SRL" are to Scully Royalty Ltd. and its
consolidated subsidiaries. Unless otherwise indicated, references herein to numbers of our common shares of US$0.001 par value each, referred
to as the "Common Shares".
The following report and the discussion and analysis
of our financial condition and results of operations for the six months ended June 30, 2022 should be read in conjunction with our
unaudited interim financial statements and notes thereto for the six months ended June 30, 2022 and the annual audited financial
statements and notes thereto of SRL for the year ended December 31, 2021 filed with the United States Securities and Exchange Commission
(the "SEC") and applicable Canadian securities regulators. Our financial statements for such periods have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB").
Non-IFRS Financial Measures
This document includes "non-IFRS financial
measures", that is, financial measures that either exclude or include amounts that are not excluded or included in the most directly
comparable measure calculated and presented in accordance with IFRS. Specifically, we make use of the non-IFRS measures "EBITDA".
EBITDA is defined as earnings before interest,
taxes, depreciation and amortization. Our management uses EBITDA as a measure of our operating results and considers it to be a meaningful
supplement to net income as a performance measurement, primarily because we incur significant depreciation and EBITDA eliminates the non-cash
impact.
EBITDA is used by investors and analysts for the
purpose of valuing an issuer. The intent of EBITDA is to provide additional useful information to investors and the measure does not have
any standardized meaning under IFRS. Accordingly, this measure should not be considered in isolation or used in substitute for measures
of performance prepared in accordance with IFRS. For a reconciliation of net income from continuing operations to EBITDA, please see "Results
of Operations".
Disclaimer for Forward-Looking Information
Certain statements in this document are forward-looking
statements or forward-looking information, within the meaning of applicable securities laws, which reflect our expectations regarding
our future growth, results of operations, performance and business prospects and opportunities. Forward-looking statements consist of
statements that are not purely historical, including statements regarding our business plans, anticipated future gains and recoveries,
our strategy to reduce trade receivables and inventories, future business prospects and any statements regarding beliefs, expectations
or intentions regarding the future. Generally, these forward-looking statements can be identified by the use of forward-looking terminology
such as "plans", "expects", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates", "believes", variations or comparable language of such words
and phrases or statements that certain actions, events or results "may", "could", "would", "should",
"might" or "will be taken", "occur" or "be achieved" or the negative connotation thereof.
While these forward-looking statements, and any
assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business,
actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future
performance suggested herein. No assurance can be given that any of the events anticipated by the forward-looking statements will occur
or, if they do occur, what benefits we will obtain from them. These forward-looking statements reflect our current views and are based
on certain assumptions and speak only as of the date hereof. These assumptions, which include our current expectations, estimates and
assumptions about our business and the markets we operate in, the global economic environment, interest rates, commodities prices, exchange
rates and our ability to expand our business. No forward-looking statement is a guarantee of future results. A number of risks and uncertainties
could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Additional information
about these and other assumptions, risks and uncertainties is set out in the "Risk Factors" section of this report and in SRL's
annual report on Form 20-F for the year ended December 31, 2021. Such forward-looking statements should therefore be construed
in light of such factors. Although we have attempted to identify important factors that could cause actual results to differ materially
from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated
or intended. Investors are cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with our
legal or regulatory obligations, we are not under any obligation and we expressly disclaim any intention or obligation to update or revise
any forward-looking statements, whether as a result of new information, future events or otherwise.
MANAGEMENT'S DISCUSSION
AND ANALYSIS
Nature of Business
We currently have three operating segments: (i) Royalty,
which includes our interest in an iron ore mine; (ii) Industrial, which includes multiple projects in resources and services; and
(iii) Merchant Banking, which comprises regulated merchant banking activities.
Management is committed to a plan to rationalize
its Industrial and Merchant Banking interests, and substantial progress has been made on both projects. These two segments have
not produced returns commensurate to that of our royalty interest, and our Board of Directors believes that these actions provide compelling
benefits to our shareholders and to all aspects and business segments of the Company. This plan is expected to simplify the Company's
corporate structure by separating its non-strategic assets and allows the independent business lines to focus on pursuing and operating
their respective businesses.
Royalty
We hold a net revenues royalty interest in the
Scully iron ore mine located in the Province of Newfoundland and Labrador, Canada. The royalty rate under this interest is 7.0% on iron
ore shipped from the mine and 4.2% on iron ore shipped from tailings and other disposed materials. The sub-lease commenced in 1956 and
expires in 2055. Pursuant to this sub-lease, we hold a net revenues royalty interest on iron ore shipped from the mine. The new operator
of the mine commenced mining operations in 2019.
The operator of the mine has disclosed that the
mine historically extracted approximately 11.8 million tonnes of raw iron per year from which approximately 4.1 million metric tonnes
of iron concentrate were produced at an onsite milling facility. It further disclosed that upon-reactivation annual production capacity
targeted a capacity of 6.25 million metric tonnes of iron concentrate by 2021, with production ranging from 5.80 million to 7.55 million
metric tonnes over the subsequent 22 years. Iron concentrate is transported by rail to the port facilities at Point Noire, Quebec, where
it is unloaded, stockpiled and loaded on vessels for sale to the seaborne market.
Under the terms of the sub-lease, we are entitled
to minimum royalty payments of $3.25 million per year, payable on a quarterly basis, which quarterly payments may be credited towards
earned royalties relating to the same calendar year.
Industrial
Our Industrial segment includes multiple projects
in resources and services around the globe. It seeks opportunities to benefit from long-term industrial and services assets, including
natural gas, with a focus on East Asia.
The Industrial segment includes our hydrocarbon
assets located in Alberta, Canada. Other production and processing assets in this segment include a hydro-electric power plant located
in Africa. The Industrial segment generated 44% of our revenues in the six months ended June 30, 2022.
We make proprietary investments as part of our
overall activities in the segment and we seek to realize gains on such investments over time. We seek to participate in many industries,
emphasizing those business opportunities where the perceived intrinsic value is not properly recognized, often as a result of financial
or other distress affecting them. These investments can take many forms and can include acquiring entire businesses or portions thereof,
investing in equity or investing in existing indebtedness (secured and unsecured) of businesses or in new equity or debt issues. These
activities are generally not passive. The structure of each of these opportunities is tailored to each individual transaction.
Merchant Banking
Our Merchant Banking segment consists of a subsidiary
with its bonds listed on the Malta Stock Exchange and comprises regulated merchant banking in Europe, including the activities of our
licensed European bank (the "Bank").
The Bank does not engage in general retail or
commercial banking, but provides specialty banking services, focused on merchant banking, to our customers, suppliers and group members.
Generally, the Bank earns fees from provisions of a range of financial and consultancy services to the customers and investment income.
In addition, we hold interests in two industrial
real estate parks in Europe for sale in the ordinary course of business or as investment property.
All Other
Our All Other segment encompasses our corporate
and other investments, as well as the overhead expenses of the parent company. Our All Other segment includes our corporate and operating
segments whose quantitative amounts do not exceed 10% of any of our reported revenue, net income and total assets for the six months ended
June 30, 2022.
Recent Developments
Update on the Scully Iron Ore Mine
The Scully iron ore mine produces a high-grade
ore in excess of 65% iron content that also has other favorable characteristics, such as relatively low contaminant ratios. Globally,
steelmakers value high grade iron ore with low contaminants (such as silica, alumina, and phosphorus) because they improve environmental
and financial performance through more efficient raw material utilization, higher plant yields, and lower emissions. Therefore, it is
common and generally expected for 65% Fe iron ore, including the Scully iron ore mine's product, to sell at a premium to 62% Fe iron ore.
In the first half of 2022, the Platts 65% Fe index sold at approximately a 17.9% (US$25) premium to the Platts 62% Fe Index.
The following table sets forth the total iron
ore products (which include pellets, chips and concentrates) shipped from the mine based upon the amounts reported to us by the Scully
mine for the periods indicated:
| | |
Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(tonnes) | |
| Iron Ore Products Shipped | |
| 1,691,184 | | |
| 1,649,098 | |
On August 30, 2019 the operator of the mine
announced that it had made its first seaborne vessel shipment of iron ore concentrate produced at the Scully iron ore mine and has since
completed a number of milestones. In July 2021, the operator of the Scully iron ore mine filed an environmental assessment registration
with the Newfoundland and Labrador government, seeking to expand its current tailings impoundment area by up to 1.411 hectares. The disclosed
purpose of such expansion was to enable the extension of mine operations by 22 years to 2047 to fully utilize the mines ore reserves.
The provincial government has not rendered a decision on such application to date.
The operator of the mine remains committed to
ramping up production to at least six million tonnes per annum, and, in support of that commitment, is currently executing several capital
improvement projects which are expected to reduce bottlenecks, while at the same time investing in human resources and operational efficiency.
Acquisition of Sparkasse Bank Malta
On March 7, 2022, we announced that our subsidiary,
Merkanti Holding plc, entered into a definitive agreement to acquire Sparkasse (Holdings) Malta Ltd., the Maltese parent company of Sparkasse
Bank. Upon closing, we intend to merge our subsidiary, Merkanti Bank Ltd. with Sparkasse Bank, in order to form a larger, more profitable
independent institution.
Merkanti is acquiring Sparkasse Holdings and the
total consideration is approximately equal to the net tangible asset value of Sparkasse (Holdings) Malta Ltd., less certain adjustments,
and includes (i) a cash payment at closing of the transaction, (ii) three consecutive annual payments of €2.5 million;
and (iii) a contingent payment, payable solely upon the recovery (if any) of an asset of Sparkasse Bank which was previously written
off in its entirety. The consideration is expected to be satisfied through cash on hand and available liquidity within our group. The
transaction is conditional upon the satisfaction of certain customary conditions precedent such as regulatory approval from various regulators,
including the European Central Bank, the Malta Financial Services Authority and the Central Bank of Ireland. It is currently expected
to be concluded in the first half of 2023.
Discussion of Operations
The following discussion and analysis of our
financial condition and results of operations for the six months ended June 30, 2022 and 2021 should be read in conjunction with
our unaudited condensed consolidated financial statements and related notes.
General
Our core asset is an interest in a mining sub-lease
of the lands upon which the Scully iron ore mine is situated in the Province of Newfoundland and Labrador, Canada. The sub-lease commenced
in 1956 and expires in 2055. Pursuant to this sub-lease, we hold a 7.0% net revenues royalty interest on iron ore shipped from the mine
and a 4.2% net revenues royalty interest on iron ore shipped from tailings and other disposed materials. The current operator of the mine
commenced mining operations in 2019. Under the terms of the sub-lease, we are entitled to quarterly minimum royalty payments of $3.25
million per year, which quarterly payments may be credited towards earned royalties relating to the same calendar year.
In addition, we have two other business segments
operating that provide merchant banking and financial services. We specialize in markets that are not adequately addressed by traditional
sources of supply and finance, with an emphasis on providing solutions for small and medium sized enterprises. We operate in multiple
geographies and participate in industries including manufacturing, natural resources and medical supplies and services.
As a supplement to our operating business, we
commit proprietary capital to assets and projects where intrinsic values are not properly reflected. These investments can take many forms,
and our activities are generally not passive. The structure of each of these opportunities is tailored to each individual transaction.
Business Environment
Our financial performance is, and our consolidated
results in any period can be, materially affected by economic conditions and financial markets generally, including the availability of
capital, the availability of credit and the level of market and commodity price volatility. Our results of operations in our merchant
banking and industrial segments may also be materially affected by competitive factors. Our competitors include firms traditionally engaged
in merchant banking as well as other capital sources such as hedge funds and private equity firms and other companies engaged in similar
activities in Europe, Asia and globally.
We operate internationally and therefore our financial
performance and position are impacted by changes in the Canadian dollar, our reporting currency, against the other functional currencies
of our international subsidiaries and operations, particularly the Euro. As at June 30, 2022, the Canadian dollar was stronger by
6.9% against the Euro from the end of 2021. We recognized a net $6.3 million currency translation adjustment loss under accumulated other
comprehensive income within equity in the six months ended June 30, 2022, compared to a net $6.6 million in the comparative period
of 2021. In addition, we recognized a net gain of $3.0 million on exchange differences on foreign currency transactions in our
consolidated statement of operations in the six months ended June 30, 2022, compared to $1.2 million in the comparative period of
2021.
In the first half of 2022, the demand for iron
ore decreased alongside global steel production. According to the World Steel Association, global crude steel production in the first
half of 2022 increased 5.5% over the first half of 2021, with strong increases in crude steel production in China, which accounts for
approximately 70% of all seaborne iron ore demand. The 65% Fe iron ore price, as reported by Platts, decreased by 22.2% to an average
US$165 per tonne for the first half of 2022, compared to an average of US$212 in the same period of 2021, as the demand for seaborne iron
ore from China weakened due to government efforts to curb steel production growth in China.
Results of Operations
Six Months Ended June 30, 2022 Compared to Six Months Ended
June 30, 2021
The following table sets forth our selected operating
results and other financial information for each of the periods indicated:
| | |
Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands,
except per share amounts) | |
| Revenue | |
$ | 36,077 | | |
$ | 46,766 | |
| Costs of sales and services | |
| 15,835 | | |
| 20,969 | |
| Selling, general and administrative expenses | |
| 11,124 | | |
| 9,821 | |
| Finance costs | |
| 929 | | |
| 953 | |
| Impairment loss on property, plant and equipment | |
| 402 | | |
| - | |
| Exchange differences on foreign currency transactions, net gain | |
| (2,999 | ) | |
| (1,249 | ) |
| Net income(1) | |
| 3,912 | | |
| 9,758 | |
| Net income(1) per share: | |
| | | |
| | |
| Basic | |
| 0.26 | | |
| 0.66 | |
| Diluted | |
| 0.26 | | |
| 0.65 | |
Notes:
| (1) | Attributable to our shareholders. |
The following table provides a breakdown of revenue
for each of the periods indicated:
| | |
Six Months Ended | |
| | |
June 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands) | |
| Merchant Banking products and services | |
$ | 29,235 | | |
$ | 41,665 | |
| Interest | |
| 2,884 | | |
| 314 | |
| Dividend income | |
| 198 | | |
| 205 | |
| Other, including medical and real estate sectors | |
| 3,760 | | |
| 4,582 | |
| Revenue | |
$ | 36,077 | | |
$ | 46,766 | |
During the six months ended June 30, 2022,
royalty revenue (which is included in Merchant Banking products and services) represented 51% of total revenue, compared to 68% in the
comparative period of 2021.
The following is a breakdown of our revenue by
segment for each of the periods indicated:
| | |
Six Months Ended | |
| | |
June 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands) | |
| Royalty | |
$ | 18,250 | | |
$ | 31,863 | |
| Industrial | |
| 15,840 | | |
| 10,261 | |
| Merchant Banking | |
| 1,987 | | |
| 4,642 | |
| Revenue | |
$ | 36,077 | | |
$ | 46,766 | |
In the first half of 2022, 7.6% of our revenue was from Europe, 79.9%
was from the Americas and 12.5% was from Asia, Africa and other regions.
In the first half of 2022, our proportionate revenue by product was
62% from iron ore royalties, 32% from hydrocarbons and 6% from other.
Based upon the average exchange rates for the first half of 2022, the
Canadian dollar strengthened by approximately 8.1% in value against the Euro compared to the same period of 2021.
Revenue for the first half of 2022 decreased to
$36.1 million from $46.8 million in the same period of 2021, mainly as a result of decrease in royalty income, partially offset by increased
Industrial revenues that primarily resulted from increased natural gas prices.
Revenue for our Royalty segment for the first
half of 2022 decreased to $18.3 million from $31.9 million in the same period of 2021, primarily as a result of a weaker iron ore pricing
environment during the period.
Revenue for our Industrial segment for the first
half of 2022 increased to $15.8 million from $10.3 million in the same period of 2021, primarily as a result of an increase in natural
gas prices.
Revenue for our Merchant Banking segment for the
first half of 2022 decreased to $2.0 million from $4.6 million in the same period of 2021. The decrease primarily resulted from the discontinuance
of a product line.
Costs of sales and services decreased to $15.8
million from $21.0 million for the same period in 2021 primarily as a result of a loss on derivatives incurred in the comparative period
in 2021 incurred in connection with iron ore prices.
The following is a breakdown of our costs of sales
and services for each of the periods indicated:
| | |
Six Months Ended | |
| | |
June 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands) | |
| Merchant banking products and services | |
$ | 13,121 | | |
$ | 12,945 | |
| Reversal of credit losses | |
| (1 | ) | |
| (4 | ) |
| Loss on derivative contracts, net | |
| - | | |
| 3,461 | |
| Fair value loss on a loan payable measured at FVTPL | |
| 176 | | |
| 1,177 | |
| Other | |
| 2,539 | | |
| 3,390 | |
| Total costs of sales and services | |
$ | 15,835 | | |
$ | 20,969 | |
In the first half of 2022, we incurred a fair
value loss on a long-term loan payable measured at fair value through profit or loss ("FVTPL") of $0.2 million, compared
to $1.2 million in the same period of 2021.
In the first half of 2022, we recognized other
costs of sales and services of $2.5 million relating to medical supplies and real estate and other, compared to $3.4 million in the same
period of 2021.
We recognized a net loss on derivative contracts
of $3.5 million in the first half of 2021 in connection with iron ore prices. We did not have such item in the current period.
Selling, general and administrative expenses increased
to $11.1 million in the first half of 2022 from $9.8 million in the same period of 2021.
In the first half of 2022, we recognized a net
foreign currency transaction gain of $3.0 million, compared to $1.2 million in the same period of 2021, in our consolidated statement
of operations. The foreign currency transaction gain or loss represents exchange differences arising on the settlement of monetary items
or on translating monetary items into our functional currencies at rates different from those at which they were translated on initial
recognition during the period or in previous financial statements.
We recognized an income tax expense (other than
resource revenue taxes) of $3.4 million in the first half of 2022, compared to $0.6 million in the same period of 2021. Our income tax
refunded in cash, excluding resource property revenue taxes, during the first half of 2022 was $0.3 million, compared to $0.1 million
income tax paid in cash in the same period of 2021. We also recognized resource property revenue tax expense of $3.5 million in the first
half of 2022 and $6.3 million in the same period of 2021. The decrease was as a result of the lower royalty revenue in the current period.
Overall, we recognized an income tax expense of
$6.9 million (income tax expense of $3.4 million and resource property revenue taxes of $3.5 million) in the first half of 2022, compared
to income tax expense of $6.9 million (income tax expense of $0.6 million and resource property revenue taxes of $6.3 million) in the
same period of 2021.
In the first half of 2022, our net income attributable
to shareholders was $3.9 million or $0.26 per share on a basic and diluted basis, compared to a net income of $9.8 million, or $0.66 per
share on a basic and $0.65 per share on a diluted basis, in the same period of 2021.
In the first half of 2022, our EBITDA was $17.0 million, compared to
$23.4 million in the first half of 2021.
The following is a reconciliation of our net income to EBITDA for
each of the periods indicated:
| | |
Six Months Ended | |
| | |
June 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands) | |
| Net income | |
$ | 3,881 | | |
$ | 9,393 | |
| Taxes | |
| 6,905 | | |
| 6,879 | |
| Interest | |
| 929 | | |
| 953 | |
| Amortization, depreciation & depletion | |
| 5,307 | | |
| 6,128 | |
| EBITDA | |
$ | 17,022 | | |
$ | 23,353 | |
Please see "Non-IFRS Financial Measures"
for additional information.
Liquidity and Capital Resources
General
Liquidity is of importance to our business as
insufficient liquidity often results in underperformance.
Our objectives when managing capital are:
| · | to safeguard our ability to continue as a going concern; |
| · | to position ourselves to generate returns for and distribute dividends to our shareholders; |
| · | to maintain a flexible capital structure that optimizes the cost of capital at acceptable risk. |
We set the amount of capital in proportion to
risk. We manage our capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics
of the underlying assets.
Consistent with others in our industry, we monitor
capital on the basis of our net debt-to-equity ratio and long-term debt-to-equity ratio. The net debt-to-equity ratio is calculated as
net debt divided by shareholders' equity. Net debt is calculated as total debt less cash. The long-term debt-to-equity ratio is calculated
as long-term debt divided by shareholders' equity.
The following table sets forth the calculation
of our net debt-to-equity ratio as at the dates indicated:
| | |
June 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands, except ratio amounts) | |
| Total debt(1) | |
$ | 33,035 | | |
$ | 35,227 | |
| Less: cash | |
| (61,172 | ) | |
| (54,873 | ) |
| Net debt | |
| Not applicable | | |
| Not applicable | |
| Shareholders' equity | |
| 354,503 | | |
| 365,600 | |
| Net debt-to-equity ratio | |
| Not applicable | | |
| Not applicable | |
Note:
| (1) | Long-term debt at June 30, 2022 and December 31, 2021 included bonds payable and did not include:
(a) a non-interest bearing loan payable of $7.1 million as at June 30, 2022 and $6.8 million as at December 31, 2021 which
is measured at fair value through profit or loss and does not have a fixed repayment date. See "– Financial Position";
and (b) long-term lease liabilities of $0.3 million as at June 30, 2022 and $0.5 million as at December 31, 2021, recognized
as a consequence of IFRS 16, Leases. |
There were no amounts in accumulated other comprehensive
income relating to cash flow hedges, nor were there any subordinated debt instruments as at June 30, 2022 and December 31, 2021.
Our net debt-to-equity was not applicable as we had a net cash balance as at June 30, 2022 and December 31, 2021.
The following table sets forth the calculation
of our long-term debt-to-equity ratio as at the dates indicated:
| | |
June 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands, except ratio amounts) | |
| Long-term debt, less current portion(1) | |
$ | 33,035 | | |
$ | 35,227 | |
| Shareholders' equity | |
| 354,503 | | |
| 365,600 | |
| Long-term debt-to-equity ratio | |
| 0.09 | | |
| 0.10 | |
Note:
| (1) | See note in table above. |
During the first half of 2022, our strategy, which
remained unchanged from the same period of 2021, was to maintain our net debt-to-equity ratio and long-term debt-to-equity ratio at manageable
levels. Our long-term debt-to-equity ratio was 0.09 as at June 30, 2022 and 0.10 as at December 31, 2021.
Cash
Flows
Our business can be cyclical and our cash flows
can vary accordingly. Our principal operating cash expenditures are for general and administrative expenses.
Working capital levels fluctuate throughout the
year and are affected by the level of operations of the mine underlying our royalty interest, the markets and prices for commodities,
the timing of collection of receivables and the payment of payables and expenses. We currently have a sufficient level of cash on hand
and expected cash flows from operations to meet our working capital and other requirements as well as unexpected cash demands.
The following table presents a summary of cash
flows for each of the periods indicated:
| | |
Six Months Ended | |
| | |
June 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands) | |
| Cash flows provided by (used in) operating activities | |
$ | 14,584 | | |
$ | (5,735 | ) |
| Cash flows provided by (used in) investing activities | |
| 1,928 | | |
| (3 | ) |
| Cash flows used in financing activities | |
| (8,353 | ) | |
| (228 | ) |
| Exchange rate effect on cash | |
| (1,860 | ) | |
| (1,992 | ) |
| Increase (decrease) in cash | |
$ | 6,299 | | |
$ | (7,958 | ) |
Cash
Flows from Operating Activities
Operating activities provided cash of $14.6 million
in the six months ended June 30, 2022, compared to using cash of $5.7 million in the same period of 2021. An increase in income tax
liabilities provided cash of $4.4 million in the first half of 2022, compared to $44,000 in the same period of 2021. A decrease in receivables
provided cash of $2.5 million in the first half of 2022, compared to an increase in receivables using cash of $19.2 million in the same
period of 2021. An increase in account payables and accrued expenses provided cash of $1.6 million in the six months ended June 30,
2022, compared to $2.8 million in the same period of 2021. An increase in deposits, prepaid and other used cash of $0.6 million in the
first half of 2022, compared to $1.2 million in the same period of 2021. A decrease in short term securities provided cash of $0.5 million
in the first half of 2022, compared to an increase in short term securities using cash of $3.1 million in the same period of 2021.
Cash
Flows from Investing Activities
Investing activities provided cash of $1.9 million
in the six months ended June 30, 2022, compared to using cash of $3,000 in the same period of 2021. Proceeds from the sale of investment
property provided cash of $2.2 million in the first half of 2022, compared to $11,000 in the same
period of 2021. In the first half of 2022, purchases of property, plant and equipment, net used cash of $0.3 million, compared to $14,000
in the same period of 2021.
Cash
Flows from Financing Activities
Cash used in financing activities was $8.4 million
in the six months ended June 30, 2022 and $0.2 million in the same period of 2021. In the first half of 2022, dividends paid used
cash of $8.6 million, compared to $nil in the same period of 2021, and stock option exercises provided cash of $0.4 million, compared
to $nil in the same period of 2021.
Financial
Position
The following table sets out our selected financial
information as at the dates indicated:
| | |
June 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands) | |
| Cash | |
$ | 61,172 | | |
$ | 54,873 | |
| Short-term securities | |
| 17,074 | | |
| 19,256 | |
| Trade receivables | |
| 3,836 | | |
| 4,164 | |
| Tax receivables | |
| 705 | | |
| 1,092 | |
| Other receivables | |
| 63,105 | | |
| 64,446 | |
| Inventories | |
| 992 | | |
| 1,100 | |
| Restricted cash | |
| 233 | | |
| 142 | |
| Deposits, prepaid and other | |
| 1,172 | | |
| 581 | |
| Total current assets | |
| 148,289 | | |
| 145,654 | |
| Working capital | |
| 130,485 | | |
| 133,306 | |
| Total assets | |
| 499,346 | | |
| 509,966 | |
| | |
| | | |
| | |
| Account payables and accrued expenses | |
| 12,443 | | |
| 11,346 | |
| Income tax liabilities | |
| 5,361 | | |
| 1,002 | |
| Total current liabilities | |
| 17,804 | | |
| 12,348 | |
| Bonds payable, long-term | |
| 33,035 | | |
| 35,227 | |
| Loan payable, long-term | |
| 7,105 | | |
| 6,817 | |
| Decommissioning obligations, long-term | |
| 12,949 | | |
| 15,096 | |
| Deferred income tax liabilities | |
| 66,511 | | |
| 67,461 | |
| Total liabilities | |
| 137,749 | | |
| 137,432 | |
| Shareholders' equity | |
| 354,503 | | |
| 365,600 | |
We maintain an adequate level of liquidity, with
a portion of our assets held in cash. This provides us with flexibility in managing our continuing business.
As at June 30, 2022, cash increased to $61.2
million from $54.9 million as at December 31, 2021. The increase was primarily the result of cash provided from operating activities.
We had short-term securities of $17.1 million
as at June 30, 2022 and $19.3 million as at December 31, 2021, which comprised of government and other securities.
Trade receivables and other receivables were $3.8
million and $63.1 million, respectively, as at June 30, 2022, compared to $4.2 million and $64.4 million, respectively, as at December 31,
2021. Trade receivables primarily consisted of product sales from our Merchant Banking and Industrial segments. Included in other receivables
were receivables of $4.7 million related to our iron ore royalty interest. Other receivables included a loan of $6.8 million and aggregate
current receivables of $48.2 million as at June 30, 2022 from a related party. See "Transactions with Related Parties"
for further information.
Deposits, prepaid and other assets were $1.2 million
as at June 30, 2022, compared to $0.6 million as at December 31, 2021. The increase primarily resulted from advances to information
technology suppliers for a core banking platform upgrade.
Inventories were $1.0 million as at June 30,
2022 and $1.1 million as at December 31, 2021.
Current tax receivables, consisting primarily
of value-added taxes and income tax recovery, were $0.7 million as at June 30, 2022 and $1.1 million as at December 31, 2021.
Account payables and accrued expenses were $12.4
million as at June 30, 2022, compared to $11.3 million as at December 31, 2021.
We had current income tax liabilities of $5.4
million as at June 30, 2022, compared to $1.0 million as at December 31, 2021.
We had bonds payable of $33.0 million as at June 30,
2022, compared to $35.2 million as at December 31, 2021. The decrease resulted from currency exchange fluctuation.
We had a non-interest bearing loan payable, which
is measured at FVTPL, of $7.1 million as at June 30, 2022, compared to $6.8 million as at December 31, 2021. The loan does not
have a fixed repayment date and the estimated fair value has been determined using a discount rate for similar instruments.
As at June 30, 2022, we had long-term decommissioning
obligations of $13.0 million relating to our existing hydrocarbon properties, which will be funded through cash flows from such interests
over their operating lives, compared to $15.1 million as at December 31, 2021. The decrease primarily results from higher discount
rates.
Future
Liquidity
We expect that there will be acquisitions of businesses
or commitments to projects in the future within our merchant banking and industrial segments. To achieve the long-term goals of expanding
our assets and earnings, including through acquisitions, capital resources will be required. Depending on the size of a transaction, the
capital resources that will be required can be substantial. The necessary resources will be generated from cash flows from operations,
cash on hand, borrowings against our assets, sales of proprietary investments or the issuance of securities.
Foreign
Currency
Our consolidated financial results are subject
to foreign currency exchange rate fluctuations.
Our presentation currency is the Canadian dollar.
We translate subsidiaries' assets and liabilities into Canadian dollars at the rate of exchange on the balance sheet date. Revenues and
expenses are translated at exchange rates approximating those at the date of the transactions or, for practical reasons, the average exchange
rates for the applicable periods, when they approximate the exchange rate as at the dates of the transactions. As a substantial amount
of revenue is generated in Euros, the financial position for any given period, when reported in Canadian dollars, can be significantly
affected by the exchange rates for these currencies prevailing during that period. In addition, we also have exposure to the Chinese yuan
and the United States dollar.
In the six months ended June 30, 2022, we
reported a net $6.3 million currency translation adjustment loss under other comprehensive income within equity. This compared to a net
loss of $6.6 million in the same period of 2021. This currency translation adjustment does not affect our profit and loss statement until
the disposal of a foreign operation.
Contractual
Obligations
The following table sets out obligations and commitments,
including contractual obligations, bonds payable and loan payable measured at fair value as at December 31, 2021.
| | |
Payments Due by Period(1) | |
| | |
(in thousands) | |
| Contractual Obligations(2) | |
Less than 1 Year | | |
1-3 Years | | |
3-5 Years | | |
More
than
5 Years | | |
Total | |
| Lease liabilities | |
$ | 314 | | |
$ | 492 | | |
$ | - | | |
$ | - | | |
$ | 806 | |
| Bonds payable | |
| 1,439 | | |
| 2,878 | | |
| 38,856 | | |
| - | | |
| 43,173 | |
| Loan payable(3) | |
| - | | |
| - | | |
| - | | |
| 6,817 | | |
| 6,817 | |
| Total | |
$ | 1,753 | | |
$ | 3,370 | | |
$ | 38,856 | | |
$ | 6,817 | | |
$ | 50,796 | |
Notes:
| (1) | Includes principal and interest. |
| (2) | This table does not include non-financial instrument liabilities and guarantees. |
| (3) | Consists of a US dollar loan payable to a former subsidiary, which is interest free, does not have a fixed
maturity date and is measured at fair value through profit or loss. The undiscounted contractual amount due to former subsidiary out of
surplus cash of the applicable subsidiary note holder is $53.3 million (US$42.1 million). The payment amount disclosed here represents
its fair value as at December 31, 2021. The total amount due on December 31, 2021 or within 12 months thereafter is $nil. The
actual repayment may be materially different from the amount disclosed herein. See "– Financial Position" for further
information. |
Risk
Management
Risk is an inherent part of our business and operating
activities. The extent to which we properly and effectively identify, assess, monitor and manage each of the various types of risk involved
in our activities is critical to our financial soundness and profitability. We seek to identify, assess, monitor and manage the following
principal risks involved in our business activities: market, credit, liquidity, operational, legal and compliance, new business, reputational
and other. Risk management is a multi-faceted process that requires communication, judgment and knowledge of financial products and markets.
Our management takes an active role in the risk management process and requires specific administrative and business functions to assist
in the identification, assessment and control of various risks. Our risk management policies, procedures and methodologies are fluid in
nature and are subject to ongoing review and modification.
Inflation
We do not believe that inflation has had a material
impact on our revenue or income over the past two fiscal years. However, increases in inflation could result in increases in our expenses,
which may not be readily recoverable in the price of goods or services provided to our clients. To the extent that inflation results in
rising interest rates and has other adverse effects on capital markets, it could adversely affect our financial position and profitability.
Application of Critical Accounting Policies
The preparation of financial statements in conformity
with IFRS requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the
reporting periods.
Our management routinely makes judgments and estimates
about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution
of the uncertainties increase, these judgments become even more subjective and complex. We have identified certain accounting policies
that are the most important to the portrayal of our current financial condition and results of operations. Please refer to Note 2B to
our audited consolidated financial statements for the year ended December 31, 2021, for a discussion of the significant accounting
policies.
In the process of applying our accounting policies,
management makes various judgments and estimates that can significantly affect the amounts it recognizes in the consolidated financial
statements. The following is a description of the critical judgments and estimates that management has made in the process of applying
our accounting policies and that have the most significant effects on the amounts recognized in the consolidated financial statements:
Identification of Cash-generating Units
Our assets are aggregated into cash-generating
units, referred to as "CGUs", for the purpose of assessing and calculating impairment, based on their ability to generate largely
independent cash flows. The determination of CGUs requires judgment in defining the smallest identifiable group of assets that generate
cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs have been determined based on
similar geological structure, shared infrastructure, geographical proximity, product type and similar exposure to market risks. In the
event facts and circumstances surrounding factors used to determine our CGUs change, we will re-determine the groupings of CGUs.
Impairment and Reversals of Impairment on
Non-Financial Assets
The carrying amounts of our non-financial assets,
other than assets held for sale and deferred tax assets, are reviewed at the end of each reporting period to determine whether there is
an indication of impairment or reversal of previously recorded impairment. If such indication exists, the recoverable amount is estimated.
Determining whether there are any indications
of impairment or impairment reversals requires significant judgment of external factors, such as an extended change in prices or margins
for hydrocarbon commodities or refined products, a significant change in an asset's market value, a significant revision of estimated
volumes, revision of future development costs, a change in the entity's market capitalization or significant changes in the technological,
market, economic or legal environment that would have an impact on our CGUs. Given that the calculations for recoverable amounts require
the use of estimates and assumptions, including forecasts of commodity prices, market supply and demand, product margins and in the case
of our interests in an iron ore mine, power plant and hydrocarbon properties, expected production volumes, it is possible that the assumptions
may change, which may impact the estimated life of the CGU and may require a material adjustment to the carrying values of goodwill, if
any, and non-financial assets.
Impairment losses recognized in prior years are
assessed at the end of each reporting period for indications that the impairment has decreased or no longer exists. An impairment loss
is reversed only to the extent that the carrying amount of the asset or CGU does not exceed the carrying amount that would have been determined,
net of depletion, depreciation and amortization, if no impairment loss had been recognized.
Assets Held for Sale and Discontinued Operations
We apply judgment to determine whether an asset
(or disposal group) is available for immediate sale in its present condition and that its sale is highly probable and therefore should
be classified as held for sale at the balance sheet date. In order to assess whether it is highly probable that the sale can be completed
within one year, or the extension period in certain circumstances, management reviews the business and economic factors, both macro and
micro, which include the industry trends and capital markets, and the progress towards a sale transaction. It is also open to all forms
of sales, including exchanges of non-current assets for other non-current assets when the exchange will have commercial substance in accordance
with IAS 16, Property, Plant and Equipment.
We measure a disposal group classified as held
for sale at the lower of its carrying amount and fair value less costs to sell. We recognize an impairment loss for any initial or subsequent
write-down of the disposal group to fair value less costs to sell, to the extent that it has not been recognized.
A discontinued operation is a component of an
entity (which comprises operations and cash flows that can be clearly distinguished, operationally and, for financial reporting purposes,
from the rest of the entity) that either has been disposed of or is classified as held for sale. While a component of the entity has distinguished
financial data, judgments must be exercised on the presentation of inter-company transactions between components that are presented as
discontinued operations and those that are presented as continuing operations. Furthermore, the allocation of income tax expense (recovery)
also involves the exercise of judgments as the tax position of continuing operations may have an impact on the tax position of discontinued
operations, or vice versa. Generally, management determines whether a component is a discontinued operation or not based on the contribution
of the component to our net income (loss), net assets, or gross assets. Management does not view revenue as a major factor in determining
whether a component is a discontinued operation or not because the revenue factor does not contribute any real economic benefits to us.
Credit Losses and Impairment of Receivables
We apply credit risk assessment and valuation
methods to our trade and other receivables under IFRS 9, Financial Instruments, which establishes a single forward-looking
expected loss impairment model.
We measure the loss allowance for a financial
instrument at an amount equal to the lifetime expected credit losses if the credit risk on the financial instrument has increased significantly
since initial recognition. The objective of the impairment requirements is to recognize lifetime expected credit losses for all financial
instruments for which there have been significant increases in credit risk since initial recognition – whether assessed on an individual
or collective basis – considering all reasonable and supportable information, including that which is forward-looking.
At each reporting date, our management assesses
whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, management
uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount
of expected credit losses. To make that assessment, management compares the risk of a default occurring on the financial instrument as
at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider
reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in
credit risk since initial recognition.
Allowance for credit losses is maintained at an
amount considered adequate to absorb the expected credit losses. Such allowance for credit losses reflects our management's best estimate
of changes in the credit risk on our financial instruments and judgments about economic conditions. The assessment of allowance for credit
losses is a complex process, particularly on a looking-forward basis; which involves a significant degree of judgment and a high level
of estimation uncertainty. The input factors include the assessment of the credit risk of our financial instruments, legal rights and
obligations under all the contracts and the expected future cash flows from the financial instruments, which include inventories, mortgages
and other credit enhancement instruments. The major source of estimation uncertainty relates to the likelihood of the various scenarios
under which different amounts are expected to be recovered through the security in place on the financial assets. The expected future
cash flows are projected under different scenarios and weighted by probability, which involves the exercise of significant judgment. Estimates
and judgments could change in the near-term and could result in a significant change to a recognized allowance.
Interests in Resource Properties and Reserve
Estimates
We had interests in resource properties mainly
comprised of an iron ore royalty interest, and to a lesser extent, hydrocarbon properties, with an aggregate carrying amount of $248.7
million as at June 30, 2022.
Generally, estimation of reported recoverable
quantities of proved and probable reserves of resource properties include judgmental assumptions regarding production profile, prices
of products produced, exchange rates, remediation costs, timing and amount of future development costs and production, transportation
and marketing costs for future cash flows. It also requires interpretation of geological and geophysical models and anticipated recoveries.
The economical, geological and technical factors used to estimate reserves may change from period to period. Changes in reported reserves
can impact the carrying amounts of our interests in resource properties and/or related property, plant and equipment, the recognition
of impairment losses and reversal of impairment losses, the calculation of depletion and depreciation, the provision for decommissioning
obligations and the recognition of deferred income tax assets or liabilities due to changes in expected future cash flows. The recoverable
quantities of reserves and estimated cash flows from our hydrocarbon interests are independently evaluated by reserve engineers at least
annually. In the first half of 2022, we did not recognize any impairment in respect of our interests in resource properties.
Our iron ore reserves are estimates of the amount
of product that can be economically and legally extracted from our mining properties. Reserve and resource estimates are an integral component
in the determination of the commercial viability of our interest in the iron ore mine, amortization calculations and impairment analyses.
In calculating reserves and resources, estimates and assumptions are required about a range of geological, technical and economic factors,
including quantities, grades, production techniques, production decline rates, recovery rates, production costs, commodity demand, commodity
prices and exchange rates. In addition, future changes in regulatory environments, including government levies or changes in our rights
to exploit the resource imposed over the producing life of the reserves and resources may also significantly impact estimates.
Our hydrocarbon reserves represent the estimated
quantities of petroleum, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified
degree of certainty to be economically recoverable in future years from known reservoirs and which are considered commercially producible.
Such reserves may be considered commercially producible if management has the intention of developing and producing them and such intention
is based upon: (a) a reasonable assessment of the future economics of such production; (b) a reasonable expectation that there
is a market for all or substantially all the expected hydrocarbon production; and (c) evidence that the necessary production, transmission
and transportation facilities are available or can be made available. Reserves may only be considered proven and probable if producibility
is supported by either production or conclusive formation tests.
Included in interests in resource properties as
at June 30, 2022, were exploration and evaluation assets with an aggregate carrying amount of $17.0 million. Exploration and evaluation
assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset
may exceed its recoverable amount and upon reclassification to hydrocarbon development and production assets. If such indicators exist,
impairment, if any, is determined by comparing the carrying amounts to the recoverable amounts. The measurement of the recoverable amount
involves a number of assumptions, including the timing, likelihood and amount of commercial production, further resource assessment plans
and future revenue and costs expected from the asset, if any.
Please see Note 12 to our audited consolidated
financial statements for the year ended December 31, 2021 for further information.
Impairment of Other Non-Financial Assets
We had property, plant and equipment aggregating
$47.7 million as at June 30, 2022, consisting mainly of a power plant and a natural gas processing facility. Impairment of our non-financial
assets is evaluated at the CGU level. In testing for impairment, the recoverable amounts of the Company's CGUs are determined as the higher
of their values in use and fair values less costs of disposal. In the absence of quoted market prices, the recoverable amount is based
on estimates of future production rates, future product selling prices and costs, discount rates and other relevant assumptions. Increases
in future costs and/or decreases in estimates of future production rates and product selling prices may result in a write-down of our
property, plant and equipment. Please see Note 11 to our audited consolidated financial statements for the year ended December 31,
2021 for further information.
Taxation
We are subject to tax in a number of jurisdictions
and judgment is required in determining the worldwide provision for income taxes. Deferred income taxes are recognized for temporary differences
using the liability method, with deferred income tax liabilities generally being provided for in full (except for taxable temporary differences
associated with investments in subsidiaries and branches where we are able to control the timing of the reversal of the temporary differences
and it is probable that the temporary differences will not reverse in the foreseeable future) and deferred income tax assets being recognized
to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized.
Our operations and organization structures are
complex, and related tax interpretations, regulations and legislation are continually changing. The income tax filings of the companies
in our group are subject to audit by taxation authorities in numerous jurisdictions. There are audits in progress and items under review,
some of which may increase our income tax liabilities. In addition, the companies have filed appeals and have disputed certain issues.
While the results of these items cannot be ascertained at this time, we believe that we have an adequate provision for income taxes based
on available information.
We recognized deferred income tax assets of $9.2
million as at June 30, 2022. In assessing the realizability of deferred income tax assets, our management considers whether it is
probable that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax
assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible or
before tax loss and tax credit carry-forwards expire. Our management considers the future reversals of existing taxable temporary differences,
projected future taxable income, taxable income in prior years and tax planning strategies in making this assessment. Unrecognized deferred
income tax assets are reassessed at the end of each reporting period.
We provide for future income tax liabilities in
respect of uncertain tax positions where additional income tax may become payable in future periods and such provisions are based on our
management's assessment of exposure. We did not recognize the full deferred tax liability on taxable temporary differences associated
with investments in subsidiaries and branches where we are able to control the timing of the reversal of the temporary differences and
it is probable that the temporary differences will not reverse in the foreseeable future. We may change our investment decision in the
normal course of our business, thus resulting in additional income tax liabilities.
Contingencies
Pursuant to IAS 37, Provisions, Contingent
Liabilities and Contingent Assets, we do not recognize a contingent liability. By their nature, contingencies will only be resolved
when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant
judgment and estimates of the outcome of future events. If it becomes probable that an outflow of future economic benefits will be required
for an item previously accounted for as a contingent liability, an accrual or a provision is recognized in the consolidated financial
statements in the period in which the change in probability occurs. See Note 23 to our audited consolidated financial statements for the
year ended December 31, 2021 and Note 9 to our condensed consolidated financial statements for the six months ended June 30,
2022 for further information.
New Standards and Interpretations Adopted
and Not Yet Adopted
In January 2020, the IASB issued the final
amendments in Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) which affect the presentation of liabilities
in the statement of financial position. The amendments clarify that the classification of liabilities as current or non-current should
be based on rights that are in existence at the end of the reporting period and align the wording in all affected paragraphs to refer
to the "right" to defer settlement by at least twelve months and make explicit that only rights in place "at the end of
the reporting period" should affect the classification of a liability; clarify that classification is unaffected by expectations
about whether an entity will exercise its right to defer settlement of a liability; and make clear that settlement refers to the transfer
to the counterparty of cash, equity instruments, other assets or services. The changes in Classification of Liabilities as Current
or Non-current — Deferral of Effective Date (Amendment to IAS 1) defers the effective date of the January 2020 Classification
of Liabilities as Current or Non-Current (Amendments to IAS 1) to annual reporting periods beginning on or after January 1, 2024.
Management does not expect that there will be material effects from these amendments on the Group's consolidated financial statements.
In February 2021, the IASB issued narrow-scope
amendments to IAS 1, Presentation of Financial Statements, IFRS Practice Statement 2, Making Materiality Judgements,
and IAS 8. The amendments are effective for annual periods beginning on or after January 1, 2023, although earlier application is
permitted. The amendments will require the disclosure of material accounting policy information rather than disclosing significant accounting
policies and clarifies how to distinguish changes in accounting policies from changes in accounting estimates. Management has chosen to
adopt these amendments on January 1, 2023 and does not expect that there will be material effects from these amendments on the Group's
consolidated financial statements.
In May 2021, the IASB issued targeted amendments
to IAS 12, Income Taxes. The amendments are effective for annual periods beginning on or after January 1, 2023, although
earlier application is permitted. With a view to reducing diversity in reporting, the amendments will clarify that companies are required
to recognize deferred taxes on transactions where equal assets and liabilities are recognized, such as leases and asset retirement (decommissioning)
obligations. Management is currently assessing the impacts of the amended standard and does not expect that there will be material effects
from these amendments on the Group's consolidated financial statements.
Transactions with Related Parties
In the normal course of operations, we enter into
transactions with related parties, which include affiliates in which we have a significant equity interest (10% or more) or have the ability
to influence their operating and financing policies through significant shareholding, representation on the board of directors, corporate
charter and/or bylaws. The related parties also include, among other things, the Company's directors, Chairman, President, Chief Executive
Officer and Chief Financial Officer. This section does not include disclosure, if any, respecting open market transactions, whereby a
related party acts as an investor of the Company's publicly traded securities or the bonds of a subsidiary.
| | |
Six Months Ended | |
| | |
June 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
(In thousands) | |
| Dividends income | |
$ | 198 | | |
$ | 198 | |
| Interest income | |
| - | | |
| 46 | |
| Royalty expenses | |
| (372 | ) | |
| (369 | ) |
| Fee expenses | |
| (59 | ) | |
| - | |
| (Reimbursements) recovery of expenses, primarily including employee benefits and lease and office expenses | |
| (774 | ) | |
| 78 | |
From time to time we have entered into arrangements
with a company controlled by our Chairman to assist us to comply with various local regulations and requirements, including the newly
introduced economic substance legislation for offshore jurisdictions, as well as fiscal efficiency. These arrangements are utilized to
aid in the divestment of financially or otherwise distressed or insolvent assets or businesses that are determined to be unsuitable for
our ongoing operations. These arrangements are implemented at cost and no economic benefit is received by, or accrued, by our Chairman
or the company controlled by him. Pursuant to this arrangement, as at June 30, 2022, we held: (i) an indemnification asset of
$6.8 million relating to a secured indemnity provided by such company to our subsidiary to comply with local regulations and requirements,
in an amount equal to the amount advanced to it, for certain short-term intercompany balances involving certain of our subsidiaries and
another subsidiary that was put into dissolution by us in 2019; (ii) a loan to such company of $0.8 million, bearing interest at
6.3%, which was made in the year ended December 31, 2019 in order to facilitate the acquisition of securities for our benefit; and
(iii) current account receivables of $47.4 million. We also had current account payables of $26,000 due to the aforesaid affiliate
as at June 30, 2022.
In addition, pursuant to this arrangement, during
the six months ended June 30, 2022 and 2021, respectively, we reimbursed and recovered such company $0.8 million and $0.1 million
(as set forth in the table above), respectively, at cost for expenses, primarily consisting of employee benefits and lease and office
expenses.
As set forth in the table above, we had royalty
expenses of $0.4 million during each of the six months ended June 30, 2022 and 2021 that were paid to a company in which we hold
a minority interest and that is a subsidiary of the operator of the underlying mine.
Financial and Other Instruments
We are exposed to various market risks from changes
in interest rates, foreign currency exchange rates and equity prices that may affect our results of operations and financial condition
and, consequently, our fair value. Generally, our management believes that our current financial assets and financial liabilities, due
to their short-term nature, do not pose significant financial risks. We use various financial instruments to manage our exposure to various
financial risks. The policies for controlling the risks associated with financial instruments include, but are not limited to, standardized
company procedures and policies on matters such as hedging of risk exposures, avoidance of undue concentration of risk and requirements
for collateral (including letters of credit) to mitigate credit risk. We have risk managers to perform audits and checking functions to
ensure that company procedures and policies are complied with.
We use derivative instruments to manage certain
exposures to commodity price and currency exchange rate risks. The use of derivative instruments depends on our management's perception
of future economic events and developments. These types of derivatives are often very volatile, as they are highly leveraged, given that
margin requirements are relatively low in proportion to their notional amounts.
Many of our strategies, including the use of derivative
instruments and the types of derivative instruments selected by us, are based on historical trading patterns and correlations and our
management's expectations of future events. However, these strategies may not be fully effective in all market environments or against
all types of risks. Unexpected market developments may affect our risk management strategies during this time, and unanticipated developments
could impact our risk management strategies in the future. If any of the variety of instruments and strategies we utilize are not effective,
we may incur losses.
Please refer to Note 26 of our audited consolidated
financial statements for the year ended December 31, 2021, for a qualitative and quantitative discussion of our exposure to market
risks and the sensitivity analysis of interest rate, currency and other price risks at December 31, 2021.
Outstanding Share Data
Our share capital consists of US$450,000 divided
into 300,000,000 Common Shares and 150,000,000 preference shares divided into US$0.001 par value each. Our Common Shares are listed on
the New York Stock Exchange under the ticker symbol "SRL". As of June 30, 2022, we had 14,822,251 Common Shares and 1,958,873
stock options issued and outstanding.
Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures
designed to ensure that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified
in provincial securities legislation. We evaluated our disclosure controls and procedures as defined under National Instrument 52-109
– Certification of Disclosure in Issuers, referred to as "NI 52-109", as at June 30, 2022. This evaluation
was performed by our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
We maintain internal controls over financial reporting
that have been designed to provide reasonable assurance of the reliability of external financial reporting in accordance with IFRS.
Management, including our then Chief Executive
Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as
of December 31, 2021. In conducting this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).
There were no changes in our internal control
over financial reporting that occurred during the six months ended June 30, 2022 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting has
inherent limitations and is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management
override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis
by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.
Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Legal Proceedings
We are subject to routine litigation incidental
to our business and are named from time to time as a defendant in various legal actions arising in connection with our activities, certain
of which may include large claims for punitive damages. Further, due to the size, complexity and nature of our operations, various legal
and tax matters are outstanding from time to time, including audits and reassessments including relating to our former affiliates, and
litigation related thereto.
The Company and certain subsidiaries have been
named as defendants in a legal action relating to a guarantee of the former parent of the Group. Management believes that such claim is
without merit and intends to vigorously defend such claim. Currently, based upon the information available to management, management does
not believe that there will be a material adverse effect on the Group's financial position or results of operations as a result of this
action. However, due to the inherent uncertainty of litigation, the Company cannot provide certainty as to the outcome. The claim
amounted to approximately $122.5 million (€91.0 million) as at June 30, 2022, compared to $131.0 million (€91.0 million)
as at December 31, 2021.
Currently, based upon information available to
us, we do not believe any such matters would have a material adverse effect upon our financial condition or results of operations as at
June 30, 2022. However, due to the inherent uncertainty of litigation, we cannot provide certainty as to their outcome. If our current
evaluations are materially incorrect or if we are unable to resolve any of these matters favourably, there may be a material adverse impact
on our financial performance, cash flows or results of operations. Please see Note 23 to our audited consolidated financial statements
for the year ended December 31, 2021 and Note 9 to our condensed consolidated financial statements for the six months ended June 30,
2022 for further information.
Risk Factors
Statements in this report that are not reported
financial results or other historical information are "forward-looking statements" within the meaning of applicable securities
legislation including the Private Securities Litigation Reform Act of 1995, as amended. These statements appear in a number of
different places in this report and can be identified by words such as "anticipate", "could", "project",
"should", "expect", "seek", "may", "intend", "likely", "will", "plan",
"estimate", "believe" and similar expressions suggesting future outcomes or statements regarding an outlook or their
negative or other comparable words. Also discussions of strategy that involve risks and uncertainties share this "forward-looking"
character.
There are a number of important factors, many
of which are beyond our control, that could harm our business, operating or financial condition or that could cause actual conditions,
events or results to differ significantly from those described in the forward-looking statements. These factors include, but are not limited
to, the following:
| - | our financial results may fluctuate substantially from period to period; |
| - | a weakening of the global economy, including capital and credit markets, could adversely affect our business
and financial results and have a material adverse effect on our liquidity and capital resources; |
| - | we are subject to global economic, market and business risks with respect to the current COVID-19 pandemic; |
| - | our business is highly competitive; |
| - | if we are unable to compete effectively with our competitors, our business and results of operations will
be adversely affected; |
| - | our earnings and, therefore, our profitability may be affected by price volatility in our various products; |
| - | we may face a lack of suitable acquisition, merger or other proprietary investment candidates, which may
limit our growth; |
| - | the operation of the iron ore mine underlying our royalty interest is generally determined by a third-party
operator and we currently have no decision-making power as to how the property is operated. In addition, we have no or very limited access
to technical or geological data respecting the mine, including as to mineralization or reserves. The operator's failure to perform or
other operating decisions could have a material adverse effect on our revenue, results of operations and financial condition; |
| - | our activities are subject to counterparty risks associated with the performance of obligations by our
counterparties; |
| - | we are subject to transaction risks that may have a material adverse effect on our business, results of
operations, financial condition and cash flow; |
| - | our risk management strategies may leave us exposed to unidentified or unanticipated risks that could
impact our risk management strategies in the future and could negatively affect our results of operations and financial condition; |
| - | if the fair values of our long-lived assets or their recoverable amounts fall below our carrying values,
we would be required to record non-cash impairment losses that could have a material impact on our results of operations; |
| - | derivative transactions may expose us to unexpected risk and potential losses; |
| - | the operations of our banking subsidiary are subject to regulation, which could adversely affect our business
and operations; |
| - | any failure to remain in compliance with sanctions, anti-money laundering laws or other applicable regulations
in the jurisdictions in which we operate could harm our reputation and/or cause us to become subject to fines, sanctions or legal enforcement,
which could have an adverse effect on our business, financial condition and results of operations; |
| - | fluctuations in interest rates and foreign currency exchange rates may affect our results of operations
and financial condition; |
| - | some of our operations are subject to environmental laws and regulations that may increase the costs of
doing business and may restrict such operations; |
| - | limitations on our access to capital could impair our liquidity and our ability to conduct our business; |
| - | we may substantially increase our debt in the future; |
| - | as a result of our global operations, we are exposed to political, economic, legal, operational and other
risks that could adversely affect our business, results of operations, financial condition and cash flow; |
| - | we are exposed to litigation risks in our business that are often difficult to assess or quantify and
we could incur significant legal expenses every year in defending against litigation; |
| - | we rely significantly on the skills and experience of our executives and the loss of any of these individuals
may harm our business; |
| - | we conduct business in countries with a history of corruption and transactions with foreign governments
and doing so increases the risks associated with our international activities; |
| - | our hydrocarbon and related operations are subject to inherent risks and hazards; |
| - | future environmental and reclamation obligations respecting our resource properties and interests may
be material; |
| - | strategic investments or acquisitions and joint ventures, or our entry into new business areas, may result
in additional risks and uncertainties in our business; |
| - | tax audits or disputes, or changes in the tax laws applicable to us, could materially increase our tax
payments; |
| - | restrictions on the remittance of Renminbi into and out of China and governmental control of currency
conversion may limit our ability to pay dividends and other obligations, and affect the value of your investment; |
| - | failures or security breaches of our information technology systems could disrupt our operations and negatively
impact our business; |
| - | investors' interests may be diluted and investors may suffer dilution in their net book value per share
if we issue additional shares or raise funds through the sale of equity securities; |
| - | certain factors may inhibit, delay or prevent a takeover of our company, which may adversely affect the
price of our common shares; and |
| - | investors may face difficulties in protecting their interests, and their ability to protect their rights
through United States courts may be limited, because we are incorporated under Cayman Islands law. |
Additional Information
We file annual and other reports, proxy statements
and other information with certain Canadian securities regulatory authorities and with the SEC in the United States. The documents filed
with the SEC are available to the public from the SEC's website at http://www.sec.gov. The documents filed with the Canadian securities
regulatory authorities are available at http://www.sedar.com.
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2022
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Scully Royalty Ltd.'s auditors have not reviewed
the unaudited financial statements for the period ended June 30, 2022.
NOTICE TO READER OF THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The preparation of the accompanying interim condensed
consolidated statements of financial position of Scully Royalty Ltd. as at June 30, 2022 and the related condensed consolidated statements
of operations, comprehensive income, changes in equity and cash flows for the six months ended June 30, 2022 is the responsibility
of management. These condensed consolidated financial statements have not been reviewed on behalf of the shareholders by the independent
external auditors of Scully Royalty Ltd.
The interim condensed consolidated financial statements
have been prepared by management and include the selection of appropriate accounting principles, judgments and estimates necessary to
prepare these financial statements in accordance with IFRS.
SCULLY ROYALTY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(Unaudited)
(Canadian Dollars in Thousands)
| | |
June 30,
2022 | | |
December 31,
2021 | |
| ASSETS | |
| | | |
| | |
| Current Assets | |
| | | |
| | |
| Cash | |
$ | 61,172 | | |
$ | 54,873 | |
| Securities | |
| 17,074 | | |
| 19,256 | |
| Trade receivables | |
| 3,836 | | |
| 4,164 | |
| Tax receivables | |
| 705 | | |
| 1,092 | |
| Other receivables | |
| 63,105 | | |
| 64,446 | |
| Inventories | |
| 992 | | |
| 1,100 | |
| Restricted cash | |
| 233 | | |
| 142 | |
| Deposits, prepaid and other | |
| 1,172 | | |
| 581 | |
| Total current assets | |
| 148,289 | | |
| 145,654 | |
| Non-current Assets | |
| | | |
| | |
| Securities | |
| 3,427 | | |
| 3,625 | |
| Real estate held for sale | |
| 12,041 | | |
| 12,867 | |
| Investment property | |
| 30,052 | | |
| 34,430 | |
| Property, plant and equipment | |
| 47,715 | | |
| 49,065 | |
| Interests in resource properties | |
| 248,665 | | |
| 254,706 | |
| Deferred income tax assets | |
| 9,157 | | |
| 9,619 | |
| Total non-current assets | |
| 351,057 | | |
| 364,312 | |
| | |
$ | 499,346 | | |
$ | 509,966 | |
| LIABILITIES AND EQUITY | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Account payables and accrued expenses | |
$ | 12,443 | | |
$ | 11,346 | |
| Income tax liabilities | |
| 5,361 | | |
| 1,002 | |
| Total current liabilities | |
| 17,804 | | |
| 12,348 | |
| Long-term Liabilities | |
| | | |
| | |
| Bonds payable | |
| 33,035 | | |
| 35,227 | |
| Loan payable | |
| 7,105 | | |
| 6,817 | |
| Decommissioning obligations | |
| 12,949 | | |
| 15,096 | |
| Deferred income tax liabilities | |
| 66,511 | | |
| 67,461 | |
| Other | |
| 345 | | |
| 483 | |
| Total long-term liabilities | |
| 119,945 | | |
| 125,084 | |
| Total liabilities | |
| 137,749 | | |
| 137,432 | |
| Equity | |
| | | |
| | |
| Capital stock, fully paid | |
| 19 | | |
| 19 | |
| Additional paid-in capital | |
| 313,070 | | |
| 312,468 | |
| Treasury stock | |
| (2,643 | ) | |
| (2,643 | ) |
| Contributed surplus | |
| 18,792 | | |
| 18,988 | |
| Retained earnings | |
| 4,383 | | |
| 9,078 | |
| Accumulated other comprehensive income | |
| 20,882 | | |
| 27,690 | |
| Shareholders' equity | |
| 354,503 | | |
| 365,600 | |
| Non-controlling interests | |
| 7,094 | | |
| 6,934 | |
| Total equity | |
| 361,597 | | |
| 372,534 | |
| | |
$ | 499,346 | | |
$ | 509,966 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
SCULLY ROYALTY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2022
and 2021
(Unaudited)
(Canadian Dollars in Thousands, Except Per Share
Amounts)
| | |
2022 | | |
2021 | |
| Revenue | |
$ | 36,077 | | |
$ | 46,766 | |
| | |
| | | |
| | |
| Costs and expenses: | |
| | | |
| | |
| Costs of sales and services | |
| 15,835 | | |
| 20,969 | |
| Selling, general and administrative | |
| 11,124 | | |
| 9,821 | |
| Finance costs | |
| 929 | | |
| 953 | |
| Impairment loss on property, plant and equipment | |
| 402 | | |
| - | |
| Exchange differences on foreign currency transactions, net gain | |
| (2,999 | ) | |
| (1,249 | ) |
| | |
| 25,291 | | |
| 30,494 | |
| | |
| | | |
| | |
| Income before income taxes | |
| 10,786 | | |
| 16,272 | |
| Income tax expense | |
| | | |
| | |
| Income taxes | |
| (3,369 | ) | |
| (620 | ) |
| Resource property revenue taxes | |
| (3,536 | ) | |
| (6,259 | ) |
| | |
| (6,905 | ) | |
| (6,879 | ) |
| Net income for the period | |
| 3,881 | | |
| 9,393 | |
| | |
| | | |
| | |
| Net loss attributable to non-controlling interests | |
| 31 | | |
| 365 | |
| Net income attributable to owners of the parent company | |
$ | 3,912 | | |
$ | 9,758 | |
| | |
| | | |
| | |
| Earnings per share | |
| | | |
| | |
| Basic | |
$ | 0.26 | | |
$ | 0.66 | |
| Diluted | |
$ | 0.26 | | |
$ | 0.65 | |
| | |
| | | |
| | |
| Weighted average number of common shares outstanding | |
| | | |
| | |
| — basic | |
| 14,799,801 | | |
| 14,779,302 | |
| — diluted | |
| 14,882,705 | | |
| 14,918,941 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
SCULLY ROYALTY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
(LOSS) INCOME
For the Six Months Ended June 30, 2022
and 2021
(Unaudited)
(Canadian Dollars in Thousands)
| | |
2022 | | |
2021 | |
| Net income for the period | |
$ | 3,881 | | |
$ | 9,393 | |
| Other comprehensive loss, net of income taxes: | |
| | | |
| | |
| Items that will be reclassified subsequently to profit or loss | |
| | | |
| | |
| Exchange differences arising from translating financial statements of foreign operations | |
| (6,346 | ) | |
| (6,594 | ) |
| Net exchange difference | |
| (6,346 | ) | |
| (6,594 | ) |
| Fair value loss on securities at fair value through other comprehensive income | |
| (291 | ) | |
| (23 | ) |
| (Reversal of) reclassification of impairment charge to statements of operations | |
| (1 | ) | |
| 23 | |
| Net fair value loss on securities at fair value through other comprehensive income | |
| (292 | ) | |
| - | |
| | |
| (6,638 | ) | |
| (6,594 | ) |
| Total comprehensive (loss) income for the period | |
| (2,757 | ) | |
| 2,799 | |
| Comprehensive (income) loss attributable to non-controlling interests | |
| (139 | ) | |
| 527 | |
| Comprehensive (loss) income attributable to owners of the parent company | |
$ | (2,896 | ) | |
$ | 3,326 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
SCULLY ROYALTY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY
For the Six Months Ended June 30, 2022
and 2021
(Unaudited)
(Canadian Dollars in Thousands)
| | |
Capital
Stock | | |
Treasury
Stock | | |
Contributed
Surplus | | |
| | |
Accumulated Other
Comprehensive
Income (Loss) | | |
| | |
| | |
| |
| | |
Number
of Shares | | |
Amount | | |
Number
of Shares | | |
Amount | | |
Share-based
Compensation | | |
Retained
Earnings | | |
Securities
at Fair
Value Through
Other
Comprehensive
Income | | |
Currency
Translation
Adjustment | | |
Shareholders'
Equity | | |
Non-controlling
Interests | | |
Total
Equity | |
| Balance at December 31, 2021 | |
| 14,856,581 | | |
$ | 312,487 | | |
| (77,279 | ) | |
$ | (2,643 | ) | |
$ | 18,988 | | |
$ | 9,078 | | |
$ | 70 | | |
$ | 27,620 | | |
$ | 365,600 | | |
$ | 6,934 | | |
$ | 372,534 | |
| Net income (loss) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,912 | | |
| - | | |
| - | | |
| 3,912 | | |
| (31 | ) | |
| 3,881 | |
| Collection of share subscription
receivables from non-controlling interests | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 21 | | |
| 21 | |
| Exercises of stock options | |
| 42,949 | | |
| 602 | | |
| - | | |
| - | | |
| (196 | ) | |
| - | | |
| - | | |
| - | | |
| 406 | | |
| - | | |
| 406 | |
| Cash dividends paid | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (8,607 | ) | |
| - | | |
| - | | |
| (8,607 | ) | |
| - | | |
| (8,607 | ) |
| Net fair value loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (292 | ) | |
| - | | |
| (292 | ) | |
| - | | |
| (292 | ) |
| Net exchange
differences | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (6,516 | ) | |
| (6,516 | ) | |
| 170 | | |
| (6,346 | ) |
| Balance at June 30, 2022 | |
| 14,899,530 | | |
$ | 313,089 | | |
| (77,279 | ) | |
$ | (2,643 | ) | |
$ | 18,792 | | |
$ | 4,383 | | |
$ | (222 | ) | |
$ | 21,104 | | |
$ | 354,503 | | |
$ | 7,094 | | |
$ | 361,597 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at December 31, 2020 | |
| 12,620,448 | | |
$ | 312,487 | | |
| (65,647 | ) | |
$ | (2,643 | ) | |
$ | 16,627 | | |
$ | 1,378 | | |
$ | (92 | ) | |
$ | 33,787 | | |
$ | 361,544 | | |
$ | 7,180 | | |
$ | 368,724 | |
| Net income (loss) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 9,758 | | |
| - | | |
| - | | |
| 9,758 | | |
| (365 | ) | |
| 9,393 | |
| Shares issued from stock dividends | |
| 1,135,729 | | |
| - | | |
| (5,908 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Forfeiture of stock options | |
| - | | |
| - | | |
| - | | |
| - | | |
| (136 | ) | |
| 136 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Net exchange
differences | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (6,432 | ) | |
| (6,432 | ) | |
| (162 | ) | |
| (6,594 | ) |
| Balance at June 30, 2021 | |
| 13,756,177 | | |
$ | 312,487 | | |
| (71,555 | ) | |
$ | (2,643 | ) | |
$ | 16,491 | | |
$ | 11,272 | | |
$ | (92 | ) | |
$ | 27,355 | | |
$ | 364,870 | | |
$ | 6,653 | | |
$ | 371,523 | |
| Total comprehensive (loss) income for the six months
ended June 30: | |
Owners
of
the Parent Company | | |
Non-controlling
Interests | | |
Total | |
| 2022 | |
$ | (2,896 | ) | |
$ | 139 | | |
$ | (2,757 | ) |
| 2021 | |
$ | 3,326 | | |
$ | (527 | ) | |
$ | 2,799 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
SCULLY ROYALTY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2022
and 2021
(Unaudited)
(Canadian Dollars in Thousands)
| | |
2022 | | |
2021 | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net income for the period | |
$ | 3,881 | | |
$ | 9,393 | |
| Adjustments for: | |
| | | |
| | |
| Amortization, depreciation and depletion | |
| 5,307 | | |
| 6,128 | |
| Exchange differences on foreign currency transactions | |
| (2,999 | ) | |
| (1,249 | ) |
| Loss on securities | |
| 502 | | |
| 346 | |
| Loss on derivatives | |
| - | | |
| 3,461 | |
| Deferred income taxes | |
| (972 | ) | |
| 598 | |
| Interest accretion | |
| 210 | | |
| 138 | |
| Fair value loss on a loan payable measured at FVTPL | |
| 176 | | |
| 1,177 | |
| Reversal of credit losses | |
| (1 | ) | |
| (4 | ) |
| Impairment loss on property, plant and equipment | |
| 402 | | |
| - | |
| Write-offs of a provision | |
| - | | |
| (390 | ) |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Short term securities | |
| 476 | | |
| (3,098 | ) |
| Receivables | |
| 2,455 | | |
| (19,244 | ) |
| Restricted cash | |
| (104 | ) | |
| (4,715 | ) |
| Inventories | |
| 112 | | |
| 9 | |
| Deposits, prepaid and other | |
| (623 | ) | |
| (1,205 | ) |
| Account payables and accrued expenses | |
| 1,609 | | |
| 2,750 | |
| Income tax liabilities | |
| 4,414 | | |
| 44 | |
| Other | |
| (261 | ) | |
| 126 | |
| Cash flows provided by (used in) operating activities | |
| 14,584 | | |
| (5,735 | ) |
| Cash flows from investing activities: | |
| | | |
| | |
| Purchases of property, plant and equipment, net | |
| (310 | ) | |
| (14 | ) |
| Proceeds from sale of investment property | |
| 2,238 | | |
| 11 | |
| Cash flows provided by (used in) investing activities: | |
| 1,928 | | |
| (3 | ) |
| Cash flows from financing activities: | |
| | | |
| | |
| Reductions in lease liabilities | |
| (173 | ) | |
| (228 | ) |
| Dividends paid | |
| (8,607 | ) | |
| - | |
| Exercises of stock options | |
| 406 | | |
| - | |
| Collection of share subscription receivables from non-controlling interests | |
| 21 | | |
| - | |
| Cash flows used in financing activities | |
| (8,353 | ) | |
| (228 | ) |
| Exchange rate effect on cash and cash equivalents | |
| (1,860 | ) | |
| (1,992 | ) |
| Increase (decrease) in cash | |
| 6,299 | | |
| (7,958 | ) |
| Cash, beginning of period | |
| 54,873 | | |
| 63,552 | |
| Cash, end of period | |
$ | 61,172 | | |
$ | 55,594 | |
| | |
| | | |
| | |
| Represented by: | |
| | | |
| | |
| Cash | |
| 60,172 | | |
| 55,594 | |
| Cash-in-transit | |
| 1,000 | | |
| - | |
| | |
$ | 61,172 | | |
$ | 55,594 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 1. Nature of Business
Scully Royalty Ltd. ("Scully" or the
"Company") is incorporated under the laws of the Cayman Islands. Scully and the entities it controls are collectively known
as the "Group" in these consolidated financial statements. The Groups's core asset is a 7% net revenue royalty interest in the
Scully iron ore mine in Newfoundland & Labrador, Canada. Scully is listed on the New York Stock Exchange under the symbol SRL.
The Company's primary business office is Suite 803, 11 Duddell Street, Dina House, Ruttonjee Centre, Central, Hong Kong SAR China.
Note 2. Basis of Presentation and Summary of Significant Accounting
Policies
Basis of Presentation
These condensed consolidated financial statements
include the accounts of Scully and entities it controls. The presentation currency of these condensed consolidated financial statements
is the Canadian dollar ($), as rounded to the nearest thousand (except per share amounts). References to "US$" herein are to
United States dollars.
This interim financial report has been prepared
by Scully in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting
Standards Board (the "IASB"). The Group's interim financial statements for the six months ended June 30, 2022 are in compliance
with IAS 34, Interim Financial Reporting ("IAS 34"). Except those accounting changes in 2022 as indicated in Note
3, the same accounting policies and methods of computation are followed in these interim consolidated financial statements as compared
with the most recent annual consolidated financial statements. In accordance with IAS 34, certain information and footnote disclosure
normally included in annual consolidated financial statements have been omitted or condensed.
The measurement procedures to be followed in an
interim financial report are designed to ensure that the resulting information is reliable and that all material financial information
that is relevant to an understanding of the financial position or performance of the Group is appropriately disclosed. While measurements
in both annual and interim financial reports are often based on reasonable estimates, the preparation of the interim financial report
generally requires a greater use of estimation methods than the annual financial report.
In the opinion of Scully, its unaudited interim
condensed consolidated financial statements contain all normal recurring adjustments necessary in order to present a fair statement of
the results of the interim periods presented. These interim consolidated financial statements should be read together with the audited
consolidated financial statements and the accompanying notes included in Scully 's latest annual report on Form 20-F. The results
for the periods presented herein are not indicative of the results for the entire year. The revenues from the Group's iron ore royalty
activities involve seasonality and cyclicality.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 3. Accounting Policy Developments
Accounting Changes in 2022
The Group has adopted the following amendments
to IFRS effective January 1, 2022. Management concluded that there were no material effects from these amendments on the Group’s
consolidated financial statements, unless otherwise explained.
In May 2020, the IASB issued amendments to
IAS 37, Provisions, Contingent Liabilities and Contingent Assets ("IAS 37"). The amendments clarify that for the purpose
of assessing whether a contract is onerous, the cost of fulfilling the contract includes both the incremental costs of fulfilling that
contract and an allocation of other costs that relate directly to fulfilling contracts.
In May 2020, the IASB issued further amendments
to IFRS 3, Business Combinations ("IFRS 3") which update references in IFRS 3 to the revised 2018 Conceptual Framework.
To ensure that this update in referencing does not change which assets and liabilities qualify for recognition in a business combination,
or create new Day 2 gains or losses, the amendments introduce new exceptions to the recognition and measurement principles in IFRS 3.
An acquirer should apply the definition of a liability in IAS 37, rather than the definition in the Conceptual Framework, to determine
whether a present obligation exists at the acquisition date as a result of past events. For a levy in the scope of IFRIC 21, Levies
("IFRIC 21"), the acquirer should apply the criteria in IFRIC 21 to determine whether the obligating event that gives rise to
a liability to pay the levy has occurred by the acquisition date. In addition, the amendments clarify that the acquirer should not recognize
a contingent asset at the acquisition date.
In May 2020, the IASB issued Property,
Plant and Equipment—Proceeds before Intended Use, which made amendments to IAS 16. The amendments prohibit a company from deducting
from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for
its intended use. Instead, a company will recognize such sales proceeds and related cost in profit or loss
In May 2020, the IASB issued Annual Improvements
to IFRS Standards 2018-2020 which contain an amendment to IFRS 9. The amendment clarifies which fees an entity includes when it applies
the "10 per cent" test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognize a financial liability. An entity includes
only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the
lender on the other's behalf.
Future Accounting Changes
In January 2020, the IASB issued the final
amendments in Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) which affect the presentation of liabilities
in the statement of financial position. The amendments clarify that the classification of liabilities as current or non-current should
be based on rights that are in existence at the end of the reporting period and align the wording in all affected paragraphs to refer
to the "right" to defer settlement by at least twelve months and make explicit that only rights in place "at the end of
the reporting period" should affect the classification of a liability; clarify that classification is unaffected by expectations
about whether an entity will exercise its right to defer settlement of a liability; and make clear that settlement refers to the transfer
to the counterparty of cash, equity instruments, other assets or services. The changes in Classification of Liabilities as Current
or Non-current — Deferral of Effective Date (Amendment to IAS 1) defers the effective date of the January 2020 Classification
of Liabilities as Current or Non-Current (Amendments to IAS 1) to annual reporting periods beginning on or after January 1, 2024.
Management does not expect that there will be material effects from these amendments on the Group's consolidated financial statements.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 3. Accounting Policy Developments (Continued)
In February 2021, the IASB issued narrow-scope
amendments to IAS 1, Presentation of Financial Statements, IFRS Practice Statement 2, Making Materiality Judgements,
and IAS 8. The amendments are effective for annual periods beginning on or after January 1, 2023, although earlier application is
permitted. The amendments will require the disclosure of material accounting policy information rather than disclosing significant accounting
policies and clarifies how to distinguish changes in accounting policies from changes in accounting estimates. Management has chosen to
adopt these amendments on January 1, 2023 and does not expect that there will be material effects from these amendments on the Group's
consolidated financial statements.
In May 2021, the IASB issued targeted amendments
to IAS 12, Income Taxes. The amendments are effective for annual periods beginning on or after January 1, 2023, although
earlier application is permitted. With a view to reducing diversity in reporting, the amendments will clarify that companies are required
to recognize deferred taxes on transactions where equal assets and liabilities are recognized, such as leases and asset retirement (decommissioning)
obligations. Management is currently assessing the impacts of the amended standard and does not expect that there will be material effects
from these amendments on the Group's consolidated financial statements.
Note 4. Business Segment Information
The Group's assets include its iron ore royalty,
financial services and other resource interests and other proprietary investments. In addition, the Group owns other merchant banking
assets and seeks to invest in businesses or assets whose intrinsic value is not properly reflected. The Group's investing activities are
generally not passive. The Group actively seeks investments where its financial expertise and management can add or unlock value.
The Group currently has three separate and independently
managed operating subgroups underneath its corporate umbrella. In reporting to management, the Group's operating results are currently
categorized into the following operating segments: Royalty, Industrial, Merchant Banking and All Other segments which include corporate
activities.
Basis of Presentation
In reporting segments, certain of the Group's
business lines have been aggregated where they have similar economic characteristics and are similar in each of the following areas: (a) the
nature of the products and services; (b) the methods of distribution; and (c) the types or classes of customers/clients for
the products and services.
The Group's Royalty segment includes an interest
in the Scully iron ore mine in the Province of Newfoundland and Labrador, Canada. The Group's Industrial segment includes multiple projects
in resources and services around the globe. It seeks opportunities to benefit from long-term industrial and services assets, including
natural gas, with a focus on East Asia. The Group's Merchant Banking segment has a subsidiary with its bonds listed on the Malta Stock
Exchange and comprises regulated merchant banking businesses with a focus on Europe. In addition, the Merchant Banking segment holds two
industrial real estate parks in Europe.
The All Other segment includes the Group's corporate
and small entities whose quantitative amounts do not exceed 10% of the Group's: (a) reported revenue; (b) net income; and (c) total
assets.
The accounting policies of the operating segments
are the same as those described in the summary of significant accounting policies in Note 2B to the Company's audited consolidated financial
statements for the year ended December 31, 2021. The chief operating decision maker evaluates performance on the basis of income
or loss from operations before income taxes and does not consider acquisition accounting adjustments in assessing the performance of the
Group's reporting segments. The segment information presented below is prepared according to the following methodologies: (a) revenue
and expenses directly associated with each segment are included in determining pre-tax earnings; (b) intersegment sales and transfers
are accounted for as if the sales or transfers were to third parties at current market prices; (c) certain selling, general and administrative
expenses paid by corporate, particularly incentive compensation and share-based compensation, are not allocated to reporting segments;
(d) all intercompany investments, receivables and payables are eliminated in the determination of each segment's assets and liabilities;
(e) deferred income tax assets and liabilities are not allocated; and (f) gains or losses on dispositions of subsidiaries which
include reclassification of realized cumulative translation adjustments from equity to profit or loss on disposals of subsidiaries, write-offs
of intercompany accounts, changes in intercompany account balances and cash used (received) in acquisition
(disposition) of a subsidiary are allocated to corporate and included within the Group's All Other segment.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 4. Business Segment Information
(Continued)
Segment Operating Results
| | |
Six Months ended June 30, 2022 | |
| | |
Royalty | | |
Industrial | | |
Merchant
Banking | | |
All Other | | |
Total | |
| Revenue from external customers | |
$ | 18,250 | | |
$ | 15,840 | | |
$ | 1,987 | | |
$ | - | | |
$ | 36,077 | |
| Intersegment sale | |
| - | | |
| 377 | | |
| 3,082 | | |
| - | | |
| 3,459 | |
| Interest expense | |
| - | | |
| 138 | | |
| 791 | | |
| - | | |
| 929 | |
| Income (loss) before income taxes | |
| 13,150 | | |
| 1,524 | | |
| 1,144 | | |
| (5,032 | ) | |
| 10,786 | |
| | |
Six Months ended June 30, 2021 | |
| | |
Royalty | | |
Industrial | | |
Merchant
Banking | | |
All Other | | |
Total | |
| Revenue from external customers | |
$ | 31,863 | | |
| 10,261 | | |
$ | 4,642 | | |
$ | - | | |
$ | 46,766 | |
| Intersegment sale | |
| - | | |
| 3,033 | | |
| 3,272 | | |
| 4,371 | | |
| 10,676 | |
| Interest expense | |
| 2 | | |
| 70 | | |
| 878 | | |
| 3 | | |
| 953 | |
| Income (loss) before income taxes | |
| 16,371 | | |
| (3,722 | ) | |
| 439 | | |
| 3,184 | | |
| 16,272 | |
Note 5. Consolidated Statements of Operations
Revenue
The Group's revenue comprised:
| Six months ended June 30: | |
2022 | | |
2021 | |
| Merchant banking products and services | |
$ | 29,235 | | |
$ | 41,665 | |
| Interest | |
| 2,884 | | |
| 314 | |
| Dividend income | |
| 198 | | |
| 205 | |
| Other, including medical and real estate sectors | |
| 3,760 | | |
| 4,582 | |
| Revenue | |
$ | 36,077 | | |
$ | 46,766 | |
During the six months ended June 30, 2022,
royalty revenue (which is included in the merchant banking products and services) from an iron mine operator represented approximately
50% of total revenue (2021: 68%).
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 5. Consolidated Statements of Operations
(Continued)
Expenses
The Group's costs of sales and services comprised:
| Six months ended June 30: | |
2022 | | |
2021 | |
| Merchant banking products and services | |
$ | 13,121 | | |
$ | 12,945 | |
| Reversal of credit losses | |
| (1 | ) | |
| (4 | ) |
| Loss on derivative contracts, net | |
| - | | |
| 3,461 | |
| Fair value loss on a loan payable measured at FVTPL | |
| 176 | | |
| 1,177 | |
| Other | |
| 2,539 | | |
| 3,390 | |
| Total costs of sales and services | |
$ | 15,835 | | |
$ | 20,969 | |
Note 6. Dividends Paid
During the six months ended June 30, 2022, the following dividends
were paid:
| (i) | a dividend of $0.25 (US$0.18) per common share which was paid in US dollars on March 4, 2022 to shareholders of record on February 21,
2022; and |
| (ii) | a dividend of $0.34 (US$0.27) per common share which was paid in US dollars on May 23, 2022 to shareholders of record on May 10,
2022. |
Note 7. Earnings Per Share
Earnings per share data for the six months ended
June 30, 2022 and 2021 are summarized as follows:
| | |
2022 | | |
2021 | |
| Basic income attributable to holders of common shares | |
$ | 3,912 | | |
$ | 9,758 | |
| Effect of dilutive securities: | |
| - | | |
| - | |
| Diluted income | |
$ | 3,912 | | |
$ | 9,758 | |
| | |
2022 | | |
2021 | |
| Weighted average number of common shares outstanding — basic | |
| 14,799,801 | | |
| 14,779,302 | |
| Effect of dilutive securities: | |
| | | |
| | |
| Options | |
| 82,904 | | |
| 139,639 | |
| Weighted average number of common shares outstanding — diluted | |
| 14,882,705 | | |
| 14,918,941 | |
Note 8. Related Party Transactions
In the normal course of operations, the Group
enters into transactions with related parties, which include affiliates in which the Group has a significant equity interest (10% or more)
or has the ability to influence their operating and financing policies through significant shareholding, representation on the board of
directors, corporate charter and/or bylaws. The related parties also include, among other things, the Company's directors, Chairman, President,
Chief Executive Officer and Chief Financial Officer. This section does not include disclosure, if any, respecting open market transactions,
whereby a related party acts as an investor of the Company's securities or the bonds of Merkanti Holding plc.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 8. Related Party Transactions (Continued)
The Group had the following transactions with
its related parties:
| Six months ended June 30: | |
2022 | | |
2021 | |
| Dividends income | |
$ | 198 | | |
$ | 198 | |
| Interest income | |
| - | | |
| 46 | |
| Royalty expenses | |
| (372 | ) | |
| (369 | ) |
| Fee expenses | |
| (59 | ) | |
| - | |
| (Reimbursements) recovery of expenses, primarily including employee benefits and lease and office expenses | |
| (774 | ) | |
| 78 | |
From time to time the Group has entered into arrangements
with a company controlled by the Group's Chairman to assist the Group to comply with various local regulations and requirements, including
the newly introduced economic substance legislation for offshore jurisdictions, as well as fiscal efficiency. These arrangements are utilized
to aid in the divestment of financially or otherwise distressed or insolvent assets or businesses that are determined to be unsuitable
for the Group's ongoing operations. These arrangements are implemented at cost and no economic benefit is received by, or accrued, by
the Group's Chairman or the company controlled by him. Pursuant to this arrangement, as at June 30, 2022, the Group held: (i) an
indemnification asset of $6,756 relating to a secured indemnity provided by such company to a subsidiary of the Group to comply with local
regulations and requirements, in an amount equal to the amount advanced to it, for certain short-term intercompany balances involving
certain of the Group's subsidiaries and another subsidiary that was put into dissolution by the Group in 2019; (ii) a loan to such
company of $827, bearing interest at 6.3%, which was made in the year ended December 31, 2019 in order to facilitate the acquisition
of securities for the Group's benefit; and (iii) current account receivables of $47,405. The Group also had current account payables
of $26 due to the aforesaid affiliate as at June 30, 2022.
In addition, pursuant to this arrangement, during
the six months ended June 30, 2022 and 2021, respectively, the Group reimbursed such company $774 and recovered $78 (as set forth
in the table above), respectively, at cost for expenses, primarily consisting of employee benefits and lease and office expenses.
As set forth in the table above, the Group had
royalty expenses of $372 and $369, respectively, during the six months ended June 30, 2022 and 2021 that were paid to a company in
which it holds a minority interest and that is a subsidiary of the operator of the underlying mine.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 9. Changes in Contingent Liabilities or Contingent
Assets Since the End of the Last Annual Reporting Period
Litigation
The Group is subject to routine litigation incidental
to its business and is named from time to time as a defendant and is a plaintiff from time to time in various legal actions arising in
connection with its activities, certain of which may include large claims for punitive damages. Further, due to the size, complexity and
nature of the Group's operations, various legal and tax matters are outstanding from time to time, including periodic audit by various
tax authorities.
The Company and certain subsidiaries have been
named as defendants in a legal action relating to a guarantee of the former parent of the Group. Management believes that such claim is
without merit and intends to vigorously defend such claim. Currently, based upon the information available to management, management does
not believe that there will be a material adverse effect on the Group's financial position or results of operations as a result of this
action. However, due to the inherent uncertainty of litigation, the Company cannot provide certainty as to the outcome. The claim
amounted to approximately $122,543 (€90,995) as at June 30, 2022, compared to $130,951 (€90,995) as at December 31,
2021.
Currently, based upon information available, management
does not believe any such matters would have a material adverse effect upon the Group's financial condition or results of operations as
at June 30, 2022. However, due to the inherent uncertainty of litigation, there cannot be certainty as to the eventual outcome of
any case. If management's current assessments are incorrect or if management is unable to resolve any of these matters favourably, there
may be a material adverse impact on the Group's financial performance, cash flows or results of operations.
Note 10. Subsequent Events
Business Combination
In March 2022, the Company announced that its subsidiary, Merkanti Holding, the parent of Merkanti Bank Ltd. (“Merkanti
Bank”), had signed a definitive agreement to acquire Sparkasse (Holdings) Malta Ltd., a company registered in Malta (“Sparkasse
Holdings”) and the parent of Sparkasse Bank Malta plc (“Sparkasse Bank”).
Merkanti Holding is acquiring Sparkasse Holdings
and the total consideration is approximately equal to the net tangible asset value of Sparkasse Holdings, less certain adjustments, and
includes (i) a cash payment at closing of the transaction, (ii) three consecutive annual payments of €2.5 million; and
(iii) a contingent payment, payable solely upon the recovery (if any) of an asset of Sparkasse Bank which was previously written
off in its entirety. The consideration is expected to be satisfied through cash on hand and available liquidity within the Group.
Upon closing of this transaction, and subject
to regulatory approval, it is the intention to merge Sparkasse Bank and Merkanti Bank, in order to form a larger independent financial
institution. The transaction is conditional upon the satisfaction of certain customary conditions precedent such as regulatory approval
from various regulators, including the European Central Bank, the Malta Financial Services Authority and the Central Bank of Ireland.
The acquisition is currently expected to be concluded in the first half of 2023.
Cash Dividends
On August 1, 2022, the Company's Board of
Directors declared a cash dividend of $0.33 (US$0.26) per common share which was paid in US dollars on August 26, 2022 to shareholders
of record on August 12, 2022.
On November 10, 2022, the Company's Board
of Directors declared a cash dividend of $0.21 (US$0.16) per common share which will be paid in US dollars on December 6, 2022 to
shareholders of record on November 22, 2022.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(Unaudited)
Note 11. Approval of Consolidated Financial
Statements
This interim financial report was approved by
the Board of Directors and authorized for issue on November 29, 2022.
NEWS RELEASE
Scully Royalty
Ltd.
1 (844) 331 3343
info@scullyroyalty.com
SCULLY ROYALTY LTD. PUBLISHES RESULTS
FOR THE SIX MONTHS
ENDED JUNE 30, 2022
HONG KONG (December 1, 2022) . . . Scully Royalty Ltd. (the
"Company") (NYSE: SRL) announces it has published its half-year report, including its results for the six months ended June
30, 2022, and other updates, a copy of which has been furnished on Form 6-K to the United States Securities and Exchange Commission (the
"Half-Year Report").
Stakeholders are encouraged to read the Company's entire
Half-Year Report for a greater understanding of the Company's business and operations.
A copy of the Half-Year Report is available through the
Company's website at www.scullyroyalty.com and is available under the Company's profile on EDGAR at www.sec.gov. Shareholders
may request a hard copy of the Half-Year free of charge, by contacting our investor relations firm at info@scullyroyalty.com.
All stakeholders who have questions regarding the information
in the Half-Year Report may book a conference call with the Company's senior management by emailing the Company at info@scullyroyalty.com.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SCULLY ROYALTY LTD.
| By: |
/s/ Samuel Morrow |
|
| |
Samuel Morrow |
|
| |
Chief Executive Officer and Chief Financial
Officer |
|
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