Notes to the Financial Statements
25. CAPITAL, RESERVES AND DIVIDENDS (CONTINUED)
(b) Dividends
(i) Dividends payable to equity shareholders of the Company attributable to the year
2017
$’000
2016
$’000 Special dividend declared during the year of $Nil (2016: $1.35) per share (Note) – 451,298 Final dividend proposed after the end of reporting period of 1.0 HK cent (2016: 2.5 HK cents) per share 7,352 18,376 7,352 469,674
Note: Pursuant to the subscription agreement (“the Subscription”) that was entered into by the Company and BOE Technology Group Co., Ltd (“the Subscriber” or “BOE”) on 3 February 2016, upon completion of the Subscription on 28 April 2016, a special dividend of $1.35 per share to ordinary shareholders of the Company totalling $451,298,000 was declared and paid during the year ended 31 December 2016. No special dividend was paid to the Subscriber whom has agreed to waive its entitlement.
The final dividend proposed after the end of the reporting period has not been recognised as a liability at the end of the reporting period.
(ii) Dividends payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the year
2017
$’000
2016
$’000 Final dividend in respect of the previous financial year, approved and paid during the year,
of 2.5 HK cents (2016: 30.5 HK cents) per share 18,376 101,960
(c) Share capital
(i) Authorised and issued share capital
2017 2016
No. of shares
’000
Amount
$’000
No. of shares
’000
Amount
$’000
Authorised:
Ordinary shares of $0.25 each 800,000 200,000 800,000 200,000
Ordinary shares, issued and fully paid:
At 1 January 735,055 183,764 331,125 82,782
Issuance of new shares – – 400,000 100,000
Issuance of shares under share option scheme 120 30 3,930 982
At 31 December 735,175 183,794 735,055 183,764
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.
(ii) Issuance of new shares
On 28 April 2016 upon the completion of the Subscription, 400,000,000 ordinary shares of the Company were allotted and issued as fully paid to the Subscriber at an issue price of $3.50 per share totalling $1,400,000,000, of which $100,000,000 was credited to share capital and the balance of $1,300,000,000 was credited to the share premium account. Issuing expenses in relation to the issuance of new shares of $6,052,000 was also capitalised into the share premium account.
25. CAPITAL, RESERVES AND DIVIDENDS
(CONTINUED)(c) Share capital
(continued)(iii) Issuance of shares under share option scheme
During the year ended 31 December 2017, options have been exercised to subscribe for 120,000 ordinary shares (2016:
3,930,000 ordinary shares) in the Company at a consideration of $686,000 (2016: $10,404,000) of which $30,000 (2016:
$982,000) was credited to share capital and the balance of $656,000 (2016: $9,422,000) was credited to the share premium account. $114,000 (2016: $3,715,000) has been transferred from the capital reserve to the share premium account in accordance with policy set out in note 1(p)(ii).
(iv) Terms of unexpired and unexercised share options at the end of the reporting period
Exercise period
Exercise price HK$
2017 Number
2016 Number
1 September 2015 to 31 August 2018 5.72 7,850,000 7,970,000
Each option entitles the holder to subscribe for one ordinary share in the Company. Further details of these options are set out in note 24 to the financial statements.
(d) Nature and purpose of reserves
(i) Share premiumThe application of the share premium account is governed by sections 150 and 157 of the Company’s Articles of Association and the Companies Act 1981 of Bermuda.
During the year ended 31 December 2016, pursuant to the passing of a resolution in the special general meeting on 21 April 2016, a capital reduction was implemented by transferring $720,191,000 from the share premium account to the contributed surplus account of the Company (note 25(d)(ii)). Further details are set out in the Company’s announcement dated 18 March 2016.
(ii) Contributed surplus
Contributed surplus comprises the capital reduction of
$720,191,000 transferred from the share premium account (note 25(d)(i)) during the year ended 31 December 2016 and the excess value of the shares of the subsidiaries acquired pursuant to the Group reorganisation scheme in 1991 over the nominal value of the new shares of the Company issued
(iii) Exchange reserve
The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of operations outside Hong Kong. The reserve is dealt with in accordance with the accounting policies set out in note 1(u).
(iv) Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of available-for-sale securities held at the end of the reporting period and is dealt with in accordance with the accounting policies in notes 1(f) and 1(i).
(v) Capital reserve
The capital reserve comprises the fair value of the actual or estimated number of unexercised share options granted to employees of the Company recognised in accordance with the accounting policy adopted for share based payments in note 1(p)(ii).
(vi) Other reserves
(Expressed in Hong Kong dollars unless otherwise indicated)
Notes to the Financial Statements
25. CAPITAL, RESERVES AND DIVIDENDS
(CONTINUED)
(e) Capital management
The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.
The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.
The Group monitors its capital structure on the basis of a net debt-to-adjusted capital ratio. For this purpose the Group defines net debt as total debt (which includes interest-bearing loans and borrowings and trade and other payables) plus unaccrued proposed dividends, less trading securities, fixed deposits with banks and cash and cash equivalents. Adjusted capital comprises all components of equity less unaccrued proposed dividends.
During 2017, the Group’s strategy, which was unchanged from 2016, was to maintain a stable net debt-to-adjusted capital ratio. In order to maintain or adjust the ratio, the Group may adjust the amount of dividends paid to shareholders, issue new shares, return capital to shareholders, raise new debt financing or sell assets to reduce debt.
The adjusted net debt-to-capital ratio at 31 December 2017 and 2016 was as follows:
Note
2017
$’000
2016
$’000
Current liabilities
Trade and other payables 20 656,784 424,060
Bank loans 21 – 8,890
Total debt 656,784 432,950
Add: Proposed dividends 7,352 18,376
Less: Fixed deposits with banks and other financial institutions with more than three months to maturity
when placed 19 (222,137) (626,231)
Cash and cash equivalents 19 (980,402) (1,098,672)
Net cash (538,403) (1,273,577)
Total equity 2,802,041 2,731,607
Less: Proposed dividends (7,352) (18,376)
Adjusted capital 2,794,689 2,713,231
Adjusted net
capital ratio N/A N/A
The Company was not subject to any externally imposed capital requirements in either current or prior year. The Group is subject to certain externally imposed capital requirements to maintain the value of net assets at a level specified in its bank loan covenants (note 21).