TIDMSHWE
RNS Number : 1560H
Myanmar Strategic Holdings Ltd
30 July 2019
30 July 2019
Myanmar Strategic Holdings Ltd.
("MSH" or the "Company" or the "Group")
Results for 12-month period ended 31 March 2019
The Board of Myanmar Strategic Holdings (LSE: SHWE), an
independent developer and manager of consumer businesses located in
Myanmar, is pleased to announce its audited results for the
12-month period ended 31 March 2019.
Copies of the annual report and accounts for the 12-month period
ended 31 March 2019 will be posted to shareholders shortly and an
electronic copy will shortly be made available on the Company's
website.
HIGHLIGHTS
Financial Highlights
All dates refer to the financial year ended 31 March 2019
("2019"), unless otherwise stated.
-- Group revenues increased 459% year on year ("YOY") to US$4.4
million, of which 78% derived from Services, 20% from Education and
2% from Hospitality.
-- Created a "Services" division following the successful
acquisition in May 2018 of EXERA, one of Myanmar's leading
providers of integrated security and risk management services, for
US$2.2 million.
-- Received an investment permit from the Myanmar Investment
Commission ("MIC") in April 2019 in relation to the Company's first
international school, the Yangon American International School,
which has been launched in June 2019.
-- Adjusted EBITDA loss widened to US$2.1 million (2018: US$1.5
million), primarily due to the pre-opening operating losses of
Yangon American (US$0.4 million), the reorganisation of EXERA and a
slower tourism market.
-- Net loss amounted to US$2.5 million (2018: US$2.1 million).
-- Underlying revenues, an indicator of the volume of business
generated by the managed and owned businesses, increased 130% YOY
to ca. US$7.3 million of which 47% derived from Services, 36% from
Education and 17% from Hospitality.
-- The Company raised US$3.07 million (153,500 new shares at a
price of US$20 per share) as part of its share issuance programme
announced in March 2018.
-- A new share issuance programme of up to 480,000 shares at a
price of not less than US$20 per share was launched in July
2018.
-- Loans of up to US$3 million with Macan Pte. Ltd., of which
US$2 million was drawn immediately, were also secured in July
2019.
Operational Highlights
Education
-- Group revenues arising from the management of the education
businesses for the year were US$874,737 (2018: US$611,870).
-- Through its Education division, the Group is currently active
in (i) English language learning (Wall Street English), (ii) higher
education (Auston College Myanmar) and (iii) K-12 international
school (Yangon American International School).
-- Under the Wall Street English brand ("WSE"), the Group
manages three retail English language centres and one corporate
centre. As at 31 March 2019, WSE served ca. 1,400 registered
students across its retail and corporate centres and has
established itself as the leading private English language
education provider in Myanmar.
-- The Group continues to seek opportunities to expand the WSE
franchise as it holds the exclusive rights to develop a further
seven WSE retail centres (up to a total of 10) over the next eight
years. In December 2018 the Company also purchased the remaining
minority non-controlling interest of 8% in MS English, yielding
full ownership.
-- Within its higher education portfolio, MSH manages Auston
College Myanmar ("Auston"), a private school offering foundation
and diploma programs in engineering. The first campus opened in
Yangon in May 2018, spans over three floors and covers 700 sqm.
-- In April 2019, the Group has also received the MIC investment permit in relation to its first international school, the Yangon American International School ("Yangon American"). The school is centrally located in Yangon in a campus of over 3,000 sqm. Its planned capacity is 400 students and operations will commence on time in August 2019.
-- During the financial year, the education businesses generated
underlying revenues of US$2.6 million (2018: US$1.5 million).
Services
-- Group revenues arising from rendering of services from the
date of acquisition to the reporting date were US$3.4 million (For
the financial year ended 31 March 2019: US$4.1 million; 2018:
US$4.0 million).
-- Through its Services division, the Group provides a range of
integrated security, risk management, journey management and cash
in transit services under the EXERA brand.
-- Acquired by the Group in May 2018, EXERA is an
internationally managed provider of security and risk management
services, operating exclusively in Myanmar. With an experienced
workforce of over 1,000 security officers as at 31 March 2019,
EXERA provides guarding, protective services, transportation,
training, and nationwide risk consulting, to a wide range of
international and local clients.
-- Its customer base includes multi-national corporations, large
oil and gas companies, established local businesses and
governmental bodies and international organisations such as WFP,
UNHCR, UNICEF and the EU. It is worth noting that, since its
acquisition in May 2018, EXERA has been able to retain 80% of the
contracts that came up for renewal or retention.
-- In May 2019 EXERA has been awarded the prestigious contract
for the provision of security guarding services at the Singapore
Embassy in Yangon for a period of three years. The total tendered
price was ca. US$478,000 for the initial period of three years.
Hospitality
-- Management and technical assistance fees to the Group for the
year were US$105,000 (2018: US$180,000). The reduction in fees was
mainly due to a broader decline in tourist arrivals in Myanmar
linked to the political uncertainty and the conflicts in Rakhine
State.
-- Under its Hospitality division, the Group manages four
boutique hostels across three of the most popular tourist
destinations in Myanmar. Following the opening of its fourth
boutique hostel, Ostello Bello Bagan Pool, the Group raised the
number of beds under management to 474, spread over 108 rooms in 4
locations across Bagan, Mandalay and Nyaung Shwe.
-- During the financial period, the number of beds sold amounted
to 65,763 (2018: 84,824) and the underlying revenues of managed
businesses were US$1.2 million (2018: US$1.7 million).
-- The Group's main focus is to maintain a strong operating
performance and generate operational synergies to offset the
currently challenging operating environment in the Myanmar tourism
sector.
-- Management maintains a positive outlook on the long-term
prospects of the Myanmar tourism sector and is pursuing expansion
opportunities in both established tourist hubs (e.g. Yangon and
Ngapali) as well as up and coming destinations (e.g. Hpa-An and
Ngwe Saung).
-- It is worth noting that in July 2019, Bagan was approved for
inclusion on UNESCO's World Heritage List, more than two decades
after it was first nominated. This strong vote of confidence is
expected to drive an increase in overall tourism inflows in the
next 12 months.
New Business Development
-- As demonstrated by the post period events listed below, MSH
continues to develop its business network and expand its pipeline
within the Company's existing sectors (e.g. Services, Education and
Hospitality) and new sectors (e.g. Technology).
-- On 21 May 2018, MSH agreed to make a strategic minority
investment of US$150,000 in NEXLABS, one of Myanmar's leading
digital consulting firms. The firm was founded in 2013 in Yangon by
Ye Myat Min, one of Forbes Asia's 30 under 30 in 2016 and employs
over 80 experienced professionals.
-- Management will also routinely conduct in-depth studies of
new sectors (e.g. Healthcare, Retail and Financial Services) and
determine whether to allocate additional human and financial
resources to selected initiatives.
Post Period End Events
Proposed acquisition of Myanmar Investments Limited
-- On 18 June 2019, the Board of MSH announced that it had made
an indicative proposal to the Board of Myanmar Investments
International Limited ("MIL") suggesting a combination of MSH and
MIL.
-- The Board of MSH believes that a combination of MSH and MIL
would generate significant value to both companies and their
respective shareholders by:
-- preserving the legacy and the goodwill of the MIL and the MSH
franchises;
-- unlocking further value within the MIL and MSH investment
portfolios;
-- leveraging the experience of the MSH team and the combined
investor base in Mergers and Acquisitions and Equity Capital
Markets transactions to maximise the value of each company's
investments;
-- accessing a portfolio of attractive investment and
consolidation opportunities in high-growth sectors such as
microfinance, consumer retail, education, hospitality and
security;
-- attracting, developing and retaining high quality talent as
one of the leading employers in Myanmar;
-- driving significant revenue and cost synergies through the
cross-fertilisation of customer bases and the removal of duplicated
functions and expenses;
-- potentially generating greater liquidity for shareholders by
virtue of a larger market capitalisation; and
-- improving the overall attractiveness of the combined business
to new investors thanks to the significantly larger size and a
diversified portfolio of operating businesses and strategic
investments.
-- MSH's indicative proposal to the Board of MIL comprised a
cash and share offer to be effected by way of a British Virgin
Islands Scheme of Arrangement or Takeover Offer. MSH's indicative
proposal would value MIL at US$0.75 per share, an implied premium
of 23% vs. the block trade conducted on 30 April 2019 at US$0.61
per share, and comprised of: (i) Cash: US$0.10 per MIL share, and
(ii) MSH shares: one newly issued MSH share for 16 MIL shares
(equivalent to ca. US$0.65 per MIL share based on MSH's closing
share price of US$10.50 (as at 17 June 2019) or ca. US$1.25 per MIL
share based on MSH's latest share issuance at US$20.00 per
share).
-- On 18 and 19 June 2019, MIL issued statements in which the
Board of MIL and its Shareholders rejected MSH's unsolicited
approach "as it significantly undervalues the Company and does not
attribute fair value to the Company's assets, nor their future
upside".
Share issuance programme and loan facility
-- On 1 July 2019, the Company announced the launch of a share
issuance programme (the "Share Issuance Programme") for up to four
hundred and eighty thousand (480,000) new ordinary shares in the
Company over the next 12 months at a an issue price which is not
less than US$20 per share.
-- The Share Issuance Programme is being implemented to provide
the Company with flexibility should it wish to raise further
capital as new investment opportunities arise in Myanmar over the
next 12 months and to provide the Company with additional working
capital.
-- In addition to the Share Issuance Programme, the Company has
put in place a Loan Facility of up to US$3.0 million with MACAN
Pte. Ltd., the Company's largest shareholder and a related party.
The Loan Facility will have a tenure of up to 3 years, may be
repayable earlier at the Company's discretion and will have an
interest rate of 6.0% per annum. The Company has drawn down US$2.0
million immediately.
MIC permit in relation to Yangon American and opening of the
international school
-- In April 2019, the Group received an investment permit from
the Myanmar Investment Commission.
-- The permit was granted under the 2016 Investment Law,
following the issue of MIC Notification No. 7 of 2018 for carrying
out investment activities in education services and private
international school(s) and provides the Company with additional
investment protection and tax benefits.
-- Yangon American was officially launched in June 2019 and is
scheduled to commence full operations in August 2019.
Myanmar Macroeconomic Highlights
-- The World Bank projects global economic growth to slow down
to 2.6% in 2019 from 3.0% in 2018, reflecting a broad-based
weakness in the global economy, global trade uncertainty and global
financial markets volatility.
-- The World Bank expects Myanmar's economic growth to pick up
to 6.8% in 2018/2019. The Asian Development Bank expects similar
rates of 6.6% for 2019 and 6.8% in 2020. This is a testament to the
stability of Myanmar's growth, despite unrest in relation to the
conflict in Rakhine State, of which the Company is acutely
aware.
-- Core inflation remains stable, with the Asian Development
Bank forecasting inflation rates of 6.8% in 2019 and 7.5% in 2020
(vs. 7.1% in 2018).
-- Opening of the Myanmar insurance sector in April 2019, as
Myanmar's government provisionally authorised five multinational
insurance companies to establish wholly owned subsidiaries.
Operations are expected to commence by the end of 2019.
-- Further liberalisation of the Myanmar banking and financial
services sector announced. Plans to award additional foreign bank
branch licenses and allow foreign banks to apply for and operate as
a subsidiary of a foreign bank. In June 2019 the International
Finance Corporation ("IFC") also converted a loan to Yoma Bank into
a 5% equity shareholding.
-- Relaxation of visa requirements for citizens of Australia,
Germany, Italy, Russia, Spain and Switzerland, with effect from 1
October 2019, and approval for inclusion of Bagan on UNESCO's World
Heritage List in July 2019 expected to further boost international
tourism arrivals.
-- Significant increase in subsidised power tariffs, with effect
from 1 July 2019, showing the strong commitment of Myanmar's
government towards sustainability. This is also expected to attract
additional investment into the energy sector.
Enrico Cesenni, Chief Executive Officer of Myanmar Strategic
Holdings, commented:
"I am very pleased to announce the Company's full year results,
which represent a truly transformational period of growth for the
overall business. Over the course of the year, we have not only
focused upon the improvement and management of the Group's existing
businesses, but also remained prudent to new potential
opportunities, as proven by the acquisition of EXERA in May
2018.
"We believe we have been successful in providing the Group's
businesses with a solid platform from which to grow organically.
For the year ahead, we will be focused on further developing the
Company's presence as a leading provider of education services in
Myanmar, as well as broadening the Company's customer base and
product portfolio across the Group's Services division.
"The Board is confident that the Company's consumer-focused
businesses are well positioned both to contribute to, and also
benefit from, the favourable outlook for economic growth in
Myanmar, and we look forward to updating shareholders on our
progress in due course."
For more information please visit www.ms-holdings.com or
contact:
Myanmar Strategic Holdings Ltd.
Richard Greer, Independent Non-Executive richardgreer@me.com
Chairman enrico@ms-holdings.com
Enrico Cesenni, Founder and CEO
Allenby Capital Limited (Broker)
Nick Athanas
Nick Naylor
Nicholas Chambers +44 (0)20 3328 5656
Yellow Jersey PR (Financial PR)
Felicity Winkles
Henry Wilkinson +44 (0)20 3004 9512
CHAIRMAN'S STATEMENT
Strategy
Myanmar Strategic Holdings' vision is to become the leading
developer and manager of consumer businesses in Myanmar while
maintaining an asset light strategy.
Since the Company's inception, our focus has been on building
committed and experienced management teams capable of starting and
growing businesses, while benefiting from the tailwinds of a
positive macroeconomic environment. I am very pleased to report
that all the businesses we manage are now in their expansion phase
and we are generating synergies across the different products and
divisions. We are confident that our growth will continue both
organically and through acquisitions.
Focused diversification is and will remain at the core of our
strategy as it allows MSH to stabilise its expected growth while at
the same time capitalising on the opportunities currently available
in Myanmar's dynamic economy. In line with this strategy, in May
2018 MSH concluded the acquisition of EXERA, one of Myanmar's
leading providers of security and risk management services. EXERA
brings to the Group a large base of corporate customers with
opportunities for cross-fertilisation across the divisions of the
Group.
It is also key for MSH to source and evaluate transformational
acquisition opportunities that can deliver scale and liquidity to
MSH's businesses and stakeholders in the next 24 to 36 months. In
June 2019, MSH announced the proposed acquisition of Myanmar
Investments International Limited ("MIL"), an investing company
listed on the AIM segment of the London Stock Exchange. We believe
that a combination of MSH and MIL would create one of the largest
listed companies focused on Myanmar and deliver significant
strategic benefits and increased liquidity to the combined
shareholder base. While the MIL Board has announced its initial
rejection of our approach, we continue to believe that a
combination of MSH and MIL would benefit both companies and be
attractive to both our and MIL's shareholders.
Board's responsibility
The Board is fully aware of the responsibility that it carries
in ensuring that all of our businesses operate in a manner that
reflects our corporate and social responsibility to all of our
stakeholders. We target sectors that positively contribute to the
overall development of Myanmar and within these sectors we aim to
build businesses that embody the best terms of business,
environmental, social and governance practices.
The Board and the Group's management actively promote
sustainability and diversity as we believe it is a core strategic
advantage that will enable the Group to maintain its leading
competitive position in the future.
Equal opportunities are promoted across the Group and we are
proud to report that female representation across our workforce is
approximately 46% (excluding EXERA).
Training programs are being implemented across the Group to
foster an environment where talent can emerge and flourish. We are
proud to report that the local workforce represents over 95% of
MSH's workforce.
Outlook
In the financial year ended 31 March 2019, MSH focused on the
growth of its Education division and the integration of EXERA into
its newly created Services division. Key appointments have been
made across the organisation, the most senior being Alain Thibault
as CEO of Wall Street English Myanmar, Mark Wakeford as CEO of
EXERA Myanmar and Francesco Romagnoni as General Manager of Ostello
Bello Myanmar.
The expansion of our business portfolio and the growth of our
management team has lead to a temporary growth in the Group's net
losses. This trend may revert in 2019/2020.
The next twelve months will be dedicated to expanding MSH's
customer base while at the same time adding complementary products
(e.g. English for children) and capabilities (e.g. facilities
management) to MSH's portfolio.
While we are acutely aware of the complex political and social
environment, we continue to maintain an optimistic stance on
Myanmar's economic prospects, and we aim to contribute to its
positive development as a responsible investor in the region.
As Myanmar's economy continued to develop at high single digit
rates, management will increasingly focus on businesses targeting
the population's primary needs such as education, security and
healthcare.
I am very confident that Myanmar Strategic Holdings is building
one of the most committed and aligned management teams in Myanmar.
This will enable us to evaluate and approach investment
opportunities with a unique strategic and data driven angle, which
will significantly differentiate MSH from the other providers of
capital and / or technical expertise in the country.
Our management depth will also enable the Group to evaluate its
involvement in minority investment opportunities in which it could
play a significant role as a strategic shareholder. As local
companies evolve, the Board expects in fact more sophisticated and
structured companies to approach the market looking for strategic
investors.
The Board wants to thank our shareholders, for their continued
support and encouragement, and our staff and partners, for their
relentless commitment and effort.
RICHARD GREER
Independent Non-Executive Chairman
29 July 2019
OPERATIONAL REVIEW
EDUCATION DIVISION
The Group's objective is to become one of the leading private
operators of educational institutions in Myanmar through the
identification and expansion of opportunities in the sector,
focusing initially on English language learning and higher
education.
Within its Education division, the Group is currently active in
(i) English language learning (Wall Street English), (ii) higher
education (Auston College) and (iii) K-12 international school
(Yangon American International School).
The Group generates revenues through management fees, technical
assistance fees, royalty fees and other one-off fees ("Fees to the
Group") from the operations it manages. These fees are variable in
nature and typically linked to the operating performance and,
ultimately, the revenue generation of the underlying managed
operations (hereby reported as "Underlying Revenues").
Wall Street English
During the financial period, the Group's Education division
managed three English language retail centres and one corporate
centre under the well-established Wall Street English brand. As at
31 March 2019, total registered students amounted to ca. 1,400.
The flagship WSE centre opened in Yangon at the Junction Square
Shopping Centre in February 2017 and spans five floors over 800
sqm. The second WSE centre opened in Yangon at City Mall St. John
in December 2017 and is located on an open floor of ca. 600 sqm. A
third WSE centre opened in Yangon at Myanmar Plaza in August 2018
and is located on an open floor of 350 sqm.
Pursuant to a strategic partnership with MCTA:RVi Academy
Mandalay announced in July 2018, WSE has also agreed to provide
English language training within the premises of MCTA's Mandalay
campus.
Over the financial year ended 31 March 2019, the Wall Street
English business generated underlying revenues of US$2.6 million
(2018: US$1.5 million) with fees and royalties to the Group of
US$874,737 (2018: US$611,870).
From an operational perspective, we are proud to report that
Myanmar currently ranks as one of the top countries in the Wall
Street English network in terms of student progress: student
satisfaction is key to establishing Wall Street English as the
leading English language education provider in Myanmar. From a
global perspective, it is also worth noting that in May 2019, Wall
Street English was awarded "Best Education Platform of the Year" at
the EducationInvestor Asia Awards 2019.
Management is in the process of assessing further growth
opportunities for Wall Street English business in order to meet the
average development targets stated under the area development
agreement with Pearson of approximately one new centre per year up
to a total of ten centres. Further sub-franchising opportunities in
Myanmar will be evaluated in due course.
Finally, the Board is also evaluating how to further expand
nationwide coverage through innovative digital solutions such as
WSE's digital classroom.
Auston College Myanmar
Auston College ("Auston") is the result of a strategic
collaboration signed in April 2018 between Myanmar Strategic
Holdings (70% equity interest) and Auston Institute of Management
(30% equity interest), an operator of private schools in Singapore
and Sri Lanka that prepares students for careers in Engineering, IT
Technology and Project management through higher education
learning.
The first campus opened in Yangon in May 2018, spans over three
floors and covers 700 sqm. The initial product portfolio includes
foundation programs and diplomas in Infrastructure & Networks,
Mechanical Engineering, Engineering Technology and Construction
Project Management.
Auston has also partnered with WSE for Auston's students to
achieve a high level of English proficiency to ensure they are
qualified to take on roles at leading local and international
companies.
No fees and royalties to the Group were generated by Auston as
the business is still in its ramp-up phase.
Yangon American
In December 2018, the Group announced its intention to launch
its first international school, the Yangon American International
School.
The first Yangon American campus, with planned capacity of up to
400 students, will be positioned as a leading educational
institution. The school is centrally located and only 4 km from
MSH's educational hub of Wall Street English and Auston Institute
of Management in Junction Square.
It has 17 classrooms spread over 2,000 sqm, plus a multi-use
playground of more than 1,000 sqm. In its first year of operation,
Yangon American will operate classes from nursery through to the
third grade, serving students from the age of two to eight with
revenues for MSH being generated from student fees, admission fees
and ancillary services.
In April 2019, the Group received an investment permit from the
Myanmar Investment Commission. The permit granted under the 2016
Investment Law, following the issue of MIC Notification No. 7 of
2018 for carrying out investment activities in education services
and private international school(s) and allows the Group to
directly own and operate the School business.
Yangon American will also become an IB-PYP candidate in August
2019 and may receive full accreditation by June 2020.
Yangon American has been officially opened on schedule and on
budget in June 2019. Operations are scheduled to commence in August
2019.
For the financial period ended 31 March 2019, Yangon American
incurred pre-opening losses (mainly rental expenses, salaries and
other pre-opening expenses) of US$0.4 million. Yangon American is
expected to continue to incur operating losses for the next 18-24
months as the number of students ramps up towards capacity.
Capital expenditures in relation to Yangon American were
forecasted at up to US$1 million and management expects to complete
the project on budget.
SERVICES DIVISION
The Group's objective is to become the leading provider of
integrated security services in Myanmar.
Founded in 2012 and acquired by the Group in May 2018 for US$2.2
million, resulting in goodwill of US$1.4 million and other
intangibles of US$0.3 million. EXERA provides risk management,
consulting, integrated security, manned guarding, secure logistics
and cash in transit services to a wide range of international and
local clients across Myanmar. EXERA is seeking to acquire other
Myanmar businesses that will build capability and accelerate its
strategy of targeting key growth sectors including Oil & Gas,
Mining, Energy and Telecoms.
As the business is fully owned, the Group generates revenues
through the provision of security services to its clients. Typical
contracts have a term of 1-3 years with predictable monthly
revenues, particularly for core manned guarding services. Risk
management services are also provided on a consulting basis.
Since the completion of its acquisition at the end of May 2018,
EXERA generated revenues of US$3.4 million (For the financial year
ended 31 March 2019: US$4.1 million; 2018: US$4.0 million).
Security Officers and Manned Guarding Services
Through an experienced network of over 1,000 security officers
active across 130 sites as at 31 March 2019, EXERA is the largest
provider of security services in Myanmar.
EXERA's customer base includes multi-national corporations,
large oil and gas companies, established local businesses and
governmental bodies and international organisations such as WFP,
UNHCR, UNICEF and the EU.
Most recently EXERA was awarded the prestigious contract for the
provision of security guarding services at the Singapore Embassy in
Yangon for a period of three years. The total tendered price was
ca. US$478,000 for the initial period of three years.
EXERA's Security Officers are highly trained in accordance with
the guidelines from the British Security Industry Association.
Furthermore, EXERA strives to achieve excellence in its systems and
processes and has been awarded ISO 9001, OHSAS 18000 and ASNSI/ASIS
PSC 1. EXERA is also the only company in Myanmar accredited to "ISO
18788 Management System for Private Security Companies". These
accreditations are the hallmark of a company intent on delivering
high quality services for the benefit of our customers.
Secured Logistics and Cash in Transit Services
EXERA provides a number of customers with English speaking
security trained drivers and vehicles on a long-term contract
basis. Our services include emergency management and crisis
intervention designed to help our clients in the event of a serious
accident, medical emergency or natural disaster.
EXERA was one of the very first international providers of
cash-in-transit ("CIT") services in Myanmar. EXERA's CIT services
are fully insured from pick-up to drop-off and are executed by a
highly trained team including an operations manager and Cash Escort
Officers.
Our cash in transit operations are continuously monitored by
EXERA's 24/7 command centre. This combination of international
standards with local expertise and knowledge makes our team
perfectly tailored to conduct CIT operations in Myanmar. The team's
training and knowledge spans all elements of CIT services,
including equipment and vehicle use, standard operating procedures
and fail-safe systems designed to prevent theft and thwart any
attempted robberies.
EXERA operates the most sophisticated and secure CIT vehicle in
Myanmar.
Security features include:
-- Remote-authorised access control facilitated by Salto(TM),
one of the world's top manufacturers of electronic access control
systems
-- 360deg CCTV camera coverage (internal & external)
-- Air-lock multi-stage entry system and anti-cut panels
-- Geofencing / distance limitations paired with continuous tracking
EXERA is currently in discussion with a number of financial
institutions to evaluate transformational outsourcing opportunities
in relation to cash management and movement services.
Facilities Management and New Services
EXERA's strategy is to develop new services that differentiate
it from its competitors, build barriers to entry and provide a
wider range of support services to existing and new customers. As
part of this strategy, EXERA is developing a comprehensive
facilities management capability. EXERA is now providing Facility
Management services to Yangon American International School and the
wider MSH Group.
HOSPITALITY DIVISION
The Group's objective to become a leading independent
hospitality operator in Myanmar by initially focusing on boutique
hostels and expanding into other categories as new opportunities
are identified.
The Group generates revenues through management fees, technical
assistance fees, royalty fees and other one-off fees ("Fees to the
Group") from the operations it manages. These fees are variable in
nature and typically linked to the operating performance and,
ultimately, revenue generation of the underlying managed operations
(hereby reported as "Underlying Revenues").
During the previous financial year, the Group signed up a fourth
boutique hostel, the second in New Bagan. The property re-opened as
Ostello Bello Bagan Pool in November 2017, featuring 58 beds across
13 rooms with en-suite bathrooms. Following the opening of this
fourth hostel, the Group currently manages 474 beds over 108 rooms
in four hostels across three of the most popular tourist
destinations in Myanmar. No new properties have been opened in 2019
as management expect further pressure on prices.
The four hostels under management generated underlying revenues
of US$1.2 million (2018: US$1.7 million) with Fees to the Group of
US$105,000 (2017: US$180,000) for the financial year ended 31 March
2019. In line with the previous year all the Fees to the Group for
the Hospitality division were generated by Ostello Bello Bagan as
the other three properties were still in a start-up phase. The
US$75,000 decline in the fees generated by Ostello Bello Bagan was
due, primarily, to a contraction in its underlying revenues by ca.
US$0.5 million (-46% vs. the previous financial year) which was
partially offset by a range of cost control initiatives and
operational synergies.
The properties sold 65,763 beds (2018: 84,824) generating a
revenue per bed of US$18.4 (2018: US$19.8). Occupancy rates
sustained a much stronger decline than prices, mainly due to the
overall slowdown in Myanmar's tourism market. It is worth noting
that the decline in bed revenues was partially offset by the
increase in food and beverage and ancillary revenues, such as
travel and tours, sold to guests.
International visitor arrivals for the first five months of 2019
have shown a strong increase of ca. 28% (Source: Myanmar's Ministry
of Hotel and Tourism), though this trend is mainly driven by an
increase in arrivals from China (+137% YOY). Arrivals from Europe
and the U.S. have remained depressed: U.S. (+3% YOY), Canada (-4%
YOY), Western Europe (-2.5% YOY). This trend is expected to
partially reverse in 2019- 2020 as the unrest in Rakhine State
moves towards a long-term resolution.
The Board also notes that in July 2019 Bagan was finally
approved for inclusion on UNESCO's World Heritage List, more than
two decades after it was first nominated. The Board believes that
this will drive a renewed wave of interest in Myanmar and its
heritage sites.
The Group intends to expand its boutique hostel model across
Myanmar focusing on core locations (such as Bagan, Mandalay and
Inle Lake/Nyaung Shwe) and secondary locations (Hpa-An, Hsipaw,
Pyin Oo Lwin, Mrauk-U, Nat Ma Taung and Ngwe Saung). While being
optimistic on the long-term opportunity, Management is currently
evaluating new locations on an opportunistic basis.
SUSTAINABILITY AND DIVERSITY
Diversity
Maintaining diversity at all levels is pivotal to the Group's
success. Myanmar Strategic Holdings believes that an inclusive,
service-oriented culture is fundamental to attracting and retaining
skilled and talented people, generate long-term value to its
shareholders and make lasting and meaningful contributions to the
surrounding communities.
As at 31 March 2019, the Group directly and indirectly employed
over 1,400 full-time employees ("FTEs") (incl. 300 FTEs employed
within the businesses under management) with over 10 nationalities.
Female representation amount to ca. 46% of the total workforce
(excluding EXERA), a remarkable achievement for a market at this
stage of development. While female participation is lower in MSH's
integrated security services business, management encourages higher
female participation through targeted hiring initiatives.
With regards to gender pay, we believe that men and women with
similar roles and similar responsibilities should be paid equally.
At this stage we are not aware of any gap between the pay of male
and female employees.
While the representation of female employees in senior
management roles is already significant, Myanmar Strategic Holdings
remains committed to increase participation of women in senior
roles by developing specific training and talent programmes in line
with the organisation's size and stage.
Environment
Myanmar Strategic Holdings is very aware of the environment it
operates in. Its managed Hospitality operations are spread across
Bagan, Nyaung Shwe and Mandalay, some of the country's most
beautiful and untarnished touristic sights.
The preservation of the natural environment and respect for the
local community is key to the Group's long-term sustainability. In
its operations, MSH seeks to have as low an impact on its
surroundings as possible, limiting the use of plastic and sorting
waste. During the course of 2018, Ostello Bello substituted plastic
water bottles with water jars and joined the "No Straw" and "Bring
your own bottle" campaigns. Furthermore, MSH's staff frequently
participate in local litter collection initiatives such as "Trash
hero" in Mandalay and environmental workshops in Bagan.
MSH will seek to introduce similar initiatives across the Group.
Our ultimate objectives are to reduce overall plastic usage and
eradicate single-use plastics.
Community
In addition to reducing its environmental footprint, the Group
remains also committed to contributing to the development of
Myanmar's society. MSH works closely with village leaders to
support the communities in which it operates and has sponsored
multiple activities benefiting the local communities including,
among others, health and safety trainings such as the Red Cross'
first aid training.
Ostello Bello often partners with leading international NGOs to
promote sustainable development. For example, all Ostello Bello
locations offer MBoutik souvenirs manufactured by independent women
producers in villages across Myanmar.
MBoutik is a social enterprise initiative of Action Aid Myanmar,
whereby women were trained in artisan crafts of weaving, tailoring,
jewellery making and rattan, with the ultimate objective of
promoting women's and local communities' development.
Through its Wall Street English language centres, MSH is also
contributing to accelerating capacity building through the
provision of English language courses. A partnership with the
Directorate of Investment and Corporate Administration to train ten
of its senior officials was announced in July 2018.
Finally, throughout the education division, the Group routinely
offers scholarships for underprivileged and talented students.
FINANCIAL REVIEW
The revenues generated by the Group in relation to the
businesses owned and managed grew to US$4.4 million for the
financial year ended 31 March 2019 (a 459% YOY increase) as a
result of the acquisition of EXERA at the end of May 2018 and the
higher fees generated by the Education businesses under management,
following the expansion of Wall Street English.
The fees generated by the Group in relation to the businesses
under management were US$1.0 million for the financial year ended
31 March 2019 (2018: US$0.8 million). The 43% YOY increase in the
fees generated by Wall Street English was partially offset the 42%
decline in the fees generated by Ostello Bello Bagan as outlined in
the Review of Operations.
RESULTS OF OPERATIONS
The Group's Adjusted EBITDA loss, which excludes expenditure of
a one-off nature and therefore shows a clearer picture of the
performance of the operations, widened to US$2.1 million (2018:
US$1.5 million), mainly due to (i) Yangon American pre-opening
losses US$0.4 million, (ii) the re-organisation of EXERA and (iii)
certain one-off expenses.
The Group's net loss amounted to US$2.5 million for the
financial year ended 31 March 2019 vs. US$2.1 million for the
previous financial year.
Audited Audited Audited
Year ended 31 Year ended 31 Year ended
March 2017 March 2018 31 March 2019
US$ US$ US$
-------------------------------------- ------------------------ ------------------------- -------------------------
Revenue 330,074 791,870 4,424,892
Other income 1,255 13,182 4,932
Employee benefits expense (504,379) (1,236,442) (3,847,090)
Other expenses (Excl. one-off
expenses pursuant to the listing
application, deal-related expenses
and losses on disposals) (1,741,010) (1,100,624) (2,638,392)
-------------------------------------- ------------------------ ------------------------- -------------------------
Adjusted EBITDA (1,914,060) (1,532,014) (2,055,658)
-------------------------------------- ------------------------ ------------------------- -------------------------
One-off expenses pursuant to the
listing application, deal-related
expenses and loss on disposals (428,476) (360,994) (321,523)
Depreciation expense (7,295) (11,406) (61,484)
Finance cost (31,522) (140,718) -
Amortisation expense (3,611) (21,667) (128,229)
-------------------------------------- ------------------------ ------------------------- -------------------------
Loss before income tax (2,384,964) (2,066,799) (2,566,894)
Income tax 553 - 30,330
-------------------------------------- ------------------------ ------------------------- -------------------------
Loss for the financial year,
representing
total comprehensive income for
the financial year (2,384,411) (2,066,799) (2,536,564)
-------------------------------------- ------------------------ ------------------------- -------------------------
Loss and total comprehensive income
attributable to:
Owner of the parent (2,372,969) (2,050,432) (2,534,646)
Non-controlling interests (11,442) (16,367) (1,918)
-------------------------------------- ------------------------ ------------------------- -------------------------
Loss per share
- Basic (1.28) (0.95) (1.03)
- Diluted (1.28) (0.95) (1.03)
-------------------------------------- ------------------------ ------------------------- -------------------------
While revenues grew by 459% vs. the previous year, the
acquisition of EXERA and the expansion of the existing businesses,
lead to a 211% YOY increase in employee benefit expenses and a 140%
YOY increase in other expenses.
Direct and indirect Full Time Employees ("FTEs") increased to
ca. 1,400 (ca. 250 as at 31 March 2018), of which ca. 300 FTEs
(2018: ca. 230) employed within the operations under management and
ca. 1,100 FTEs (2018: ca. 20) employed in the owned operations.
Such exponential growth was due to the acquisition of EXERA (over
1,000 security officers as at 31 March 2019) and the growth in the
education businesses, including Yangon American.
As detailed in the Financial Statements, the growth in other
expenses, was mainly due to the additional expenses in relation to
EXERA (e.g. operating leases of motor vehicles of US$0.3 million in
2019), higher rental expenses for the international school and the
offices (US$0.3 million in 2019 vs. US$0.1 million in 2018) and
higher hostel related expenses (US$0.3 million in 2019 vs. US$0.2
million in 2018).
The Group also incurred one-off expenses and losses on disposals
of US$0.3 million (2018: US$0.4 million), mainly due to the one-off
deal-related expenses for the acquisition of EXERA.
During the financial year, the Company raised US$3.07 million
(153,500 shares at a price of US$20 per share) within the Share
Issuance Programme announced in March 2018.
In line with the Group's dividend policy, the Board is not
declaring the payment of a dividend.
UNDERLYING REVENUE
The Underlying Revenues are an indicator of the total volume of
business generated in each division. The operating businesses
managed and owned by the Group generated revenues ("Underlying
Revenues") of US$7.3 million for the financial year ended 31 March
2019 (2018: US$3.2 million), an increase of ca. 130% YOY.
The growth of the existing Education and Hospitality businesses
was further enhanced by (i) the opening of Auston College Myanmar
in May 2018, (ii) the opening of a third WSE retail centre in
August 2018 and (ii) the launch of the MCTA:RVi WSE corporate
centre in November 2018.
The businesses owned by the Group generated revenues of US$3.4
million since EXERA's acquisition (For the financial year ended 31
March 2019: US$4.1 million, 2018: US$4.0 million). This relates
exclusively to EXERA, the integrated security services company
operating within MSH's Services division.
Unaudited Unaudited Unaudited
Year ended 31 Year ended 31 Year ended 31
March 2017 March 2018 March 2019
Underlying Revenue US$ US$ US$
--------------------------------- -------------------------- -------------------------- --------------------------
Managed Businesses
Hospitality 1,238,046 1,679,852 1,209,258
Education 33,041 1,483,851 2,618,741
Food and Beverage (Discontinued
Operations) 105,914 - -
--------------------------------- -------------------------- -------------------------- --------------------------
Total managed businesses 1,377,001 3,163,703 3,827,999
--------------------------------- -------------------------- -------------------------- --------------------------
Owned Businesses - - 3,445,155
--------------------------------- -------------------------- -------------------------- --------------------------
Total underlying revenues 1,377,001 3,163,703 7,273,154
--------------------------------- -------------------------- -------------------------- --------------------------
Growth % 59% 130% 130%
GROUP REVENUE
The operating businesses managed by the Group generated Fees to
the Group of US$1.0 million in the financial year ended 31 March
2019 (2018: US$0.8 million). The Fees to the Group comprised of
US$0.9 million fees generated by Wall Street English and US$0.1
million generated by Ostello Bello Bagan. No fees were generated by
the other hostels and education businesses as they are still in a
start-up phase.
Group revenues are formed by the Fees generated by the Managed
Businesses and the Revenues generated by the Owned Businesses.
Group revenues for the financial year ended 31 March 2019 amounted
to US$4.4 million (+459% YOY) and were composed of US$1.0 million
in fees generated by the Managed Businesses and US$3.4 million in
revenues generated by the Owned Businesses.
Audited Audited Audited
Year ended 31 Year ended 31 Year ended
March 2017 March 2018 31 March 2019
Fees Generated by Managed US$ US$ US$
Businesses
------------------------------------ ------------------------- ------------------------- --------------------------
Hospitality 227,000 180,000 105,000
Education 93,074 611,870 874,737
Food & Beverage (Discontinued
Operations) 10,000 - -
------------------------------------ ------------------------- ------------------------- --------------------------
Fees Generated by Managed
Businesses 330,074 791,870 979,737
------------------------------------ ------------------------- ------------------------- --------------------------
Growth % 400% 140% 24%
The operations under management for the financial year ended 31
March 2017 included two Indian restaurants. These Food and Beverage
activities were discontinued in March 2017 as they were not
generating the targeted Fees to the Group and were deemed by
management to be non-core.
LIQUIDITY AND CAPITAL RESOURCES
With regards to the investing activities, the Group advances
funds to the owners of the relevant managed operations to fund
refurbishment expenses, improvements and general working capital.
Such advances are unsecured and interest free and there is a risk
that the Group may not be repaid some or all of these monies.
The significant growth in cash used in investing activities in
2019 was mainly due to the acquisition of EXERA for US$2.2 million
in cash and shares (impact of US$1.9 million on cash flow, net of
cash acquired), the purchase of plant and equipment for Yangon
American and the fit- out of the WSE corporate centre at
MCTA:RVi.
With regards to the Group's financing activities, the Group's
principal sources of liquidity in the financial year ended 31 March
2019 has been the issuance of ordinary shares. It is worth noting
that in 2019 the Company purchased a 8% non-controlling interest in
MS English.
During the financial year, the net reduction in cash and cash
equivalents was US$2.6 million. This negative trend was due to the
negative operating cash flow and the continued investments in the
managed operations as demonstrated by the increase in advances to
related parties and third parties for the build-up of further Wall
Street English centres and Auston college Myanmar.
On 1 July 2019, the Company announced a new Share Issuance
Programme for up to US$480,000 shares at a price of not less than
US$20 per share. On the same date, the Company put in place a Loan
Facility of up to US$3.0 million with MACAN Pte. Ltd., the
Company's largest shareholder and a related party. The Loan
Facility will have a tenure of up to 3 years, may be repayable
earlier at the Company's discretion and will have an interest rate
of 6.0% per annum. The Company has drawn down US$2.0 million since
the year end.
Audited Audited Audited
Year ended Year ended Year ended
31 March 2017 31 March 2018 31 March
2019
US$ US$ US$
---------------------------------------------------- --------------------- --------------------- ------------------
Operating activities
Loss before income tax (2,384,964) (2,066,799) (2,566,894)
Adjustment for:
Share-based compensation - 180,893 138,675
Amortisation of intangible assets 3,611 21,667 128,229
Impairment loss of financial assets 12,000 - 28,657
Allowance for impairment of receivable 550,327 - -
Depreciation of plant and equipment 7,295 11,406 61,484
Interest income (1,255) (2,380) (2,099)
Interest expense 31,522 140,718 -
Loss on disposal of plant and equipment - 430 1,015
Plant and equipment written off - 893 19,801
Gain on liquidation of a subsidiary - - (1,663)
Operating cash flows before working capital
changes (1,781,464) (1,713,172) (2,192,795)
Working capital changes:
Trade and other receivables (15,353) (70,151) (344,546)
Trade and other payables 64,761 186,080 139,077
Deferred revenue - - 184,525
Cash used in operations (1,732,056) (1,597,243) (2,213,739)
Interest received 1,255 2,380 2,099
Income tax paid (9,947) - (51,512)
Net cash used in operating activities (1,740,748) (1,594,863) (2,263,152)
Investing activities
Purchase of plant and equipment (13,006) (12,677) (480,279)
Purchase of intangible assets (170,000) - (90,000)
Advances to related parties (1,065,681) (856,153) (770,811)
Advances to third parties (265,869) (90,585) 29,112
Net cash outflow on acquisition of a subsidiary - - (1,937,040)
Purchase of other investments - - (150,000)
Net cash used in investing activities (1,514,556) (959,415) (3,399,018)
Financing activities
Acquisition of equity interest from non-controlling
interest (1) - (80)
Proceeds from subscription of shares by
non-controlling interests - - 300
Proceeds from issuance of convertible
loans 1,717,300 40,000 -
Proceeds from issuance of ordinary shares 3,711,400 1,421,353 3,070,000
Proceeds from disposal of interest in
a subsidiary without loss of control - 80 -
Net cash generated from financing activities 5,428,699 1,461,433 3,070,220
Net changes in cash and cash equivalents 2,173,395 (1,092,845) (2,591,950)
Cash and cash equivalents at beginning
of financial year 2,289,247 4,462,642 3,369,797
Cash and cash equivalents at end of financial
year 4,462,642 3,369,797 777,847
OUTLOOK
The Company's ambition is to become the leading developer and
manager of consumer businesses in Myanmar.
In line with this vision, management is looking at opportunities
to grow the Group through both organic and acquisitive means, in
sectors which target the population's primary needs. The Group will
continue to pursue an asset light strategy and increase the
portfolio of businesses under management.
As the scale of the operations under management grows, the Group
may decreasingly rely on external financing and instead finance its
organic growth through the Fees to the Group generated by the
managed operations and the profits earned by the owned
businesses.
Management will also continue to build and train the relevant
human resources to sustain and accelerate the Group's growth.
Operational and financial sustainability are key strategic
priorities communicated at all levels within the organisation.
Notwithstanding the recent political and economic uncertainty,
the Board and management continue to remain positive on the overall
macroeconomic environment underpinning the broader investment
opportunity.
DENNIS YEO
Chief Financial Officer
29 July 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL
YEARED 31 MARCH 2019
2019 2018
US$ US$
----------------------------------------------------- ----------- -----------
Revenue 4,424,892 791,870
Other income 4,932 13,182
Employee benefits expense (3,847,090) (1,236,442)
Depreciation expense (61,484) (11,406)
Amortisation expense (128,229) (21,667)
Other expenses (2,931,258) (1,461,618)
Impairment loss on financial assets (28,657) -
Finance cost - (140,718)
----------------------------------------------------- ----------- -----------
Loss before income tax (2,566,894) (2,066,799)
Income tax 30,330 -
----------------------------------------------------- ----------- -----------
Loss for the year, representing total comprehensive
income for the year (2,536,564) (2,066,799)
----------------------------------------------------- ----------- -----------
Loss and total comprehensive income attributable
to:
Owners of the Company (2,534,646) (2,050,432)
Non-controlling interests (1,918) (16,367)
----------------------------------------------------- ----------- -----------
(2,536,564) (2,066,799)
----------------------------------------------------- ----------- -----------
Loss per share attributable to the owners
of the Company (US$)
- Basic and diluted (1.03) (0.95)
----------------------------------------------------- ----------- -----------
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH
2019
2019 2018
ASSETS US$ US$
---------------------------------- ----------- -----------
Non-current assets
Plant and equipment 536,556 17,203
Intangible assets 1,839,608 144,722
Financial asset at FVOCI 150,000 -
---------------------------------- ----------- -----------
Total non-current assets 2,526,164 161,925
---------------------------------- ----------- -----------
Current assets
Trade and other receivables 4,166,647 2,400,886
Cash and cash equivalents 777,847 3,369,797
---------------------------------- ----------- -----------
Total current assets 4,944,494 5,770,683
---------------------------------- ----------- -----------
Total assets 7,470,658 5,932,608
---------------------------------- ----------- -----------
LIABILITIES AND EQUITY
Liabilities
Non-current liabilities
Deferred revenue 57,291 -
Deferred tax liabilities 46,196 -
---------------------------------- ----------- -----------
Total non-current liabilities 103,487 -
---------------------------------- ----------- -----------
Current liabilities
Trade and other payables 783,766 348,784
Deferred revenue 173,692 -
---------------------------------- ----------- -----------
Total current liabilities 957,458 348,784
---------------------------------- ----------- -----------
Total liabilities 1,060,945 348,784
---------------------------------- ----------- -----------
Equity
Share capital 14,016,058 10,746,042
Equity reserves (118,061) (37,457)
Share option reserve 319,568 180,893
Accumulated losses (7,860,436) (5,279,332)
---------------------------------- ----------- -----------
Equity attributable to owners of
the Company 6,357,129 5,610,146
Non-controlling interests 52,584 (26,322)
---------------------------------- ----------- -----------
Total equity 6,409,713 5,583,824
---------------------------------- ----------- -----------
Total liabilities and equity 7,470,658 5,932,608
---------------------------------- ----------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL
YEARED 31 MARCH 2019
Equity
Share attributable Non-
Share Equity option Accumulated to owners controlling Total
capital reserves reserve losses of the interests equity
Company
2019 US$ US$ US$ US$ US$ US$ US$
---------------- ---------------- --------------- ------------- ---------------------- -------------------- -------------------- ---------------
Equity
Balance as at
1 April 2018,
as previously
stated 10,746,042 (37,457) 180,893 (5,279,332) 5,610,146 (26,322) 5,583,824
Effect of
transition
to IFRS 15 - - - (46,458) (46,458) - (46,458)
---------------- ---------------- --------------- ------------- ---------------------- -------------------- -------------------- ---------------
Balance as at
1 April 2018,
as restated 10,746,042 (37,457) 180,893 (5,325,790) 5,563,688 (26,322) 5,537,366
Loss for the
financial
year,
representing
total
comprehensive
income for
the
financial
year - - - (2,534,646) (2,534,646) (1,918) (2,536,564)
Contribution
by owners of
the Company
---------------- --------------- ------------- ---------------------- -------------------- -------------------- ---------------
Issuance of
shares 3,270,016 - - - 3,270,016 - 3,270,016
Recognition of
share- based
payments - - 138,675 - 138,675 - 138,675
---------------- --------------- ------------- ---------------------- -------------------- -------------------- ---------------
3,270,016 - 138,675 - 3,408,691 - 3,408,691
Change in
ownership
interest in a
subsidiary
Issuance of
shares - (60,541) - - (60,541) 60,841 300
Acquisition of
non-
controlling
interest - (20,063) - - (20,063) 19,983 (80)
---------------- ---------------- --------------- ------------- ---------------------- -------------------- -------------------- ---------------
Balance as at
31 March 2019 14,016,058 (118,061) 319,568 (7,860,436) 6,357,129 52,584 6,409,713
---------------- ---------------- --------------- ------------- ---------------------- -------------------- -------------------- ---------------
Equity
Share attributable Non-
Share Equity option Accumulated to owners controlling Total
capital reserves reserve losses of the interests equity
Company
2018 US$ US$ US$ US$ US$ US$ US$
--------------- -------------- -------------- -------------- ---------------------- -------------------- -------------------- ----------------
Equity
Balance as at
1 April 2017 5,401,049 (47,492) - (3,228,900) 2,124,657 - 2,124,657
Loss for the
financial
year,
representing
total
comprehensive
income for
the
financial
year - - - (2,050,432) (2,050,432) (16,367) (2,066,799)
Contribution
by owners of
the Company
Issuance of
shares 5,344,993 - - - 5,344,993 - 5,344,993
Recognition
of share-
based
payments - - 180,893 - 180,893 - 180,893
5,344,993 - 180,893 - 5,525,886 - 5,525,886
Change in
ownership
interest in
a subsidiary
Disposal of
interest in
a subsidiary
without loss
of control - 10,035 - - 10,035 (9,955) 80
--------------- -------------- -------------- -------------- ---------------------- -------------------- -------------------- ----------------
Balance as at
31 March 2018 10,746,042 (37,457) 180,893 (5,279,332) 5,610,146 (26,322) 5,583,824
--------------- -------------- -------------- -------------- ---------------------- -------------------- -------------------- ----------------
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEARED 31
MARCH 2019
2019 2018
US$ US$
------------------------------------------- ----------- -----------
Operating activities
Loss before income tax (2,566,894) (2,066,799)
Adjustments for:
Interest income (2,099) (2,380)
Gain on liquidation of a subsidiary (1,663) -
Share-based compensation 138,675 180,893
Interest expense - 140,718
Impairment loss of financial assets 28,657 -
Loss on disposal of plant and equipment 1,015 430
Plant and equipment written off 19,801 893
Depreciation of plant and equipment 61,484 11,406
Amortisation of intangible assets 128,229 21,667
------------------------------------------- ----------- -----------
Operating cash flows before working
capital changes (2,192,795) (1,713,172)
Working capital changes:
Trade and other receivables (344,546) (70,151)
Deferred revenue 184,525 -
Trade and other payables 139,077 186,080
------------------------------------------- ----------- -----------
Cash used in operations (2,213,739) (1,597,243)
Interest received 2,099 2,380
Income tax paid (51,512) -
------------------------------------------- ----------- -----------
Net cash used in operating activities (2,263,152) (1,594,863)
------------------------------------------- ----------- -----------
Investing activities
Purchase of plant and equipment (480,279) (12,677)
Purchase of intangible assets (90,000) -
Advances to related parties (770,811) (856,153)
Advances to third parties 29,112 (90,585)
Acquisition of subsidiaries, net
of cash acquired (1,937,040) -
Purchase of financial asset, at FVOCI (150,000) -
------------------------------------------- ----------- -----------
Net cash used in investing activities (3,399,018) (959,415)
------------------------------------------- ----------- -----------
2019 2018
US$ US$
----------------------------------------------------- ------------- -------------
Financing activities
Acquisition of equity interest from non-controlling
interests (80) -
Proceeds from subscription of shares by
non-controlling interests 300 -
Proceeds from issuance of convertible
bonds - 40,000
Proceeds from issuance of ordinary shares 3,070,000 1,421,353
Proceeds from disposal of interest in
a subsidiary without loss of control - 80
----------------------------------------------------- ------------- -------------
Net cash generated from financing activities 3,070,220 1,461,433
----------------------------------------------------- ------------- -------------
Net changes in cash and cash equivalents (2,591,950) (1,092,845)
Cash and cash equivalents at beginning
of year 3,369,797 4,462,642
----------------------------------------------------- ------------- -------------
Cash and cash equivalents at end of year 777,847 3,369,797
----------------------------------------------------- ------------- -------------
Note A: Reconciliation of liabilities
arising from financing activities
Non-cash changes
Balance Balance
as at 1 Conversion as at 31
April Financing Interest of March
2017 cash expense convertible 2018
flows bonds
As at end of
reporting US$ US$ US$ US$ US$
period
31 March
2018
------------- ---------------------- ---------------- ---------------- ------------------------- ---------------------
Convertible
bonds
(Note 18) 3,742,922 40,000 140,718 (3,923,640) -
------------- ---------------------- ---------------- ---------------- ------------------------- ---------------------
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEARED 31
MARCH 2019
GENERAL
Myanmar Strategic Holdings Limited (the "Company") (Registration
Number 201302159D) is a public company limited by shares
incorporated and domiciled in Singapore with its principal place of
business and registered office 80 Raffles Place #32-01, UOB Plaza,
Singapore 048624. The Company was listed on Main Market of London
Stock Exchange on 22 August 2017.
The principal activities of the Company is investment and
trading in Myanmar related investment projects. The principal
activities of the subsidiaries are set out in Note 12 to the
financial statements.
The Company's immediate and ultimate holding company is Macan
Pte. Ltd., a company incorporated and domiciled in Singapore.
Related companies in these financial statements refer to the
members of the Macan Pte. Ltd. Group.
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union and are prepared under the historical cost
convention, except as disclosed in the accounting policies
below.
The consolidated financial statements of the Group are presented
in United States dollar ("US$") which is the functional currency
and the presentation currency for the consolidated financial
statements.
The preparation of financial statements in compliance with IFRS
requires management to make judgements, estimates and assumptions
that affect the Group's application of accounting policies and
reported amounts of assets, liabilities, revenue and expenses.
Although these estimates are based on management's best knowledge
of current events and actions, actual results may differ from those
estimates. The areas where such judgements or estimates have
significant effect on the financial statements are disclosed in
Note 3 to the financial statements.
(a) Going concern
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group
therefore continues to adopt the going concern basis in preparing
its consolidated financial statements.
(b) Changes in accounting policy and disclosures
In the current financial year, the Group has adopted all the new
IFRS that are relevant to its operations and effective for the
current financial year. The adoption of the new IFRS did not result
in changes to the Group's accounting policies and has no material
effect on the amounts reported for the current or prior financial
years, except for IFRS 9 Financial Instruments and IFRS 15 Revenue
from Contracts with Customers as disclosed below:
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments was effective for accounting
periods commencing on or after 1 April 2018. The standard addresses
the classification, measurement and recognition of financial assets
and liabilities. IFRS 9 retains and establishes three primary
measurement categories for financial assets: amortised cost, fair
value through OCI and fair value through P&L. The basis of the
classification depends on the business model and the contractual
cash flow characteristics of the financial asset. A revised
expected credit loss model replaces the incurred loss impairment
model used in IAS 39. As at the date of initial application, the
adoption of the expected credit loss model has no material effect
on the financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 supersedes IAS 18 Revenue and related interpretations
and it applies, with limited exceptions, to all revenue arising
from contracts with customers. IFRS 15 establishes a five-step
model to account for revenue arising from contracts with customers
and requires that revenue be recognised at an amount that reflect
the consideration to which an entity expects to be entitled in
exchange for transferring goods or services to a customer.
IFRS 15 requires entities to exercise judgement, taking into
consideration all of the relevant facts and circumstances when
applying each step of the model to contracts with their customers.
The standard also specifies the accounting for the incremental
costs of obtaining a contract and the costs directly related to
fulfilling a contract. In addition, the standard requires extensive
disclosures.
The Group adopted IFRS 15 using the modified retrospective
method of adoption with the date of initial application of 1 April
2018. Under this method, the standard can be applied either to all
contracts at the date of initial application or only to contracts
that are not completed at this date. The Group elected to apply the
standard to contracts that are not completed as at 1 April
2018.
The cumulative effect of initially applying IFRS 15 is
recognised at the date of initial application as an adjustment to
the opening balance of retained earnings. Therefore, the
comparative information was not restated and continues to be
reported under IAS 18 and related interpretations.
The effect of transition to IFRS 15 as at 1 April 2018 was as
follows:
Increase/(Decrease)
US$
-------------------------------
Non-current liabilities
Deferred revenue 41,458
--------------------- --------
Current liabilities
Deferred revenue 5,000
--------------------- --------
Equity
Accumulated losses (46,458)
--------------------- --------
The following shows the amount by which each financial statement
line item is affected for the financial year ended 31 March 2019 as
a result of the transition to IFRS 15. The third column shows
amounts prepared under IFRS 15 and the first column shows what the
amounts would have been had IFRS 15 not been adopted:
Consolidated statement of comprehensive
income
Reported under Reported
IAS 18
2019 IFRS 15 under IFRS
15
adjustments 2019
US$ US$ US$
---------------------------------------- ---------------------------- -------------------- ------------------------
Revenue 4,429,892 (5,000) 4,424,892
Loss before income tax (2,561,894) (5,000) (2,566,894)
Loss for the year, representing total
comprehensive income for the financial
year (2,531,564) (5,000) (2,536,564)
---------------------------------------- ---------------------------- -------------------- ------------------------
The following shows the amount by which each financial statement
line item is affected as at 31 March 2019 as a result of the
adoption of IFRS 15:
Consolidated statement of
financial position
Reported
Reported under
under IAS 18 IFRS 15 IFRS 15
2019 adjustments 2019
US$ US$ US$
-------------------------- ------------ ----------- -----------
Non-current liabilities
Deferred revenue - (36,458) (36,458)
-------------------------- ------------ ----------- -----------
Current liabilities
Deferred revenue - (5,000) (5,000)
-------------------------- ------------ ----------- -----------
Equity
Accumulated losses (7,855,436) (5,000) (7,860,436)
-------------------------- ------------ ----------- -----------
The nature of the adjustment as at 1 April 2018 and the reasons
for the significant changes in the statement of financial position
as at 31 March 2019 and the statements of comprehensive income for
the financial year ended 31 March 2019 are described below:
New centre fee
New centre fee was received for the opening of new "Wall Street
English" language centres in Myanmar. Under IAS 18, the revenue was
recognised upon the new opening of language centres. Upon adopting
IFRS 15, the Company recognised the new centre fee as deferred
revenue and will recognise income over the period of 10 years,
representing the rights to develop and operate the "Wall Street
English" language centre in Myanmar.
On 1 April 2018, advanced payment received from customers of
US$46,458 was recognised as deferred revenue. The adjustment was
made against accumulated losses.
There was no impact on other revenue streams on the adoption of
IFRS 15 as the point of transfer of risks and rewards under IAS 18
is the same as when the control was transferred under IFRS 15, and
that both methods are over time.
IFRS issued but not yet effective
At the date of authorisation of these financial statements, the
following IFRS that are relevant to the Group were issued but not
yet effective, and have not been adopted early in these financial
statements:
Effective date
(annual periods
beginning on or after)
IFRS 16 : Leases 1 January 2019
-------------- ----------------------- ---------------
IFRIC 23 : Uncertainty 1 January 2019
over Income
Tax Treatments
-------------- ----------------------- ---------------
Amendments to References to the
Conceptual Framework in IFRS Standards
--------------------------------------------------------
- IFRS 9 : Prepayment 1 January 2019
Features with
Negative Compensation
(Amendments)
-------------- ----------------------- ---------------
- IAS 28 : Long-term 1 January 2019
interests in
Associates
and Joint Ventures
(Amendments)
-------------- ----------------------- ---------------
- IAS 19 : Plan Amendment, 1 January 2019
Curtailment
or Settlement
(Amendments)
-------------- ----------------------- ---------------
Consequential amendments were also made to various standards as
a result of these new or revised standards.
Management anticipates that the adoption of the above IFRS and
IFRIC in future periods will not have a material impact on the
financial statements of the Group in the period of their initial
adoption except as disclosed below.
IFRS 16 LEASES
IFRS 16 supersedes IAS 17 Leases and introduces a new single
lessee accounting model which eliminates the current distinction
between operating and finance leases for lessees. IFRS 16 requires
lessees to capitalise all leases on the statement of financial
position by recognising a 'right-of-use' asset and a corresponding
lease liability for the present value of the obligation to make
lease payments, except for certain short-term leases and leases of
low- value assets. Subsequently, the lease assets will be
depreciated and the lease liabilities will be measured at amortised
cost. IFRS 16 also requires enhanced disclosures by the
lessees.
The Group has performed an assessment on the adoption of IFRS 16
based on currently available information as well as recognition
exemptions under IFRS 16. The Group expects to capitalise the
operating lease of the international school on the statement of
financial position by recognising a 'right-of-use' asset of
US$3,533,000 and the corresponding lease liabilities present valued
based on the future lease payments of US$4,560,000. The lease
liability was calculated with consideration of the likelihood of
exercising the first and second extension period of 3 years and 5
years, respectively. This assessment may be subject to changes from
the ongoing analysis until the finalisation transition entries.
The Group plans to adopt the standard in the financial year
beginning on 1 April 2019 using the modified retrospective method
in accordance with the transitional provisions, and therefore will
only recognise leases on statement of financial position as at 1
April 2019. The Group will include the required additional
disclosures in its financial statements for the financial year
ending 31 March 2020.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries. Subsidiaries are
entities over which the Group has control. The Group controls an
investee if the Group has power over the investee, exposure to
variable returns from the investee, and the ability to use its
power to affect those variable returns. Control is reassessed
whenever facts and circumstances indicate that there may be a
change in any of these elements of control.
Subsidiaries are consolidated from the date on which control is
obtained by the Group up to the effective date on which control is
lost, as appropriate.
Intra-group balances and transactions and any unrealised income
and expenses arising from intra-group transactions are eliminated
on consolidation. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment loss of the asset
transferred.
The financial statements of the subsidiaries are prepared for
the same reporting period as that of the Company, using consistent
accounting policies. Where necessary, accounting policies of
subsidiaries are changed to ensure consistency with the policies
adopted by other members of the Group.
NON-CONTROLLING INTERESTS
Non-controlling interests in subsidiaries relate to the equity
in subsidiaries which is not attributable directly or indirectly to
the owners of the parent. They are shown separately in the
consolidated statements of comprehensive income, financial position
and changes in equity.
Non-controlling interests in the acquiree that are a present
ownership interest and entitle its holders to a proportionate share
of the entity's net assets in the event of liquidation may be
initially measured either at fair value or at the non-controlling
interests' proportionate share of the fair value, of the acquiree's
identifiable net assets. The choice of measurement basis is made on
an acquisition-by-acquisition basis. Subsequent to acquisition, the
carrying amount of non-controlling interests is the amount of those
interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity. Total
comprehensive income is attributed to non-controlling interests
even if this results in the non-controlling interests having a
deficit balance.
Changes in the Group's interest in a subsidiary that do not
result in a loss of control are accounted for as equity
transactions. The carrying amounts of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in
their relative interests in the subsidiary. Any difference between
the amount by which the non-controlling interests are adjusted and
the fair value of the consideration paid or received is recognised
directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, it derecognises
the assets and liabilities of the subsidiary and any
non-controlling interest. The profit or loss on disposal is
calculated as the difference between (i) the aggregate of the fair
value of the consideration received and the fair value of any
retained interest and (ii) the previous carrying amount of the
assets (including goodwill), and liabilities of the subsidiary and
any non-controlling interests. Amounts previously recognised in
other comprehensive income in relation to the subsidiary are
accounted for (i.e. reclassified to profit or loss or transferred
directly to retained earnings) in the same manner as would be
required if the relevant assets or liabilities were disposed of.
The fair value of any investments retained in the former subsidiary
at the date when control is lost is regarded as the fair value on
initial recognition for subsequent accounting under IFRS 9
Financial Instruments or, when applicable, the cost on initial
recognition of an investment in an associate or joint venture.
REVENUE RECOGNITION
Revenue is recognised when a performance obligation is
satisfied. Revenue is measured based on consideration of which the
Group expects to be entitled in exchange for transferring promised
good or services to a customer, excluding amounts collected on
behalf of third parties (i.e. sales related taxes). The
consideration promised in the contracts with customers are derived
from fixed price contracts.
Deferred revenue comprise management fees, new centre fee and
other advance consideration received from customers and a related
party. Deferred revenue are recognised as revenue when performance
obligations under its contracts are satisfied.
Rendering of services
The Group provides security guarding, risk management and
security training services to the customer over a specified
contract period. The performance obligation is satisfied over time
as the customer simultaneously receives and consumes the benefits
of the Group's performance in providing the security services.
As the Group's efforts or inputs are expended throughout the
performance period, revenue is recognised on a straight-line basis
over the specified contract period.
For certain contracts where the Group supplies security
equipment and provides ad-hoc services such as journey management,
revenue is recognised at point in time when goods and services are
delivered.
Technical support service fees
Technical support service fees earned from hostels and language
centres managed by the Group are recognised over time and when
services are rendered with reference to the terms of the
contracts.
Management fees
Management fees earned from hostels, engineering college and
language centres managed by the Group, under long-term contracts
with the owners, are recognised over time as and when services are
rendered with reference to the terms of the contracts. The fees are
incentive fees, which are based on the profitability of these
business operations and the amount of course modules to be
delivered.
Royalty income
Royalty income is recognised over time on an accrual basis with
reference to the terms of the "Wall Street English" Centre
Franchise Agreement. Royalty is determined based on the agreed
royalty rate and the annual total gross revenue of the managed
language centres in Myanmar.
New centre fee
New centre fee for the opening of new "Wall Street English"
language centre in Myanmar are recognised over the exclusive rights
to develop and operate for a period of 10 years.
Accounting policy for revenue recognition prior to 1 April
2018
Revenue is measured at the fair value of the consideration
received or receivable. Revenue is presented net of discounts,
other similar allowances and sales related taxes. The revenue
recognition policies for management fees, technical support
services fees and royalty income are the same as the current
financial year.
EMPLOYEE BENEFITS
Retirement benefit costs
Payments to defined contribution retirement benefit plans are
charged as an expense as they fall due. Payments made to state-
managed retirement benefit schemes, such as the Singapore Central
Provident Fund and Myanmar Social Security Benefit, are dealt with
as payments to defined contribution plans where the Group's
obligations under the plans are equivalent to those arising in a
defined contribution retirement benefit plan.
Employee leave entitlements
Employee entitlements to annual leave are recognised when they
accrue to employees. A provision is made for the estimated
undiscounted liability for annual leave expected to be settled
wholly within 12 months from the reporting date as a result of
services rendered by employees up to the end of the financial
year.
SHARE-BASED PAYMENTS
The Group issues equity-settled share-based payments to certain
employees.
Equity-settled share-based payments are measured at fair value
of the equity instruments (excluding the effect of non-market-based
vesting conditions) at the date of grant. The fair value determined
at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period with a
corresponding credit to the share-based payment reserve, based on
the Group's estimate of the number of equity instruments that will
eventually vest and adjusted for the effect of non-market- based
vesting conditions. At the end of each financial year, the Group
revises the estimate of the number of equity instruments expected
to vest. The impact of the revision of the original estimates, if
any, is recognised in profit or loss over the remaining vesting
period with a corresponding adjustment to the share-based payment
reserve.
Fair value is measured using the Black-Scholes pricing model.
The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
TAXES
Income tax expense comprise current tax expense and deferred tax
expense.
Current income tax
Current income tax expense is the amount of income tax payable
in respect of the taxable profit for a period. Current income tax
liabilities for the current and prior periods shall be measured at
the amount expected to be paid to the taxation authorities, using
the tax rates and tax laws in the countries where the Group
operates, that have been enacted or substantively enacted by the
end of the reporting period.
Current income tax expenses are recognised in profit or loss,
except to the extent that the tax relates to items recognised
outside profit or loss, either in other comprehensive income or
directly in equity.
Deferred tax
Deferred tax is recognised on all temporary differences between
the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases of asset and
liabilities, except when the temporary difference arises from the
initial recognition of goodwill or other assets and liabilities
that is not a business combination and affects neither the
accounting profit nor taxable profit.
Deferred tax liabilities are recognised for all taxable
temporary differences associated with investments in subsidiaries,
except where the Group is able to control the timing of reversal of
the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred tax
assets are recognised for all deductible temporary differences to
the extent that it is probable that taxable profit will be
available against which the temporary difference can be
utilised.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the deferred tax asset to be
utilised.
Deferred tax assets and liabilities are measured using the tax
rates expected to apply for the period when the asset is realised
or the liability is settled, based on tax rate and tax law that
have been enacted or substantially enacted by the end of reporting
period. The measurement of deferred tax reflects the tax
consequences that would follow from the manner in which the Group
expects to recover or settle its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Deferred tax is recognised in profit or loss, except when it
relates to items recognised outside profit or loss, in which case
the tax is also recognised either in other comprehensive income or
directly in equity, or where it arises from the initial accounting
for a business combination. Deferred tax arising from a business
combination, is taken into account in calculating goodwill on
acquisition.
Sales tax
Revenue, expenses and assets are recognised net of the amount of
sales tax except:
-- when the sales taxation that is incurred on purchase of
assets or services is not recoverable from the taxation
authorities, in which case the sales tax is recognised as part of
cost of acquisition of the asset or as part of the expense item as
applicable; and
-- receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or payables
in the statement of financial position.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency ("foreign currencies") are recorded at the rate
of exchange prevailing on the date of the transaction. At the end
of each financial year, monetary items denominated in foreign
currencies are retranslated at the rates prevailing as of the end
of the financial year. Non-monetary items carried at fair value
that are denominated in foreign currencies are retranslated at the
rates prevailing on the date when the fair value was determined.
Non- monetary items that are measured in terms of historical cost
in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary
items, and on retranslation of monetary items are included in
profit or loss for the period. Exchange differences arising on the
retranslation of non-monetary items carried at fair value are
included in profit or loss for the period except for differences
arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such
non-monetary items, any exchange component of that gain or loss is
also recognised directly in equity.
PLANT AND EQUIPMENT
All items of plant and equipment are initially recognised at
cost. The cost includes its purchase price and any costs directly
attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended
by management. Dismantlement, removal or restoration costs are
included as part of the cost if the obligation for dismantlement,
removal or restoration is incurred as a consequence of acquiring or
using the plant and equipment.
Subsequent expenditure on an item of plant and equipment is
added to the carrying amount of the item if it is probable that
future economic benefits associated with the item will flow to the
Group and the cost can be measured reliably. All other costs of
servicing are recognised in profit or loss when incurred.
Plant and equipment are subsequently stated at cost less
accumulated depreciation and any accumulated impairment losses.
Depreciation is calculated using the straight line method to
allocate the depreciable amounts over their estimated useful lives
on the following basis:
Computers 3 years
----------------------- -------
Furniture and fittings 3 years
----------------------- -------
Motor vehicles 5 years
----------------------- -------
No depreciation is charged on construction-in-progress as they
are not yet ready for their intended use as at the end of the
reporting period.
The carrying values of plant and equipment are reviewed for
impairment when events or changes in circumstances indicate that
the carrying value may not be recoverable.
The estimated useful lives, residual values and depreciation
methods are reviewed, and adjusted as appropriate, at the end of
each financial year.
An item of plant and equipment is derecognised upon disposal or
when no future economic benefits are expected from its use or
disposal.
The gain or loss arising on disposal or retirement of an item of
plant and equipment is determined as the difference between the
sales proceeds and the carrying amount of the asset and is
recognised in profit or loss.
INTANGIBLE ASSETS
Area development and centre fees
An area development fee is paid for the exclusive rights to
develop and operate the "Wall Street English" language centres in
Myanmar while the centre fee is required to be paid in respect for
the opening of a new "Wall Street English" language centre in
Myanmar. The area development fee and centre fee are capitalised
and amortised over the period of 10 years from the date operation
commences and when the new centre commences operations,
respectively.
The area development fee and centre fee are initially
capitalised at cost and subsequently measured at cost less any
accumulated amortisation and any accumulated losses.
Set-up fee and brand licensing fee
Set-up fee is paid for the exclusive rights to develop and
operate the "Auston" college in Myanmar. Brand licensing fee is
paid for the exclusive, irrecoverable, non-transferrable rights of
use of the licensed intellectual property and trademark for the
operations of the Auston college. The set-up and brand licensing
fees are capitalised and amortised over the period of 10 years from
the date operation commences.
The set-up and brand licensing fees are initially capitalised at
cost and subsequently measured at cost less any accumulated
amortisation and any accumulated losses.
Computer software licence
Acquired computer software licence is initially capitalised at
cost which includes the purchase price (net of any discounts and
rebates) and other directly attributable costs of preparing the
software for its intended use. Direct expenditure which enhances or
extends the performance of computer software beyond its
specifications and which can be reliably measured is added to the
original cost of the software. Costs associated with maintaining
computer software are recognised as an expense as incurred.
Computer software licence is subsequently carried at cost less
accumulated amortisation and accumulated impairment losses. These
costs are amortised to profit or loss using the straight-line
method over their estimated useful lives of 3 years.
Customer-related assets (Services segment)
Customer-related assets comprise customer contracts and customer
relationship arising from business combinations. These assets are
capitalised at fair value as at acquisition date and subsequently
measured at cost less any accumulated amortisation and any
accumulated losses.
Amortisation is recognised in profit or loss on a straight-line
basis over their estimated useful lives of 3 years.
Goodwill (Services segment)
Goodwill arising on the acquisition of a subsidiary or business
represents the excess of the consideration transferred, the amount
of any non-controlling interests in the acquiree and the
acquisition date fair value of any previously held equity interest
in the acquiree over the acquisition date fair value of the
identifiable assets, liabilities and contingent liabilities of the
subsidiary recognised at the date of acquisition.
Goodwill on subsidiary is recognised separately as intangible
assets. Goodwill is initially recognised at cost and subsequently
measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash-generating units expected to benefit from
the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-
rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a
subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the gain or loss on
disposal.
Intangible assets except goodwill with finite useful lives are
amortised over the estimated useful lives and assessed for
impairment whenever there is an indication that the intangible
asset may be impaired. The amortisation period and the amortisation
method are reviewed at least at each financial year- end. Changes
in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset is accounted for
by changing the amortisation period or method , as appropriate, and
are treated as changes in accounting estimates. The amortisation
expense on intangible assets with finite useful lives is recognised
in profit or loss or expected category consistent with the function
of the intangible asset.
An item of intangible asset is derecognised upon disposal or
when no future economic benefits are expected from its use of
disposal. Any gain or loss on derecognition of the asset is
included in profit or loss in the financial year the asset is
derecognised.
IMPAIRMENT OF NON-FINANCIAL ASSETS EXCLUDING GOODWILL
At the end of each financial year, the Group reviews the
carrying amounts of its non-financial assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment
annually, and whenever there is an indication that the asset may be
impaired.
The recoverable amount of an asset or cash-generating unit is
the higher of its fair value less costs to sell and its value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised immediately in profit or loss.
FINANCIAL INSTRUMENTS
The Group recognises a financial asset or a financial liability
in its statement of financial position when, and only when, the
Group becomes party to the contractual provisions of the
instrument.
FINANCIAL ASSETS
The Group classifies its financial assets into one of the
categories below, depending on the Group's business model for
managing the financial assets as well as the contractual terms of
the cash flows of the financial asset. The Group shall reclassify
its affected financial assets when and only when the Group changes
its business model for managing these financial assets. The Group's
accounting policy for each category is as follows:
Amortised cost
These assets arise principally from provision of services to
customers, but also incorporate other types of financial assets
where the objective is to hold these assets in order to collect
contractual cash flows and the contractual cash flows are solely
payments of principal and interest. They are initially recognised
at fair value plus transaction costs that are directly attributable
to their acquisition or issue, and are subsequently carried at
amortised cost using the effective interest rate method, less
provision for impairment.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process, the probability of the
non-payment of the trade receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being presented in the consolidated statement of
comprehensive income. On confirmation that the trade receivable
will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
Impairment provisions for other receivables and amounts due from
related parties are recognised based on a forward looking expected
credit loss model. The methodology used to determine the amount of
the provision is based on whether at each reporting date, there has
been a significant increase in credit risk since initial
recognition of the financial asset. For those where the credit risk
has not increased significantly since initial recognition of the
financial asset, twelve month expected credit losses along with
gross interest income are recognised. For those for which credit
risk has increased significantly, lifetime expected credit losses
along with the gross interest income are recognised. For those that
are determined to be credit impaired, lifetime expected credit
losses along with interest income on a net basis are
recognised.
The Group's financial assets measured at amortised cost comprise
trade and other receivables (excluding prepayment and advances for
hostel operations) and cash and cash equivalents in the
consolidated statement of financial position.
Financial asset at fair value through other comprehensive income
("FVOCI")
The Group has a strategic investment in the equity securities of
an unlisted entity which is not accounted for as a subsidiary,
associate or jointly controlled entity. The Group has made an
irrevocable election to classify the investment at fair value
through other comprehensive income rather than through profit or
loss as the Group considers this measurement to be the most
representative of the business model for these assets. They are
carried at fair value with changes in fair value recognised in
other comprehensive income and accumulated in the fair value
through other comprehensive income reserve. Upon disposal, any
balance within fair value through other comprehensive income
reserve is reclassified directly to retained earnings and is not
reclassified to profit or loss.
Dividends are recognised in profit or loss, unless the dividend
clearly represents a recovery of part of the cost of the
investment, in which case the full or partial amount of the
dividend is recorded against the associated investment carrying
amount.
Purchases and sales of financial assets measured at fair value
through other comprehensive income are recognised on settlement
date with any change in fair value between trade date and
settlement date being recognised in the fair value through other
comprehensive income reserve.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity.
ACCOUNTING POLICY FOR FINANCIAL ASSETS PRIOR TO 1 APRIL 2018
Financial assets and financial liabilities are recognised on the
statements of financial position when the Group becomes a party to
the contractual provisions of the instrument.
FINANCIAL ASSETS
All financial assets are initially recognised at fair value,
plus transaction costs which are initially recognised at fair
value.
The Group classifies its financial assets as loans and
receivables. The classification depends on the nature and purpose
for which these financial assets were acquired and is determined at
the time of initial recognition.
Loans and receivables
Non-derivative financial assets which have fixed or determinable
payments that are not quoted in an active market are classified as
loans and receivables. Loans and receivables are measured at
amortised cost, using the effective interest method, less
impairment. Interest is recognised by applying the effective
interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
The Group's loans and receivables in the statements of financial
position comprise trade and other receivables (excluding
prepayments and advances for hostel operations) and cash and cash
equivalents.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at
the end of each financial year. Financial assets are impaired where
there is objective evidence that, as a result of one or more events
that occurred after the initial recognition of the financial
assets, the estimated future cash flows of the investment have been
impacted.
For financial assets carried at amortised cost, the amount of
the impairment is the difference between the asset's carrying
amount and the present value of estimated future cash flows,
discounted at the original effective interest rate.
The carrying amounts of all financial assets are reduced by the
impairment loss directly with the exception of trade receivables
where the carrying amount is reduced through the use of an
allowance account. Changes in the carrying amount of the allowance
account are recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment loss was recognised, the previously
recognised impairment loss is reversed through profit or loss to
the extent the carrying amount of the financial assets at the date
the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS
Classification as debt or equity
Financial liabilities and equity instruments issued by the Group
are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial
liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities. Equity instruments are recorded at the proceeds
received, net of direct issue costs. The Company classifies
ordinary shares as equity instruments.
Financial liabilities
The Group classifies all financial liabilities as subsequently
measured at amortised cost.
Trade and other payables
Trade and other payables, excluding advances received, are
initially measured at fair value, net of transaction costs, and are
subsequently measured at amortised cost, where applicable, using
the effective interest method.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire. The difference between the carrying amount and the
consideration paid is recognised in profit or loss.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the statement of financial position
comprise of cash on hand, cash at bank and demand deposits which
are readily convertible to known amounts of cash and are subject to
insignificant risk of changes in value.
LEASES
OPERATING LEASES
Rentals payable under operating leases (net of any incentives
received from lessors) are charged to profit or loss on a
straight-line basis over the term of the relevant lease unless
another systematic basis is more representative of the time pattern
in which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as
an expense in the period in which they are incurred.
PROVISIONS
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event, it is probable
that the Group will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the financial year, taking into account the risks and
uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, the
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably. The increase in the provision
due to the passage of time is recognised in the statement of
comprehensive income as finance expense.
Changes in the estimated timing or amount of the expenditure or
discount rate are recognised in profit or loss when the changes
arise.
SEGMENT REPORTING
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Group Chief Executive Officer
who makes strategic decisions.
LOSS PER SHARE
The calculation of the basic and diluted loss per share
attributable to the ordinary equity holders of the Company is based
on the following data:
2019 2018
---------------------------------------------------- ----------- -----------
Loss
Loss for the financial year attributable to the
owners of the Company (US$) (2,534,646) (2,050,432)
---------------------------------------------------- ----------- -----------
Number of shares
Weighted average number of ordinary shares for the
purposes of basic and diluted loss per share 2,453,229 2,157,340
---------------------------------------------------- ----------- -----------
Loss per share (US$)
Basic and diluted (1.03) (0.95)
---------------------------------------------------- ----------- -----------
In the current and previous financial years, diluted loss per
share is the same as the basic loss per share because the dilutive
potential ordinary shares to be exercised are anti-dilutive as the
effect of the shares conversion would be to decrease the loss per
share.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LIFVEDLIIVIA
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July 30, 2019 02:02 ET (06:02 GMT)
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