REG - Asia Strategic Ltd - Results for the period ended 30 September 2022
31/01/2023 07:00
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RNS Number : 3263O Asia Strategic Holdings Limited 31 January 2023
31 January 2023
Asia Strategic Holdings Ltd.
("Asia Strategic", the "Group" or the "Company")
Results for the financial year ended 30 September 2022
Asia Strategic Holdings Ltd. (LSE: ASIA), the independent developer and
operator of consumer businesses in emerging Asia, is pleased to announce its
audited results for the financial year ended 30 September 2022 ("FYE 2022").
Copies of the annual report and accounts for the financial year ended 30
September 2022 will be made available on the Company's website
(www.asia-strategic.com (http://www.asia-strategic.com) ).
HIGHLIGHTS
Financial Highlights
All dates for the reporting period refer to the financial year ended 30
September 2022 ("FYE 2022") and the comparative period refers to financial
year ended 30 September 2021 ("FYE 2021"), unless otherwise stated.
The year on year ("YOY") growth or decline refers to any change that occurred
between FYE 2022 and FYE 2021.
· Group revenues for FYE 2022 increased 19% vs. FYE 2021 to US$17.9
million, of which 68% (FYE 2021: 62%) derived from Education and 32% (FYE
2021: 38%) derived from Services.
· The double-digit revenue growth was mainly driven by (i) the sharp
turnaround of the Education segment's performance in Myanmar during FYE 2022
of 158% YOY, and (ii) EXERA, which was able to achieve single-digit growth on
the back of a strong FYE 2021.
· Covid-19 cases in Vietnam peaked towards the end of 2021 and subsided
in February 2022. This resulted in an uneven recovery within the Group's
operations wherein the Education division in Myanmar recovered to pre Covid-19
levels by December 2021 whilst Vietnam student numbers remain depressed,
albeit they are now improving.
· The Group's adjusted EBITDA loss for FYE 2022 widened to US$1.9 million
(FYE2021: US$0.9 million).
· The Group's net loss for FYE 2022 increased to US$6.0 million (FYE
2021: US$4.8 million, excluding the impairment of an amount due from a related
party of US$1.0 million), due to (i) the impact from six months of Covid-19
related closures in late 2021, (ii) the slow recovery of Wall Street English
Vietnam, (iii) the strengthening of USD against MMK by ca. 50%, leading to a
foreign exchange net loss of US$1.0 million in FYE 2022 (FYE 2021: US$0.8
million gain), and (iv) the increase in marketing expenses of US$0.7 million
for the ramp-up of marketing activities subsequent to the relaxation of
Covid-19 restrictions in Myanmar and Vietnam.
· The Group net comprehensive loss for FYE 2022 narrowed to US$6.0
million (FYE 2021: US$6.3 million).
· As at 30 September 2022, the Group's current and long-term deferred
revenue, which represent cash received in advance of performance obligations,
amounted to US$8.1 million and US$1.9 million, compared to US$5.3 million and
US$0.6 million as at 30 September 2021. Current deferred revenues shall be
realised in FYE 2023 while long-term deferred revenues shall be realised in
FYE 2024 and FYE 2025, as and when services are rendered to students with
reference to the individual terms of the student contracts.
· As a result of extensive cost control and cash flow management
initiatives, financial resources continue to be carefully administered. The
Group generated cash inflows from operating activities of ca. US$3.6 million
in FYE 2022 vs. cash outflows of US$1.2 million in FYE 2021, excluding the
repayment of lease liabilities of US$3.0 million (FYE 2021: US$1.8 million).
The Group's overall performance and cash flow generation should further
benefit from the expected economic recovery across ASEAN post Covid-19.
· In November 2021, the Company announced the subscription of convertible
notes totalling US$5.7 million. Through a loan re-organisation exercise, the
Company's largest corporate shareholder, Macan Pte. Ltd. ("MACAN"), subscribed
to a US$3.5 million Zero Coupon Convertible Note, satisfied through a cash
consideration of US$1.0 million and the conversion of one of the shareholder's
loan facilities amounting to US$2.5 million.
As part of the loan re-organisation exercise, this loan facility agreement was
terminated with effect from 31 October 2021. After the loan re-organisation
exercise, the Group has a remaining loan facility of up to US$1.5 million with
MACAN. During the financial year, the Group has drawn down an additional
US$0.3 million, and repaid US$2.1 million. As at the date of this report, the
available facility remains at US$1.5 million.
Management has assessed that there are sufficient mitigating actions within
the control of the Group to ensure sufficient liquidity for its working
capital requirements for at least the next 12 months from the date of this
report, such as (i) undertaking a controlled expansion of its existing and
future businesses, (ii) maintaining financial liquidity discipline, and (iii)
accessing the unutilised credit facility of US$1.5 million with MACAN. No cash
outflow is expected from the convertible notes as conversion into ordinary
shares of the Company is mandatory at the earlier of maturity or the
qualifying event as disclosed in Note 22 to the financial statements.
· The diversification of the Group's operations between Vietnam and Myanmar
will continue to play an important role in mitigating any further economic
risk and single-country exposure to the Group.
Operational Highlights
Education
· Group revenues from owned and managed Education businesses for FYE 2022
were US$11.9 million and US$0.2 million (FYE 2021: US$8.8 million and US$0.5
million), respectively. The managed business is expected to wind down within
FYE 2023, following the completion of services delivered to legacy students.
· As at 30 September 2022, the Group's current and long-term deferred
revenue from education businesses representing cash received in advance of
performance were at US$7.9 million and US$1.9 million, compared to US$5.2
million and US$0.6 million as at 30 September 2021.
· The Group's Education segment is currently operating the Group's owned
businesses and servicing legacy students for the managed business of a related
party, comprising:
(i) English language education for children from as young as one-year
old through teenagers (Kids&Us), under exclusive licensing agreements
entered in FYE 2022 in Vietnam and Myanmar;
(ii) Adult English language learning (Wall Street English) in Vietnam
and Myanmar;
(iii) Tertiary education (Auston University) in Myanmar; and
(iv) K-12 international school (Yangon American International School) in
Myanmar.
Through these businesses Asia Strategic provides a wide range of education
services to students from nursery up to tertiary education. The Wall Street
English language learning centres support the training of the Group's
employees and provide synergistic value to the Group.
· As at 30 September 2022, the number of centres and students were as
follows:
Number of centres Number of students
2022 2021 2022 2021
Vietnam
- Wall Street English 7 7 3,800 3,300
- Kids&Us 1* - 50 -
Myanmar
- Wall Street English 4* 4 3,100 1,900
- Auston 1* 1 500 50
- Yangon American 1 1 55 50
Group 14* 13 7,505 5,300
* Since October 2022, the number of centres has grown to 19, reflecting
the additional openings of 3 Kids&Us centres in Vietnam, 1 Wall Street
English centre in Myanmar and 1 Auston satellite campus in Mandalay.
· In April and August 2022, the Group entered into exclusive franchising
agreements with Kids&Us English, S.L.U ("Kids&Us") for the development
of English language centres for children under the brand "Kids&Us School
of English" in Myanmar and Vietnam, respectively.
Four Kids&Us centres have opened between September and November 2022 in Ho
Chi Min City situated at District 3, District 7, Cao Duc Lan and Su Van Hanh,
Vietnam, with over 100 students to date.
Two Kids&Us centres are planned to be operational in Myanmar by June 2023.
No Kids&Us centres were operational in Myanmar in FYE 2022.
· It is worth noting the strong increase in the number of students in
Myanmar across all divisions and in particular Wall Street English and Auston.
Notwithstanding the complex political and security environment, the Wall
Street English and Auston businesses appear to have fully recovered and even
exceed their pre Covid-19 performance.
· A decrease in student enrolment was experienced by WSE Vietnam at the
end of FYE 2022 due to (i) the strict Covid-19 restrictions imposed in Vietnam
between November 2021 and February 2022, and (ii) closures of two language
centres for refurbishment during the pre-Covid-19 period to revitalise the
centres in preparation for the commercial recovery post Covid-19.
Services
· Group revenues from owned and managed Services businesses recorded low
single-digit growth reaching US$5.8 million (FYE 2021: US$5.7 million),
partially due to the weakening of the Myanmar Kyat against the United States
Dollar (functional currency) from an average of 1,514 in FYE 2021 to 1,855 in
FYE 2022, which impacted the revenues denominated in Myanmar Kyats.
· Through its Services segment, the Group is currently active in (i)
owned integrated security services (EXERA), and (ii) managed hospitality
services (Ostello Bello).
EXERA
· 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 operates exclusively in Myanmar
through an experienced workforce of ca. 1,600 security officers, as at 30
September 2022, supporting 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, the Embassy of the
Republic of Singapore and the Delegation of the European Union to Myanmar.
· EXERA follows international process standards including ISO 9001, OHSAS
18000, and ANSI/ASIS PSC 1, and is the only company in Myanmar accredited to
the ISO 18788 Management System for Private Security Operations.
Ostello Bello
· Ostello Bello, previously operating within the Hospitality Division,
comprises boutique hostels with ca. 300 beds and over 70 rooms in three
locations across Bagan and Mandalay, the most popular tourist destinations in
Myanmar.
· The performance of Ostello Bello has been severely impacted by the
continued Covid-19 related travel restrictions. In FYE 2022, management
decided to discontinue its location in Nyaung Shwe from July 2022, thus
reducing the number of beds and rooms managed by the Group. Furthermore, in
December 2022 management decided to cease operations in one location in Bagan.
The closure of these two outlets does not have a material impact on the Group
as operations and management fees were already minimal in both FYE 2022 and
FYE 2021.
· To address the continued underperformance of Myanmar's tourism industry
and to offset the currently challenging operating environment in Myanmar, the
Group remains focused on reducing operating costs and generating operational
synergies. It is worth noting that through its boutique hostels, the Group
provides livelihood for hundreds of individuals in developing communities such
as Bagan and Mandalay. Management takes great pride and acknowledges its role
as a responsible long-term investor in these communities.
· Currently, Ostello Bello Mandalay hosts teachers and security
personnel, providing safe accommodation and flexibility to ramp-up headcount
in Mandalay to enable expansion of the Group's Education operations.
Others
· Asia Strategic continues to develop its business network and expand its
pipeline within the Group's existing sectors (e.g. Education and Services) and
explore new sectors. The Group is currently focused on building a stronger
presence on the ground in Vietnam, whilst seeking new opportunities,
partnerships and synergistic acquisitions throughout emerging Asia to
diversify the Group's geographical exposure.
· Management also routinely conducts in-depth studies of new sectors (e.g.
Healthcare, Retail and Financial Services) to determine whether to allocate
additional human and financial resources to new initiatives.
· As at 30 September 2022, the Group held an investment in the listed
equity security of Myanmar Investments International Limited ("MIL"), a
Myanmar-focused investment company listed on the AIM market of the London
Stock Exchange with investments in the telecommunications and financial
sectors. The Group intends to hold the investment for long-term strategic
purposes and capital appreciation and therefore designated this investment as
financial assets at fair value through other comprehensive income. The
investment is carried at fair value based on the quoted bid market price on
the last trading day of the reporting date.
· As at 30 September 2022, the Group recorded a fair value adjustment loss
in the other comprehensive income of US$0.2 million (FYE 2021: loss of US$0.4
million). As at 30 September 2022, based on available information, the
unaudited net asset value reported by MIL has decreased by 59% percent to
US$10.5 million (30 September 2021: US$25.6 million), equivalent to US$0.28
(FYE 2021: US$0.67) per MIL share.
SIGNIFICANT EVENTS AND TRANSACTIONS
1) Settlement and Termination of Shareholder's Loans
On 20 October 2021, the Company entered into a loan re-organisation with the
Company's largest corporate shareholder, MACAN, as detailed below:
i) Subscribed US$3.5 million Zero Coupon Convertible Notes of the
Company satisfied through cash consideration of US$1.0 million and the
conversion of principal shareholder's Loan Facility 2 amounting to US$2.5
million (Note 18); and
ii) Terminated Loan Facility 2 agreement with the Company with
effect from 31 October 2021.
2) Convertible Notes Programme
On 1 November 2021, the Company launched a Convertible Notes
Programme to raise up to US$10.0 million over a six-month period for working
capital and future investments. The convertible note ("CN") holders have an
option to subscribe to either (i) a 10% coupon option ("10% Coupon Convertible
Note") or (ii) a zero−coupon option ("Zero Coupon Convertible Note").
The Company's existing shareholders subscribed to CN amounting to
US$5.7 million (excluding transaction costs) comprising:
I. 10% Coupon Convertible Notes amounting to US$0.5 million; and
II. Zero−Coupon Convertible Notes amounting to US$5.2 million
including subscription by MACAN as detailed above and in Note 18 to the
financial statements.
3) Adoption of 2022 Employee Share Option Scheme
At the Annual General Meeting, held on 4 March 2022, in order to incentivise
existing and new management and employees, the Company's shareholders approved
a new share option scheme (the "2022 ESOS"), whereby share options in respect
of up to 200,000 ordinary shares in the capital of the Company may be granted
to certain individuals at an exercise price of US$11.00 per share with a
typical vesting schedule of 40% of the option on the first anniversary of the
grant date, 40% of the option on the second anniversary of the grant date and
20% of the option on the third anniversary of the grant date. A total of
135,000 share options have been granted under the 2022 ESOS as of the date of
this report.
4) Exclusive Agreement for Kids&Us School of English in Vietnam and
Myanmar
On 25 April 2022 and 15 August 2022, the Group entered into exclusive
franchising agreements with Kids&Us English, S.L.U ("Kids&Us") for the
development of English language centres for children under the brand
"Kids&Us School of English" in Myanmar and Vietnam, respectively, for a
period of 10 years.
Kids&Us is a leading provider of English language education for children
from as young as one-year old through teenagers. Founded in Manresa,
Barcelona, in 2003, Kids&Us has over 157,000 students across more than 500
schools in 9 countries. Kids&Us has developed an innovative and effective
pedagogical method:
· Kids&Us uses a unique teaching method based on the natural process
of developing one's mother tongue, a process which takes place in a specific,
natural and spontaneous order.
· The courses are adapted to the students' ages and life experiences.
· Small groups - a maximum of five in the 'Babies' stage (one and
two-year-olds) and eight across the rest of the courses - allow for
personalised attention and a high level of student participation and
interaction in the classroom.
· Continuity of the courses allows children to learn from one-year old.
· Classes are conducted entirely in English, ensuring total linguistic
immersion.
· Students can continue learning English outside of class time:
o The Kids&Us 360º Universe provides an endless range of activities and
stimulating opportunities to continue learning at urban day camps, workshops
(for cooking, science, theatre), summer camps, etc.
o Products created by Kids&Us include books, boardgames, etc.
o Apps, online homework exercises and electronic devices.
Under the terms of these agreements, the Group paid initial fees of US$216,000
for Myanmar and Vietnam (EUR100,000 for each territory) and has committed to
pay (i) ongoing service fees as a percentage of revenues, (ii) cumulative
opening fees of EUR150,000 within four years from signing of the Vietnam
franchising agreement, and (iii) didactic materials based on consumption,
among other fees.
The Group established its first four centres in Ho Chi Minh City between
September and November 2022 and is planning to open its first two centres in
Yangon by June 2023.
5) Impact of Coronavirus ("Covid−19") on Vietnam and Myanmar
The number of Covid-19 daily cases in Vietnam has been at a manageable level
since February 2022, which in turn enabled the Government to ease Covid-19
restrictions and re-open to vaccinated international tourists in mid-March in
line with other ASEAN countries. As at the date of this report, we have no
knowledge of further restrictions being planned.
Myanmar has largely recovered from Covid-19, with substantially fewer cases
reported, and reopened the country to international travel in a bid to bolster
international tourism and engage with the international business communities
since 1 April 2022.
In support of the respective countries effort to achieve a higher vaccination
rate and ensuring the well-being of its employees, the Group on its own accord
executed a Covid-19 vaccination programme for all eligible employees. This
enabled management to focus firmly on operational improvements, planned
expansion and new business opportunities with sufficient preventive measures
from past experiences for future disruptions arising from spikes in
Covid-19.
As at the date of approval of these financial statements, the number of
Covid-19 daily cases across ASEAN remains negligible and no further
restrictions are planned. The Group continuously monitors these developments
and makes appropriate adjustments to the business operations to ensure
resilience and sustainability for each of its operating segment.
6) Impact of the State of Emergency on Myanmar
On 1 February 2021, the Myanmar military announced that it had declared a
State of Emergency. In the short aftermath of the military takeover, the
Group's businesses were disrupted intermittently due to (i) outages in
telecommunication, (ii) imposition of martial law in certain townships, (iii)
widespread demonstrations and, subsequently (iv) increased security risks. The
political situation is evolving daily, and the outcome and long-term effects
remain unclear at this stage.
While the political outlook remains uncertain, economic activity has resumed
in the main economic hubs of Yangon and Mandalay. Management continues to
monitor several risk factors including:
· The rise of an insurgence campaign resulting in daily explosions and
political assassinations across the country;
· The retaliation by the military and other armed forces;
· The disruption of the global and local supply chain, resulting in
double digit inflation;
· The weakening of the banking financial system and limited access to
cash; and
· Exchange rate volatility and capital controls.
In April 2022, through notifications and directives, the Central Bank of
Myanmar ("CBM") implemented foreign exchange control measures requiring all
foreign currency receipts from 4 April 2022 to be converted to Myanmar Kyat
("Kyat" or "MMK"), restricting conversion of foreign currencies and limiting
offshore remittance.
Subsequently, the CBM announced exemptions and the relaxation of certain
measures to Myanmar Investment Committee ("MIC") permitted foreign
investments, investments in Special Economic Zones, embassies, airlines and
certain non-profit organisations. The Group owns and operates the Yangon
American International School ("Yangon American"), an approved international
school qualified for certain foreign exchange control exemptions.
The development of these regulations remains fluid and subject to abrupt
changes. The Group continuously monitors any additional announcements or
clarifications from the CBM to manage its currency exposure proactively.
7) Impact of the war in Ukraine and trade war
Countries within emerging Asia are navigating through the recovery of the
prolonged pandemic, however the war initiated by Russia against Ukraine
fuelled new economic uncertainties and inflationary pressures globally.
Coupled with the trade war between the United States and China, this has also
disrupted global supply chains and reduced the availability of certain goods
and materials in the countries in which the Group operates.
As the Group's activities are focused on services rather than manufacturing,
disruption to the Group's activities has been limited to date. The Group will
continuously undertake measured expansion of its existing and future
businesses and maintain financial liquidity discipline.
Subject to the impact of foreign exchange fluctuations, the Group's operations
in Vietnam are expected to exceed Myanmar over time, however contribution from
both markets remains an important diversification strategy to mitigate the
overall Covid-19 and geographical risk exposure of the Group.
The Group has considered the market conditions as at the reporting date, in
making estimates and judgements on the recoverability of the assets as at 30
September 2022. The significant estimates and judgements applied are disclosed
in Note 3 to the financial statements.
COUNTRY-SPECIFIC UPDATES
The Asian Development Bank ("ADB") expects GDP growth in developing Asia of
4.2% in 2022 and 4.6% in 2023, amid mounting challenges regionally and
globally. The downward revisions vs. prior estimates (4.3% and 4.9%
respectively) are driven by the increased monetary tightening by central banks
led by the US Treasury, the Russian invasion of Ukraine and the strict
Covid-19 lockdowns in the People's Republic of China.
Inflation in developing Asia in 2022 is likely to reach 4.4% and 4.2% in 2023.
While inflation in the region remains lower than elsewhere, supply disruptions
continue to push up food and fuel prices.
Vietnam Updates
· Vietnam ended 2021 with a 2.6% GDP growth rate, according to the General
Statistics Office of Vietnam, weathering one of the harshest Covid-19
lockdowns in the world during the second half of 2021 from June to October.
Demonstrating its resilience, Vietnam is also one of the rare economies to
post two consecutive years of growth since the start of Covid-19 globally.
· The ADB forecast gross domestic product growth at 6.5% in 2022 and 6.7%
in 2023 reflecting a sharp rebound made possible by Vietnam's high Covid-19
vaccination coverage, quick shift to a more flexible pandemic containment
approach/reopening, expanding trade, and the Government's economic recovery
and development initiatives.
· The world is experiencing widespread and persistent inflationary
pressures due to the effects of the Russian invasion of Ukraine and increasing
interest rates by US Treasury. IMF forecasts global inflation to peak at 9.5%
in 2022 before falling to 4.1% in 2022. In general, among the five economies
of the ASEAN-5 region, Indonesia and Vietnam are the two countries that are
forecasted by the IMF to have a higher inflation rate in 2023 than in 2022.
Specifically, the inflation rate in Indonesia will increase sharply from 4.6%
in 2022 to 5.5%. Meanwhile, Vietnam's inflation is forecast to increase only
slightly, from 3.8% in 2022 to 3.9% in 2023.
· Vietnam is also expected to benefit from the European Union Vietnam Free
Trade Agreement and the Regional Comprehensive Economic Partnership ("RCEP"),
agreed by all ten ASEAN countries as well as China, Japan, South Korea,
Australia and New Zealand, officially came into force in January 2022. The
World Bank forecasts that RCEP could drive GDP to increase by 1.5% for
Vietnam.
· Vietnam continues as the preferred destination of multiple supply chain
and manufacturing relocations, due to strong economic fundamentals and a
favourable foreign investment environment when compared with neighbouring
countries. Vietnam is also the next best alternative to China for global
manufacturers to diversify and shelter from the on-going China-US trade war.
· In recent years, Vietnam has emerged as a leading hub for manufacturing
electronics in Southeast Asia. Relocations by manufacturing companies such as
Foxconn, Intel, Foster, Luxshare, and Lego since 2019 highlight this trend. In
recent years, Vietnam has emerged as a leading hub for manufacturing of
electronics in Southeast Asia. The computer and electronics products gross
value has increased from US$67.9 billion in 2015 to US$119.9 billion in 2020
with CAGR of ca. 18%.
· Vietnam is the 15(th) most populous country in the world and is amongst
the countries with the highest population density. Vietnam is also
experiencing rapid demographic and social change as its population is
forecasted to grow from 98 million today to 120 million by 2050. Based on the
2021 Population Census Report by the General Statistics Office of Vietnam, 56%
of the population is under 35 years old, with a life expectancy of 76 years,
the highest among countries in the region at similar income levels. Vietnam's
emerging middle class is approximately 13% of the population and is expected
to reach 26% by 2026.
· Vietnam was rated as a country with moderate English proficiency and
ranked 60 globally based on EF English Proficiency Index ("EF EPI"). The EF
EPI index was derived from the surveys conducted by EF Education First, a
Swedish education company, analysing the results of 2.1 million non-native
English speakers who took their EF SET English tests in 2021 across 111
countries and regions. The list, EF English Proficiency Index (EF EPI) 2022
(https://www.ef.com/wwen/epi/) , divided countries into different bands from
"Very high proficiency" to "Very low proficiency".
Myanmar Updates
· Since 2020, the compounded effects of the Covid-19 pandemic, the
proclaimed State of Emergency and global inflation have reversed the
development gains since the democratic reform process started in 2011. The
World Bank reported in 2022 that poverty is estimated to have doubled compared
to March 2020, with ca. 40 percent of the population is estimated to be living
below the national poverty line, undoing a decade of progress in poverty
reduction.
· The World Bank's Myanmar Economic Monitor report in July 2022 projects
economic growth of 3.0% in the fiscal year ending September 2022, a
single-digit recovery after experiencing a contraction of 18% in fiscal year
2021. The near-term economic outlook remains weak due to the ongoing impact of
the military coup. The Russian war against Ukraine has caused additional
economic uncertainties and inflationary pressures globally exacerbating the
economic issues.
Myanmar's economy has faced a series of external and internal disruptions
which have impeded recovery from the large contraction in economic activity
last year.
· In April 2022, through notifications and directives, the Central Bank
of Myanmar ("CBM") implemented certain foreign exchange control measures
requiring all foreign currency receipts from 4 April 2022 to be converted to
Myanmar Kyat, restricting conversion of foreign currencies and limiting
offshore remittance. The immediate impact was further weakening of the Kyat
and sharp rise in the prices of imported goods, prices of fuel with
corresponding increase in transportation cost and other basic items.
· The World Bank reported a spike in inflation that has disrupted the
operations of all businesses. The latest available data indicate that CPI
inflation increased to 17.3 percent YOY in March 2022.
· Whilst Myanmar navigates through the headwinds, certain sectors have
stabilised or recovered over the past twelve months driving modest growth.
Some firms have reported operating at a higher proportion of their capacity in
2022 than was the case in 2021, particularly in the manufacturing sector, and
manufactured exports are recovering.
· Construction activity and work on several projects have resumed after a
long pause last year, and the pipeline of issued permits has grown. A rise in
mobility at workplaces, retail outlets, and transport hubs have supported
overall activity, although indicators of consumer spending are weak.
· However, industries reliant on domestic demand are facing challenges
from lower household incomes and rising prices of daily necessity, while
agricultural production remains constrained by increased input prices,
transport disruptions, and ongoing conflict.
· Any future recovery in domestic activity will likely be contingent on
political improvement, the removal of temporary foreign control measures, the
reopening of the country to international travel in a bid to bolster
international tourism and continued engagement with the international business
communities.
· The economic outlook is uncertain, with a wide range of possible
scenarios. Any future recovery in domestic activity will likely be contingent
on improvement in the political situation and a rebound in mobility and the
restoration of key services, including financial services. The trade and
foreign investment outlook will depend on the reactions of international
investors and governments.
Enrico Cesenni (OSI), Chief Executive Officer of Asia Strategic, commented:
"I am very pleased to report that over the financial year ended 30 September
2022, Asia Strategic has continued to achieve double-digit growth while
strengthening its operations, in a complex social, economic and political
environment both locally and internationally.
"As the Covid-19 related restrictions were gradually lifted from November 2021
in Myanmar and February 2022 in Vietnam, the Group has experienced a material
rebound in its operating businesses, particularly within consumer facing
brands such as Wall Street English and Auston.
"It is worth noting that revenues grew across both Education (+30% YOY) and
Services (+2% YOY), notwithstanding the strong currency devaluation in
Myanmar, and that the Group continues to benefit from commercial momentum that
is driven by pent-up demand and the limited spending options available to
customers, particularly in Myanmar."
"In the medium term, global inflation and supply chain shortages will likely
result in a reduction of disposable income and hinder discretionary spending,
particularly in Myanmar."
"On the other hand, the Group remains focused on sectors that are less
correlated with the broader economy, such as Security Services, or that
address core needs, such as Education. This allows Asia Strategic to pursue a
long-term agenda, confident in our capital structure."
"We would like to take this opportunity to thank shareholders for their
continued support and all members of staff across the Group for their hard
work and sacrifices through these challenging, uncertain and troubling times."
For more information, please visit www.asia-strategic.com
(http://www.asia-strategic.com) or contact:
Asia Strategic Holdings Ltd. richard@asia-strategic.com (mailto:richard@asia-strategic.com)
Richard Greer, Independent Non-Executive Chairman enrico@asia-strategic.com (mailto:enrico@asia-strategic.com)
Enrico Cesenni (OSI), Founder and CEO
Allenby Capital Limited (Broker) +44 (0)20 3328 5656
Nick Athanas
Nick Naylor
Lauren Wright
Yellow Jersey PR (Financial PR) +44 (0) 20 3004 9512
Sarah Hollins
Bessie Elliot
CHAIRMAN'S STATEMENT
Mission and Strategy
Asia Strategic's "mission is to grow sustainable businesses in emerging Asia
through patient and committed capital" in line with our purpose of "empowering
communities in emerging Asia". Our strategy is to identify, seed, acquire and
grow tech-enabled consumer businesses in emerging Asia, that address core
needs and have the potential to grow into regional and global champions.
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 growth of ASEAN economies. While the Group's Hospitality
operations remain severely affected by Myanmar's State of Emergency, the
Education and Services businesses have thrived and are generating synergies
across the respective products and businesses. 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 Asia Strategic to stabilise its expected growth, while simultaneously
capitalising on the opportunities currently available in emerging Asia. While
the Covid-19 global pandemic continued to present significant challenges to
the Group during FYE 2022, the transformational acquisition of WSE Vietnam in
2020 was a key strategic milestone for Asia Strategic as it provided
geographical diversification and exposure to one of the most attractive and
fast-growing markets in ASEAN. Building on our knowledge in the education
sector and the Group's transversal capabilities, we have acquired the
exclusive franchising rights to Kids&Us School of English in Vietnam and
Myanmar and opened our first four centres in Vietnam.
Board's Responsibility
The Board is fully aware of its responsibility to ensure that all 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 the countries in which we operate,
enabling jobs and alleviating poverty, and within these sectors we aim to
build businesses that embody the best business, environmental, social and
governance practices.
The ongoing political upheaval in Myanmar has once again brought to light the
importance of responsible business dealings. Before engaging with any
customer, the Group conducts extensive diligence checks on the counterpart's
activities, ownership and business associates. Group-wide know-your-client
("KYC") and anti-bribery trainings are conducted routinely and for all new
employees.
Throughout the Covid-19 pandemic, our team remained on the ground in Myanmar
and implemented several initiatives aimed at containing the potential spread
while continuing to successfully service our customers across over 200 sites.
Furthermore, Asia Strategic's management facilitated the sharing of best
practices and medical knowledge between Myanmar's front-line medical personnel
and an international task force composed of Italian and American doctors. With
the kind support of Pun Hlaing Hospitals, most of our eligible workforce was
vaccinated.
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 over 63% (excluding EXERA's
security officers). We are also actively looking to increase female
representation and overall diversity within the Board of Directors.
Training programmes 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 96% of Asia Strategic's workforce.
Outlook
In FYE 2022, Asia Strategic remained focused on:
(i) the recovery of all the Group's operation post Covid-19;
(ii) the reorganisation of WSE Vietnam;
(iii) the stabilisation of the Myanmar businesses throughout a serious of
exogenous shocks; and
(iv) the launch of Kids&Us in Vietnam.
In FYE 2023, management shall be concentrated on organically growing the
Group's Education and Services businesses regionally, including Kids&Us in
both Vietnam and Myanmar, together with complementary acquisitions. The Group
will continue to pursue its asset-light strategy while increasing the
portfolio of businesses owned and under management.
Words of appreciation
Thanks to the hard work and personal sacrifices of all our employees, the
Group's operations have strengthened, leading to a positive operating cash
flow for FYE 2022, notwithstanding a highly volatile trading environment.
Asia Strategic's management has gained valuable knowledge and experience as a
result of the adversities faced since early 2020 and I can confidently claim
that Asia Strategic is building one of the most committed and aligned
management teams in emerging Asia.
This will enable us to evaluate and approach investment opportunities with a
unique strategic and data-driven angle, leveraging groupwide capabilities and
further differentiating Asia Strategic from the other providers of capital
and/or technical expertise in those countries.
The Board would like to take this opportunity to thank our shareholders for
their continued support and encouragement, and our staff, partners and
customers for their relentless commitment, effort and support throughout these
unprecedented times.
Richard Greer
Independent Non-Executive Chairman
30 January 2023
OPERATIONAL REVIEW
Education
The Group's objective is to become one of the leading private operators of
educational institutions in emerging Asia through the identification of
opportunities and expansion in the sector.
Within its Education segment, the Group is currently active in (i) adult
English language learning (Wall Street English), (ii) tertiary education
(Auston), (iii) K-12 international school (Yangon American), and (iv) English
language education for children from as young as one-year old through
teenagers (Kids&Us).
The Group generates student revenues from the businesses it owns and operates.
The fees paid by students are typically variable depending on the type,
duration of the services purchased to the customer and course intake.
Furthermore, the Group generates revenues through management fees, technical
assistance fees and other one-off fees ("Fees to the Group") from the
operations it manages. In FYE 2022, such fees were in respect of support
services rendered to legacy students of a related party.
Wall Street English Vietnam
Wall Street English Vietnam ("WSE Vietnam") caters to the premium English
Language Training market, focusing exclusively on adult learning, and offers
its services through a flexible and integrated blended learning solution that
can be delivered entirely online.
WSE Vietnam owns and operates seven English language retail centres in Ho Chi
Minh City and Binh Duong. The centres operate under 10-year Centre Franchise
Agreements with Wall Street English International on terms similar to those in
place for WSE Myanmar.
In July 2020, the Group completed the acquisition of WSE Vietnam for a nominal
consideration, resulting in a carried-forward goodwill of US$4.7 million as at
30 September 2022.
In FYE 2022, WSE Vietnam generated revenues to the Group of US$7.4 million
(FYE 2021: US$7.5 million). It is worth noting that in FYE 2022, WSE Vietnam
accounted for approximately 41% of the total Group's revenue for the year,
which emphasises the importance of Vietnam as a key growth market for the
Group and mitigates the concentration of revenue risk from a single source
country.
Management routinely conducts in-depth studies to assess further growth
opportunities for WSE Vietnam through opening of new centres within Ho Chi
Minh City and other major cities such as Hanoi.
Wall Street English Myanmar
Wall Street English Myanmar ("WSE Myanmar") caters to the premium English
Language Training market, focusing exclusively on adult learning, and offers
its services through a flexible and integrated blended learning solution that
can be delivered entirely online.
WSE Myanmar owns and operates five English language retail centres across
Yangon and Mandalay. The fifth centre was only established in October 2022 and
did not contribute to FYE 2022.
In FYE 2022, WSE Myanmar generated revenues to the Group of US$3.2 million
(FYE 2021: US$0.7 million) and fees to the Group of US$0.2 million (FYE 2021:
US$0.5 million) from its Managed businesses. In the next financial year, the
Group is expected to generate revenues solely from its Owned business on
completion of services to the legacy students.
Management continues to assess further growth opportunities for WSE Myanmar in
order to meet the average development targets stated under the area
development agreement with Wall Street English International 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.
During the Covid-19 restrictions, Wall Street English quickly adapted to the
new environment and launched the Wall Street English online solution and
digital classroom. While instrumental during lockdown periods, these solutions
are critical to further expand the addressable market through nationwide
coverage. Moving forward, Wall Street English shall leverage on the
franchisor's teachers to deliver services to students remotely. This enables
WSE Myanmar to achieve higher student to teachers ratio, reduce fixed staff
costs and improve flexibility for future expansion.
From an operational perspective, we are proud to report that, notwithstanding
several lockdowns and restrictions, both WSE Myanmar and WSE Vietnam continue
to rank as 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 premium English language education provider for adults.
Auston
Auston is the result of a strategic collaboration signed in April 2018 between
Asia Strategic and the Auston Institute of Management, an operator of private
schools in Singapore that prepares students for careers in Engineering, IT
Technology and Project Management through higher education learning.
Its first campus opened in Yangon in May 2018 covering over three floors 1,000
sqm and has expanded to Mandalay since October 2022. The initial product
portfolio included foundation programmes and diplomas in Infrastructure &
Networks, Mechanical Engineering, Engineering Technology and Construction
Project Management.
In February 2020, the Company announced a partnership with Liverpool John
Moores University ("LJMU") to provide high quality engineering training
programmes for young, working professionals in Myanmar. The partnership with
LJMU is a significant milestone for Auston in offering students a path towards
an engineering degree and providing globally recognised degrees in Myanmar and
that by lecturers with, at a minimum, a master's degree or a PhD from a
recognised awarding body.
Auston's programmes are often packaged together with WSE Myanmar services to
provide students a platform to achieve a high level of English proficiency and
ensure they are qualified for leading roles at local and international
companies. Auston's campuses are in close proximity of WSE Myanmar's learning
centres, which provides added convenience to the students. The WSE Myanmar
collaboration complements other education businesses and creates synergies
within the Group.
In FYE 2022, Auston recorded accounting revenues of US$0.5 million (FYE 2021:
US$0.01 million) and deferred revenues of ca. US$0.7 million (Sept'21: US$0.1
recognised in FYE2022), which will be realised within the next financial year
and US$0.3 million in FYE 2023.
As of 31 December 2022, the number of enrolled students at Auston has grown
exponentially to over 500 (FYE 2021: ca. 50) and the cumulative contract value
increased by US$1.6 million (31 December 2021: US$0.5 million). High
cumulative contract value indicates potential unbilled receivables and
accounting revenues, which will realise in the near future when courses are
delivered to the students over the course period/intake.
The strong revenue and student growth is predominantly due to students seeking
globally recognised diplomas/degrees in Myanmar to further their studies
abroad in search of better job opportunities locally and abroad.
Yangon American
In April 2019, the Group received an investment permit from the MIC to own and
operate its first international school, Yangon American International School
("Yangon American"). The permit is 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 schools.
Yangon American, which commenced operations in August 2019, with planned
capacity of up to 400 students, is positioned as a leading K-12 school. The
school is centrally located and only 4 km from Asia Strategic's educational
hub of WSE Myanmar and Auston in Junction Square. It has 17 classrooms spread
over 2,000 sqm, plus a multi-use playground of more than 1,000 sqm.
Yangon American operates classes from nursery through fifth grade, serving
students from the age of 2 to 11 with revenues for Asia Strategic being
generated from student fees, admission fees and ancillary services.
Despite the Covid-19 temporary closures and State of Emergency, Yangon
American maintained student enrolment of over 50 students for Academic Year
2021/2022 with a mixture of foreign and local student support.
In July 2021, Yangon American was fully accredited to offer the International
Baccalaureate Primary Years Programme ("IB PYP") and is able to leverage the
accreditation to secure more students and compete with other international
schools. Yangon American's application to receive the Western Association of
Schools and Colleges ("WASC") certification is in progress.
For FYE 2022, Yangon American generated revenues of US$0.8 million (FYE 2021:
US$0.6 million). Yangon American is still in a development phase building its
academic credentials and student enrolment towards capacity.
Kids&Us Vietnam and Myanmar
On 25 April 2022 and 15 August 2022, the Group entered into exclusive
franchising agreements with Kids&Us English, S.L.U ("Kids&Us") for the
development of English language centres for children under the brand
"Kids&Us School of English" in Myanmar and Vietnam, respectively, for a
period of 10 years.
Kids&Us is a leading provider of English language education for children
from as young as one-year old through teenagers. Founded in Manresa,
Barcelona, in 2003, Kids&Us has over 157,000 students across 500 schools
in 9 countries. Kids&Us has developed an innovative and effective
pedagogical method:
· Kids&Us uses a unique teaching method based on the natural process
of developing one's mother tongue, a process which takes place in a specific,
natural and spontaneous order.
· The courses are adapted to the students' ages and life experiences.
· Small groups - a maximum of five in the 'Babies' stage (one and
two-year-olds) and eight across the rest of the courses - allow for
personalised attention and a high level of student participation and
interaction in the classroom.
· Continuity of the courses allows children to learn from one-year old.
· Classes are conducted entirely in English, ensuring total linguistic
immersion.
· Students can continue learning English outside of class time:
o The Kids&Us 360º Universe provides an endless range of activities and
stimulating opportunities to continue learning.
o Products created by Kids&Us include books, boardgames, etc.
o Apps, online homework exercises and electronic devices.
The Group established its first four centres in Ho Chi Minh City between
September and November 2022 and is planning to open its first two centres in
Yangon by June 2023. No revenues were recorded in FYE 2022.
Services
The Group's objective is to become one of the leading risk management partners
for companies and organisations operating across emerging Asia.
EXERA was founded in 2012 and was acquired by the Group in May 2018 for US$2.2
million, resulting in goodwill of US$1.4 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 grow organically and through
synergistic acquisition of other security related businesses within emerging
Asia to build its capacity and ability to service customers in key growth
sectors.
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 either on a consulting or yearly
subscription. EXERA publishes Security Information Reports ("SIRs") that
support the security-related decision making of its customers. The circulation
of SIRs has sustained demand because of Covid-19 and the riskier operating
environment in Myanmar.
For FYE 2022, EXERA's revenues growth slowed to low single-digit yielding
US$5.8 million (FYE 2021: US$5.7 million), partly balancing the 44% YOY growth
in FYE 2021.
Protection of Assets and People
As of 30 September 2022, EXERA had an experienced workforce of over 1,600
(Sept'21: ca. 1,700) security officers and provides a range of integrated
security, guarding, protective services, journey management, training, and
nationwide risk consulting, to a wide range of international and local clients
across ca. 200 sites (Sept'21: 170 sites).
EXERA's customer base includes internationally recognised and high credit
worthy customers such as multi-national corporations, large oil and gas
companies, established local businesses, governmental bodies and international
organisations and embassies. EXERA's services are essential to the continued
presence of these organisations in Myanmar throughout the current political
and economic instability.
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 accreditations. 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
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 CIT 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 is in regular discussion and continuously seeking partnership with a
number of financial institutions to evaluate transformational outsourcing
opportunities in relation to cash management and movement services.
Facilities Management and Other 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 the Yangon American International
School, selected embassies and businesses within the wider Asia Strategic
Group.
Managed Hospitality business
Ostello Bello, a managed business previously operating separately within the
Hospitality segment, comprises boutique hostels with ca. 300 beds and 70 rooms
in three locations across Bagan and Mandalay, the most popular tourist
destinations in Myanmar.
The performance of Ostello Bello has been severely impacted by the continued
Covid-19 related travel restrictions in place between 2020 and 2022. The Group
has discontinued its location in Nyaung Shwe from July 2022, thus reducing the
number of beds and rooms managed by the Group. Furthermore, in December 2022,
management decided to cease operations in one location in Bagan. The closure
of these two outlets does not have a material impact on the Group as
operations were already minimal in both FYE 2021 and FYE 2022.
To address the continued under performance of Myanmar's tourism industry and
to offset the currently challenging operating environment in Myanmar, the
Group's remains focused on reducing operating costs and generating operational
synergies. It is worth noting that through its boutique hostels the Group
provides livelihood for hundreds of individuals in developing communities such
as Bagan. Management takes great pride and acknowledges its role as a
responsible long-term investor in these communities.
SUSTAINABILITY AND DIVERSITY
Operating internationally, the Group remains cognisant of evolving operational
standards and their implications for the sustainability of our business in the
respective countries. The Group ensures systems and processes are localised
and integrated into every aspect of the businesses focusing on Quality
Services and Safety, Occupational Health and Safety, Talent Development &
Retention and Human Rights and Labour Practices.
The Group has identified a range of focus areas that are closely aligned to
the Sustainable Development Goals ("SDGs") of the 2020 Agenda for Sustainable
Development and the Ten Principles of the UN Global Compact ("UNGC").
Asia Strategic embraces and supports the following SDGs within its operations:
SDG 1 - No Poverty
The businesses managed and owned by the Group provide ca. 2,200 jobs to local
employees in Vietnam and Myanmar.
All employees are paid at least the statutory minimum wage, provided cost of
living allowances to weather through global inflation and benefit from fair
working conditions and shift patterns.
Throughout its presence across over 200 sites, the Group supports local
businesses, job creation and entrepreneurship.
SDG 4 - Quality Education
Through its Education segment, the Group ensures inclusive and equitable
education and promotes lifelong learning opportunities for all. All education
businesses adopted remote learning technologies, access to foreign teachers
and access to academic advancement opportunities at affordable prices for ca.
7,500 students.
Graduated Wall Street English and Auston students are equipped with globally
recognised certificates/diplomas/degrees in Myanmar to further their studies
abroad in search of better job opportunities locally and abroad. Several
scholarships were also offered across both Wall Street English and Auston and
the Group successfully assisted graduated Auston students to secure
internships positions.
SDG 5 - Gender Equality
Direct and indirect Full Time Employees ("FTEs") marginally increased to 2,310
(30 September 2021: 2,284), notwithstanding a slight decrease in the Services
segment.
As of 30 September 2022, 96% of the total workforce (30 September 2021: 96%)
are local employees in the countries where the Group operates. Approximately
63% (30 September 2021: 71%) of the Group's workforce are female (excluding
EXERA's security officers). While female participation is lower in Asia
Strategics' Services segment, 65% of the new hires are female (excluding
EXERA's security officers) thanks to management's targeted hiring initiatives.
At this stage we are not aware of any gap between the pay of male and female
employees.
Direct and indirect Full Time Employees ("FTEs") 2022 2021
Female 462 502
Male 268 202
730 704
Male (EXERA's security officers) 1,580 1,580
Total employees 2,310 2,284
Ratio of female representation
(excluding EXERA's security officers) 63% 71%
Male 215 137
Female 407 241
622 378
Male (EXERA's security officers) 667 772
Total new hires (net) 1,289 1,150
Ratio of female new hires
(excluding EXERA's security officers) 65% 64%
SDG 8 - Decent Work and Economic Growth
The Group ensures fair working conditions and standards for all its employees
across over 200 sites. The Group follows the principles of the UK Modern
Anti-Slavery Act 2015 and prohibits child labour across all of its business
operations and projects, and there were no cases of child labour reported
since the founding of the Group.
In support of the respective countries effort to achieve a higher vaccination
rate and ensuring the well-being of our employees, the Group at its own accord
initiated the Covid-19 vaccination programme for all eligible employees. As at
the date of this report, 83% of our total workforce are fully vaccinated (91%
when EXERA's security officers located outside Yangon are excluded).
Several Covid-19 prevention initiatives have also been implemented for the
protection of our staff, students and customers including, among others
frequent disinfection, adequate PPE, risk assessments, Covid-19 helpline.
Furthermore, support is provided to the immediate family members of any
deceased employee.
Despite being rich in resources and strong in agriculture, Myanmar wasn't
spared by the effects of global inflation on food prices and fuel. Beginning
October 2022, the Group provided cost of living allowances to selected group
of employees to cope with the effects of inflation.
FINANCIAL REVIEW
The Group revenues from the owned and managed businesses grew by 19% to
US$17.9 million (FYE 2021: US$15.0 million), despite (i) the political
headwinds in Myanmar, (ii) the effects of global inflation, (iii) the Covid-19
restrictions in the first half of FYE 2022, and (iv) the currency devaluation
in Myanmar.
All Education businesses recorded a strong rebound in revenue, except for WSE
Vietnam which remained flat due to Covid-19 related closures in late 2021. It
is worth highlighting the strong performance of the Education businesses in
Myanmar as students increasingly seek access to global opportunities and
quality products.
The Services segment recorded only a moderate growth due to the contraction of
the economy in Myanmar and the impact of the FX devaluation on the
MMK-denominated revenue. It is worth noting that FYE 2022 revenues remained
substantially higher than FYE 2020, at US$5.8 million and US$3.9 million
respectively.
2022 2021 2020
US$ US$ US$
Brand Audited Audited Unaudited
Owned businesses
Services EXERA 5,794,603 5,664,019 3,933,477
Education 11,876,265 8,810,457 2,353,975
- English language learning WSE (Vietnam) 7,391,025 7,479,035 1,983,834
- English language learning WSE (Myanmar) 3,204,937 734,606 -
- International school (K-12) Yangon American 804,396 567,982 370,141
- Tertiary education Auston 475,907 28,834 -
Managed businesses
Education (Legacy) 236,006 497,849 998,288
- English language learning WSE (Myanmar) 235,363 485,819 998,288
- Tertiary education Auston 643 12,030 -
Services (previously Hospitality) Ostello Bello - 13,712 90,000
Total Group revenue 17,906,874 14,986,037 7,375,740
RESULTS OF OPERATIONS
The 19% YOY increase in Group revenues to US$17.9 million (FYE 2021: US$15.0
million) reflects the impact of (i) a strong recovery in Myanmar's education
businesses (+158% YOY), (ii) EXERA's moderate growth (+2% YOY), following
stronger growth in the prior years, and (iii) the muted performance of
Vietnam's education business (-1% YOY) impacted by Covid-19 related closures
in late 2021.
2022 2021
Audited Audited
US$ US$
Revenue 17,906,874 14,986,037
Cost of services (9,924,470) (10,466,705)
Gross profit 7,982,404 4,519,332
Gross profit margin 45% 30%
Other income 80,711 70,350
Foreign exchange (loss)/gain (972,259) 767,833
Administrative and other operating expenses (12,176,613) (10,320,565)
Loss from operations (5,085,757) (4,963,050)
Finance cost (862,678) (999,992)
Loss before income tax (5,948,435) (5,963,042)
Income tax (expense)/credit (33,646) 114,688
Loss for after income tax (5,982,081) (5,848,354)
Selected non-cash items:
Total depreciation of plant and equipment 436,363 419,057
Total amortisation of right-of-use asset 2,694,870 2,560,875
Total amortisation of intangible assets 74,342 113,684
Impairment of trade and other receivables 15,453 1,004,384
Reversal of impairment of intangible assets (30,000) -
Finance costs (excluding interest
on lease liabilities) 115,890 243,547
Total interest on lease liabilities 754,370 756,445
4,061,288 5,097,992
Adjusted EBITDA (*) (1,887,147) (865,050)
Adjusted EBITDA after impact of ROUs (*) (5,336,387) (4,182,370)
* Key performance of the Group is measured, among others, based on (i)
earnings before interest, income tax, depreciation and amortisation ("Adjusted
EBITDA"), and (ii) Adjusted EBITDA less amortisation of right-of-use assets
and interest on lease liabilities ("Adjusted EBITDA after impact of ROUs").
Group gross profit for year was US$8.0 million (FYE 2021: US$4.5 million), a
marked increase in both absolute (+77% YOY) and relative terms (45% in FYE
2022 vs 30% in FYE 2021). The notable improvement in gross profit margin was
attributable to (i) higher rate of renewal / new student contracts secured for
across all Education businesses leading to the recovery of Myanmar's revenues,
(ii) the shift to a more profitable product mix, and (iii) further cost
efficiencies across all segments.
Revenue growth (+19% YOY) and improvement in gross profit margin (+77% YOY)
was partially offset by the increase in administrative and other operating
expenses (+24% YOY excluding depreciation and amortisation), (i) foreign
exchange loss, linked to the adverse foreign exchange movements due to the
weakening of the Myanmar Kyat against the United States Dollar (functional
currency) from an average 1,514 in FYE 2021 to 1,855 in FYE 2022, which
resulted in a net loss of US$1.0 million (FYE 2021: gain of US$0.8 million),
(ii) ramp-up of marketing activities coupled with higher cost due to the
strengthening of USD (e.g. Facebook/Google), and (iii) higher employee benefit
expenses (e.g. additional headcount for expansion, extensive vaccination
campaigns, insurance and bonus).
Direct and indirect Full Time Employees ("FTEs") increased to ca. 2,310
(Sep'21: 2,280). The additional headcount was mainly due to the new Vietnam
Kids&Us business segment and the ramping up of Education operations across
Vietnam and Myanmar.
LIQUIDITY AND CAPITAL RESOURCES
As at 30 September 2022, the Group's cash and cash equivalents amounted to
US$2.0 million, compared to US$2.2 million as at 30 September 2021.
The Group recorded positive cash flows generated from operating activities of
US$3.6 million, compared to cash outflows from operating activities of US$1.2
million FYE 2021. This is mainly due increase in contract liabilities of
US$4.1 million (FYE 2021: US$0.6 million) arising from higher renewals/new
student contracts secured and collections from WSE Myanmar and Auston, whereby
courses are paid in advance of services being delivered over the duration of
the respective courses.
If repayment of leases liabilities were considered, the Group would record a
manageable adjusted cash inflow from operating activities of US$0.7 million
(includes US$0.2 million prepayment of a lease).
In FYE 2022, the Group incurred capital expenditures of US$1.7 million (FYE
2021: US$0.2 million) mainly on leasehold improvements for the (i) relocation
and space optimisation of three English language centres in Vietnam, (ii) the
opening of four new Kids&Us Centres in Vietnam, and (iii) a new Wall
Street English centre in Yangon (Terminal M) and (iv) the expansion of the
Auston campus in Myanmar. Such investments are planned expansion to capitalise
on the reopening from Covid-19 restrictions and is expected to further enhance
the Group's commercial success post Covid-19 and set it apart from its
competitors.
On 25 April 2022 and 15 August 2022, the Group entered into exclusive
franchising agreements with Kids&Us English, S.L.U ("Kids&Us") for the
development of English language centres for children under the brand
"Kids&Us School of English" in Myanmar and Vietnam, respectively for a
period of 10 years. Under the terms of these agreements, the Group paid
initial fees of US$0.2 million for Myanmar and Vietnam.
The Group's Convertible Note Programme launched in November 2021 successfully
generated cash subscriptions amounting to US$3.2 million (excluding
transaction costs), which were utilised for working capital and partial
repayment of the shareholder's loan and interests. As part of the Group's loan
re-organisation with MACAN, the Group repaid cash of US$2.1 million as part
cash settlement of the Loan Facility 1 and full settlement of the Loan
Facility 2 which terminated with effect from 31 October 2021 (FYE 2021:
drawdown of US$2.3 million, net of repayments).
Increase in repayment of lease liabilities by US$1.1 million is mainly due to
(i) prepayment of annual lease for Yangon American for calendar year 2023,
(ii) new leases relating to marketing billboards for Auston/Wall Street
English/Kids&Us, and (iii) lease of Exera's new corporate office.
Cash and cash equivalents ended at US$2.0 million on 30 September 2022
(Sept'21: US$2.2 million), close to the previous year despite large loan
repayments and capital expenditures for enhancement and expansion of education
centres/campuses. As at the date of this report, as part of risk management,
cash balances are predominantly located in Singapore to mitigate country and
credit risk exposures.
DIVIDENDS
The Board of Directors does not recommend payment of dividends for the
financial year ended 30 September 2022 as the Group needs to conserve cash for
working capital and future expansion.
WORKING CAPITAL
The Board of Directors has carried out a detailed review of the cash flow
forecast of the Group of at least 24 months from the financial year ended 30
September 2022. The cash flow forecast has been prepared with consideration of
timing, extent of future recovery from Covid−19 and Myanmar's State of
Emergency and other available information of the future at the end of the
reporting period.
Given the uncertainty of these events, the Group conducted extensive
stress−testing on the various possible impacts on the financial performance
and cash flows of the Group and the length of time it will take for
operational activities to recover from these effects according to business
segments and countries the Group operates.
Appropriate adjustments were made to the estimates and judgements applied on
the future prospects and timing of future recovery with consideration of
several other factors such as the general macroeconomic environment and
initiatives within the control of the Group.
The Directors have evaluated that there are sufficient mitigating actions
within their control, such as a significant reduction of operational
activities of non−profitable business segments and a reduction of
discretionary expenditures to manage operational cost. Other key
considerations in the assessment, amongst others, include:
a) Access to a credit facility of US$1.5 million from Loan Facility 1
with MACAN expiring in 30 June 2024 as disclosed in Note 18 of the financial
statements, for working capital purposes and provides flexibility for
fulfilment of future expansion plan;
b) The MACAN shareholder's loan Facility 1 is due to expire in June
2024 at which date the forecasts anticipate that the Group will have
sufficient cash reserves to repay the outstanding amount. MACAN has confirmed
that it would not seek repayment of the facility unless the Group has
sufficient cash flows available;
c) Undertaking by MACAN, the Company's largest shareholder, not to
demand repayment for the loan (Note 18) within the next 12 months from the
date of approval of the financial statements for the financial year ended 30
September 2022;
d) Positive working capital as student fees in the Education business
segments are generally collected 1 to 12 months (FYE 2021: same) and more than
12 months for certain students who prepaid in advance of performance with
reference to the individual terms of the student contracts. Refer to Note 4 of
the financial statements for further details;
e) Limited variance of the actual cash flow and forecasted cash flow
of the Group for the period subsequent to the year end up to the date of these
financial statements;
f) Higher operational flexibility and lower fixed costs by utilising
franchisor's teachers chargeable based on actual usage with no minimum volume
requirements; and
g) No future cash outflows arising from the mandatory conversion of
the convertible notes (Note 22) as these CN will be converted entirely in the
ordinary shares of the Company.
It is also worth noting that the Education businesses in Myanmar have exceeded
its revenue volumes of pre-Covid-19 levels and EXERA was able to sustain a
high revenue level and a single-digit growth. Management expects this
trajectory trend to continue for the foreseeable future.
The Vietnam operations have shown improvements in the second half of FY2022
and future improvement is expected, given Vietnam's further improvement in
economic recovery from Covid-19 due to high foreign direct investments and
relatively lower inflation than other developing countries.
Therefore, as at the date of this report, the Group has adequate financial
resources to cover its working capital needs for the next 12 months.
OUTLOOK
Management is focused on growing organically the Company's Education and
Services businesses through partnerships with globally recognised franchises
and continues to actively consider complementary acquisitions. The Group will
continue to pursue its asset light strategy and increase the portfolio of
businesses owned.
Management will also continue to build and train human resources to sustain
and accelerate the Group's growth. Operational and financial sustainability
are key strategic priorities communicated throughout all levels within the
organisation.
Through effective cash management, operational activities of non−profitable
business segments will be minimised and profitability from business segments
with strong cash flows will be reallocated to supplement business segments in
expansionary phase. Accordingly, the Group may rely less on external financing
and instead finance its organic growth.
The Board and management continue to remain positive on the overall
macroeconomic environment underpinning the broader investment opportunity
across ASEAN, with Vietnam and Myanmar as key contributors.
OTHER INFORMATION
Asia Strategic Holdings Limited (the "Company" or "Asia Strategic") is listed
on the London Stock Exchange and incorporated and domiciled in Singapore. The
address of its registered office 80 Raffles Place #32−01, UOB Plaza,
Singapore 048624.
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the financial year ended 30 September 2022.
The financial information for the financial year ended 30 September 2022 is
derived from the Asia Strategic statutory accounts for the financial year
ended 30 September 2022, which will be delivered to the Accounting and
Corporate Regulatory Authority in Singapore. The auditors reported on those
accounts; their report was unqualified. The statutory accounts for the year
ended 30 September 2022 will be finalised based on the financial information
presented by the Directors in this earnings announcement and will be delivered
to the Accounting and Corporate Regulatory Authority in Singapore following
the Company's Annual General Meeting.
This announcement was approved by the Directors on 30 January 2023.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2022
Note 2022 2021
US$ US$
Revenue 4 17,906,874 14,986,037
Cost of services (9,924,470) (10,466,705)
Gross profit 7,982,404 4,519,332
Other income 5 80,711 838,183
Administrative and other operating expenses (13,133,419) (9,316,181)
Loss allowance on trade and other receivables 16 (15,453) (1,004,384)
Loss from operations (5,085,757) (4,963,050)
Finance costs 7 (862,678) (999,992)
Loss before income tax 8 (5,948,435) (5,963,042)
Income tax (expense)/credit 9 (33,646) 114,688
Loss after income tax (5,982,081) (5,848,354)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 152,095 (64,523)
Items that will not be reclassified subsequently to profit or loss:
Changes in fair value of equity instruments at FVOCI 14 (157,063) (361,449)
Other comprehensive income for the year, net of tax (4,968) (425,972)
Total comprehensive income (5,987,049) (6,274,326)
The accompanying notes form an integral part of these financial statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2022
Note 2022 2021
US$ US$
Loss for the year attributable to:
Owners of the parent (5,936,622) (5,781,316)
Non−controlling interest (45,459) (67,038)
(5,982,081) (5,848,354)
Total comprehensive income attributable to:
Owners of the parent (5,941,590) (6,207,288)
Non−controlling interest (45,459) (67,038)
(5,987,049) (6,274,326)
Loss per share attributable to the owners of
the Company (US$)
− Basic and diluted 24 (2.04) (2.05)
The accompanying notes form an integral part of these financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2022
Note 2022 2021
US$ US$
ASSETS
Non−current assets
Plant and equipment 10 2,032,390 868,989
Intangible assets 11 6,681,443 6,696,483
Right-of-use assets 12 11,275,139 10,094,291
Financial assets at FVOCI 14 157,062 314,125
Trade and other receivables 16 1,542,501 990,616
Total non-current assets 21,688,535 18,964,504
Current assets
Inventories 15 165,891 96,366
Trade and other receivables 16 1,628,965 1,390,303
Fixed deposits 17 − 100,625
Cash and cash equivalents 17 1,980,232 2,165,257
Total current assets 3,775,088 3,752,551
Total assets 25,463,623 22,717,055
LIABILITIES AND EQUITY
Liabilities
Non−current liabilities
Contract liabilities 4 1,872,423 607,578
Lease liabilities 12 9,142,979 7,911,109
Shareholder's loans 18 1,500,000 5,743,547
Total non-current liabilities 12,515,402 14,262,234
Current liabilities
Contract liabilities 4 8,093,625 5,284,512
Bank loan 19 115,530 −
Trade and other payables 20 3,636,898 2,697,681
Lease liabilities 12 1,961,444 1,860,070
Tax payables 16,229 65,730
Total current liabilities 13,823,726 9,907,993
Total liabilities 26,339,128 24,170,227
Equity
Share capital 21 21,439,638 20,799,638
Convertible notes 22 5,730,000 −
Accumulated losses 23 (28,224,857) (22,288,235)
Other reserves 23 179,714 73,874
Equity attributable to owners of the Company (875,505) (1,414,723)
Non-controlling interests − (38,449)
Total equity (875,505) (1,453,172)
Total liabilities and equity 25,463,623 22,717,055
The accompanying notes form an integral part of these financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2022
Note Share Convertible Equity Share Fair Foreign exchange reserve Accumulated Equity Non− Total
capital notes reserves option reserve value reserve losses attributable controlling equity
to owners of interests
the Company
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Balance as at 1 October 2021 20,799,638 − (128,362) 774,102 (448,629) (123,237) (22,288,235) (1,414,723) (38,449) (1,453,172)
Total comprehensive income for the financial year:
Loss for the financial year − − − − − − (5,936,622) (5,936,622) (45,459) (5,982,081)
Other comprehensive income − − − − (157,063) 152,095 − (4,968) − (4,968)
− − − − (157,063) 152,095 (5,936,622) (5,941,590) (45,459) (5,987,049)
Contribution by owners of the Company
Issuance of shares in lieu of bonus 21 640,000 − − − − − − 640,000 − 640,000
Issuance of convertible notes 22 − 5,730,000 − − − − − 5,730,000 − 5,730,000
Recognition of share-based payments 23 − − − 194,717 − − − 194,717 − 194,717
640,000 5,730,000 − 194,717 − − − 6,564,717 − 6,564,717
Changes in ownership interest
in a subsidiary
Acquisition of non-controlling interest 13 − − (83,909) − − − − (83,909) 83,908 (1)
Balance as at 30 September 2022 21,439,638 5,730,000 (212,271) 968,819 (605,692) 28,858 (28,224,857) (875,505) − (875,505)
The accompanying notes form an integral part of these financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2022
Note Share Convertible Equity Share Fair Foreign exchange reserve Accumulated Equity Non− Total
capital notes reserves option reserve value reserve losses attributable controlling equity
to owners of interests
the Company
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
30 September 2021
Balance as at 1 October 2020 20,553,638 − (118,061) 610,737 (87,180) (58,714) (16,517,220) 4,383,200 28,589 4,411,789
Total comprehensive income for the financial year:
Loss for the financial year − − − − − − (5,781,316) (5,781,316) (67,038) (5,848,354)
Other comprehensive income − − − − (361,449) (64,523) − (425,972) − (425,972)
− − − − (361,449) (64,523) (5,781,316) (6,207,288) (67,038) (6,274,326)
Contribution by owners of the Company
Issuance of shares in lieu of bonus 21 246,000 − − − − − − 246,000 − 246,000
Recognition of share-based payments 23 − − − 163,365 − − − 163,365 − 163,365
246,000 − − 163,365 − − − 409,365 − 409,365
Liquidation of a subsidiary − − (10,301) − − − 10,301 − − −
Balance as at 30 September 2021 20,799,638 − (128,362) 774,102 (448,629) (123,237) (22,288,235) (1,414,723) (38,449) (1,453,172)
The accompanying notes form an integral part of these financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2022
Note 2022 2021
US$ US$
Operating activities
Loss before income tax (5,948,435) (5,963,042)
Adjustments for:
Interest income 5 (21,589) (11,695)
Share−based compensation 6 194,717 163,365
Interest on shareholder's loans 7 115,890 243,547
Plant and equipment written off 8 12,271 99,481
Intangible assets written off 8 2,972 4,842
Loss on disposal of plant and equipment 8 837 -
Depreciation of plant and equipment 10 436,363 419,057
Reversal of impairment of intangible assets 11 (30,000) -
Amortisation of intangible assets 11 74,342 113,684
Amortisation of rights-of-use assets 12 2,694,870 2,560,875
Lease concession 12 (161,774) (768,474)
Interest on lease liabilities 12 754,370 756,445
Impairment loss on trade and other receivables 16 15,453 1,004,384
Unrealised foreign exchange loss/(gain) 191,438 (920,800)
Operating cash flows before working capital changes (1,668,275) (2,298,331)
Working capital changes:
Trade and other receivables (358,925) 57,553
Contract liabilities 4,073,958 630,810
Inventories (65,533) (62,868)
Trade and other payables 1,656,544 481,771
Cash provided from / (used in) operations 3,637,769 (1,191,065)
Interest received 21,589 11,695
Income tax paid (83,147) -
Net cash provided from / (used in) operating activities 3,576,211 (1,179,370)
Investing activities
Purchase of plant and equipment 10 (1,684,196) (210,498)
Purchase of intangible assets 11 (245,580) (2,729)
Advances to related parties (395,516) (592,278)
Repayment by related arties - 48,013
Net cash used in investing activities (2,325,292) (757,492)
The accompanying notes form an integral part of these financial statements
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2022
Note 2022 2021
US$ US$
Financing activities
Acquisition of equity interest from non-controlling interest (1) -
Repayment of lease liabilities 12 (2,235,413) (1,312,469)
Interest paid on lease liabilities 12 (754,370) (501,983)
Movement in fixed deposits pledged to bank 17 100,625 (100,625)
Proceeds from shareholder's loans 18 250,000 2,500,000
Repayment of shareholder's loans 18 (1,750,000) -
Interest on shareholder's loans 18 (359,437) (218,207)
Proceeds from bank loan 19 115,530 -
Proceeds from convertible notes 22 3,230,000 -
Net cash (used in) / provided from financing activities (1,403,066) 366,716
Net changes in cash and cash equivalents (152,147) (1,570,146)
Effect of exchange rate changes on cash and cash equivalents (32,878) (206,010)
Cash and cash equivalents at beginning of year 2,165,257 3,941,413
Cash and cash equivalents at end of year 17 1,980,232 2,165,257
The accompanying notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2022
These notes form an integral part of and should be read in conjunction with
the accompanying financial statements.
1. General
Asia Strategic Holdings Limited (the "Company" or "Asia Strategic")
(Registration Number 201302159D), formerly known as Myanmar Strategic Holdings
Limited, is a public company limited by shares incorporated and domiciled in
Singapore with its principal place of business and registered office at 80
Raffles Place #32−01, UOB Plaza, Singapore 048624. The Company was listed on
the Main Market of the London Stock Exchange on 22 August 2017.
The principal activities of the Company consist of developing, managing,
operating and investing in businesses across emerging Asia, including services
to its subsidiaries. The principal activities of the subsidiaries are set out
in Note 13 to the financial statements. Related companies in these financial
statements refer to members of the Group.
2. Significant accounting policies
2.1 Basis of preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the European Union and
are prepared under the historical cost convention, except as disclosed in the
accounting policies below.
The individual financial statements of each Group entity are measured and
presented in the currency of the primary economic environment in which the
entity operates (its functional currency). The consolidated financial
statements of the Group is presented in United States dollar ("US$") which is
the functional currency of the Company and the presentation currency for the
consolidated financial statements.
In the current financial year, the Group changed the presentation format of
its consolidated statement of comprehensive income from classifying expenses
by nature to the function in a manner consistent with the internal reporting
provided to the chief operating decision maker to analyse the financial
performance of the Group. Accordingly, the comparative figures for the
consolidated statement of comprehensive income for the previous financial year
were re-presented to conform to the current financial year's presentation.
This change does not impact the consolidated statement of financial position
of the Group as of 30 September 2021.
Direct employee benefit expenses and other directly attributable expenses of
the respective businesses are included in the cost of services. This is to
compute and present the gross profit of the Group, a key performance indicator
of the Group.
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.
Impact of Coronavirus ("Covid−19") on Vietnam and Myanmar
The number of Covid-19 daily cases in Vietnam has been at a manageable level
since February 2022, which in turn enabled the Government to ease Covid-19
restrictions and reopen to vaccinated international tourists in mid-March in
line with other ASEAN countries. As at the date of this report, we have no
knowledge of further restrictions being planned.
Myanmar has largely recovered from Covid-19 with substantially fewer cases
reported and reopened the country to international travel in a bid to bolster
international tourism and engage with the international business communities
since April 2022.
In support of the respective countries effort to achieve a higher vaccination
rate and ensuring the well-being of its employees, the Group on its own accord
executed a Covid-19 vaccination programme for all eligible employees. This
enabled management to focus firmly on operational improvements, planned
expansion and new business opportunities with sufficient preventive measures
from past experiences for future disruptions arising from spikes in
Covid-19.
As at the date of approval of these financial statements, the number of
Covid-19 daily cases across ASEAN remains negligible and no further
restrictions are planned. The Group continuously monitors these developments
and makes appropriate adjustments to the business operations to ensure
resilience and sustainability for each of its operating segment.
Impact of the State of Emergency on Myanmar
On 1 February 2021, the Myanmar military announced that it had declared a
State of Emergency. In the short aftermath of the military takeover, the
Group's businesses were disrupted intermittently due to (i) outages in
telecommunication, (ii) imposition of martial law in certain townships, (iii)
widespread demonstrations and, subsequently (iv) increased security risks. The
political situation is evolving daily, and the outcome and long-term effects
remain unclear at this stage.
While the political outlook remains uncertain, economic activity has resumed
in the main economic hubs of Yangon and Mandalay. Management continues to
monitor several risk factors including:
· The rise of an insurgence campaign resulting in daily explosions and
political assassinations across the country;
· The retaliation by the military and other armed forces;
· The disruption of the global and local supply chain, resulting in
double digit inflation;
· The weakening of the banking financial system and limited access to
cash; and
· Exchange rate volatility and capital controls.
In April 2022, through notifications and directives, the Central Bank of
Myanmar ("CBM") implemented foreign exchange control measures requiring all
foreign currency receipts from 4 April 2022 to be converted to Myanmar Kyat
("Kyat"), restricting conversion of foreign currencies and limiting offshore
remittance.
Subsequently, the CBM announced exemptions and the relaxation of certain
measures to Myanmar Investment Committee ("MIC") permitted foreign
investments, investments in Special Economic Zones, embassies, airlines and
certain non-profit organisations. The Group owns and operates the Yangon
American International School ("Yangon American"), an approved international
school qualified for certain foreign exchange control exemptions.
The development of these regulations remains fluid and subject to abrupt
changes. The Group continuously monitors any additional announcements or
clarifications from the CBM to manage its currency exposure proactively.
Impact of the war in Ukraine and trade war
Countries within emerging Asia are navigating through the recovery of the
prolonged pandemic, however the war initiated by Russia against Ukraine
fuelled new economic uncertainties and inflationary pressures globally.
Coupled with the trade war between the United States and China, this has also
disrupted global supply chains and reduced the availability of certain goods
and materials in the countries in which the Group operates. As the Group's
activities are focused on services rather than manufacturing, any disruption
to the Group's activities has been limited to date. The Group will
continuously undertake measured expansion of its existing and future
businesses and maintain financial liquidity discipline.
Subject to the impact of foreign exchange fluctuations, the Group's operations
in Vietnam are expected to exceed Myanmar over time, however contribution from
both markets remains an important diversification strategy to mitigate the
overall Covid-19 and geographical risk exposure of the Group.
The Group has considered the market conditions as at the reporting date, in
making estimates and judgements on the recoverability of the assets as at 30
September 2022. The significant estimates and judgements applied are disclosed
in Note 3 to the financial statements.
Going concern assumption
The Group recorded a loss for the year of US$5,982,081 (2021: US$5,848,354).
As at reporting date, the Group's current liabilities and total liabilities
exceeded its current assets and total assets amounting to US$10,048,638 (2021:
US$6,155,442) and US$875,505 (2021: US$1,453,172), respectively.
The Board of Directors have carried out a detailed review of the cash flow
forecast of the Group for 24 months from the financial year ended 30 September
2022.
The cash flow forecast has been prepared with consideration of timing, extent
of future recovery from Covid−19 and Myanmar's State of Emergency and other
available information of the future at the end of the reporting period. Given
the uncertainty of these events, the Group conducted extensive
stress−testing on the various possible impacts on the financial performance
and cash flows of the Group and the length of time it will take for
operational activities to recover from these effects according to business
segments and countries in which the Group operates. Appropriate adjustments
were made to the estimates and judgements applied on the future prospects and
timing of future recovery with consideration of several other factors such as
the general macroeconomic environment and initiatives within the control of
the Group.
One of the critical analysis applied is the worst case scenario of prolonged
impact on certain business segments including temporary cessation of the
Hospitality segment for the period under review.
The Directors have evaluated that there are sufficient mitigating actions
within their control, such as timing/cost of expansionary capital
expenditures, significant reduction of operational activities of
non−profitable operating segments and reduction of discretionary
expenditures to manage operational cost. Other key considerations in the
assessment, amongst others, include:
a) Unutilised shareholder's loan Facility 1 amounting to
US$1,500,000 as disclosed in Note 18 to the financial statements, for working
capital purposes;
b) The MACAN shareholder's loan Facility 1 is due to expire
in June 2024 at which date the forecasts anticipate that the Group will have
sufficient cash reserves to repay the outstanding amount. MACAN has confirmed
that it would not seek repayment of the facility unless the Group has
sufficient cash flows available;
c) Undertaking by the Company's shareholder, Macan Pte Ltd
("MACAN") not to demand repayment for the Loan Facility 1 (Note 18) within the
next 12 months from the date of approval of the financial statements for the
financial year ended 30 September 2022;
d) No future cash outflow arising from the mandatory
conversion of the convertible notes (Note 22) into ordinary shares of the
Company;
e) Positive working capital as student fees in the Education
segment are generally collected 1 to 12 months (2021: same) in advance of
performance with reference to the individual terms of the student contracts.
Refer to Note 4 for further details;
f) Higher operational efficiency by utilising franchisor's
teachers chargeable based on actual usage and without volume commitments;
g) Flexibility over the timing and size of certain capital
expenditures related to the expansion of the education businesses operated by
the Group; and
h) Limited variance of the actual cash flow and forecasted
cash flow of the Group for the period subsequent to the year end up to the
date of these financial statements.
Based on the current market environment in the respective countries the Group
operates, there are no indicators that warrant material adjustments to the key
assumptions and judgements applied.
The Directors of the Company are of the opinion that no material uncertainty
exists and the going concern basis is appropriate in the preparation of the
financial statements.
Changes in accounting policies
New standards, amendments and interpretations effective from 1 October 2021
The standards, amendments to standards, and interpretations that will apply
for the first time by the Group do not impact the Group as they are either not
relevant to the Group's business activities or require accounting which is
consistent with the Group's current accounting policies.
IFRSs issued but not yet effective
At the date of authorisation of these financial statements, the following IASB
were issued but not yet effective and have not been early adopted in these
financial statements:
Effective date
(annual periods
beginning on
or after)
IFRS 10 and IAS 28 (Amendments) : Sale or Contribution of Assets between an Investor and its Associate or To be determined
Joint Venture
IFRS 3 (Amendments) : Reference 1 January 2022
(https://www.asc.gov.sg/pronouncements/singapore-financial-reporting-standards-international/changes-effective-for-annual-periods-beginning-after-1-jan-2019)
to the Conceptual Framework
IFRS 16 (Amendments) : Property, Plant and Equipment - Proceeds before Intended Use 1 January 2022
IFRS 37 (Amendments) : Onerous Contracts − Cost of Fulfilling a Contract 1 January 2022
Various : Annual Improvements to IFRSs 2018−2020 1 January 2022
IAS 1 and IFRS Practice Statement 2 (Amendments) : Disclosure of Accounting Policies 1 January 2023
Amendments to IFRS 8 : Definition of Accounting Estimates 1 January 2023
IAS 12 (Amendments) : Deferred Tax Related to Assets and Liabilities arising from a Single 1 January 2023
Transaction
Amendments to IFRS 16 : Leases (Liability in a Sale and Leaseback) 1 January 2024
Amendments to IFRS 1 : Classification of Liabilities as Current or Non−current 1 January 2024
Amendments to IFRS 1 : Presentation of Financial Statements (Non-current liabilities with 1 January 2024
Covenants)
Consequential amendments were also made to various standards as a result of
these new or revised standards.
The Group is currently assessing the impact of these new accounting standards
and amendments. The Group does not expect any other standards issued by the
IASB, but not yet effective, to have a material impact on the Group.
2.2 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 its involvement with 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 commences until
the date on which control ceases. Control is reassessed whenever the facts and
circumstances indicate that they may be a change in the elements of control.
All 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 an impairment indicator of the transferred asset.
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 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, consolidated statement of changes in equity and
consolidated statement of financial position.
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 (i.e. transactions with
owners). 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 parent.
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.
In the separate financial statements of the Company, investment in
subsidiaries are carried at cost, less any impairment loss that has been
recognised in profit or loss.
2.3 Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method.
The consideration transferred for the acquisition is measured at the aggregate
of the fair values, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in exchange
for control of the acquiree. Acquisition−related costs are recognised in
profit or loss as incurred. Consideration transferred also includes any
contingent consideration measured at the fair value at the acquisition date.
Subsequent changes in fair value of contingent consideration which is deemed
to be an asset or liability, will be recognised in profit or loss. The
acquiree's identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3 are recognised at their fair
values at the acquisition date.
Where a business combination is achieved in stages, the Group's previously
held interests in the acquired entity are remeasured to fair value at the
acquisition date (i.e. the date the Group attains control) and the resulting
gain or loss, if any, is recognised in profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that have previously
been recognised in other comprehensive income are reclassified to profit or
loss, where such treatment would be appropriate if that interest were disposed
of.
Goodwill arising on acquisition is recognised as an asset at the acquisition
date and initially measured at the excess of the sum of the consideration
transferred, the amount of any non−controlling interest in the acquiree and
the fair value of the acquirer's previously held equity interest (if any) in
the entity over net acquisition−date fair value amounts of the identifiable
assets acquired and the liabilities and contingent liabilities assumed.
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.
2.4 Revenue recognition
Revenue is recognised when a performance obligation is satisfied. Revenue is
measured based on the 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.
Contract liabilities are deferred revenue comprising student fees, new centre
fee and other advance consideration received from customers and a related
party. Deferred revenue is recognised as revenue when performance obligations
under its contracts are satisfied.
Student fees
Student fees are earned through the provision of educational and enrichment
programmes across the Group's educational businesses, either in person or
online. Student fees are recognised over the duration of the course and when
services are rendered with reference to the terms of the contract on a
straight−line basis over the term of the courses. Sale of merchandise and
ancillary fees are either recognised at point in time when goods are delivered
and over time on a straight−line basis, respectively according to the
delivery of the performance obligations.
Rendering of services
The Group provides a broad range of 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 and cash in transit, revenue are
recognised at point in time when goods and services are delivered.
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 on a straight -line basis 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.
2.5 Borrowing costs
Borrowing costs are recognised in profit or loss in the period in which they
are incurred using the effective interest method.
2.6 Employee benefits
Retirement benefit costs
Payments to defined contribution plans are charged as an expense in the period
in which the related service is performed. Defined contribution plans are
post−employment benefit plans under which the Group pays fixed contributions
into state−managed retirement benefit schemes in the countries where the
Group operates and has no legal and constructive obligation to pay further
once the payments are made.
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 period.
Termination benefits
Termination benefits comprise benefits payable when employment is terminated
before the normal retirement date, or whenever an employee accepts voluntary
redundancy in exchange for such benefits. Termination benefits are recognised
when the Group is committed to either terminating the employment of current
employees based on a formal plan without the possibility of withdrawal; or
providing termination benefits as a result of an offer made to encourage
voluntary redundancy.
Initial recognition and subsequent changes to the expense and liability for
termination benefits are measured in line with the accounting policies
disclosed above for other short-term and long-term employee benefits.
2.7 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 period,
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 of the share options 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.
For cash-settled share-based payments, a liability and a corresponding expense
equal to the portion of the goods or services received is recognised at the
current fair value determined at the end of each financial year, with
movements recognised in profit or loss.
2.8 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 financial year. Management evaluates its income tax provisions
on periodical basis.
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
financial year 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 financial year. 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.
2.9 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.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations (including comparatives) are
expressed in United States dollar using exchange rates prevailing at the end
of the financial year. Income and expense items (including comparatives) are
translated at the average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the exchange rates
at the dates of the transactions are used. Exchange differences arising, are
recognised initially in other comprehensive income and accumulated in the
Group's foreign exchange reserve.
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities (including monetary items that, in substance,
form part of the net investment in foreign entities), and of borrowings and
other currency instruments designated as hedges of such investments, are taken
to the foreign exchange reserve.
On disposal of a foreign operation, the accumulated foreign exchange reserve
relating to that operation is reclassified to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
2.10 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 and books 3 - 5 years
Furniture and fittings 3 - 7 years
Motor vehicles 5 years
Leasehold improvements 3 − 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 period.
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.
2.11 Intangible assets
Goodwill
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 acquired in a business combination
Intangible assets acquired in a business combination are identified and
recognised separately from goodwill if the assets and their fair values can be
measured reliably. The cost of such intangible assets is their fair value as
at the acquisition date.
Subsequent to initial recognition, intangible assets acquired in a business
combination are reported at cost less accumulated amortisation and any
accumulated impairment losses, on the same basis as intangible assets acquired
separately.
Intangible assets 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 period−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.
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
period the asset is derecognised.
Area development and centre fees
Area development fees are paid for the exclusive rights to develop and operate
the English language centres for the franchises under "Wall Street English"
(Myanmar) and "Kids&Us" (Myanmar and Vietnam) at the designated
territories. Centre fees are required to be paid in respect for the opening of
a new "Wall Street English" and "Kids&Us" English language centres in
Vietnam and Myanmar. The area development and centre fees are capitalised and
amortised over the period of 10 years according to the term of the franchise
agreements.
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
perpetual, irrecoverable, non−transferrable rights of use of the licensed
intellectual property and trademark for the operations of the Auston college
in Myanmar. The set−up fee is capitalised and amortised over the period of
10 years from the date operation commences.
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
Customer−related assets comprise customer contracts and customer
relationship arising from business combinations and are initially measured at
fair value as at the date of acquisition. 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.
2.12 Impairment of non−financial assets excluding goodwill
At the end of each financial period, 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 ("CGU") 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.
2.13 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 the provision of goods and services to
customers (e.g. trade receivables), 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. Interest income
from these financial assets is included in interest income using the effective
interest rate method.
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 recognised 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 are recognised based on a
forward−looking expected credit loss. 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 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 prepayments and sales tax) and cash and cash
equivalents in the consolidated statement of financial position.
Equity instruments at fair value through other comprehensive income ("FVOCI")
The Group has strategic investments in the equity securities of listed and
unlisted entities which are not accounted for as a subsidiary, associate or
jointly controlled entity. For those equity instruments, 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.
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 sales taxes and advances, are initially
measured at fair value, net of transaction costs, and are subsequently
measured at amortised cost, where applicable, using the effective interest
method.
Loans from a shareholder
Interest−bearing loans from a shareholder is initially measured at fair
value, net of transaction costs and are subsequently measured at amortised
cost, using the effective interest method.
Convertible notes
The test on the classification of convertible notes as equity or as liability
is based on the substance of the contractual arrangement. If there is no
obligation on the Group to pay cash to the holders or to settle the
convertible notes with a variable number of the Company's ordinary shares,
they are classified as equity. In all other cases, the instrument is accounted
for as a liability. Upon issuance, the convertible notes are measured at the
transaction price including qualifying issuance costs. Convertible notes
accounted for as equity instruments are subsequently not remeasured. Upon
settlement of equity classified convertible notes by issuance of ordinary
shares upon conversion or by early redemption at the option of the Company,
all amounts are also directly recognised in equity.
The convertible notes issued by the Company are convertible at maturity only
into a fixed number of ordinary shares of the Company. The holders have no
right to demand repayment of the convertible notes from the Company.
The net proceeds of the convertible notes issued (including any directly
attributable transaction costs) are classified entirely as an equity
component.
If the convertible notes are redeemed before its maturity date, the difference
between any redemption consideration and the carrying amounts of the
convertible notes are directly recognised in equity at the date of
transaction.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged, cancelled or they expire. The differences between
the carrying amount and the consideration paid is recognised in profit or
loss.
2.14 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. For the purposes of the consolidated statement of cash flows, cash and
cash equivalents excludes any pledged deposits.
2.15 Inventories
Inventories mainly comprise consumables are stated at the lower of cost and
net realisable value. Costs comprise direct materials and other directly
attributable costs that have been incurred in bringing the inventories to
their present location and condition. Cost is calculated using the first−in
first−out ("FIFO") method. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs to be incurred
in marketing, selling and distribution.
2.16 Leases
As lessee
All leases are accounted for by recognising a right−of−use asset and a
lease liability except for:
· leases of low value assets; and
· leases with a duration of twelve months or less.
The payments for leases of low value assets and short−term leases are
recognised as an expense on a straight−line basis over the lease term.
Initial measurement
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the Group's incremental
borrowing rate on commencement of the lease is used.
Variable lease payments are only included in the measurement of the lease
liability if it is depending on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying amount of lease liabilities also
includes:
· amounts expected to be payable under any residual value
guarantee;
· the exercise price of any purchase option granted in favour of
the Group if it is reasonably certain to assess that option; and
· any penalties payables for terminating the lease, if the term
of the lease has been estimated on the basis of termination option being
exercised.
Right−of−use assets are initially measured at the amount of lease
liabilities, reduced by any lease incentives received and increased for:
· lease payments made at or before commencement of the lease;
· initial direct costs incurred; and
· the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased asset.
The Group presents the right−of−use assets and lease liabilities
separately from other assets and other liabilities in the consolidated
statement of financial position.
Subsequent measurement
Right−of−use assets are subsequently measured at cost less any accumulated
amortisation, any accumulated impairment loss and, if applicable, adjusted for
any remeasurement of the lease liabilities. The right−of−use assets under
cost model are amortised on a straight−line basis over the shorter of either
the remaining lease term or the remaining useful life of the right−of−use
assets using the straight−line method, on the following bases:
Years
International school building 10
Office premises and education campuses 1 - 10
Motor vehicles 2.5 − 3
If the lease transfers ownership of the underlying asset by the end of the
lease term or if the cost of the right−of−use asset reflects that the
Group will exercise the purchase option, the right−of−use assets are
depreciated over the useful life of the underlying asset.
The carrying amount of right−of−use assets are reviewed for impairment
when events or changes in circumstances indicate that the right−of−use
asset may be impaired. The accounting policy on impairment is as described in
Note 2.12 to the financial statements.
Subsequent to initial measurement, lease liabilities are adjusted to reflect
interest charged at a constant periodic rate over the remaining lease
liabilities, lease payment made and if applicable, account for any
remeasurement due to reassessment or lease modifications.
After the commencement date, interest on the lease liabilities and variable
lease payments not included in the measurement of the lease liabilities are
recognised in profit or loss, unless the costs are eligible for capitalisation
in accordance with other applicable standards.
When the Group revises its estimate of any lease term (i.e. probability of
extension or termination option being exercised), it adjusts the carrying
amount of the lease liability to reflect the payments over the revised term.
The carrying amount of lease liabilities is similarly revised when the
variable element of the future lease payment dependent on a rate or index is
revised. In both cases, an equivalent adjustment is made to the carrying
amount of the right−of−use assets. If the carrying amount of the
right−of−use assets is reduced to zero and there is a further reduction in
the measurement of lease liabilities, the remaining amount of the
remeasurement is recognised directly in profit or loss.
When the Group renegotiates the contractual terms of a lease with the lessor,
the accounting treatment depends on the nature of the modification:
· If the renegotiation results in one or more additional assets
being leased for an amount commensurate with the standalone price for the
additional right−of−use obtained, the modification is accounted for as a
separate lease in accordance with the above policy;
· In all other cases where the renegotiation increases the scope
of the lease (i.e. extension to the lease term, or one or more additional
assets being leased), the lease liability is remeasured using the discount
rate applicable on the modification date, with the right−of−use asset
being adjusted by the same amount;
· If the renegotiation results in a decrease in scope of the
lease, both the carrying amount of the lease liability and right−of−use
asset are reduced by the same proportion to reflect the partial or full
termination of the lease with any difference being recognised in profit or
loss. The lease liability is then further adjusted to ensure its carrying
amount reflects the amount of the renegotiated payments over the renegotiated
term, with the modified lease payments discounted at the rate applicable on
the modification date. The right−of−use asset is adjusted by the same
amount.
For lease contracts that convey a right to use an identified asset and require
services to be provided by the lessor, the Group has elected to allocate any
amount of contractual payments to, and account separately for, any services
provided by the lessor as part of the contract.
As discussed in Note 2, in the annual financial statements for the financial
year ended 30 September 2021, the Group had elected early adopted and applied
the practical expedient introduced by the amendments to IFRS 16 (issued in May
2020), extending the practical expedient in order to permit lessees to apply
it to rent concessions for which reductions in lease payments affect payments
originally due on or before 30 June 2022.
During the financial year and in the previous financial year, additional rent
concessions that satisfied the criteria were accounted by remeasuring the
lease liability to reflect the revised consideration using the original
discount rate and the effect of change in the lease liability is reflected in
profit or loss in the period in which the event or condition that triggers the
rent concession occurs.
Rent concessions beyond 30 June 2022 are not eligible for the application of
the practical expedient are accounted as lease modifications.
The effect of applying the practical expedient is disclosed in Note 12 to the
financial statements expedient.
2.17 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 period,
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.
2.18 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.
3. Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are described in
Note 2 to the financial statements, management made judgements, estimates and
assumptions about the carrying amounts of assets and liabilities that were not
readily apparent from other sources. The estimates and associated assumptions
were based on historical experience and other factors that were considered to
be reasonable under the circumstances. Actual results may differ from these
estimates.
These estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
3.1 Critical judgements made in applying the entity's accounting
policies
The following are the critical judgements, apart from those involving
estimations (see below) that management has made in the process of applying
the Group's accounting policies and which have a significant effect on the
amounts recognised in the financial statements.
Determine the lease term
The Group leases office premises, international school building, premises for
its English language centres, university campus ("Office premise and Education
campuses") and motor vehicles. Included in these lease arrangements, there are
extension and termination options held and exercisable only by the Group. In
determining the lease term, management considers the likelihood of either to
exercise the extension option, or not to exercise the termination option.
Management considers all facts and circumstances that create an economic
incentive to extend and economic penalty or costs relating to the termination
of lease.
The assessment on lease terms are reviewed at the end of each reporting date
if there is a significant change in the Group's intentions, business plan or
other circumstances unforeseen since it was first estimated.
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation
uncertainty at the end of the financial period, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
i) Loss allowance for trade and other receivables
The Group uses the simplified approach to calculate expected credit losses
("ECLs") for trade receivables. The provision rates are based on various
customers' historical observed default rates.
The Group will consider and evaluate the historical credit loss experience
with forward−looking information. For instance, if forecast economic
conditions are expected to deteriorate over the next year which can lead to an
increased number of defaults in the customers, the historical default rates
are adjusted. At the end of each financial year, the historical observed
default rates are updated and changes in the forward−looking estimates are
analysed.
The assessment of the correlation between historical observed default rates,
forecast economic conditions and ECLs is a significant estimate. The amount of
ECLs is sensitive to changes in circumstances and of forecast economic
conditions. The Group's historical credit loss experience and forecast of
economic conditions may also not be representative of customer's actual
default in the future.
Other than trade receivables, the Group assesses the credit risk of other at
each financial year on an individual basis, to determine whether or not there
have been significant increases in credit risk since the initial recognition
of these assets. To determine whether there is a significant increase in
credit risks, the Group considers factors such as whether the debtors are
facing significant financial difficulties, any default or significant delay in
payments. Where there is a significant increase in credit risk, the Group
determines the lifetime expected credit loss by considering the loss given
default, the probability of default and exposure at default assigned to each
counterparty. These financial assets are written off either partially or in
full when there is no realistic prospect of recovery. This is generally the
case when the Group determines that the debtor does not have assets or sources
of income that could generate sufficient cash flows to repay the amount
subject to the write−offs.
The carrying amounts of the trade and other receivables as at the end of the
financial date are disclosed in the Note 16 to the financial statements.
ii) Impairment of goodwill and other intangible assets (area
development and centre fees)
The management determines whether goodwill is impaired at least on an annual
basis and as and when there is an indication that goodwill and other
intangible assets may be impaired. Other intangible assets are assessed for
indicators of impairment at the end of the financial year. This requires an
estimation of the value−in−use of the cash−generating units to which the
goodwill and other intangible assets are allocated. Estimating the
value−in−use requires the Group to make an estimate of the expected future
cash flows from the cash−generating unit and also to choose a suitable
growth rate, gross margin and discount rate in order to calculate the present
value of those cash flows.
The Group's carrying amount of intangible assets as at 30 September 2022 and
details of the impairment assessments and key assumptions used are disclosed
in Note 11 to the financial statements.
iii) Impairment of plant and equipment and right−of−use assets
(ROU)
The Group carries out impairment assessment for certain plant and equipment
and ROU where there is indication of an impairment. In carrying out the
impairment assessment, management has identified the cash−generating units
("CGUs") to which the plant and equipment and ROU belong and determined the
recoverable amounts of the CGUs by estimating the expected discounted future
cash flows over the remaining useful lives of the plant and equipment/ROU.
Estimating the recoverable amounts requires the Group to determine a suitable
sales growth rate, gross margin, discount rate and to make an estimate of the
expected future cash flows from the cash−generating unit in order to
calculate the present value of those cash flows.
The carrying amounts of plant and equipment and right−of−use assets as at
30 September 2022 are as disclosed in Note 10 and Note 12, respectively to the
financial statements.
iv) Measurement of lease liabilities
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term. The Group has determined the
discount rates with reference to the respective lessee's incremental borrowing
rates when the rate inherent in the lease is not readily determinable. The
Group obtains the relevant market interest rates after considering the
applicable currency of the lease payments and the geographical location where
the lessee operates as well as the term of the lease. Management considers its
own credit spread information from its recent borrowings, industry data
available as well as any security available in order to adjust the market
interest rate obtained from similar economic environment, term and value of
the lease.
The incremental borrowing rate applied to lease liabilities as at 30 September
2022 ranges from 8.1% to 10.0% (2021: 6.0% to 9.5%). The carrying amount of
lease liabilities as at 30 September 2022 is as disclosed in Note 12 to the
financial statements.
If the incremental borrowing rate had been 1.0% (2021: 0.5%) higher or lower
than management's estimates, the Group's lease liabilities would have been
lower or higher by approximately US$172,000 (2021: US$65,000).
4. Revenue
Disaggregation of revenue
The Group has disaggregated revenue into various categories in the following
table which is intended to:
• depict how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by economic factors; and
• enable users to understand the relationship with revenue
segment information provided in Note 27 to the financial statements.
Education Services Total
2022 2021 2022 2021 2022 2021
US$ US$ US$ US$ US$ US$
Student fees 11,876,265 8,792, 610 − − 11,876,265 8,792,610
Rendering of − − 5,794,603 5,664,019 5,794,603 5,664,019
services
Management 218,159 497,849 − 13,712 218,159 511,561
fees
New centre fee 17,847 17,847 − − 17,847 17,847
12,112,271 9,308,306 5,794,603 5,677,731 17,906,874 14,986,037
Timing of transfer
of services
Over time 12,087,207 9,307,334 5,333,005 4,850,317 17,420,212 14,157,651
Point in time 25,064 972 461,598 827,414 486,662 828,386
12,112,271 9,308,306 5,794,603 5,677,731 17,906,874 14,986,037
The timing of revenue recognition would affect the amount of revenue and
deferred revenue recognised as at the reporting date in the consolidated
statement of financial position.
2022 2021
US$ US$
Contract liabilities
Deferred revenue 9,966,048 5,892,090
Analysed as:
Current 8,093,625 5,284,512
Non−current 1,872,423 607,578
9,966,048 5,892,090
a) Significant changes in contract liabilities are as detailed
below:
2022 2021
US$ US$
At 1 October 5,892,090 5,180,719
Cash received in advance of performance
and not recognised as revenue
- Additions 16,213,749 9,381,140
Revenue recognised during the financial year:
- On contract liabilities balances at beginning of financial year (4,928,924) (4,566,761)
- On cash received in advance during financial year (7,027,948) (4,181,407)
(11,956,872) (8,748,168)
Foreign exchange difference (182,919) 78,399
At 30 September 9,966,048 5,892,090
b) Remaining performance obligations
Non−current deferred revenue are in respect of cash received in advance of
performance which will be recognised according to the following:
(i) The Group recognised new centres fees in prior years for the
Education businesses, which were collected in advance of the performance
obligations.
(ii) Student fees are generally collected 1 to 12 months (2021:
same) and more than 12 months for certain students who prepaid in advance of
performance with reference to the individual terms of the student contracts.
(iii) Fees in relation to certain security services are collected 6
to 12 months (2021: same) in advance of performance with reference to the
individual terms of the customer contracts.
Deferred revenue from student fees are recognised over the duration of the
respective courses and the remaining contract period ranging from 1 to 6
(2021: 1 to 7) years.
The amount of revenue that will be recognised in future periods on these
contracts when those remaining performance obligations will be satisfied is
analysed as follows:
Within Within More Total
1 year 2 to 3 than 4
years years
US$ US$ US$ US$
2022
New centre fees 17,847 − − 17,847
Student fees 7,899,098 1,832,433 39,990 9,771,521
Services 176,680 − − 176,680
8,093,625 1,832,433 39,990 9,966,048
2021
New centre fees 17,847 17,847 − 35,694
Student fees 5,168,737 529,746 59,985 5,758,468
Services 97,928 − − 97,928
5,284,512 547,593 59,985 5,892,090
5. Other income
2022 2021
US$ US$
Foreign exchange gain, net − 767,833
Interest income from bank deposits 21,589 11,695
Others 59,122 58,655
80,711 838,183
6. Employee benefits expense
2022 2021
US$ US$
Wages, salaries and allowances 11,070,883 10,732,701
Contributions to defined contribution plans 186,817 103,318
Share−based compensation
- Share bonus 200,000 640,000
- ESOS (Note 23(e)) 194,717 163,365
394,717 803,365
Staff accommodation and welfare 248,357 305,733
Staff insurance and medical expenses 122,543 209,129
Termination benefits 29,659 38,428
Others 167,333 103,557
12,220,309 12,296,231
Total employee benefit expenses comprise:
- Cost of services 7,018,505 7,745,478
- Administrative and other operating expenses 5,201,804 4,550,753
12,220,309 12,296,231
Included in salaries and bonus are Directors' fees and remuneration as
disclosed in Note 25 to the financial statements.
A total bonus to key management personnel of US$305,000 has been accrued in
the consolidated statement of financial position, of which US$175,000 will be
satisfied through the issuance of ordinary shares and remaining balance
US$130,000 in cash subsequent to the reporting date.
Annual bonus for certain key management personnel accrued in the previous
financial year amounting to US$640,000 were paid in the current financial year
through the issuance of 80,000 ordinary shares as detailed in Note 21 to the
financial statements.
7. Finance cost
2022 2021
US$ US$
Interest expense:
- Lease liabilities (Note 12) 746,788 756,445
- Loans from a shareholder (Note 18) 115,890 243,547
862,678 999,992
8. Loss before income tax
Depreciation and amortisation expenses relating to plant and equipment,
right-of-use assets and intangible assets directly attributable to provision
of services and for operating activities are included in the "cost of
services" and "Administrative and other operating expenses", respectively in
the consolidated statement of comprehensive income.
In addition to the charges disclosed elsewhere in the financial statements,
the loss before income tax includes the following charges:
2022 2021
US$ US$
Cost of services:
Academic expenses 1,352,827 575,860
Security service expenses 196,791 273,189
Hostel-related expenses 94,856 176,171
Depreciation of plant and equipment 83,159 289,234
Amortisation of right-of-use assets 98,479 −
Amortisation of intangible assets 5,308 35,396
Interest on lease liabilities 7,582 −
Administrative and other operating expenses:
Marketing expenses 1,887,367 1,166,059
Professional fees 707,640 696,776
Travelling expenses 187,014 253,991
Lease expenses on:
- Short-term lease expense 213,712 396,750
- Variable lease payments/(reversal) (16,265) 19,143
- Lease concession ((1)) (161,774) (768,474)
Foreign exchange loss, net 972,259 −
Loss on disposal of plant and equipment 837 −
Intangible assets written off 2,972 4,842
Plant and equipment written off 12,271 99,481
Depreciation of plant and equipment 353,204 129,823
Amortisation of right-of-use assets 2,596,391 2,560,875
Amortisation of intangible assets 69,034 78,288
Reversal of impairment loss on intangible assets (30,000) −
((1) ) The lease concession is related to additional rent concessions
received from landlords due to the Covid-19 pandemic.
9. Income tax expense/(credit)
2022 2021
US$ US$
Current income tax
− current financial year 33,646 65,730
Deferred income tax
− current financial year - (180,418)
Total income tax expense/(credit) recognised 33,646 (114,688)
in profit or loss
The corporate income tax rate applicable to the Company and its subsidiaries
in Singapore is at 17% (2021: 17%).
The Group has significant operations in Myanmar and Vietnam, for which the
corporate income tax rate applicable are 22% (2021: 25%) and 20% (2021: 20%),
respectively.
Taxation for other jurisdictions is calculated at the rates prevailing in the
relevant jurisdictions.
The reconciliation between income tax expense and the product of accounting
losses multiplied by the applicable corporate tax rates of the respective
countries where the Group operates, are as follows:
2022 2021
US$ US$
Loss before income tax (5,948,435) (5,963,042)
Tax at the domestic rates applicable to profits in (1,219,166) (1,172,802)
the country concerned
Tax effect of non−allowable expenses 618,771 127,999
Deferred tax assets not recognised 634,041 930,115
Total income tax expense/(credit) recognised in profit or loss 33,646 (114,688)
Deferred tax assets have not been recognised in respect of the following
items:−
2022 2021
Singapore Myanmar Vietnam Singapore Myanmar Vietnam
US$ US$ US$ US$ US$ US$
Unutilised tax losses 5,823,730 6,581,916 4,770,970 5,569,932 6,107,154 2,339,513
Other temporary differences 100,212 − − 99,294 − −
5,923,942 6,581,916 4,770,970 5,669,226 6,107,154 2,339,513
Unrecognised deferred tax assets on the above temporary differences 1,007,070 1,448,022 954,194 963,768 1,343,574 467,903
The unutilised tax losses above are subject to the agreement by the Myanmar,
Vietnam and Singapore tax authorities. Deferred tax assets have not been
recognised as it is uncertain that there will be sufficient future taxable
profits to realise these future benefits. Accordingly, these deferred tax
assets have not been recognised in the financial statements of the Group in
accordance with the accounting policy in Note 2.8 to the financial statements.
The unutilised tax losses of Myanmar and Vietnam subsidiaries may be carried
forward for a maximum period of 3 and 5 years, respectively and the unutilised
tax losses of Singapore subsidiaries may be carried indefinitely subject to
the conditions imposed by law.
The expiry dates of the Myanmar and Vietnam unutilised tax losses are as
follows:
2022 2021
Myanmar Vietnam Myanmar Vietnam
US$ US$ US$ US$
Expiring in first year 2,608,484 131,247 1,233,756 327,224
Expiring in second year 2,264,908 1,710,032 2,608,484 131,347
Expiring in third year 1,708,524 − 2,264,914 1,711,343
Expiring in fourth year − 169,468 − −
Expiring in fifth year − 2,760,223 − 169,599
6,581,916 4,770,970 6,107,154 2,339,513
The comparative figures for the unutilised tax losses for the previous
financial reporting period for Myanmar subsidiaries and a Vietnam subsidiary
have been revised from US$8,552,304 to US$6,107,154 (2021: US$6,346,965 to
US$5,952,623) and US$2,551,029 to US$2,339,513 (2021: same) based on the
latest approved tax assessment of the Inland Revenue of Myanmar and General
Department of Taxation of Vietnam to enhance the comparability with the
current year's income tax reconciliation notes to the financial statements.
10. Plant and equipment
Computers Furniture Motor Leasehold improvements Construction- Total
and books and fittings vehicles In-progress
US$ US$ US$ US$ US$ US$
Cost
Balance as at 1 October 2021 257,866 382,552 40,243 884,289 162,321 1,727,271
Additions 225,930 174,076 − 241,424 1,042,766 1,684,196
Transfers 8,020 134,387 − 600,881 (743,288) −
Reclassifications − 166,828 − (166,828) − −
Disposals − (1,507) − − − (1,507)
Write-offs (29,586) (160,676) − (20,712) − (210,974)
Foreign exchange difference (5,886) (7,671) − (32,395) (39,633) (85,585)
Balance as at 30 September 2022 456,344 687,989 40,243 1,506,659 422,166 3,113,401
Accumulated depreciation
Balance as at 1 October 2021 182,167 202,679 16,713 456,723 − 858,282
Depreciation for the year 84,750 109,111 3,468 239,034 − 436,363
Reclassifications − 153,855 − (153,855) − −
Disposals − (670) − − − (670)
Write-offs (29,648) (155,230) − (13,825) − (198,703)
Adjustments (1,973) − − − (1,973)
Foreign exchange difference (3,130) (1,337) − (7,821) − (12,288)
Balance as at 30 September 2022 232,166 308,408 20,181 520,256 − 1,081,011
Net carrying amount
Balance as at 30 September 2022 224,178 379,581 20,062 986,403 422,166 2,032,390
Group Computers Furniture Motor Leasehold improvements Construction- Total
and books and fittings vehicles In-progress
US$ US$ US$ US$ US$ US$
Cost
Balance as at 1 October 2020 209,998 404,055 44,807 907,536 6,852 1,573,248
Additions 19,195 6,180 - 23,955 161,168 210,498
Transfers - - - 6,852 (6,852) -
Write-offs (8,136) (27,850) (4,564) (77,656) - (118,206)
Foreign exchange difference 36,809 167 - 23,602 1,153 61,731
Balance as at 30 September 2021 257,866 382,552 40,243 884,289 162,321 1,727,271
Accumulated depreciation
Balance as at 1 October 2020 86,230 125,002 17,809 187,183 - 416,224
Depreciation for the year 69,061 80,728 3,468 265,800 - 419,057
Write-offs (5,398) (3,137) (4,564) (5,626) - (18,725)
Foreign exchange difference 32,274 86 - 9,366 - 41,726
Balance as at 30 September 182,167 202,679 16,713 456,723 - 858,282
2021
Net carrying amount
Balance as at 30 September 75,699 179,873 23,530 427,566 162,321 868,989
2021
During the financial year ended 30 September 2022 and 2021, all education
businesses incurred losses, which may indicate that the plant and equipment,
intangibles and right-of-use assets ("operating assets") may be impaired.
Management performed impairment assessments on these operating assets for the
education businesses to determine their recoverable amounts based on the
value-in-use ("VIU") calculations.
In carrying out the impairment assessments, management had identified and
allocated the operating assets to the respective cash generating units
("CGUs"). Accordingly, the recoverable amounts of the CGUs are determined by
estimating the expected discounted future cash flows. The details of the key
assumptions used are disclosed in Note 11 to the financial statements.
11. Intangible assets
Balance as at 30 September 2022 452,153 24,000 31,468 − 6,173,822 6,681,443
Area development Set−up fee Computer software Customer− Goodwill Total
and centre fees and brand license related
licensing fees assets
US$ US$ US$ US$ US$ US$
Cost
Balance as at 1 October 2021 398,780 40,000 121,653 273,913 6,376,406 7,210,752
Additions 219,053 − 26,527 − − 245,580
Write-offs (1,347) − (6,115) − − (7,462)
Reclassification 18,306 − (18,306) − − −
Foreign exchange difference (12,399) − (760) − (202,584) (215,743)
Balance as at 30 September 2022 622,393 40,000 122,999 273,913 6,173,822 7,233,127
Accumulated amortisation and impairment
Balance as at 1 October 2021 107,312 40,000 93,044 273,913 − 514,269
Amortisation for the year 54,736 6,000 13,606 − − 74,342
Reversal of impairment for the year − (30,000) − − − (30,000)
Reclassifications 11,770 − (11,770) − − −
Write-offs (1,347) − (3,143) − − (4,490)
Foreign exchange difference (2,231) − (206) − − (2,437)
Balance as at 30 September 2022 170,240 16,000 91,531 273,913 − 551,684
Net carrying amount
Area development Set−up fee Computer software Customer- Goodwill Total
and centre fees and brand licence related
licensing fees assets
US$ US$ US$ US$ US$ US$
Cost
Balance as at 1 October 2020 395,372 40,000 103,904 273,913 6,291,859 7,105,048
Additions 2,729 − − − − 2,729
Write-offs − − (4,842) − − (4,842)
Foreign exchange difference 679 − 22,591 − 84,547 107,817
Balance as at 30 September 2021 398,780 40,000 121,653 273,913 6,376,406 7,210,752
Accumulated amortisation and impairment
Balance as at 1 October 2020 65,875 40,000 47,731 218,262 − 371,868
Amortisation for the year 34,597 − 23,436 55,651 − 113,684
Foreign exchange difference 6,840 − 21,877 − − 28,717
Balance as at 30 September 2021 107,312 40,000 93,044 273,913 − 514,269
Net carrying amount
Balance as at 30 September 2021 291,468 − 28,609 − 6,376,406 6,696,483
The carrying amounts of significant intangible assets allocated to the
respective CGU which have been grouped to the following segments:
Education Security services
Myanmar Vietnam Myanmar
2022 2021 2022 2021 2022 2021
Note US$ US$ US$ US$ US$ US$
Goodwill − − 4,734,832 4,937,416 1,438,990 1,438,990
Area development and centre fees 195,798 114,168 256,355 177,300
(a)(b) − −
(a) The area development fee is for the exclusive right to develop and
operate the "Wall Street English" language centres in Myanmar while the centre
fees are paid for the opening of each new "Wall Street English" language
centre in Myanmar and Vietnam for a period of 10 years from the date operation
commences and when the new centre commences operations respectively.
The remaining useful lives of the area development and centre fees ranges
between 4 to 8 (2021: 5 to 9) years.
(b) On 25 April 2022 and 15 August 2022, the Group entered into entered into
exclusive franchising agreements with Kids&Us English, S.L.U
("Kids&Us") for the development of English language centres for children
under the brand "Kids&Us School of English" in Myanmar and Vietnam,
respectively for a period of 10 years. Under the terms of these agreements,
the Group paid initial fees of US$216,048 for Myanmar and Vietnam (EUR100,000
for each territory).
The remaining useful lives of the area development ranges from 9.5 - 9.9
years.
Impairment testing of goodwill and other intangible assets
Goodwill acquired in a business combination is allocated to the
cash−generating units ("CGUs") that are expected to benefit from that
business combination, which is also the reportable operating segment. The
management determines whether goodwill is impaired at least on an annual basis
and as and when there is an indication that goodwill may be impaired. Other
intangible assets with finite useful lives are assessed for indicators of
impairment at the end of the financial year.
The recoverable amount is determined based on value in use calculations. The
use of this method requires the estimation of future cash flows and the
determination of a discount rate in order to calculate the present value of
the cash flows.
During the financial year, management determined that:
i) no impairment for any of its CGUs containing goodwill or other
intangible assets with finite useful lives; and
ii) the recoverable amount of Auston's CGU had exceeded the carrying amounts
of the operating assets of the CGU. This resulted in a reversal of impairment
of US$30,000 during the financial year in respect of the set-up fee and brand
licensing fees for Auston in Myanmar.
The recoverable amounts of the CGUs are determined from value−in−use
calculations based on cash flow forecasts derived from the most recent
financial budgets approved by management for the next 5 years.
Financial budgets are prepared for CGUs with consideration of the timing,
extent and future recovery from the Covid-19 pandemic with consideration of
several other factors such as the general political, macroeconomic environment
and initiatives within the control of the Group. In respect of the CGU for
Security services, demand peaked and remained at high levels as there is no
significant improvement in the Myanmar state of Emergency. Adjustments were
made to reflect normalised future growth rates.
The key assumptions for these value-in-use calculations are those regarding
the discount rates, revenue growth rates and gross margins which consider the
current economic, business environment and extent of recovery from the
Covid-19 pandemic. The severity of the impact of these events varied from
country to country and industries.
The key assumptions for these value-in-use calculations are as follows:
Education Services
Vietnam Myanmar Myanmar
2022 2021 2022 2021 2022 2021
% % % % % %
Discount rate((1)) 21 18 25 − 30 19 − 25 29 24
Average growth rate((2)) 5 - 70 11 5 − 61 7 − 31 10 - 15 6
Terminal value growth rate ((3)) 1 1 5 0 − 2 5 1
((1) ) Pre−tax discount rate applied to the cash flow projections.
((2) ) Revenue growth rate for the 5−year period.
((3) ) Terminal growth rate used in the cash flow projections which does
not exceed the expected inflation for the country of operations.
The Education segment in Myanmar includes the following CGUs: Wall Street
English Myanmar, Auston and the Yangon American International School.
Key assumptions used in the value−in−use calculations
The calculations of value−in−use for all the CGUs are most sensitive to
the following assumptions:
Revenue growth rates - The forecasted sales growth rates are based on
management estimates with reference to the historical trend as well as the
forecasted economic condition over the budgeted period of 5 years.
Pre−tax discount rates - Discount rates are based on the Group's
post-tax weighted average cost of capital are benchmarked to externally
available data such as country risk premium, equity risk premium and beta
adjusted to reflect the CGUs geographical location of operations and
management's assessment of specific risks related to each of the cash
generating units.
Terminal value - The terminal growth rate is based on
management's expected long-term sustainable growth rate, taking into
consideration the economic and political environment of the countries these
CGUs are located and operating.
Sensitivity to changes in the key assumptions
Based on the sensitivity analysis performed on the key assumptions in the
impairment assessments, no reasonably possible change in any of the key
assumptions would cause the carrying amounts of the CGUs and the related
goodwill to exceed their recoverable amount except for the Yangon American
International School. A more in-depth analysis has been conducted for the
Yangon American International School, whereby (i) an increase in discount rate
of 1.0%, (ii) reduction of 1.0% average revenue growth and decrease in
terminal value growth rate of 4.0% would result in the recoverable amount
being equal to the carrying amount.
12. Leases
The Group leases a number of properties for its office premise and Education
campuses in Vietnam and Myanmar. The Group's obligation under the lease is
secured by the leased asset. The Group is restricted from assigning and
subleasing the leased asset. These leases entered are with fixed payments
over the lease terms. The leases are for a period of 1 to 10 years, with an
option to renew for a further 2 to 5 years. For leases with variable lease
payment based on a percentage of revenue over the rental period, the variable
lease payment is not included in the measurement of lease liabilities and is
recognised in profit or loss as incurred.
The Group also leases certain equipment with only fixed payments over the
lease terms.
Certain leases contain extension or termination option held and exercisable by
the Group. The judgement used in determining the lease term is disclosed under
Note 3.1 to the financial statements.
Certain motor vehicles, signage, office and employee residences are leased,
based on terms of 12 months or less and accordingly the Group applied the
"short−term lease" recognition exemptions for these leases. The election of
short−term leases exemption is made by class of underlying assets with
similar nature and use in the Group's operations whereas the low−asset value
lease exemption is made on lease−by−lease basis.
The majority of the extension options are exercisable by the Group and not by
the lessor. The leases for certain leased properties contain extension
periods, for which the related lease payments had not been included in the
lease liabilities as the Group is not reasonably certain to exercise these
extension options and the Group could replace these assets without significant
cost or business disruption. The Group negotiates extension options to
optimise operational flexibility in terms of managing the assets used in the
Group's operations to align with the Group's business requirements.
As at 30 September 2022, the Group has US$211,000 (2021: US$98,000) of
aggregate undiscounted commitments for short−term leases.
(a) Right−of−use assets
International school Office Motor Total
building premise and education campuses vehicles
US$ US$ US$ US$
2022
At 1 October 2021 2,714,989 7,171,674 207,628 10,094,291
Additions − 4,854,227 − 4,854,227
Amortisation charge (346,179) (2,250,212) (98,479) (2,694,870)
Lease modification (264,151) (417,486) (48,544) (730,181)
Foreign exchange difference − (248,328) − (248,328)
At 30 September 2022 2,104,659 9,109,875 60,605 11,275,139
International school Office Motor Total
building premise and education campuses vehicles
US$ US$ US$ US$
2021
At 1 October 2020 3,089,470 5,989,001 231,556 9,310,027
Additions − 3,453,823 87,864 3,541,687
Amortisation charge (374,481) (2,074,602) (111,792) (2,560,875)
Lease modification − (283,039) − (283,039)
Foreign exchange difference − 86,491 − 86,491
At 30 September 2021 2,714,989 7,171,674 207,628 10,094,291
(b) Lease liabilities
International school Office Motor Total
building premise and Education campuses vehicle
US$ US$ US$ US$
2022
At 1 October 2021 2,600,122 6,957,119 213,938 9,771,179
Additions − 4,854,227 − 4,854,227
Interest expense 134,521 612,268 7,581 754,370
Lease modification (264,151) (425,288) (40,742) (730,181)
Lease concession − (161,774) − (161,774)
Lease payments:
− Principal portion (345,479) (1,781,295) (108,639) (2,235,413)
− Interest portion (134,521) (612,268) (7,581) (754,370)
Foreign exchange differences − (393,615) − (393,615)
At 30 September 2022 1,990,492 9,049,374 64,557 11,104,423
2021
At 1 October 2020 3,114,832 5,998,172 232,118 9,345,122
Additions − 3,453,823 87,864 3,541,687
Interest expense 165,290 576,563 14,592 756,445
Lease modification − (283,038) − (283,038)
Lease concession (200,000) (568,474) − (768,474)
Lease payments:
− Principal portion (314,710) (891,715) (106,044) (1,312,469)
− Interest portion (165,290) (322,101) (14,592) (501,983)
Foreign exchange differences − (1,006,111) − (1,006,111)
At 30 September 2021 2,600,122 6,957,119 213,938 9,771,179
The maturity analysis of lease liabilities of the Group at each reporting date
are as follows:
2022 2021
US$ US$
Contractual undiscounted cash flows
Not later than a year 2,589,378 2,442,610
Between one and two years 3,577,548 3,273,925
Between two and five years 5,348,376 4,645,407
More than five years 1,968,165 1,362,171
13,483,467 11,724,113
Less: Future interest expense (2,379,044) (1,952,934)
Present value of lease liabilities 11,104,423 9,771,179
Presented in consolidated statement of financial position
− Current 1,961,444 1,860,070
− Non−current 9,142,979 7,911,109
11,104,423 9,771,179
As at 30 September 2022, the net carrying amounts of ROU and lease liabilities
arising from lease of Office premise and Education campuses from a related
party (refer to entities where a Director of certain Group's subsidiaries has
beneficial interests) of the Group amounted to US$2,799,850, US$311,231 and
US$2,032,377 (2021: US$3,379,857, US$2,910,937 and US$2,555,070),
respectively. These related party transactions were at terms agreed between
the respective parties.
The currency profile of lease liabilities of the Group at each reporting date
are as follows:
2022 2021
US$ US$
United States Dollar 2,073,626 3,349,182
Myanmar Kyat 2,343,607 2,074,055
Vietnamese Dong 6,687,190 4,347,942
11,104,423 9,771,179
(c) Amount recognised in profit or loss
2022 2021
US$ US$
Amortisation of right−of−use assets 2,694,870 2,560,875
Interest expense on lease liabilities 754,370 756,445
Lease concession (161,774) (768,474)
Variable lease payments/(reversal) (16,265) 19,143
Lease expense not capitalised in lease liabilities:
- Expense relating to short−term leases 213,712 396,750
Total amount recognised in profit or loss 3,484,913 2,964,739
The Group had total cash outflows for leases of US$3,203,495 (2021:
US$2,211,202) which includes expense relating to short-term lease of
US$213,712 (2021: US$396,750).
13. Investments in subsidiaries
The following are all the subsidiaries of the group that have been included in
the consolidated financial statements and their particulars are as detailed
below:
Held by the Company
Principal activities Effective Proportion of ownership
Name of Company interest held by Company held by non−controlling interests
(Country of incorporation and principal place of business)
2022 2021 2022 2021
% % % %
MS Exera Pte Ltd ("MS Exera")((1)) Investment holding and provision of management services 100 100 − −
(Singapore)
MS Leisure Pte Ltd ("MS Leisure")((1)) Investment holding and provision of management services 100 100 − −
(Singapore)
MS English Pte. Ltd. ("MS English")((1)) Investment holding and provision of management services 100 100 − −
(Singapore)
MS Auston Pte. Ltd. ("MS Auston")((1)) Investment holding and provision of management services 100 70 − 30
(Singapore)
MS English 2 Pte. Ltd. ("MS English 2")((1)) Investment holding and provision of management services 100 100 − −
(Singapore)
AS English 3 Pte. Ltd. ("AS English 3")((1)) Investment holding and provision of management services 100 − − −
(Singapore)
American International Partners Limited ("AIP")((2)) Operation of an international school in Myanmar 100 100 − −
(Myanmar)
Name of Company Principal activities Effective Proportion of ownership
(Country of incorporation and principal place of business) interest held by Company held by non−controlling interests
2022 2021 2022 2021
% % % %
Held through MS Exera
EXERA Myanmar Limited ("EXERA Myanmar")((2)) Provision of integrated security services 100 100 − −
(Myanmar)
Held through MS Leisure
L Partners Limited Operation and management of Kids&Us English language centres 100 100 − −
("L Partners")((2))
(Myanmar)
Kipling Global Hospitality Group Limited ("Kipling")((2)) Liquidated (with effect on 27 December 2022) 100 100 − −
(Myanmar)
Held through MS English
E Partners Limited Operation and management of Wall Street English language centres 100 100 − −
("E Partners")((2))
(Myanmar)
Held through MS Auston
A Partners Limited Operation and management of Auston 100 70 − 30
("A Partners")((2))
(Myanmar)
Held through MS English 2
Wall Street English Limited Liability Company Operation and management of Wall Street English language centres 100 100 − −
("WSE Vietnam")((3))
(Vietnam)
Held through AS English 3
AS English Vietnam Limited Liability Company Operation and management of Kids&Us English language centres 100 − − −
("AS Vietnam")((3))
(Vietnam)
((1) ) Audited by BDO LLP, Singapore.
((2) ) Audited by BDO Consulting (Myanmar) Co. Ltd, for consolidation
purposes.
((3) ) Audited by BDO Audit Services Co., Ltd. (Vietnam) for
consolidation purposes and for statutory reporting in Vietnam.
a) Acquisition of a non-controlling interest in a subsidiary
MS Auston Pte Ltd
The Company had on 7 February 2022 acquired 3,000 ordinary shares,
representing 30% equity interest, from the non-controlling interest for a
consideration of US$1.00. The carrying value of the net liabilities of MS
Auston Pte Ltd as at the date of acquisition was US$279,693 and the carrying
value of the additional equity interest acquired was US$83,908. The difference
of US$83,909 between the consideration and the carrying value of additional
interest acquired resulted in a premium paid on acquisition of non-controlling
interest recognised directly in equity in equity reserve.
The following table details the effect of changes of the Group's ownership
interest that did not result in loss of control, on the equity attributable to
the owners of the Company.
2022
US$
Amount paid on changes in ownership interest in a subsidiary 1
Non-controlling interest comprising net liabilities acquired 83,908
Total amount recognised in equity reserves (Note 23) 83,909
b) Newly incorporated subsidiary
AS English 3 Pte Ltd ("AS English 3")
AS English 3 was incorporated on 18 February 2022 in the Republic of Singapore
with an issued paid-up share capital of US$100, which was fully subscribed by
Asia Strategic Holdings Limited.
14. Financial assets at fair value through other comprehensive
income ("FVOCI")
2022 2021
US$ US$
At 1 October 314,125 675,574
Fair value recognised in other comprehensive income (157,063) (361,449)
At 30 September 157,062 314,125
Detail of the investment is as follows:
2022 2021
US$ US$
Listed equity instrument
- London Stock Exchange (AIM Market) 157,062 314,125
The Group designated the investment as quoted equity security to be measured
at FVOCI. The Group intends to hold the investment for long−term
appreciation in value as well as strategic investment purposes.
The investment in listed equity instrument has no fixed maturity date nor
coupon rate. The fair value of the equity instrument is based on quoted bid
market price on the last market day of the financial year.
The FVOCI are denominated in United States dollar as at reporting date.
15. Inventories
Inventories of the Group consist of consumables, security accessories,
uniform, raw materials, fabric, merchandise and academic books.
16. Trade and other receivables
2022 2021
US$ US$
Current
Trade receivables
Third parties 663,789 741,036
Less: Loss allowances (15,453) -
Third parties, net 648,336 741,036
Accrued receivables 6,913 75,554
Related party - 1,042,614
Less: Loss allowances - (989,688)
Total trade receivables 655,249 869,516
Other receivables
Third parties 280,327 280,327
Less: Loss allowances (280,327) (280,327)
- -
Sundry receivables - 39,465
Rental deposits 77,619 75,642
Prepayments for enrolment expenses 333,229 229,250
Sales tax 56,475 -
Other prepayments 506,393 176,430
Total other receivables 973,716 520,787
Total trade and other receivables (current) 1,628,965 1,390,303
Non−current
Related party
- trade 1,042,614 -
- non-trade 4,256,996 3,914,406
Less: Loss allowances (4,400,124) (3,410,436)
899,486 503,970
Rental deposits 545,296 442,609
Prepayments for enrolment expenses 97,719 44,037
Total other receivables 1,542,501 990,616
(non−current)
Total trade and other receivables 3,171,466 2,380,919
Less: Prepayments (937,341) (449,717)
Less: Sales tax (56,475) -
Add: Cash and cash equivalents and fixed deposits (Note 17) 1,980,232 2,265,882
Financial assets at amortised cost 4,157,882 4,197,084
Trade and other receivables
Trade receivables are non−interest bearing and are generally on 15 to 60
(2021: 15 to 60) days credit term. They are measured at their original invoice
amounts which represent their fair value on initial recognition.
Amounts due from related parties are non−trade in nature, unsecured,
interest−free and are repayable on demand.
Expected credit loss allowances
i) Trade receivables - Third party
During the financial year, a one-off loss allowance of US$15,453 (2021:
US$Nil) was made for a third party trade debtor determined to be
credit-impaired as the likelihood of recovery is remote.
ii) Other receivables - Third party
In prior years, allowance for impairment of receivables from third parties of
US$280,327 was made in respect of advances to the owners of the hostels under
management as two of the hostels under management experienced continuous
losses and recoverability is in doubt.
The Group may commit to provide annual or monthly advances to the owners of
the managed hostels pursuant to each operation and management agreement. If
the managed hostels do not meet the agreed performance measures, such advances
are recognised as hostel related operating expenses in the profit or loss.
iii) Other receivables - Related party
In the previous financial year, loss allowances of US$1,004,384 were made on
the trade and non−trade amounts due from a related party in respect of
payments made on behalf and advances for the operation of the managed
operations of Wall Street English and Auston in Myanmar. The loss allowance
made based on the financial information of the related party and the expected
repayment from the provision of property management services to the Group. At
the end of reporting period, the total carrying amount of trade and non-trade
receivables due from the related party is US$Nil and US$899,486 (2021:
US$52,926 and US$503,970) respectively.
The expected recovery of the amounts due from a related party resulted in a
reclassification of the balances to non-current based on the expected
settlement which falls more than 12 months after the end of the reporting
period.
The Group's trade and other receivables balances are denominated in the
following currencies:
2022 2021
US$ US$
United States Dollar 2,186,608 885,396
Myanmar Kyats 379,259 723,033
Vietnamese Dong 579,710 748,983
Singapore Dollar 4,187 -
Euro 21,702 23,507
3,171,466 2,380,919
17. Cash and cash equivalents and fixed deposits
2022 2021
US$ US$
Cash at bank 986,400 1,829,015
Cash at financial institutions 47,980 3,374
Cash on hand 945,852 332,868
Cash and cash equivalents 1,980,232 2,165,257
Fixed deposits − 100,625
1,980,232 2,265,882
Cash at bank earns interest at floating rates based on daily bank deposit
rates.
In the previous financial year, fixed deposits were placed for periods of 30
to 365 days and yielded interest ranging from 4.6% to 5.4% per annum.
The entire fixed deposits were pledged to a Vietnam bank as security for
credit facility and represented restricted cash.
Cash and cash equivalents and fixed deposits are denominated in the following
currencies:
2022 2021
US$ US$
United States Dollar 1,142,830 1,111,559
Singapore Dollar 209,294 56,181
Myanmar Kyat 430,909 667,072
Vietnamese Dong 151,097 430,555
Euro 46,102 515
1,980,232 2,265,882
For the purpose of the consolidated statement of cash flows, cash and cash
equivalents comprise the following at the end of the reporting date:
2022 2021
US$ US$
Fixed deposits − 100,625
Cash and bank balances and on hand 2,165,257
1,980,232
Total 1,980,232 2,265,882
Less: pledged fixed deposits − (100,625)
Cash and cash equivalents for the purpose of the consolidated statement of 1,980,232 2,165,257
cash flows
18. Shareholder's loans (Unsecured)
Changes in shareholder's loan balances (interest and principal) arising from
financing activities:
Non−cash changes
Subscription of
Drawdown Repayment convertible notes Interest expense
2021 of loan of loans 2022
US$ US$ US$ US$ US$ US$
Facility 1 3,151,576 250,000 (2,004,725) − 103,149 1,500,000
Facility 2 2,591,971 − (104,712) (2,500,000) 12,741 −
5,743,547 250,000 (2,109,437) (2,500,000) 115,890 1,500,000
Non−cash changes
Drawdown Repayment Interest expense
2020 of loan of loans 2021
US$ US$ US$ US$ US$
Facility 1 2,188,124 1,000,000 (188,124) 151,576 3,151,576
Facility 2 1,030,083 1,500,000 (30,083) 91,971 2,591,971
3,218,207 2,500,000 (218,207) 243,547 5,743,547
(a) Loan Facility 1
On 1 July 2019, the Group secured a loan facility of up to US$3,000,000 with
its shareholder, Macan Pte Ltd ("MACAN") ("Loan Facility 1"). On 1 November
2021, the Group had repaid outstanding principal loan amounting to
US$1,500,000. Accordingly, the Group has a remaining unutilised credit
facility of US$1,500,000.
(b) Loan Facility 2
On 23 March 2020, MACAN granted the Group an additional loan facility of up
to US$4,000,000 ("Loan Facility 2"). On 20 October 2021, the Company entered
into a loan re-organisation with MACAN for the following:
i) Subscribed a total amount of US$3,500,000 Zero Coupon Convertible
Notes (Note 22) of the Company satisfied through cash consideration of
US$1,000,000 and the conversion of Macan's Loan Facility 2 amounting to
US$2,500,000; and
ii) Terminated Loan Facility 2 agreement with effect from 31 October
2021 subsequent to the repayment of all accrued interest under Loan Facility 2
on 31 October 2021.
These Loan Facilities bear semi−annual interest at 6% (2021: 6%) per annum
and are repayable on demand in full with all accrued interest, in any case no
later than 30 June 2024. As at reporting date, MACAN has indicated that it
will not demand repayment within the next 12 months from the date of approval
of the audited financial statements of the Group for the financial year ended
30 September 2022.
19. Bank loan (unsecured)
On 25 January 2022, the Group secured a short-term interest free bank loan
from a third-party bank, the Vietnam Bank for Social Policies amounting to
US$115,530. The loan is denominated in Vietnamese Dong, repayable 11 months
from the date of disbursement of the loan and any overdue balances bears
interest of 12% per annum. The loan has been repaid in full in December 2022.
20. Trade and other payables
2022 2021
US$ US$
Trade payables
Third parties 940,798 624,725
Accrued enrolment expenses 116,103 55,563
Total trade payables 1,056,901 680,288
Other payables
Third parties 59,162 18,429
Related party - 18,512
Accruals - others 1,039,572 1,060,038
Accruals - bonus 703,330 769,195
Refundable deposits from customers 735,513 131,293
Sales tax 42,420 19,926
Total other payables 2,579,997 2,017,393
Total trade and other payables 3,636,898 2,697,681
Add: Lease liabilities (Note 12) 11,104,423 9,771,179
Add: Shareholder's loans (Note 18) 1,500,000 5,743,547
Add: Bank loan (Note 19) 115,530 -
Less: Sales tax (42,420) (19,926)
Financial liabilities carried at amortised cost 16,314,431 18,192,481
Trade amounts due to third parties are unsecured, non−interest bearing and
are on 15 to 60 (2021: 15 to 45) days credit term.
The non−trade amounts due to third parties and a related party are
unsecured, interest−free and repayable on demand.
Trade and other payables are denominated in the following currencies:
2022 2021
US$ US$
United States Dollar 1,641,267 1,323,232
Singapore Dollar 72,002 29,768
Myanmar Kyat 1,092,685 485,108
Vietnamese Dong 644,812 778,251
Pound Sterling 183,336 68,979
Euro 2,796 12,343
3,636,898 2,697,681
21. Share capital
2022 2021 2022 2021
Number of shares US$ US$
Issued and fully paid
ordinary shares:
At 1 October 2,845,920 2,804,920 20,799,638 20,553,638
Shares issued during the financial year 80,000 41,000 640,000 246,000
At 30 September 2,925,920 2,845,920 21,439,638 20,799,638
On 13 December 2021, the Company issued 80,000 ordinary shares at US$8.00 per
share (being the closing bid price of the Company's ordinary shares as at date
of issuance) in lieu of payment for accrued employee bonus of US$640,000, in
respect of employment services rendered for financial year ended 30 September
2021 to certain key management personnel as detailed in Note 6 to the
financial statements.
In the previous financial period, on 24 June 2021, the Company issued 41,000
ordinary shares at US$6.00 per share (being the closing bid price of the
Company's ordinary shares as at date of issuance) in lieu of payment for
accrued employee bonus of US$246,000, in respect of employment services
rendered for the financial period from 1 April 2019 to 30 September 2020 to
certain key management personnel as detailed in Note 6 to the financial
statements.
The holders of ordinary shares are entitled to receive dividends as and when
declared by the Company. All ordinary shares have no par value and carry one
vote per share without restriction.
22. Convertible notes
2022 2021
US$ US$
At 1 October - -
Issued and paid during the financial year:
- Cash 3,230,000 -
- Shareholder's loans (Note 18) 2,500,000 -
At 30 September 5,730,000 -
The Group launched a Convertible Notes Programme to raise up to US$10 million
for working capital and future investments. The convertible notes ("CN")
holders had an option to subscribe to either (i) a 10% coupon option ("10%
Coupon Convertible Notes") or (ii) a zero−coupon option ("Zero Coupon
Convertible Notes"). The proceeds from the convertible notes were limited to
50% for activities in Myanmar and rank pari passu to all present and future
unsecured obligations.
The CNs are mandatorily convertible at the date falling on the earlier of the
maturity date (30 October 2024) or when the Qualifying Event is satisfied
("Conversion Date"). On the Conversion Date, the CNs are converted based on
the stipulated conversion price and are paid-up in full to the note holders
entirely (interest and principal) through the issuance of ordinary shares of
the Company.
The convertible notes were issued on 1 November 2021 and the Group's existing
shareholders have subscribed to CN amounting to US$5,730,000 comprising:
i) Zero−Coupon Convertible Notes of US$5,230,000 (including
subscription by MACAN amounting to US$3,500,000, of which US$1,000,000 was in
cash and the rest was from conversion of a loan from MACAN, as detailed in
Note 18 of the financial statements); and
ii) 10% Coupon Convertible Notes amounting to US$500,000.
Both the Zero-Coupon and 10% Coupon Convertible Notes met the fixed for fixed
criteria and the entire amount is recognised within equity. The convertible
notes are denominated in United States dollar.
The salient features of the convertible notes are as follows:
Type Zero-Coupon Convertible Notes 10% Coupon Convertible Notes
Tenure Up to 3 years Up to 3 years
Maturity 30 October 2024 30 October 2024
Coupon Zero-coupon 10% annual
Conversion price The higher of: The higher of:
(i) Floor Subscription Price; and (i) US$15.00 per Share; and
(ii) the Discounted Subscription Price. (ii) 90% of the subscription price per Share for a Qualifying Event
Discount Between 2.0% and 20.5% based on conversion schedule 10% vs. subscription price for a Qualifying Event
Floor conversion price US$11.9 per share (based on the maximum discount listed above) US$15.0 per share
Conversion date The date falling on the earlier of: The date falling on the earlier of:
(i) the Maturity Date; and (i) the Maturity Date; and
(ii) the Qualifying Event. (ii) the Qualifying Event.
Qualifying event Share issuance in excess of Share issuance in excess of
US$5 million US$5 million
Use of proceeds Development of business Development of business
Working capital Working capital
Limitation to use of proceeds Max. 50% of the proceeds for activities in Myanmar Max. 50% of the proceeds for activities in Myanmar
Rank Pari passu to all present and future unsecured obligations Pari passu to all present and future unsecured obligations
23. Other reserves
2022 2021
US$ US$
Share option reserve 968,819 774,102
Fair value reserve (605,692) (448,629)
Equity reserve (212,271) (128,362)
Foreign exchange reserve 28,858 (123,237)
At 30 September 179,714 73,874
(a) Equity reserves
The equity reserve represents the effects of changes in ownership interests in
subsidiaries when there is no change in control.
(b) Accumulated losses
Accumulated losses represent all other net gains and losses and transactions
with owners not recognised elsewhere.
(c) Foreign exchange reserve
The foreign exchange reserve of the Group represents foreign exchange
differences arising from the translation of the financial statements of
foreign operations whose functional currencies are different from that of the
Group's presentation currency. This is non−distributable and the movements
in this account are set out in the statements of changes in equity.
(d) Fair value reserve
2022 2021
US$ US$
At 1 October (448,629) (87,180)
Changes in fair value during the year (157,063) (361,449)
At 30 September (605,692) (448,629)
Fair value reserve represents the cumulative fair value changes, net of tax,
of financial assets measured at FVOCI until they are derecognised. Upon
derecognition, the cumulative fair value changes will be transferred to
retained earnings.
(e) Share option reserve
2022 2021
US$ US$
At 1 October 774,102 610,737
Share option expense 194,717 163,365
At 30 September 968,819 774,102
Share option reserve represents the equity−settled share options granted to
employees. The reserve is made up of the cumulative value of services received
from employees recorded over the vesting period commencing from the grant date
of equity−settled share options and is reduced by the forfeiture of the
share options.
Employee Share Option Schemes ("ESOS 2016") and ("ESOS 2022")
At an Extraordinary General Meeting held on 25 October 2016, the shareholders
approved the Employee Share Option Scheme granting share options to certain
Directors, senior management and key employees and consultants of the Group.
The Remuneration Committee comprising all the Independent Non−Executive
Directors, Christopher John David Clarke, who acts as chairman of the
committee, Richard Edgar Greer and Dennis Yeo Ting Teck are responsible for
administering the ESOS 2016 and ESOS 2022.
At the Annual General Meeting held on 4 March 2022, in order to incentivise
existing and new management and employees, the Company's shareholders approved
a new share option scheme ("2022 ESOS"), whereby share options in respect of
up to 200,000 ordinary shares in the capital of the Company may be granted to
certain individuals at an exercise price of US$11.00 per share with a typical
vesting schedule of 40% of the option on the first anniversary of the grant
date, further 40% of the option on the second anniversary of the grant date
and further 20% of the option on the third anniversary of the grant date.
The Group had on 23 May 2017, 1 December 2017, 17 October 2018, 21 July 2020
and 5 July 2022 entered into share option agreements with the employees and
Directors of the Group to allot and issue 117,000, 13,000, 72,000, 61,500 and
135,000 share options, respectively.
Statutory and other information regarding ESOS 2022 are set out below:
(i) Consideration payable by each option holder for the grant is
US$1.00.
(ii) Exercise price is US$11.00 per ordinary share.
(iii) Options are valid during the period commencing on the grant date and
terminating on the tenth anniversary of the grant date for up to 200,000
ordinary shares with no par value in the capital of the Company ("Option
Shares").
(iv) Options granted will vest with effect as follows:
(a) from the first anniversary in respect of 40 percent of the Option
Shares.
(b) from the second anniversary in respect of a further 40 percent of the
Option Shares.
(c) from the third anniversary in respect of a further 20 percent of the
Option Shares.
(v) Options will only be exercisable in respect of Option Shares that
have already vested.
(vi) If the participants cease to be director or employee of the Company
and its subsidiaries at any time, then the Option will only be exercisable in
respect of the Option Shares that have vested prior to the date of
termination.
Statutory and other information regarding ESOS 2016 are set out below:
(i) Consideration payable by each option holder for the grant is
US$1.00.
(ii) Exercise price is US$11.00 per ordinary share.
(iii) Options are valid during the period commencing on the grant date and
terminating on the tenth anniversary of the grant date for up to 200,000
ordinary shares with no par value in the capital of the Company ("Option
Shares").
(iv) Options granted will vest with effect as follows:
(a) from the second anniversary in respect of 50 percent of the Option
Shares.
(b) from the third anniversary in respect of a further 30 percent of the
Option Shares.
(c) from the fourth anniversary in respect of a further 20 percent of
the Option Shares.
(v) Options will only be exercisable in respect of Option Shares that
have already vested.
(vi) If the participants cease to be director or employee of the Company
and its subsidiaries at any time, then the Option will only be exercisable in
respect of the Option Shares that have vested prior to the date of
termination.
The weighted average fair value of the share options granted during the
financial year is US$2.15. These granted share options have a weighted average
contractual life of 6.69 years.
These fair values were calculated using the Black−Scholes pricing model
using the following assumptions:
Grant date
23 May 1 December 2017 17 October 21 July 5 July
2017 2018 2020 2022
Fair value at grant date (US$) 4.48 7.09 5.17 5.13 3.02
Grant date share price (US$) 10.00 13.00 10.00 10.00 6.50
Exercise price (US$) 11.00 11.00 11.00 11.00 11.00
Expected volatility 33.91% 36.07% 38.43% 42.92% 44.87%
Option life 10 years 10 years 10 years 10 years 10 years
Risk−free annual interest rate 2.28% 2.36% 3.21% 0.60% 2.88%
Expected volatility was determined by calculating the historical volatility
share price over a period of ten years of comparable companies in similar
industries. 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.
The Group recognised total expenses of US$194,717 (2021: US$163,365) related
to equity−settled share−based payment transactions during the financial
year.
The following reconciles the share options outstanding at the start and at end
of the financial year.
2022 2021
Number Weighted average exercise Number Weighted average exercise
Price Price
(US$) (US$)
US$ US$
At 1 October 193,500 11.00 200,000 11.00
Granted 135,000 11.00 − 11.00
Forfeited − 11.00 (6,500) 11.00
At 30 September 328,500 11.00 193,500 11.00
As at 30 September 2022, 164,700 (2021: 158,171) shares options are
exercisable.
24. 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:
2022 2021
Numerator
Loss for the financial year attributable to the owners
of the parent (US$) (5,936,622) (5,781,316)
Denominator
Weighted average number of ordinary shares for the
purposes of basic and diluted loss per share 2,910,619 2,823,964
Loss per share (US$)
Basic and diluted (2.04) (2.05)
In the current and previous financial year, 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. Accordingly, the dilutive effect arising
from the dilutive share options and full conversion of convertible notes into
ordinary shares are not considered.
25. Significant related party transactions
During the financial year, in addition to the information disclosed elsewhere
in these financial statements, the Group entered into the following
significant transactions with related parties at rates and terms agreed
between the parties:
2022 2021
US$ US$
Related party(#):
- Management fees 218,159 497,849
- Advances to 395,516 592,278
- Repayment by − (48,013)
Corporate shareholder(*):
Interest on shareholder's loans (Note 7) 115,890 243,547
Shareholder's loans (Note 18) 1,500,000 5,743,547
Subscription of convertible notes (Note 22) 3,500,000 −
Director of the subsidiaries:
- Professional fees 42,000 90,000
(#) Related party refer to entities where a Director of certain Group's
subsidiaries has beneficial interests.
(* ) Corporate shareholder refers to MACAN, a substantial shareholder.
The outstanding balances as at reporting date with related parties are
disclosed in Notes 12, 16 and 20 to the financial statements, respectively.
Key management personnel remuneration
Key management personnel are those persons having the authority and
responsibility for planning, directing and controlling the activities of the
Company, directly or indirectly. The Company's key management personnel are
the Directors of the Company and its subsidiaries.
The remuneration of key management personnel of the Company and its
subsidiaries during the financial year are as follows:
2022 2021
US$ US$
Short−term benefits 809,123 601,227
Other staff benefits 148,175 77,210
Share−based compensation
- Share bonus (Note 6) 175,000 640,000
- ESOS (Note 23(e)) 160,215 138,360
1,292,513 1,456,797
26. Commitment
At each reporting date, commitments in respect of capital expenditure, are as
follows:
2022 2021
US$ US$
Capital expenditure contracted but not provided for
- Property, plant and equipment 296,219 -
27. Segment information
Management has determined the operating segments based on the reports reviewed
by the chief operating decision maker (Note 2.18).
Management monitors the Group's operations from both a geographic and sector
perspective.
Geographically, management manages and monitors the business in these primary
geographic areas: Singapore, Vietnam and Myanmar.
For management purposes, the Group is organised into business units based on
its services, and has three reportable operating segments as follows:
a) Education - Operation of education businesses ranging from early years
to tertiary education and including vocational training, consultancy, advisory
and project management services in the education sector in Myanmar and in
Vietnam;
b) Services - Provision of integrated security services, consultancy,
advisory and project management services in the security and hospitality
sectors in Myanmar. This reportable segment has been formed by aggregating the
relevant operating entities, which are regarded by management to exhibit
similar economic characteristics; and
c) Others - Corporate services, management support and certain shares
services to subsidiaries of the Group.
The "Others" operating segment includes the Group's minor trading and
investment holding activities which are not included within reportable
segments as (i) they are not separately reported to the chief operating
decision maker, and (ii) they contribute minor amounts of revenue to the
Group.
The Group's reportable segments are strategic business units that are
organised based on their function and targeted customer groups. They are
managed separately because each business unit requires different skill sets
and marketing strategies.
Management monitors the operating results of the segments separately for the
purposes of making decisions about resources to be allocated and assessing
performance. Segment performance is evaluated based on operating profit or
loss which is similar to the accounting profit or loss. Income taxes are
managed by the management of respective entities within the Group.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. There is no
asymmetrical allocation to reportable segments. Management evaluates
performance on the basis of profit or loss from operations before income tax
expense not including non−recurring gains and losses and foreign exchange
gains or losses. There is no change from prior periods in the measurement
methods used to determine reported segment profit or loss.
Income taxes are managed by the management of respective entities within the
Group.
The Key Management Personnel assesses the performance of the operating
segments based, among others, measure of (i) earnings before interest, income
tax, depreciation and amortisation ("Adjusted EBITDA"), and (ii) Adjusted
EBITDA less amortisation of right-of-use assets and interest on lease
liabilities ("Adjusted EBITDA after impact of ROUs"), among others. These
measurements basis excludes the effects of expenditure from the operating
segments such as impairments and reversal of impairments that are not expected
to recur regularly in every period and are separately analysed.
All income and expenses are allocated to the respective operating segments
based on the entities within each operating segment, except for interest
expenses which as this type of activity is managed centrally.
Business segments
Education Services Others Total
US$ US$ US$ US$
2022
Revenue 12,112,271 5,794,603 − 17,906,874
Cost of services (6,103,995)* (3,820,475)* − (9,924,470)*
Gross profit 6,008,276 1,974,128 − 7,982,404
Other income 20,539 48,868 11,304 80,711
Foreign exchange (loss)/gain, net (901,889) (85,078) 14,708 (972,259)
Administrative and other
operating expenses (9,539,048)** (1,289,239) (1,348,326)(#) (12,176,613)
(Loss)/profit from operations (4,412,122) 648,679 (1,322,314) (5,085,757)
Finance cost (708,281) (38,507) (115,890) (862,678)
Segment (loss)/profit before tax (5,120,403) 610,172 (1,438,204) (5,948,435)
Income tax expense − (33,646) − (33,646)
(Loss)/profit after income tax (5,120,403) 576,526 (1,438,204) (5,982,081)
Other non-cash items:
Total depreciation of plant and equipment
401,164 34,373 826 436,363
Total amortisation of right-of-use asset
2,496,729 198,141 − 2,694,870
Total amortisation of intangible assets 70,504
3,838 − 74,342
Impairment of trade and other receivables
− 15,453 − 15,453
Reversal of impairment of intangible assets (30,000)
− − (30,000)
Finance costs (excluding interest on lease liabilities)
− − 115,890 115,890
Total interest on lease liabilities 708,281 46,089 − 754,370
3,646,678 297,894 116,716 4,061,288
Adjusted EBITDA (1,473,725) 908,066 (1,321,488) (1,887,147)
Adjusted EBITDA after impact (4,678,735) 663,836 (1,321,488) (5,336,387)
of ROUs
* Cost of services arising from "Education" and "Services" segments comprise
mainly employee benefits expenses of US$3,653,927 and US$3,364,578,
respectively.
** Include marketing expenses of US$1,899,581.
(#) Include employee benefits expenses and professional fees of US$842,765
and US$317,977, respectively.
Education Services Others Total
US$ US$ US$ US$
2022
Reportable segment assets 21,782,026 3,228,058 296,477 25,306,561
Financial assets at FVOCI - - 157,062 157,062
Total Group's assets 25,463,623
Included in the segment assets:
Additions:
- Plant and equipment 1,656,265 27,931 − 1,684,196
- Right−of−use assets 4,562,213 292,014 − 4,854,227
- Intangibles 245,580 − − 245,580
Reportable segment liabilities (23,440,701) (943,810) (1,954,617) (26,339,128)
representing total Group's liabilities
Education Services Others Total
US$ US$ US$ US$
2021
Revenue 9,308,306 5,677,731 − 14,986,037
Cost of services (6,272,154)* (4,194,551)* − (10,466,705)
Gross profit 3,036,152 1,483,180 − 4,519,332
Other income 56,702 7,269 6,379 70,350
Foreign exchange (loss)/gain, net 743,148 38,012 (13,327) 767,833
Administrative and other (6,809,015)** (1,656,974) (1,854,576)(#) (10,320,565)
operating expenses
(Loss)/profit from operations (2,973,013) (128,513) (1,861,524) (4,963,050)
Finance cost (718,751) (37,694) (243,547) (999,992)
Segment (loss)/profit before tax (3,691,764) (166,207) (2,105,071) (5,963,042)
Income tax credit/(expense) 166,505 (51,817) − 114,688
Loss after income tax (3,525,259) (218,024) (2,105,071) (5,848,354)
Other non−cash items:
Total depreciation of plant and equipment 386,646 31,585 826 419,057
Total amortisation of right-of-use asset 2,374,423 186,452 − 2,560,875
Total amortisation of intangible assets 112,143 1,541 − 113,684
Impairment of trade and other receivables 1,004,384 − − 1,004,384
Finance costs (excluding interest on lease liabilities) 243,547 243,547
− −
Total interest on lease liabilities 718,751 37,694 − 756,445
4,596,347 257,272 244,373 5,097,992
Adjusted EBITDA 904,583 91,065 (1,860,698) (865,050)
Adjusted EBITDA after impact (2,188,591) (133,081) (4,182,370)
of ROUs (1,860,698)
* Cost of services arising from "Education" and "Services" segments
comprise mainly employee benefits expenses of US$4,080,329 and US$3,665,149,
respectively.
** Include impairment loss on amount due from a related party of US$1,004,384.
(#) Include employee benefits expenses and professional fees of
US$1,427,509 and US$422,934, respectively.
Reportable segment assets 19,398,361 2,682,549 322,020 22,402,930
Financial assets at FVOCI - - 314,125 314,125
Total Group's assets 22,717,055
Included in the segment assets:
Additions:
- Plant and equipment 177,663 31,691 1,144 210,498
- Right−of−use assets 2,857,920 683,767 − 3,541,687
- Intangibles 2,729 − − 2,729
Reportable segment liabilities (16,242,496)
representing total Group's liabilities
(1,324,000) (6,603,731) (24,170,227)
Geographical segments
The Group operates in three main geographical areas. Revenue is based on the
country in which the customers are located. Segmental non−current assets
consist primarily of non−current assets other than financial instruments and
deferred tax assets. Segment non−current assets are shown by geographical
area in which the assets are located.
2022 2021
US$ US$
Revenue
Singapore 33,079 −
Myanmar 10,482,770 7,507,002
Vietnam 7,391,025 7,479,035
17,906,874 14,986,037
Segment non−current assets
Singapore 25,450 1,603
Myanmar 7,554,647 8,015,138
Vietnam 12,408,875 9,643,022
19,988,972 17,659,763
Non−current assets consist of plant and equipment, intangible assets and
right−of−use assets in the consolidated statements of financial position
of the Group.
28. Financial instruments and financial risks
The Group's activities have exposure to credit risks, market risks (including
foreign currency risks, interest rates risks and equity price risk) and
liquidity risks arising in the ordinary course of business. The Group's
overall risk management strategy seeks to minimise adverse effects from the
volatility of financial markets on the Group's financial performance.
The Board of Directors are responsible for setting the objectives and
underlying principles of financial risk management for the Group. The Group's
management then establishes the detailed policies such as risk identification
and measurement, exposure limits and hedging strategies, in accordance with
the objectives and underlying principles approved by the Board of Directors.
There has been no change to the Group's exposure to these financial risks or
the manner in which the risks are managed and measured, except for those key
estimates and judgements applied in Note 3 to the financial statements.
The Group does not hold or issue derivative financial instruments for trading
purposes or to hedge against fluctuations, if any, in interest rates and
foreign exchange rates.
28.1 Credit risks
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group has adopted a policy of only dealing with creditworthy
counterparties as a means of mitigating the risk of financial loss from
defaults or requiring advance payments from customers. The Group performs
ongoing credit evaluation of its counterparties' financial condition and
generally do not require collaterals.
The Board of Directors has established a credit policy under which each new
customer is analysed individually for creditworthiness before the Group's
standard payment and delivery terms and conditions are offered.
The Board of Directors determines concentrations of credit risk by quarterly
monitoring the creditworthiness rating of existing customers and through a
monthly review of the trade receivables' ageing analysis.
Excluding the amounts due from a related party, the Group has significant
credit exposure arising from 1 (2021: 10) trade receivables amounting to
US$104,430 (2021: US$408,168), representing 16% (2021: 55%) of the total trade
receivables from third parties.
The Group has significant credit exposure arising from trade and non−trade
receivables due from a related party amounting to US$Nil and US$899,486 (2021:
US$52,926 and US$503,970), representing 28% (2021: 23%) of the total current
and non-current trade and other receivables.
As the Group do not hold any collateral, the maximum exposure to credit risk
to each class of financial instruments is the carrying amount of that
financial instruments presented in the consolidated statement of financial
position.
Expected credit loss assessment for trade receivables from third parties
The Group applies the simplified approach to measure the expected credit
losses for trade receivables. To measure expected credit losses on a
collective basis, trade receivables are grouped based on similar credit risk
and ageing.
The expected loss rates are based on the Group's historical credit losses
experienced. The historical loss rates are then adjusted for current and
forward−looking information on macroeconomic factors affecting the Group's
customers. The Board of Directors has identified the gross domestic product
(GDP), unemployment rate and inflation rate as the key macroeconomic factors
in the countries.
Expected credit loss assessment for trade receivables from third parties
(Continued)
The following table provides information about the exposure to credit risk and
expected credit loss for the Group's trade receivables from third parties as
at 30 September 2022.
2022 2021
US$ US$
Current 533,758 634,177
Past due 1 to 30 days 28,768 140,698
Past due 31 to 60 days 62,005 18,231
Past due over 60 days 30,718 23,484
655,249 816,590
The Group has assessed that the trade receivables due from third parties are
subject to immaterial expected credit losses.
Expected credit loss assessment for trade and other receivables due from a
related party, and third party
(a) Movement in the loss allowance for trade and other receivables
are as follows:
2022 2021
US$ US$
At 1 October 4,680,451 3,676,067
Loss allowance recognised during the year 15,452 1,004,384
At 30 September 4,695,903 4,680,451
(b) Based on management's review, loss allowance of US$15,453
(2021: US$ Nil) for a third party has been made which has been identified as
credit impaired.
(c) For amount due a related party (Note 16), the Board of Directors
has taken into account information that it has available internally about
related party's past, current and expected operating performance and cash flow
position. Board of Directors monitors and assess at each reporting date on any
indicator of significant increase in credit risk on the amount due from a
related party, by considering their performance and any default in external
debts.
Based on their review, other receivables relating to related party has been
identified as credit impaired. In the previous financial year, a loss
allowance of US$1,004,384 for amounts due from a related party relating to
other receivables for the operation of the managed language centres) as above
has been made which has been identified as credit impaired. The loss
allowances are measured at an amount equal to lifetime expected credit losses.
Other receivables due from third parties
For other receivables, the Board of Directors adopts a policy of dealing with
high credit quality counterparties. Board of Directors monitors and assess at
each reporting date on any indicator of significant increase in credit risk on
these other receivables. Full impairment have been made on amounts due from
third parties in respect of advances to the owners of the hostels. Other than
those impaired as detailed in Note 16 to the financial statements, other
receivables are measured at 12−month expected credit loss and subject to
immaterial credit loss.
Cash and cash equivalents and fixed deposits
Cash and cash equivalents and fixed deposits are mainly deposits with
reputable banks with high credit ratings assigned by international credit
rating agencies.
The cash and cash equivalents and fixed deposits are held with banks which are
rated Baa2 to Aaa, based on Moody's rating. The Board of Directors monitors
the credit ratings of counterparties regularly. Impairment on cash and cash
equivalents and fixed deposits have been measured on the 12−month expected
loss. At the reporting date, the Group did not expect any credit losses from
non−performance by the counterparties.
The cash and cash equivalents and fixed deposits are categorised under the
following countries:
2022 2021
US$ US$
Myanmar 1,303,696 1,369,988
Singapore 468,118 371,364
Vietnam 208,418 524,530
1,980,232 2,265,882
28.2 Market risks
Market risk arises from the Group's use of interest bearing, tradable and
foreign currency financial instruments. It is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates (currency risk), interest rates (interest rate risk)
or other market factors (equity price risk).
Foreign currency risks
Foreign exchange risk arises when individual entities within the Group enters
into transactions denominated in a currency other than their functional
currency.
The currencies that give rise to this risk of the Group are primarily Myanmar
Kyats ("Kyat"), Vietnam Dong ("VND"), Singapore dollar ("SGD"), British Pound
("GBP") and Euro.
There is an exposure to Myanmar Kyat ("Kyat") as the Myanmar subsidiaries have
USD as functional currency.
The Group have not entered into any currency forward exchange contracts as at
the end of the reporting period.
The Group's material exposure from foreign currency denominated financial
assets and financial liabilities as at the end of the reporting period is as
follows:
United States Dollar Myanmar Kyat Vietnamese Dong Others Total
US$ US$ US$ US$ US$
2022
Financial assets 3,486,500 810,168 730,807 281,285 5,308,760
Financial liabilities (5,214,893) (3,436,292) (7,447,532) (258,134) (16,356,851)
Net financial (liabilities)/assets (1,728,393) (2,626,124) (6,716,725) 23,151 (11,048,091)
Add: Net financial liabilities/(assets) denominated in the respective (2,584,579) (79,376) 6,429,565 214,305 3,979,915
entities' functional currencies
Currency exposure of financial assets/(liabilities) net of those denominated (4,312,972) (2,705,500) (287,160) 237,456 (7,068,176)
in the respective entities' functional currencies
2021
Financial assets 2,107,492 1,386,661 936,854 80,203 4,511,210
Financial liabilities (10,415,963) (2,539,237) (5,126,193) (111,088) (18,192,481)
Net financial (liabilities)/assets (8,308,471) (1,152,576) (4,189,339) (30,885) (13,681,271)
Add: Net financial liabilities/(assets) denominated in the respective 8,402,446 112,246 4,189,339 − 12,704,031
entities' functional currencies
Currency exposure of financial assets/(liabilities) net of those denominated 93,975 (1,040,330) − (30,885) (977,240)
in the respective entities' functional currencies
Foreign currency sensitivity analysis
The following table details the Group's sensitivity to 30% (2021: 30%) change
in Myanmar Kyat ("Kyat ") against United States dollar. The sensitivity
analysis assumes an instantaneous change in the foreign currency exchange
rates from the end of the reporting dated, with all variables held constant.
Gain/(Loss)
2022 2021
US$ US$
Myanmar Kyats
Strengthen against United States dollar (812,000) (312,000)
Weaken against United States dollar 812,000 312,000
Interest rate risk
The Group is not exposed to any significant interest rate risk as at reporting
date as it does not have significant variable interest bearing financial
assets and liabilities. The Group is primary exposed to fixed rate interest
bearing loans from a shareholder. Accordingly, interest rate risk sensitivity
analysis disclosure is deemed not necessary.
Equity price risks
The Group holds strategic equity investments in other companies where those
complement the Group's operations (see Note 14 to the financial statements).
The directors believe that the exposure to market price risk from this
activity is acceptable in the Group's circumstances.
Equity price sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to
equity price risks at each reporting date.
The effect of a 20% (2021: 20%) increase in the value of the equity investment
held at the reporting date would, all other variables held constant, have
resulted in an increase in the fair value through other comprehensive income
reserve and net assets of US$31,000 (2021: US$63,000). A 20% decrease in their
value would, on the same basis, have decreased the fair value through other
comprehensive income reserve and net assets by the same amount.
28.3 Liquidity risks
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The following table details the Group's remaining contractual maturity for its
non−derivative financial liabilities. The table has been drawn up based on
undiscounted cash flows of financial liabilities based on the earlier of the
contractual date or when the Group is expected to pay. The table includes both
expected interest and principal cash flows.
Less Between Between Over Total
than 1 1 and 2 2 and 5 5 years
year years years
US$ US$ US$ US$ US$
2022
Trade and other payables 3,594,478 − − − 3,594,478
Bank loan 115,530 − − − 115,530
Loans from a shareholder − 1,657,500 − − 1,657,500
Lease liabilities 2,589,378 3,577,548 5,348,376 1,968,165 13,483,467
6,299,386 5,235,048 5,348,376 1,968,165 18,850,975
2021
Trade and other payables 2,677,755 − − − 2,677,755
Loans from a shareholder − − 6,981,273 − 6,981,273
Lease liabilities 2,442,610 3,273,925 4,645,407 1,362,171 11,724,113
5,120,365 3,273,925 11,626,680 1,362,171 21,383,141
29. Financial instruments and financial risks
Financial instruments and measurements
Financial instruments not measured at fair value
Financial instruments not measured at fair value includes cash and cash
equivalents and fixed deposits, current trade and other receivables (excluding
prepayments, sales taxes, due from a related party and advances), long term
rental deposits and trade and other payables. Due to their short−term
nature, the carrying amount of these current financial assets and financial
liabilities measured at amortised costs approximate their fair value.
The carrying amounts of the bank loan and loans due to a shareholder
approximates its fair value as the fixed interest rate approximates market
interest rates for such liabilities.
The non-current receivables due from a related party (Note 16) amounting to
US$899,486 (2021: US$503,970) has an estimated fair value of US$899,486 (2021:
US$318,328), is measured according to Level 2 of the fair valuation hierarchy.
The fair value of the amount due from a related party is determined based on
discounted cash flow method, taking into consideration the estimated duration
required for the related party to repay and the market interest rate used for
discounting to present value.
The carrying amounts of non-current receivables and non-current rental
deposits approximate their fair value due to insignificant effects of
discounting.
Financial instruments measured at fair value
The financial instruments as disclosed in Note 14 to the financial statements
included in Level 1 of the fair value hierarchy, are traded in active market
and their fair values are based on quoted market prices at the reporting date.
There were no transfers between levels during the financial year.
There have been no changes in the valuation techniques of the various classes
of financial instruments during the financial year.
30. Capital risk management policies and objectives
The Group manages its capital to ensure that the Group is able to continue as
a going concern and maintains an optimal capital structure so as to maximise
shareholder value. The Group sets the amount of capital it requires in
proportion to risk. The Group manages its capital structure and makes
adjustments to it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the
capital structure, the Group may issue new shares and enter into new debt
arrangements.
The capital structure of the Group consists of equity attributable to the
equity holders of the Company comprising issued capital, other reserves, loans
from a shareholder and convertible notes.
The Group's management reviews the capital structure on an annual basis. As
part of this review, management considers the cost of capital and the risks
associated with each class of capital. The Group's overall strategy remains
unchanged from 30 September 2021.
The Group is not subject to externally imposed capital requirements for the
financial year ended 30 September 2022 and 30 September 2021.
Management monitors capital based on a gearing ratio.
The gearing ratio is calculated as net debt divided by total capital. Net debt
is calculated as shareholder's loans, lease liabilities, bank loan less cash
and cash equivalents and fixed deposits. Total capital is calculated as equity
plus net debt.
2022 2021
US$ US$
Net debt (excl. shareholder's loans) 9,239,721 7,505,297
Shareholder's loans (Note 18) 1,500,000 5,743,547
Total equity (875,505) (1,453,172)
Total capital 9,864,216 11,795,672
Gearing ratio 109% 112%
Adjusted gearing ratio * 94% 64%
* Excluded shareholder's loan, as MACAN has
indicated that it will not demand repayment within the next 12 months from the
date of approval of the annual report.
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