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, 2019
Commission File No.: 001-04192
Scully Royalty Ltd.
(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, 2019
(December 31, 2019)
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, 2019 should be read in conjunction
with our unaudited interim financial statements and notes thereto for the six months ended June 30, 2019 and the annual audited
financial statements and notes thereto of SRL for the year ended December 31, 2018 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").
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, our plans to enhance shareholder value and the expected benefits of such strategies, 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 this report, including under
“Risk Factors”, and in our annual report on Form 20-F for the year ended December 31, 2018. 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.
Dear Fellow Shareholders:
Today we announced the financial results
of Scully Royalty Ltd. for the first half of 2019 as well as an important first step we are taking to maximize shareholder value
in the future.
We previously announced that one of our
priorities for 2019 was to structure the group in a way that assists in eliminating the discount between the market price of our
common shares and our stated net book value per share. We are currently in the process of finalizing the first step in this process,
being an internal restructuring that will result in Scully Royalty Ltd. having the following three separate and independently managed
groups operating underneath its corporate umbrella:
Beginning with our annual report for 2019,
we intend to disclose the operating results of these three groups on a separate basis. Among other things, we believe that this
will allow investors to better assess and evaluate our interest in the Scully Iron Ore Mine and the assets of each of our other
groups on a standalone basis. This is a key step as we work towards our goal of eliminating the existing discount between our net
book value and the market price of our common shares.
Letter to Shareholders
(i)
The following table provides selected information
regarding our financial position as at June 30, 2019:
(Canadian dollars in thousands, except share and per share amounts)
|
|
June 30, 2019
|
|
Current assets
|
|
|
86,829
|
|
Non-current assets
|
|
|
402,039
|
|
Current liabilities
|
|
|
(35,483
|
)
|
Long-term liabilities
|
|
|
(85,276
|
)
|
Working capital
|
|
|
51,346
|
|
Shareholders' equity
|
|
|
360,262
|
|
|
|
|
|
|
Shares outstanding (‘000s)
|
|
|
12,535
|
|
Book value per share (Canadian dollars)
|
|
|
28.74
|
|
Going forward, we plan to continue to work
towards structuring the group in a way that maximizes shareholder value over the long-term. We expect to make further progress
on this in 2020.
Stakeholder Communications
Management welcomes any questions you may
have and looks forward to discussing our operations, results and plans with stakeholders. Further, stakeholders are encouraged
to:
|
-
|
read this entire half-year report, which includes our unaudited financial statements and management’s
discussion and analysis for the six months ended June 30, 2019, for a greater understanding of our business and operations; and
|
|
-
|
direct any questions regarding the information in this report to our North American toll free line
at 1 (844) 331 3343 or email info@scullyroyalty.com to book a conference call with our senior management.
|
Respectfully Submitted,
Michael J. Smith
Chairman, President and Chief Executive
Officer
Letter to Shareholders
(ii)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Nature of Business
We are an international merchant bank that
provides 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 natural resources and medical supplies and services. We also hold an interest in a mining sub-lease of
the lands upon which the Wabush iron ore mine is situated in 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 new operator
of the mine re-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, with minimum payments earned in 2017 and 2018 creditable to earned royalties in 2018 and 2019.
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.
Our business is divided into two operating
segments: (i) Merchant Banking, which includes our royalty interest, captive supply assets, financial services and proprietary
investing activities; and (ii) All Other.
Discussion of Operations
The following discussion and analysis
of our financial condition and results of operations for the six months ended June 30, 2019 and 2018 should be read in conjunction
with our unaudited condensed consolidated financial statements and related notes.
General
We are an international merchant bank that
provides financial services and facilitates structured trade for corporations and institutions. 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 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, 2019, the Canadian
dollar was stronger by 4.9% against the Euro from the end of 2018. We recognized a net $10.0 million currency translation adjustment
loss under accumulated other comprehensive income within equity in the six months ended June 30, 2019, compared to $0.9 million
in the comparative period of 2018. In addition, we recognized net gains of $3.5 million on exchange differences on foreign
currency transactions in our consolidated statement of operations in the six months ended June 30, 2019, compared to $4.9 million
in the comparative period of 2018.
Results of Operations
Six Months Ended June 30, 2019 Compared to Six Months
Ended June 30, 2018
The following table sets forth our selected
operating results and other financial information for each of the periods indicated:
|
|
Six Months Ended
June
30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(In
thousands, except per share amounts)
|
|
Revenue
|
|
$
|
66,498
|
|
|
$
|
78,083
|
|
Costs of sales and services
|
|
|
74,223
|
|
|
|
94,820
|
|
Selling, general and administrative expenses
|
|
|
11,784
|
|
|
|
13,728
|
|
Share-based compensation – selling, general and administrative
|
|
|
-
|
|
|
|
69
|
|
Loss on settlement
|
|
|
-
|
|
|
|
5,600
|
|
Finance costs
|
|
|
380
|
|
|
|
1,781
|
|
Exchange differences on foreign currency transactions, net gain
|
|
|
(3,506
|
)
|
|
|
(4,926
|
)
|
Net loss(1)
|
|
|
(16,406
|
)(2)
|
|
|
(31,973
|
)(3)
|
Loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(1.31
|
)
|
|
|
(2.55
|
)
|
Diluted
|
|
|
(1.31
|
)
|
|
|
(2.55
|
)
|
Notes:
|
(1)
|
Attributable to our shareholders.
|
|
(2)
|
Includes credit losses of $12.5 million.
|
|
(3)
|
Includes credit losses of $33.6 million primarily in connection with our insolvent former customer
and former subsidiaries, a write-off of payables of $8.6 million related to former subsidiaries and a loss on settlement of $5.6
million.
|
The following is a breakdown of our gross
revenue by segment for each of the periods indicated:
|
|
Six Months Ended
June
30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(In thousands)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Merchant banking
|
|
$
|
62,846
|
|
|
$
|
75,572
|
|
All other
|
|
|
3,652
|
|
|
|
2,511
|
|
|
|
$
|
66,498
|
|
|
$
|
78,083
|
|
In the first half of 2019, 85% of our revenue
was from Europe, 10% were from the Americas and 5% were from Asia and other regions.
In the first half of 2019, our proportionate
revenue by product w 88% from materials processing, 7% from hydrocarbons and 5% from other.
Based upon the average exchange rates for
the first half of 2019, the Canadian dollar strengthened by approximately 2.7% in value against the Euro compared to the same period
of 2018.
Revenue for the first half of 2019 decreased
to $66.5 million from $78.1 million in the same period of 2018 primarily as a result of a decrease in materials processing.
Revenue for our merchant banking business
for the first half of 2019 decreased to $62.8 million from $75.6 million in the same period of 2018 primarily as a result of reduced
volumes and pricing of certain metals products. Revenue for our all other segment increased to $3.7 million in the first half of
2019 from $2.5 million in the same period of 2018. No revenue was recognized from our interest in the Scully Iron Ore Mine during
the first six months of 2019 as payments received in 2019 are considered to be deferred revenue as they may be credited towards
any royalties earned on actual production in the same year.
Revenue for our all other segment was $3.7
million in the first half of 2019, compared to $2.5 million in the same period of 2018.
Costs of sales and services decreased to
$74.2 million during the first half of 2019 from $94.8 million for the same period in 2018 primarily as a result of decreased merchant
banking products and services and credit losses. See "Recent Developments".
The following is a breakdown of our costs
of sales and services for each of the periods indicated:
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(In thousands)
|
|
Merchant banking products and services
|
|
$
|
60,874
|
|
|
$
|
66,184
|
|
Credit losses
|
|
|
12,531
|
|
|
|
33,640
|
|
Market value (increase) decrease on commodity inventories
|
|
|
(44
|
)
|
|
|
81
|
|
(Gain) loss on derivative contracts, net
|
|
|
(437
|
)
|
|
|
74
|
|
Write-down of inventories
|
|
|
1,776
|
|
|
|
-
|
|
(Gain) loss on subsidiaries
|
|
|
(691
|
)
|
|
|
17
|
|
Fair value loss on a loan payable measured at FVTPL
|
|
|
245
|
|
|
|
-
|
|
Other
|
|
|
(31
|
)
|
|
|
(5,176
|
)
|
Total costs of sales and services
|
|
$
|
74,223
|
|
|
$
|
94,820
|
|
In the first half of 2019, we recognized
credit losses of $12.5 million, which included the write-off of a $6.1 million loan, provisions related to contingent liabilities
which are expected to be realized and the impairment of certain receivables, compared to $33.6 million in the same period of 2018.
We recognized a gain on subsidiaries of $0.7
million in the first half of 2019 compared to a loss of $17,000 in the same period of 2018.
Selling, general and administrative expenses
decreased to $11.8 million in the first half of 2019 from $13.7 million in the same period of 2018 primarily as a result of a reduction
in operations and activities.
In the first half of 2019, finance costs
decreased to $0.4 million from $1.8 million in the same period of 2018 primarily as a result of decreased indebtedness during the
period.
In the first half of 2019, we recognized
a net foreign currency transaction gain of $3.5 million, compared to $4.9 million in the same period of 2018, in the consolidated
statement of operations. The foreign currency transaction gain represents exchange differences arising on the settlement of monetary
items and the disposition of subsidiaries with accumulated other comprehensive income due to foreign exchange 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 recovery of
$58,000 in the first half of 2019, compared to $1.3 million in the same period of 2018. Our income tax paid in cash, excluding
resource property revenue taxes, during the first half of 2019 was $0.2 million, compared to $1.8 million in the same period of
2018. We also recognized resource property revenue taxes of $nil in the first half of 2019 and $0.3 million in the same period
of 2018.
Overall, we recognized an income tax recovery
of $58,000 (income tax recovery of $58,000 and resource property revenue taxes of $nil) in the first half of 2019, compared to
$1.0 million (income tax recovery of $1.3 million and resource property revenue taxes of $0.3 million) in the same period of 2018.
In the first half of 2019, our net loss
attributable to shareholders was $16.4 million, or $1.31 per share on a basic and diluted basis, compared to $32.0 million, or
$2.55 per share on a basic and diluted basis, in the same quarter of 2018.
Liquidity and Capital Resources
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 so that we can continue to provide
returns for shareholders and benefits for other stakeholders;
|
|
•
|
to provide an adequate return to our shareholders by pricing products and services
commensurately with the level of risk; and
|
|
•
|
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 and cash equivalents.
The long-term debt-to-equity ratio is calculated as long-term debt, less current portion 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,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(In thousands, except ratio amounts)
|
|
Total debt
|
|
$
|
-
|
|
|
$
|
-
|
|
Less: cash and cash equivalents
|
|
|
(58,183
|
)
|
|
|
(67,760
|
)
|
Net debt
|
|
|
Not
applicable
|
|
|
|
Not applicable
|
|
Shareholders' equity
|
|
|
360,262
|
|
|
|
386,376
|
|
Net debt-to-equity ratio
|
|
|
Not applicable
|
|
|
|
Not applicable
|
|
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, 2019 and December
31, 2018. Our net debt-to-equity was not applicable as we had a net cash and cash equivalents balance as at June 30, 2019 and December
31, 2018.
The following table sets forth the calculation
of our long-term debt-to-equity ratio as at the dates indicated:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(In thousands, except ratio amounts)
|
|
Long-term debt, less current portion(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
Shareholders' equity
|
|
|
360,262
|
|
|
|
386,376
|
|
Long-term debt-to-equity ratio
|
|
|
Not applicable
|
|
|
|
Not applicable
|
|
Notes:
|
(1)
|
Does
not include a non-interest bearing loan payable of 4.1 million as at June 30, 2019 and
4.0 million as at December 31, 2018 which is measured at fair value through profit or
loss and does not have a fixed repayment date. See "— Financial Position".
|
During the first half of 2019, our strategy,
which remained unchanged from the same period of 2018, was to maintain our net debt-to-equity ratio and long-term debt-to-equity
ratio at manageable levels.
Cash
Flows
Due to the number of businesses we engage
in, our cash flows are not necessarily reflective of net earnings and net assets for any reporting period. As a result, instead
of using a traditional cash flow analysis solely based on cash flow statements, our management believes it is more useful and meaningful
to analyze our cash flows by overall liquidity and credit availability. Please see the discussion on our financial position, short-term
bank loans, facilities and long-term debt below for further information.
Our business can be cyclical and our cash
flows can vary accordingly. Our principal operating cash expenditures are for our working capital, proprietary investments and
general and administrative expenses.
Working capital levels fluctuate throughout
the year and are affected by the level of our operations, the markets and prices for commodities, the timing of collection of receivables
and the payment of payables and expenses. Changes in the volume of transactions can affect the level of receivables and influence
overall working capital levels. 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,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(In thousands)
|
|
Cash flows used in operating activities
|
|
$
|
(6,636
|
)
|
|
$
|
(4,350
|
)
|
Cash flows provided by investing activities
|
|
|
154
|
|
|
|
544
|
|
Cash flows used in financing activities
|
|
|
(560
|
)
|
|
|
(805
|
)
|
Exchange rate effect on cash and cash equivalents
|
|
|
(2,535
|
)
|
|
|
2,222
|
|
Decrease in cash and cash equivalents
|
|
|
(9,577
|
)
|
|
|
(2,389
|
)
|
Cash
Flows from Operating Activities
Operating activities used cash of $6.6
million in the six months ended June 30, 2019, compared to $4.4 million in the same period of 2018. An increase in receivables
used cash of $0.5 million in the six months ended June 30, 2019, compared to a decrease in receivables providing cash of $8.5 million
in the same period of 2018. A decrease in account payables and accrued expenses provided cash of $1.3 million in the six months
ended June 30, 2019, compared to a decrease in account payables and accrued expenses using cash of $2.2 million in the same period
of 2018. In the six months ended June 30, 2019, short-term bank borrowings had a cash effect of $nil, compared to a decrease in
short-term bank borrowings using $1.6 million in the same period of 2018. A decrease in inventories provided cash of $2.8 million
in the six months ended June 30, 2019, compared to an increase in inventories using cash of $2.1 million in the same period of
2018. An increase in deposits, prepaid and other used cash of $0.8 million in the six months ended June 30, 2019, compared to $0.9
million in the same period of 2018. An increase in assets held for sale used cash of $3.4 million in the six months ended June
30, 2019 compared to $nil in the same period of 2018.
Cash
Flows from Investing Activities
Investing activities provided cash of $0.2
million in the six months ended June 30, 2019, compared to $0.5 million in the same period of 2018. In the six months ended June
30, 2019, proceeds from sales of investment property provided cash of $nil, compared to $1.0 million in the same period of 2018.
In the six months ended June 30, 2019, sales of property, plant and equipment, net of purchases, provided cash of $40,000, compared
to sales of property, plant and equipment, net of purchases, using cash of $0.4 million in the same period of 2018.
Cash
Flows from Financing Activities
Cash used by financing activities was $0.6
million in the six months ended June 30, 2019, compared to $0.8 million in the same period of 2018. A reduction in finance lease
liabilities used cash of $0.6 million in the six months ended June 30, 2019, compared to $nil in the same period of 2018.
Financial
Position
The following table sets out our selected
financial information as at the dates indicated:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(In thousands)
|
|
Cash and cash equivalents
|
|
$
|
58,183
|
|
|
$
|
67,760
|
|
Short-term securities
|
|
|
7,160
|
|
|
|
7,400
|
|
Securities – derivatives (current)
|
|
|
165
|
|
|
|
209
|
|
Trade receivables
|
|
|
4,630
|
|
|
|
5,343
|
|
Tax receivables (current portion)
|
|
|
816
|
|
|
|
104
|
|
Other receivables
|
|
|
3,457
|
|
|
|
8,675
|
|
Inventories
|
|
|
6,365
|
|
|
|
11,406
|
|
Restricted cash
|
|
|
-
|
|
|
|
281
|
|
Deposits, prepaid and other
|
|
|
1,935
|
|
|
|
828
|
|
Assets held for sale
|
|
|
4,118
|
|
|
|
-
|
|
Total assets
|
|
|
488,868
|
|
|
|
506,913
|
|
Working capital
|
|
|
51,346
|
|
|
|
74,799
|
|
|
|
|
June 30,
|
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
|
(In thousands)
|
|
Account payables and accrued expenses
|
|
|
33,037
|
|
|
|
26,315
|
|
Financial liabilities – derivatives (current)
|
|
|
355
|
|
|
|
37
|
|
Income tax liabilities
|
|
|
881
|
|
|
|
855
|
|
Liabilities relating to assets held for sale
|
|
|
1,210
|
|
|
|
-
|
|
Loan payable (long-term)
|
|
|
4,064
|
|
|
|
3,981
|
|
Deferred income tax liabilities
|
|
|
65,049
|
|
|
|
66,421
|
|
Decommissioning obligations (long- term)
|
|
|
15,861
|
|
|
|
13,641
|
|
Shareholders' equity
|
|
|
360,262
|
|
|
|
386,376
|
|
We maintain an adequate level of liquidity,
with a portion of our assets held in cash and cash equivalents and securities. The liquid nature of these assets provides us with
flexibility in managing and financing our business and the ability to realize upon investment or business opportunities as they
arise. We also use liquidity for our own proprietary trading and investing activities.
As at June 30, 2019, cash and cash equivalents
decreased to $58.2 million from $67.8 million as at December 31, 2018.
Trade receivables and other receivables
were $4.6 million and $3.5 million, respectively, as at June 30, 2019, compared to $5.3 million and $8.7 million, respectively,
as at December 31, 2018. The decrease in other receivables was primarily as a result of the write-off of a loan.
Inventories decreased to $6.4 million as
at June 30, 2019, from $11.4 million as at December 31, 2018 primarily as a result of improved working capital management and efficiencies.
Substantially all of our inventories were contracted at fixed prices or hedged as at June 30, 2019.
Deposits, prepaid and other assets were
$1.9 million as at June 30, 2019, compared to $0.8 million as at December 31, 2018.
We had short-term securities of $7.2 million
as at June 30, 2019 and $7.4 million as at December 31, 2018.
We had short-term financial assets relating
to hedging derivatives of $0.2 million as at June 30, 2019 and as at December 31, 2018. We had current liabilities relating to
hedging derivatives of $0.4 million as at June 30, 2019, compared to $37,000 as at December 31, 2018.
Current tax receivables, consisting primarily
of refundable value-added taxes, were $0.8 million as at June 30, 2019 and $0.1 million as at December 31, 2018.
We had assets held for sale as at June
30, 2019 of $4.1 million which related to a subsidiary in dissolution compared to $nil as at December 31, 2018.
Account payables and accrued expenses were
$33.0 million as at June 30, 2019, compared to $26.3 million as at December 31, 2018. The increase was primarily due to a provision
of $3.1 million for losses on guarantees.
We had deferred income tax liabilities
of $65.0 million as at June 30, 2019, compared to $66.4 million as at December 31, 2018.
We had a non-interest bearing loan payable,
which is measured at fair value through profit or loss, of $4.1 million as at June 30, 2019, compared to $4.0 million as at December
31, 2018. 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, 2019, we had long-term decommissioning
obligations of $15.9 million relating to our existing hydrocarbon properties, compared to $13.6 million as at December 31, 2018.
Short-Term
Bank Loans and Facilities
As part of our operations, we establish,
utilize and maintain various kinds of credit lines and facilities. Most of these facilities are short-term. These facilities are
used in our day-to-day structured solutions and merchant banking business. The amounts drawn under such facilities fluctuate with
the kind and level of transactions being undertaken.
Long-Term
Debt
As at June 30, 2019 we have no long-term
debt. Please refer to Note 16 to our audited consolidated financial statements for the year ended December 31, 2018, for further
information.
Future
Liquidity
We expect that there will be acquisitions
of businesses or commitments to projects in the future. 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 revenues 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, 2019,
we reported a net $10.0 million currency translation adjustment loss under accumulated other comprehensive income within equity.
This compared to a net $0.9 million currency translation adjustment loss in the same period of 2018. 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 our contractual
obligations and commitments as at December 31, 2018 in connection with our long-term liabilities.
|
|
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
|
|
Operating lease obligations
|
|
$
|
1,327
|
|
|
$
|
1,402
|
|
|
$
|
902
|
|
|
$
|
1,155
|
|
|
$
|
4,786
|
|
Purchase obligations
|
|
|
686
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
686
|
|
Loan Payable(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,981
|
|
|
|
3,981
|
|
Total
|
|
$
|
2,013
|
|
|
$
|
1,402
|
|
|
$
|
902
|
|
|
$
|
5,136
|
|
|
$
|
9,453
|
|
Notes:
|
(2)
|
This table does not include non-financial instrument liabilities, guarantees and liabilities relating
to assets held for sale.
|
|
(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 $55.1 million (US$42,070). The payment amount disclosed here represents
its fair value as December 31, 2018. Inclusive of the undiscounted contractual amount due, total contractual obligations at June
30, 2019 are $60.3 million. The actual repayment may be materially different from the amounts 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 2 to our audited consolidated financial statements for the year ended December 31, 2018 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 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, marketing supply
and demand, product margins and in the case of 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 value of goodwill
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.
Valuation of Investment Property
Investment properties are included in the
consolidated statement of financial position at their market value, unless their fair value cannot be reliably determined at that
time. The market value of investment properties is assessed annually by an independent qualified valuer, who is an authorized expert
for the valuation of developed and undeveloped land in Germany, after taking into consideration the net income with inputs on realized
basic rents, operating costs and damages and defects. The assumptions adopted in the property valuations are based on the market
conditions existing at the end of the reporting period, with reference to current market sales prices and the appropriate capitalization
rate. Changes in any of these inputs or incorrect assumptions related to any of these items could materially impact these valuations.
Assets Held for Sale
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.
Consolidation
Judgment is required when assessing whether
we control and therefore consolidate an entity, particularly an entity with complex share capital, management/decision-making or
financing structures. Judgment is required to determine whether we have decision-making power over the key relevant activities
of an investee, whether we have exposure or rights to variable returns from its involvement with the investee and whether we have
the ability to use that power to affect its returns.
Purchase Price Allocations
For each business combination, we measure
the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values. The determination of fair value
requires us to make assumptions, estimates and judgments regarding future events, including the profit forecast of the new subsidiary
in the future. The allocation process is inherently subjective and impacts the amounts assigned to individual identifiable assets
and liabilities, including the fair value of long-lived assets, the recognition and measurement of any unrecorded intangible assets
and/or contingencies and the final determination of the amount of goodwill or bargain purchase. The inputs to the exercise of judgments
include legal, contractual, business and economic factors. As a result, the purchase price allocation impacts our reported assets
and liabilities and future net earnings due to the impact on future depreciation, depletion and amortization and impairment tests.
Credit Losses and Impairment of Receivables
On January 1, 2018, we adopted IFRS 9,
Financial Instruments, referred to as "IFRS 9". As a result, we apply credit risk assessment and valuation methods
to our trade and other receivables under IFRS 9 which establishes a single forward-looking expected loss impairment model to replace
the incurred impairment model under IAS 39, Financial Instruments: Recognition and Measurement.
We measure the loss allowance for a financial
instrument at an amount equal to the lifetime expected credit losses if the credit risk on that 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 interest in an iron ore mine, and to a lesser extent, hydrocarbon properties, with an aggregate carrying
amount of $274.2 million as at June 30, 2019.
Estimation of reported recoverable quantities
of proved and probable reserves 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 in 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 group's interests in resource properties and/or 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. See Note 13 to our audited annual consolidated financial statements for the year ended December 31, 2018 for
further information.
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, 2019, 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.
Impairment of Other Non-Financial
Assets
We had property, plant and equipment aggregating
$56.1 million as at June 30, 2019, 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.
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. As a result, there are usually
some tax matters in question that result in uncertain tax positions. We only recognize the income tax benefit of an uncertain tax
position when it is probable that the ultimate determination of the tax treatment of the position will result in that benefit being
realized.
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 $14.5 million as at June 30, 2019. 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 of the period in which the change in probability occurs. See Note 26 to our audited annual
consolidated financial statements for further information.
New Standards and Interpretations
Adopted and Not Yet Adopted
IFRS 16, Leases, referred to as
"IFRS 16", issued in January 2016, introduces a single on-balance sheet model of accounting for leases by lessees under
a model that eliminates the distinction between operating and finance leases. Lessor accounting remains largely unchanged and the
distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17, Leases and its related interpretations
and management adopted IFRS 16 for annual reporting periods beginning on January 1, 2019. The impacts of IFRS 16 on our consolidated
financial statements as of January 1, 2019 were a debit of $2.9 million to the right-of-use assets with credits of $0.8 million
and $2.1 million, respectively, to the account payables and accrued expenses under current liabilities and other long-term liabilities
when we applied IFRS 16 retrospectively with the cumulative effect of initially applying the standards as at the date of its initial
application.
In December 2017, Annual Improvements
to IFRS Standards 2015-2017 Cycle amended paragraph 14 of IAS 23, Borrowing Costs. The amendments clarify that the capitalization
rate to the expenditures on a qualifying asset shall be the weighted average of the borrowing costs applicable to the borrowings
of the entity that are outstanding during the period, and an entity shall exclude from this calculation borrowing costs applicable
to borrowings made specifically for the purpose of obtaining the qualifying asset until substantially all the activities necessary
to prepare that asset for its intended use or sale are complete. We applied these amendments effective January 1, 2019 and there
was no material impacts on our consolidated financial statements.
In June 2017, the IASB issued IFRIC 23
Uncertainty over Income Tax Treatments, referred to as "IFRIC 23". IFRIC 23 aims to reduce diversity in how
companies recognize and measure a tax liability or tax asset when there is uncertainty over income tax treatments. This interpretation
was effective for annual periods beginning on January 1, 2019. On initial application, we elected to apply this interpretation
retrospectively, with the cumulative effect of initially applying the interpretation recognized at the date of initial application
as an adjustment, which was $nil, to the opening balance of retained earnings.
In October 2018, IASB issued amendments
to its definition of material to make it easier for companies to make materiality judgements. The updated definition amends IAS
1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.
The amendments clarify the definition of material and how it should be applied and ensure that the definition of material is consistent
across all IFRS standards. The changes are effective from January 1, 2020, but companies can decide to apply them earlier. Our
management is assessing its impacts on our financial statement presentation.
Transactions with Related Parties
In the normal course of operations, we
enter into transactions with related parties, as such term is defined under IFRS. These related party transactions are conducted
in arm's-length transactions at normal market prices and on normal commercial terms. In one situation, certain expenses of our
group were settled by a company owned by our President / Chief Executive Officer at cost and are either subsequently reimbursed
or advanced. This arrangement is in place to comply with various local regulations and requirements, including the newly introduced
economic substance legislation for offshore jurisdictions, as well as fiscal efficiency. As at June 30, 2019, we had net receivables
of $4,776 related to this arrangement. In addition to any transactions disclosed elsewhere herein, we had the following transactions
with related parties:
Six
months ended June 30:
|
|
2019
|
|
|
2018
|
|
|
|
(In thousands)
|
|
Interest income
|
|
$
|
4
|
|
|
$
|
-
|
|
Reimbursements of general and administrative expenses, at cost
|
|
$
|
(241
|
)
|
|
$
|
-
|
|
As
at June 30:
|
|
2019
|
|
|
2018
|
|
|
|
(In thousands)
|
|
Receivables
|
|
$
|
854
|
|
|
$
|
-
|
|
Receivables (included in assets held for sale)
|
|
$
|
3,922
|
|
|
$
|
-
|
|
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 29 of our audited
consolidated financial statements for the year ended December 31, 2018 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, 2018.
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 December 30, 2019, we had 12,554,801 Common
Shares, 426,000 stock options and no share purchase warrants 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, 2019. 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 Chief Executive
Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting
as of December 31, 2018. 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, 2019 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 an alleged guarantee of the former parent of our group in the amount of
approximately EUR 43 million. We believe such claim is without merit and intend to vigorously defend such claim.
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.
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 favorably, there may be a material adverse impact
on our financial performance, cash flows or results of operations. Please see Note 26 to our audited consolidated financial statements
for the year ended December 31, 2018 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;
|
|
-
|
our business is highly competitive;
|
|
-
|
if the fair values of our long-lived assets 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;
|
|
-
|
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;
|
|
-
|
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;
|
|
-
|
derivative transactions may expose us to unexpected risk and potential losses;
|
|
-
|
the operations of our banking subsidiary are subject to regulation and risks faced by other financial
institutions, 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, environmental, 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;
|
|
-
|
the operation of the iron ore mine underlying our royalty interest was closed in 2014. Its operation
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 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 effect 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 U.S. 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, 2019
UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Scully Royalty Ltd.'s auditors have not
reviewed the unaudited financial statements for the period ended June 30, 2019.
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, 2019 and the related condensed consolidated
statements of operations, comprehensive income, changes in equity and cash flows for the six months ended June 30, 2019 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.
(Formerly MFC Bancorp Ltd.)
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
(Unaudited)
(Canadian Dollars in Thousands)
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
58,183
|
|
|
$
|
67,760
|
|
Securities
|
|
|
7,160
|
|
|
|
7,400
|
|
Securities - derivatives
|
|
|
165
|
|
|
|
209
|
|
Trade receivables
|
|
|
4,630
|
|
|
|
5,343
|
|
Tax receivables
|
|
|
816
|
|
|
|
104
|
|
Other receivables
|
|
|
3,457
|
|
|
|
8,675
|
|
Inventories
|
|
|
6,365
|
|
|
|
11,406
|
|
Restricted cash
|
|
|
-
|
|
|
|
281
|
|
Deposits, prepaid and other
|
|
|
1,935
|
|
|
|
828
|
|
Assets held for sale
|
|
|
4,118
|
|
|
|
-
|
|
Total current assets
|
|
|
86,829
|
|
|
|
102,006
|
|
Non-current Assets
|
|
|
|
|
|
|
|
|
Securities
|
|
|
4,001
|
|
|
|
4,702
|
|
Real estate held for sale
|
|
|
13,337
|
|
|
|
13,830
|
|
Investment property
|
|
|
38,964
|
|
|
|
37,804
|
|
Property, plant and equipment
|
|
|
56,083
|
|
|
|
58,325
|
|
Interests in resource properties
|
|
|
274,167
|
|
|
|
273,250
|
|
Tax receivables
|
|
|
465
|
|
|
|
488
|
|
Deferred income tax assets
|
|
|
14,526
|
|
|
|
15,735
|
|
Other
|
|
|
496
|
|
|
|
773
|
|
Total non-current assets
|
|
|
402,039
|
|
|
|
404,907
|
|
|
|
$
|
488,868
|
|
|
$
|
506,913
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Account payables and accrued expenses
|
|
$
|
33,037
|
|
|
$
|
26,315
|
|
Financial liabilities - derivatives
|
|
|
355
|
|
|
|
37
|
|
Income tax liabilities
|
|
|
881
|
|
|
|
855
|
|
Liabilities relating to assets held for sale
|
|
|
1,210
|
|
|
|
-
|
|
Total current liabilities
|
|
|
35,483
|
|
|
|
27,207
|
|
Long-term Liabilities
|
|
|
|
|
|
|
|
|
Loan payable
|
|
|
4,064
|
|
|
|
3,981
|
|
Decommissioning obligations
|
|
|
15,861
|
|
|
|
13,641
|
|
Deferred income tax liabilities
|
|
|
65,049
|
|
|
|
66,421
|
|
Other
|
|
|
302
|
|
|
|
1,257
|
|
Total long-term liabilities
|
|
|
85,276
|
|
|
|
85,300
|
|
Total liabilities
|
|
|
120,759
|
|
|
|
112,507
|
|
Equity
|
|
|
|
|
|
|
|
|
Capital stock, fully paid
|
|
|
16
|
|
|
|
16
|
|
Additional paid-in capital
|
|
|
312,132
|
|
|
|
312,132
|
|
Treasury stock
|
|
|
(2,643
|
)
|
|
|
(2,643
|
)
|
Contributed surplus
|
|
|
16,735
|
|
|
|
16,735
|
|
Retained earnings
|
|
|
2,927
|
|
|
|
19,333
|
|
Accumulated other comprehensive income
|
|
|
31,095
|
|
|
|
40,803
|
|
Shareholders' equity
|
|
|
360,262
|
|
|
|
386,376
|
|
Non-controlling interests
|
|
|
7,847
|
|
|
|
8,030
|
|
Total equity
|
|
|
368,109
|
|
|
|
394,406
|
|
|
|
$
|
488,868
|
|
|
$
|
506,913
|
|
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, 2019
and 2018
(Unaudited)
(Canadian Dollars in Thousands, Except
Per Share Amounts)
|
|
2019
|
|
|
2018
|
|
Revenue
|
|
$
|
66,498
|
|
|
$
|
78,083
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Costs of sales and services
|
|
|
74,223
|
|
|
|
94,820
|
|
Selling, general and administrative
|
|
|
11,784
|
|
|
|
13,728
|
|
Share-based compensation – selling, general and administrative
|
|
|
-
|
|
|
|
69
|
|
Loss on settlement
|
|
|
-
|
|
|
|
5,600
|
|
Finance costs
|
|
|
380
|
|
|
|
1,781
|
|
Exchange differences on foreign currency transactions, net gain
|
|
|
(3,506
|
)
|
|
|
(4,926
|
)
|
|
|
|
82,881
|
|
|
|
111,072
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(16,383
|
)
|
|
|
(32,989
|
)
|
Income tax recovery (expense):
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
58
|
|
|
|
1,332
|
|
Resource property revenue taxes
|
|
|
-
|
|
|
|
(325
|
)
|
|
|
|
58
|
|
|
|
1,007
|
|
Net loss for the period
|
|
|
(16,325
|
)
|
|
|
(31,982
|
)
|
Net (income) loss attributable to non-controlling interests
|
|
|
(81
|
)
|
|
|
9
|
|
Net loss attributable to owners of the parent company
|
|
$
|
(16,406
|
)
|
|
$
|
(31,973
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.31
|
)
|
|
$
|
(2.55
|
)
|
Diluted
|
|
|
(1.31
|
)
|
|
|
(2.55
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
|
— basic
|
|
|
12,534,801
|
|
|
|
12,534,801
|
|
— diluted
|
|
|
12,534,801
|
|
|
|
12,534,801
|
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
SCULLY ROYALTY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
For the Six Months Ended June 30, 2019
and 2018
(Unaudited)
(Canadian Dollars in Thousands)
|
|
2019
|
|
|
2018
|
|
Net loss for the period
|
|
$
|
(16,325
|
)
|
|
$
|
(31,982
|
)
|
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
|
|
|
(8,891
|
)
|
|
|
(928
|
)
|
Reclassification adjustment for exchange differences to statement of operations for subsidiaries disposed
|
|
|
(1,082
|
)
|
|
|
-
|
|
Net exchange difference
|
|
|
(9,973
|
)
|
|
|
(928
|
)
|
Fair value gain (loss) on securities at fair value through other comprehensive income
|
|
|
1
|
|
|
|
(41
|
)
|
Reclassification of reversal of impairment charge to statement of operations
|
|
|
-
|
|
|
|
(2
|
)
|
Net fair value gain (loss) on securities at fair value through other comprehensive income
|
|
|
1
|
|
|
|
(43
|
)
|
Items that will not be reclassified subsequently to profit or loss
|
|
|
|
|
|
|
|
|
Remeasurement of net defined benefit liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(9,972
|
)
|
|
|
(971
|
)
|
Total comprehensive loss for the period
|
|
|
(26,297
|
)
|
|
|
(32,953
|
)
|
Comprehensive loss (income) attributable to non-controlling interests
|
|
|
183
|
|
|
|
(54
|
)
|
Comprehensive loss attributable to owners of the parent company
|
|
$
|
(26,114
|
)
|
|
$
|
(33,007
|
)
|
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, 2019
and 2018
(Unaudited)
(Canadian Dollars in Thousands)
|
|
Capital
Stock
|
|
|
Treasury
Stock
|
|
|
Contributed
Surplus
|
|
|
|
|
|
Available
Other
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Share-based
Compensation
|
|
|
Contingently
Issuable
Shares
|
|
|
Retained
Earnings
(Deficit)
|
|
|
Available-
for-sale
Securities
|
|
|
Securities
at Fair
Value
Through
Other
Comprehensive
Income
|
|
|
Currency
Translation
Adjustment
|
|
|
Shareholders'
Equity
|
|
|
Non-
controlling
Interests
|
|
|
Total
Equity
|
|
Balance at December 31, 2018
|
|
|
12,600,448
|
|
|
$
|
312,148
|
|
|
|
(65,647
|
)
|
|
$
|
(2,643
|
)
|
|
$
|
16,735
|
|
|
$
|
-
|
|
|
$
|
19,333
|
|
|
$
|
-
|
|
|
$
|
(141
|
)
|
|
$
|
40,944
|
|
|
$
|
386,376
|
|
|
$
|
8,030
|
|
|
$
|
394,406
|
|
Net (loss) income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,406
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,406
|
)
|
|
|
81
|
|
|
|
(16,325
|
)
|
Net fair value gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
Net exchange differences
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,709
|
)
|
|
|
(9,709
|
)
|
|
|
(264
|
)
|
|
|
(9,973
|
)
|
Balance at June 30, 2019
|
|
|
12,600,448
|
|
|
$
|
312,148
|
|
|
|
(65,647
|
)
|
|
$
|
(2,643
|
)
|
|
$
|
16,735
|
|
|
$
|
-
|
|
|
$
|
2,927
|
|
|
$
|
-
|
|
|
$
|
(140
|
)
|
|
$
|
31,235
|
|
|
$
|
360,262
|
|
|
$
|
7,847
|
|
|
$
|
368,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
|
12,600,448
|
|
|
$
|
312,148
|
|
|
|
(65,647
|
)
|
|
$
|
(2,643
|
)
|
|
$
|
16,666
|
|
|
$
|
-
|
|
|
$
|
(87,183
|
)
|
|
$
|
461
|
|
|
$
|
-
|
|
|
$
|
38,331
|
|
|
$
|
277,780
|
|
|
$
|
2,169
|
|
|
$
|
279,949
|
|
Initial application of
new international financial reporting standard
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
524
|
|
|
|
(461
|
)
|
|
|
(63
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,973
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,973
|
)
|
|
|
(9
|
)
|
|
|
(31,982
|
)
|
Dividends paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(805
|
)
|
|
|
(805
|
)
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
69
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
69
|
|
|
|
-
|
|
|
|
69
|
|
Net fair value loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(43
|
)
|
|
|
-
|
|
|
|
(43
|
)
|
|
|
-
|
|
|
|
(43
|
)
|
Net exchange differences
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(991
|
)
|
|
|
(991
|
)
|
|
|
63
|
|
|
|
(928
|
)
|
Balance at June 30, 2018
|
|
|
12,600,448
|
|
|
$
|
312,148
|
|
|
|
(65,647
|
)
|
|
$
|
(2,643
|
)
|
|
$
|
16,735
|
|
|
$
|
-
|
|
|
$
|
(118,632
|
)
|
|
$
|
-
|
|
|
$
|
(106
|
)
|
|
$
|
37,340
|
|
|
$
|
244,842
|
|
|
$
|
1,418
|
|
|
$
|
246,260
|
|
Total Comprehensive (Loss) Income
for the six months ended June 30:
|
|
Owners
of
the Parent Company
|
|
|
Non-controlling
Interests
|
|
|
Total
|
|
2018
|
|
$
|
(33,007
|
)
|
|
$
|
54
|
|
|
$
|
(32,953
|
)
|
2019
|
|
$
|
(26,114
|
)
|
|
$
|
(183
|
)
|
|
$
|
(26,297
|
)
|
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, 2019
and 2018
(Unaudited)
(Canadian Dollars in Thousands)
|
|
2019
|
|
|
2018
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(16,325
|
)
|
|
$
|
(31,982
|
)
|
Adjustments for:
|
|
|
|
|
|
|
|
|
Amortization, depreciation and depletion
|
|
|
3,332
|
|
|
|
2,996
|
|
Exchange differences on foreign currency transactions
|
|
|
(3,506
|
)
|
|
|
(4,926
|
)
|
Gain on short-term securities, net
|
|
|
(110
|
)
|
|
|
(80
|
)
|
Share-based compensation
|
|
|
-
|
|
|
|
69
|
|
(Gain) loss on dispositions of subsidiaries
|
|
|
(691
|
)
|
|
|
17
|
|
Deferred income taxes
|
|
|
(298
|
)
|
|
|
(1,860
|
)
|
Market value (increase) decrease on commodity inventories
|
|
|
(44
|
)
|
|
|
81
|
|
Interest accretion
|
|
|
98
|
|
|
|
230
|
|
Change in fair value of a loan payable measured at FVTPL
|
|
|
245
|
|
|
|
-
|
|
Change in fair value of real estate and investment property
|
|
|
(3,111
|
)
|
|
|
-
|
|
Credit losses
|
|
|
12,531
|
|
|
|
33,640
|
|
Write-downs of inventories
|
|
|
1,776
|
|
|
|
-
|
|
Write-offs of payables
|
|
|
-
|
|
|
|
(8,640
|
)
|
Provision for settlement loss
|
|
|
-
|
|
|
|
5,600
|
|
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
Short-term securities
|
|
|
-
|
|
|
|
(231
|
)
|
Receivables
|
|
|
(512
|
)
|
|
|
8,513
|
|
Restricted cash
|
|
|
271
|
|
|
|
-
|
|
Inventories
|
|
|
2,833
|
|
|
|
(2,054
|
)
|
Deposits, prepaid and other
|
|
|
(825
|
)
|
|
|
(903
|
)
|
Assets held for sale
|
|
|
(3,358
|
)
|
|
|
-
|
|
Short-term bank borrowings
|
|
|
-
|
|
|
|
(1,623
|
)
|
Account payables and accrued expenses
|
|
|
1,288
|
|
|
|
(2,155
|
)
|
Income tax liabilities
|
|
|
32
|
|
|
|
(1,244
|
)
|
Other
|
|
|
(262
|
)
|
|
|
202
|
|
Cash flows used in operating activities
|
|
|
(6,636
|
)
|
|
|
(4,350
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment, net
|
|
|
40
|
|
|
|
(415
|
)
|
Proceeds from sales of investment property
|
|
|
-
|
|
|
|
1,006
|
|
Disposition of a subsidiary, net of cash and cash equivalents disposed of
|
|
|
(2
|
)
|
|
|
(24
|
)
|
Other
|
|
|
116
|
|
|
|
(23
|
)
|
Cash flows provided by investing activities
|
|
|
154
|
|
|
|
544
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Reduction in lease liabilities
|
|
|
(560
|
)
|
|
|
-
|
|
Dividends paid to non-controlling interests
|
|
|
-
|
|
|
|
(805
|
)
|
Cash flows used in financing activities
|
|
|
(560
|
)
|
|
|
(805
|
)
|
Exchange rate effect on cash and cash equivalents
|
|
|
(2,535
|
)
|
|
|
2,222
|
|
Decrease in cash and cash equivalents
|
|
|
(9,577
|
)
|
|
|
(2,389
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
67,760
|
|
|
|
74,870
|
|
Cash and cash equivalents, end of period
|
|
$
|
58,183
|
|
|
$
|
72,481
|
|
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, 2019
(Unaudited)
Note 1. Nature of Business
Scully Royalty Ltd. ("SRL" or
the "Company") is incorporated under the laws of the Cayman Islands. SRL and the entities it controls are collectively
known as the Group in these condensed consolidated financial statements. The Group is a merchant bank that provides financial services,
with its core asset being an interest in the Scully Iron Ore Mine in the Province of Newfoundland & Labrador, Canada. 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.
Note 2. Basis of Presentation and Significant
Accounting Policies
These condensed consolidated financial
statements include the accounts of SRL and entities it controls. The presentation currency of these consolidated financial statements
is the Canadian dollar ($), as rounded to the nearest thousand (except per share amounts).
This interim financial report has been
prepared by SRL 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, 2019
are in compliance with IAS 34, Interim Financial Reporting ("IAS 34"). Except as indicated below 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 financial statements. In accordance with IAS 34, certain information and footnote disclosure normally included
in annual 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 SRL, 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 SRL'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 merchant
banking activities involve seasonality and cyclicality.
Note 3. Accounting Policy Developments
New accounting policies for 2019
IFRS 16, Leases ("IFRS 16"),
issued in January 2016, introduces a single on-balance sheet model of accounting for leases by lessees that eliminates the distinction
between operating and finance leases. Lessor accounting remains largely unchanged and the distinction between operating and finance
leases is retained.
The most significant effect of the new
standard is the lessee's recognition of the initial present value of unavoidable future lease payments as right-of-use lease assets
and lease liabilities on the statement of financial position, including those for most leases that would previously have been accounted
for as operating leases. Both leases with durations of 12 months or less and leases for low-value assets may be exempted. The measurement
of the total lease expense over the term of a lease will be unaffected by the new standard. However, the new standard results in
an acceleration of the timing of lease expense recognition for leases that would previously have been accounted for as operating
leases. The presentation on the statement of income and other comprehensive income required by the new standard results in the
presentation of most lease expenses as depreciation of right-of-use lease assets and financing costs arising from lease. Relative
to the results of applying the previous standard, although actual cash flows will be unaffected, the lessee's statement of cash
flows reflects increases in cash flows from operating activities offset equally by decreases in cash flows from financing activities.
This is the result of the presentation of the payments of the "principal" component of leases, which were previously
accounted for as operating leases, as a cash flow used within financing activities under the new standard.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 3. Accounting Policy Developments (continued)
IFRS 16 supersedes IAS 17, Leases,
and related interpretations and the Group adopted IFRS 16 for annual reporting periods beginning on January 1, 2019. The impacts
of IFRS 16 on the Group's consolidated financial statements as of January 1, 2019 were a debit of $2,911 to the right-of-use assets
with credits of $843 and $2,068, respectively, to the account payables and accrued expenses under current liabilities and other
long-term liabilities when the Group applied IFRS 16 retrospectively with the cumulative effect of initially applying the standards
at the date of its initial application.
In December 2017, Annual Improvements
to IFRS Standards 2015-2017 Cycle amended paragraph 14 of IAS 23, Borrowing Costs. The amendments clarify that the capitalization
rate to the expenditures on a qualifying asset shall be the weighted average of the borrowing costs applicable to the borrowings
of the entity that are outstanding during the period, and an entity shall exclude from this calculation borrowing costs applicable
to borrowings made specifically for the purpose of obtaining the qualifying asset until substantially all the activities necessary
to prepare that asset for its intended use or sale are complete. The Group has applied these amendments effective January 1, 2019.
There was no material impact on these interim consolidated financial statements.
In June 2017, The IFRS Interpretations
Committee (IFRS IC) issued IFRIC 23, Uncertainty over Income Tax Treatment ("IFRIC 23"), to clarify how
the recognition and measurement requirements of IAS 12, Income taxes, are applied where there is uncertainty over income
tax treatments.
IFRIC 23 explains how to recognize and
measure deferred and current income tax assets and liabilities if there is uncertainty over a tax treatment. An uncertain tax treatment
is any tax treatment applied by an entity where there is uncertainty over whether that approach will be accepted by the tax authority.
IFRIC 23 applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including
taxable profit or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates.
An entity is required to assume that a
tax authority with the right to examine and challenge tax treatments will examine those treatments and have full knowledge of all
related information. If an entity concludes that it is probable that the tax authority will accept an uncertain tax treatment that
has been taken or is expected to be taken on a tax return, it should determine its accounting for income taxes consistently with
that tax treatment. If an entity concludes that it is not probable that the treatment will be accepted, it should reflect the effect
of the uncertainty in its income tax accounting in the period in which that determination is made.
The entity should measure the impact of
the uncertainty using the method that best predicts the resolution of the uncertainty; either the most likely amount method or
the expected value method. The most likely amount method might be appropriate if the possible outcomes are binary or are concentrated
on one value. The expected value method might be appropriate if there is a range of possible outcomes that are neither binary nor
concentrated on one value. IFRIC 23 requires consistent judgments and estimates to be applied to current and deferred taxes.
The judgments and estimates made to recognize
and measure the effect of uncertain tax treatments are reassessed whenever circumstances change or when there is new information
that affects those judgments. New information might include actions by the tax authority, evidence that the tax authority has taken
a particular position in connection with a similar item, or the expiry of the tax authority's right to examine a particular tax
treatment. IFRIC 23 states specifically that the absence of any comment from the tax authority is unlikely to be, in isolation,
a change in circumstances or new information that would lead to a change in estimate.
The Interpretation is effective for annual
periods beginning on January 1, 2019. The Group, on initial application, elected to apply this Interpretation retrospectively,
with the cumulative effect of initially applying the Interpretation recognized at the date of initial application as an adjustment,
which was $nil, to the opening balance of retained earnings.
Future Accounting Changes
In October 2018, the IASB Board amended
IFRS 3, Business Combinations, ("IFRS 3") seeking to clarify whether an acquisition transaction results in the
acquisition of an asset or the acquisition of a business. The amendments are effective for acquisition transactions on or after
January 1, 2020, although earlier application is permitted. The amended standard has a narrower definition of a business, which
could result in the recognition of fewer business combinations than under the current standard; the implication of this is that
amounts which may have been recognized as goodwill in a business combination under the current standard may now be recognized as
allocations to net identifiable assets acquired under the amended standard (with an associated effect in an entity's results of
operations that would differ from the effect of goodwill having been recognized). Management is currently assessing the impacts
and transition provisions of the amended standard; however, management expects that the Group will apply the standard prospectively
from January 1, 2020. The effects, if any, of the amended standard on the Group's financial performance and disclosure will be
dependent on the facts and circumstances of any future acquisition transactions.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 3. Accounting Policy Developments (continued)
In October 2018,
the IASB issued amendments to its definition of material to make it easier for companies to make materiality judgements. The updated
definition amends IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting
Estimates and Errors. The amendments clarify the definition of material and how it should be applied and ensure that the definition
of material is consistent across all IFRS Standards. The changes are effective from January 1, 2020, but companies can decide to
apply them earlier. Management is assessing its impacts on the Group's financial statement presentation.
Note 4. Business Segment Information
The Group is primarily in the merchant
banking business, which includes various financial services and proprietary investing activities.
In reporting to management, the Group's
operating results are categorized into the following operating segments: merchant banking and all other segments.
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 merchant banking segment includes
its marketing activities, captive supply assets, structured solutions, financial services and proprietary investing activities.
The Group is a merchant bank that provides financial services and facilitates structured trade for corporations and institutions.
The Group specializes 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. The Group's merchant banking business operates in multiple geographies,
and participates in industries including manufacturing and natural resources. The Group also seeks investments in many industries,
emphasizing those business opportunities where the perceived intrinsic value is not properly recognized. The Group uses its financial
and management expertise to add or unlock value within a relatively short time period.
The all other segment includes the Group's
corporate and operating segments whose quantitative amounts do not exceed 10% of any of the Group's: (a) reported revenue; (b)
net income; or (c) total assets. The Group's all other operating segment primarily includes business activities in medical supplies
and services.
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, 2018. 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) revenues 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; and (e) deferred income tax assets and liabilities are not allocated.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 4. Business Segment Information (continued)
Segment Operating Results
|
|
Six
months ended June 30, 2019
|
|
|
|
Merchant
banking
|
|
|
All
other
|
|
|
Total
|
|
Revenue from external customers
|
|
$
|
62,846
|
|
|
$
|
3,652
|
|
|
$
|
66,498
|
|
Intersegment sale
|
|
|
1,501
|
|
|
|
39
|
|
|
|
1,540
|
|
Interest expense
|
|
|
177
|
|
|
|
17
|
|
|
|
194
|
|
Loss income before income taxes
|
|
|
(10,674
|
)
|
|
|
(5,709
|
)
|
|
|
(16,383
|
)
|
|
|
Six
months ended June 30, 2018
|
|
|
|
Merchant
banking
|
|
|
All
other
|
|
|
Total
|
|
Revenue from external customers
|
|
$
|
75,572
|
|
|
$
|
2,511
|
|
|
$
|
78,083
|
|
Intersegment sale
|
|
|
1,297
|
|
|
|
97
|
|
|
|
1,394
|
|
Interest expense
|
|
|
1,588
|
|
|
|
1
|
|
|
|
1,589
|
|
Loss before income taxes
|
|
|
(26,354
|
)
|
|
|
(6,635
|
)
|
|
|
(32,989
|
)
|
Note 5. Capital Stock
The authorized share capital of SRL consists of US$450,000 divided
into 300,000,000 common shares of US$0.001 par value per share and 150,000,000 preference shares divided into US$0.001 par value
per share.
As at June 30, 2019, there are 12,534,801 Common Shares issued
and outstanding.
All the Company's treasury stock is held by the Company itself.
Note 6. Condensed Consolidated Statements of Operations
Revenue
The Group's revenue comprised:
Six months ended
June 30:
|
|
2019
|
|
|
2018
|
|
Merchant banking products and services
|
|
$
|
60,328
|
|
|
$
|
72,067
|
|
Interest
|
|
|
704
|
|
|
|
412
|
|
Other
|
|
|
5,466
|
|
|
|
5,604
|
|
Revenue
|
|
$
|
66,498
|
|
|
$
|
78,083
|
|
Expenses
The Group's costs of sales and services
comprised:
Six months ended
June 30:
|
|
2019
|
|
|
2018
|
|
Merchant banking products and services
|
|
$
|
60,874
|
|
|
$
|
66,184
|
|
Credit losses
|
|
|
12,531
|
|
|
|
33,640
|
|
Market value (increase) decrease on commodity inventories
|
|
|
(44
|
)
|
|
|
81
|
|
(Gain) loss on derivative contracts, net
|
|
|
(437
|
)
|
|
|
74
|
|
Write-down of inventories
|
|
|
1,776
|
|
|
|
-
|
|
(Gain) loss on subsidiaries
|
|
|
(691
|
)
|
|
|
17
|
|
Fair value loss on a loan payable measured at FVTPL
|
|
|
245
|
|
|
|
-
|
|
Other
|
|
|
(31
|
)
|
|
|
(5,176
|
)
|
Total costs of sales and services
|
|
$
|
74,223
|
|
|
$
|
94,820
|
|
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 7. Share-Based Compensation
The following table is a summary of the
changes in stock options granted under the 2017 Plan during the six months ended June 30, 2019:
|
|
2017
Plan
|
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise
price per share
|
|
|
|
|
|
|
(US$)
|
|
Outstanding as at December 31, 2018
|
|
|
450,000
|
|
|
|
8.76
|
|
Expired
|
|
|
(4,000
|
)
|
|
|
8.76
|
|
Canceled
|
|
|
-
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
|
|
Outstanding as at June 30, 2019
|
|
|
446,000
|
|
|
|
8.76
|
|
As at June 30, 2019:
|
|
|
|
|
|
|
|
|
Options exercisable
|
|
|
446,000
|
|
|
|
|
|
The following table summarizes the share-based
compensation expenses recognized by the Group:
Six months ended
June 30:
|
|
2019
|
|
|
2018
|
|
Share-based compensation expenses arising from stock options granted by the Company
|
|
$
|
-
|
|
|
$
|
69
|
|
On May 12, 2018, a Group executive surrendered
for cancellation 20,000 options to purchase the Company's common shares. On the same date, the Company granted to a different employee
options to purchase 20,000 of the Company's common shares at an exercise price of US$8.76 per share. The options vested immediately
and expire on December 1, 2027. The aggregate fair value of options granted was $69 which was recognized as share-based compensation
expense in the Group's consolidated statement of operations for the six months ended June 30, 2018.
Note 8. Earnings per Share
Earnings per share data for the six months
ended June 30 is summarized as follows:
Six
months ended June 30:
|
|
2019
|
|
|
2018
|
|
Basic loss available to holders of common shares
|
|
$
|
(16,406
|
)
|
|
$
|
(31,973
|
)
|
Effect of dilutive securities:
|
|
|
-
|
|
|
|
-
|
|
Diluted loss
|
|
$
|
(16,406
|
)
|
|
$
|
(31,973
|
)
|
|
|
Number
of Shares
|
|
|
|
2019
|
|
|
2018
|
|
Weighted average number of common shares outstanding — basic
|
|
|
12,534,801
|
|
|
|
12,534,801
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Options
|
|
|
-
|
|
|
|
-
|
|
Contingently issuable shares
|
|
|
-
|
|
|
|
-
|
|
Weighted average number of common shares outstanding — diluted
|
|
|
12,534,801
|
|
|
|
12,534,801
|
|
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 9. 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 the operating and financing policies through significant shareholding, representation
on the board of directors, corporate charter and/or bylaws. The related parties also include SRL's directors, President, Chief
Executive Officer and Chief Financial Officer, as well as any person and entity which have significant influence over SRL. These
related party transactions are conducted in arm's-length transactions at normal market prices and on normal commercial terms. In
one situation, certain expenses of the Group were settled by a company owned by the Group's President / Chief Executive Officer
at cost and are either subsequently reimbursed or advanced. This arrangement is in place to comply with various local regulations
and requirements, including the newly introduced economic substance legislation for offshore jurisdictions, as well as fiscal efficiency.
As at June 30, 2019, the Group had net receivables of $4,776 related to this arrangement. In addition to transactions disclosed
elsewhere in these condensed consolidated financial statements, the Group had the following transactions with related parties:
Six
months ended June 30:
|
|
2019
|
|
|
2018
|
|
Interest income
|
|
$
|
4
|
|
|
$
|
-
|
|
Reimbursements of general and administrative expenses, at cost
|
|
$
|
(241
|
)
|
|
$
|
-
|
|
As
at June 30:
|
|
2019
|
|
|
2018
|
|
Receivables
|
|
$
|
854
|
|
|
$
|
-
|
|
Receivables (included in assets held for sale)
|
|
$
|
3,922
|
|
|
$
|
-
|
|
Note 10. Changes in Contingent Liabilities
or Contingent Assets Since the End of the Last Annual Reporting Period
Litigation
The Group is subject to litigation in the
normal course of business. Management considers the aggregate liability which may result from such litigation not material as at
June 30, 2019.
Guarantees
Guarantees are accounted for as contingent
liabilities unless it becomes probable that the Group will be required to make a payment under the guarantee.
In the normal course of its merchant banking
activities, the Group issues guarantees to its trade and financing partners in order to secure financing facilities. Upon the use
or drawdown of the underlying financing facilities, the financing facilities are recorded as liabilities on the consolidated statement
of financial position such as short-term bank borrowings or debt. Accordingly, the issued guarantees relating to such financing
facilities that are used or drawn are not considered contingent liabilities or off-balance sheet transactions. As at June 30, 2019,
the Group had no unrecorded contingent liabilities relating to outstanding guarantees issued to its trade and financing partners
in the normal course of its merchant banking activities.
Note 11. Subsequent Events
On August 16, 2019, one of the Group's
subsidiaries in Europe issued a seven-year secured bond with a principal amount of EUR 25 million and an annual interest rate of
4%. The bond is secured by the Group's investment property and real estate held for sale and the shares of the subsidiaries holding
the investment property and real estate assets.
The Group sold certain European subsidiaries
in metals processing industries for approximately their net asset value in the second half of 2019. These subsidiaries were not
material from a net income, total asset or net asset perspective.
The Company and certain subsidiaries have
been named as defendants in a legal action relating to an alleged guarantee of the former parent of the Group in the amount of
approximately EUR 43 million. The Group believes such claim is without merit and intends to vigorously defend such claim. Currently,
based upon the information available to us, we do not believe that there will be a material adverse effect on our financial condition
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.
SCULLY ROYALTY LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 12. Approval of Consolidated Financial
Statements
This interim financial report was approved
by the Board of Directors and authorized for issue on December 30, 2019.
NEWS RELEASE
|
Scully
Royalty Ltd.
1 (844) 331 3343
info@scullyroyalty.com
|
|
Hong Kong (December 31, 2019) . . . Scully
Royalty Ltd. (the “Company”) (NYSE: SRL) announces that it has issued its semi-annual report (the "Semi-Annual
Report") for the six months ended June 30, 2019, a copy of which is available under the Company's profile at www.sec.gov.
All Stakeholders are encouraged to:
|
·
|
read the entire Semi-Annual Report, which
includes the Company's unaudited financial statements and management's discussion and analysis for the six months ended June 30,
2019 and other corporate updates, for a greater understanding of the Company's business and operations; and
|
|
·
|
direct any questions regarding the information
in the Semi-Annual Report to the Company's North American toll free line at 1 (844) 331 3343 or email info@scullyroyalty.com to
book a conference call with senior management.
|
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 Financial Officer
|
|
|
|
|
|
Date:
|
December 31, 2019
|
|
KHD Humboldt Wedag (CE) (USOTC:KHDHF)
Historical Stock Chart
From May 2024 to Jun 2024
KHD Humboldt Wedag (CE) (USOTC:KHDHF)
Historical Stock Chart
From Jun 2023 to Jun 2024