TIDMCSFG
RNS Number : 8816I
CSF Group PLC
14 December 2015
Embargoed until 7am 14 December 2015
CSF Group plc
("CSF" or "the Group")
HALF-YEAR RESULTS
For the six months ended 30 September 2015
CSF Group plc (AIM: CSFG), a leading provider of data centre
facilities and services in South East Asia and the largest provider
of data centre services in Malaysia, today announces its unaudited
half-year results for the six months ended 30 September 2015.
Financial highlights:
-- Group revenue of RM34.1m (GBP5.1m*) (H1 2015: RM47.5m (GBP7.1m*)).
-- Profit before tax of RM1.8m** (GBP0.3m*) compared to a loss
before tax of RM6.4m (GBP1.0m*) for the corresponding period of the
previous financial year.
-- Earnings per share : 0.72 sen (0.11p*) per share (H1 2015:
loss of 4.15 sen (loss 0.62p*) per share).
-- Closing cash position as at 30 September 2015 higher at
RM46.7m (GBP7.0m*) (31 March 2015: RM29.2m (GBP4.4m*)). The higher
cash position was mainly due to cash receipts of advances and trade
receivable from the CX5 project owner upon the completion of Block
C of CX5 in June 2015, amounting to RM31.4 million (GBP4.7m*).
Operational highlights:
-- Completed the fit-out works for two new tenancy contracts at
Block A and Block B of CX5 in time for the commencement of the
tenancies in July 2015 and October 2015 respectively.
-- Completed the negotiations with the freeholder of CX1, CX2
and CX5 data centres to restructure the lease rental payments in
December 2015. The freeholder has agreed to revise the terms of the
leases of CX1, CX2 and CX5 that includes rescheduled terms of
payment that would improve the operating cash flow of the Group
especially in the earlier years and a revision of the lease period
to 9 years commencing 1 January 2016 with an option to extend for
an additional 16 years.
-- Enhancement of the terms of certain tenancy agreements in
order to arrive at rental prices that are more commensurable to the
level of data centre infrastructure and services provided to the
tenants.
-- Continuing to pursue the pipeline of potential customers.
* The proforma balances in pounds Sterling are included solely
for convenience. The proforma balances in pounds Sterling are
stated, as a matter of arithmetical computation only, on the basis
of all current and prior year balances being translated from
Malaysian Ringgits into pounds Sterling at the rate prevailing on
30 September 2015 of RM6.6715 : GBP1.00. This translation should
not be construed as meaning that the Malaysian Ringgit amounts
actually represent, have been, or could be converted into the
stated number of pounds Sterling.
** Includes a reversal and utilisation of provision of onerous
leases of RM23.0m (GBP3.5m*) and reversal of impairment of tangible
assets of RM13.1m (GBP2.0m*).
For further information:
CSF Group
Phil Cartmell, Chairman +603 8318 1313
Allenby Capital Limited (Nominated Adviser
& Broker)
Nick Naylor / David Hart / Alex Brearley +44 (0)20 3328 5656
CHAIRMAN'S STATEMENT
Overview of the current financial period
The Group continued to incur gross loss during the six months
ended 30 September 2015 as both the CX2 and CX5 data centres have
not yet attained the optimum level of occupancy. The recently
completed fit out works for two new tenancy contracts only started
to generate rental revenue in H1 2016 and H2 2016 respectively.
The profit before tax for the financial period was RM1.8m
(GBP0.3m*) compared to the loss before tax of the corresponding
period of the previous financial year ("H1 2015") of RM6.4m
(GBP1.0m*) mainly due to the inclusion of the following items in
the results of H1 2016:
(i) reversal and utilisation of provision of onerous lease of RM23.0m (GBP3.5m*); and
(ii) reversal of impairment of tangible assets of RM13.1m (GBP2.0m*).
As at 30 September 2015 the Group has cash and cash equivalents
of RM46.7m (GBP7.0m*) (31 March 2015: RM29.2m (GBP4.4m*)). In
addition, the Group has approximately RM36.9m (GBP5.5m*) (31 March
2015: RM68.4m (GBP10.3m*)) tied up as working capital for the
development of CX5 which will be received progressively in line
with the expiry of the warranty period of certain components of the
fit-out works, which is expected to end in the first half of
financial year ending 31 March 2018.
The Group has completed its negotiations with the freeholder of
CX1, CX2 and CX5 data centres to restructure the lease rental
payments in December 2015. The salient terms agreed by the
freeholder are as follows:
(i) Settlement of the outstanding lease rental payable accrued
up to 31 December 2015 by way of monthly instalments over a period
of ten (10) years commencing on 1 January 2016 ("Debt Settlement").
The monthly instalment payments, which shall include finance
charges, shall be lower in the earlier years and progressively
increasing thereafter;
(ii) Restructured schedule of lease rental payments commencing 1
January 2016 whereby the lease rental payments shall be lower in
the earlier years and progressively increasing thereafter
("Restructured Lease Rental Payments"); and
(iii) The tenure of the leases for CX1, CX2 and CX5 shall be 9
years commencing 1 January 2016 with an option to extend by an
additional 16 years subject to lease rental rates to be mutually
agreed between the parties at the relevant time ("Revised Lease
Period").
The above terms will be encapsulated in the following agreements
to be executed in due course between the Group and the
freeholder:
(a) Debt Settlement Agreement pertaining to the Debt Settlement; and
(b) Supplemental Lease Agreement pertaining to the Restructured
Lease Rental Payments and the Revised Lease Period.
The completion of the restructuring of the lease rental payments
will reduce the burden on operating cash flow whilst allowing the
Group to focus on securing new tenancy contracts in order to
further reduce the burn rate of its cash reserve.
Current trading and outlook
As highlighted in last year's results, which were announced in
July 2015, the Group remains focused on filling the remaining
capacity of its data centres. It has also undertaken a number of
strategic initiatives to improve its financial performance.
Given the need to reduce the burn rate of our cash reserves, the
Board will continue to ensure that there is no significant cash
outlay other than sums required to cover the committed lease
rentals and other necessary operating overheads, subject to any
further capital or operating expenditure that may be required in
relation to tenancy contracts.
The Board believes that the key strategic initiatives that are
being undertaken have positioned the business in the right
direction and seen some positive development in the Group, the
Board remains focused on these plans going forward.
The Board and management team continue to follow-up on the key
strategies and pursue the pipeline of potential customers and
business alliances. An update will be made to shareholders on this
progress in due course.
Dividends
The Board does not propose any payment of dividends in respect
of the six month period ended 30 September 2015 (H1 2015: Nil).
Phil Cartmell
Chairman
CSF Group plc
* The proforma balances in pounds Sterling are included solely
for convenience. The proforma balances in pounds Sterling are
stated, as a matter of arithmetical computation only, on the basis
of all current and prior year balances being translated from
Malaysian Ringgits into pounds Sterling at the rate prevailing on
30 September 2015 of RM6.6715 : GBP1.00. This translation should
not be construed as meaning that the Malaysian Ringgit amounts
actually represent, have been, or could be converted into the
stated number of pounds Sterling.
CHIEF FINANCIAL OFFICER'S REVIEW
Introduction
The Group recorded basic earnings per share ("EPS") of 0.72 sen
(0.11 p*) (H1 2015: loss 4.15 sen (loss 0.62 p*)).
Financial results
Proforma
------------------------- ------------------------------ ------------------------------
6 months 6 months 6 months 6 months
ended ended ended ended
30 September 30 September 30 September 30 September
2015 2014 2015 2014
RM'000 RM'000 GBP'000 GBP'000
(unaudited) (unaudited) (unaudited) (unaudited)
------------------------- -------------- -------------- -------------- --------------
Total Group revenue 34,072 47,523 5,107 7,123
------------------------- -------------- -------------- -------------- --------------
Gross loss (22,550) (12,617) (3,380) (1,891)
------------------------- -------------- -------------- -------------- --------------
Other operating income 8 4 1 1
------------------------- -------------- -------------- -------------- --------------
Gain on disposal
of joint venture - 17,001 - 2,548
------------------------- -------------- -------------- -------------- --------------
Share of loss after
tax of joint venture - (1,309) - (196)
------------------------- -------------- -------------- -------------- --------------
Administrative expenses (8,088) (9,549) (1,211) (1,431)
------------------------- -------------- -------------- -------------- --------------
Bad debts written
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off (51) (379) (8) (57)
------------------------- -------------- -------------- -------------- --------------
Net allowance for
doubtful debts (1,160) 488 (174) 73
------------------------- -------------- -------------- -------------- --------------
Reversal of impairment
of tangible assets 13,100 - 1,964 -
------------------------- -------------- -------------- -------------- --------------
Reduction of contingent
consideration 950 - 142 -
------------------------- -------------- -------------- -------------- --------------
Provision of onerous
leases 23,025 3,906 3,451 585
------------------------- -------------- -------------- -------------- --------------
Profit / (loss) from
operations 5,234 (2,455) 785 (368)
------------------------- -------------- -------------- -------------- --------------
Net finance income
/ (cost) 369 (3) 55 -
------------------------- -------------- -------------- -------------- --------------
Unwinding of discounts
on provision (3,825) (3,906) (573) (585)
------------------------- -------------- -------------- -------------- --------------
Profit / (loss) before
tax 1,778 (6,364) 267 (953)
------------------------- -------------- -------------- -------------- --------------
Tax (619) (279) (93) (42)
------------------------- -------------- -------------- -------------- --------------
Profit / (loss) for
the financial period 1,159 (6,643) 174 (995)
------------------------- -------------- -------------- -------------- --------------
Net foreign exchange
(loss) / gain (704) 29 (106) 4
------------------------- -------------- -------------- -------------- --------------
Total comprehensive
income for the period 455 (6,614) 68 (991)
------------------------- -------------- -------------- -------------- --------------
Basic EPS 0.72 sen (4.15) sen 0.11 p (0.62) p
------------------------- -------------- -------------- -------------- --------------
Revenue
Proforma
---------------------------- ------------------------------ ------------------------------
6 months 6 months 6 months 6 months
ended ended ended ended
30 September 30 September 30 September 30 September
2015 2014 2015 2014
RM'000 RM'000 GBP'000 GBP'000
(unaudited) (unaudited) (unaudited) (unaudited)
---------------------------- -------------- -------------- -------------- --------------
Data centre rental
income 26,826 33,473 4,021 5,017
---------------------------- -------------- -------------- -------------- --------------
Maintenance income 4,794 5,238 719 785
---------------------------- -------------- -------------- -------------- --------------
31,620 38,711 4,740 5,802
---------------------------- -------------- -------------- -------------- --------------
Design and fit-out
of data centre facilities 2,452 8,812 367 1,321
---------------------------- -------------- -------------- -------------- --------------
Total Group revenue 34,072 47,523 5,107 7,123
---------------------------- -------------- -------------- -------------- --------------
Data centre rental revenue decreased by 19.9% from RM33.5m
(GBP5.0m*) in H1 2015 to RM26.8m (GBP4.0m*) in the six months under
review, mainly due to the non-renewal of a tenancy contract at CX2
which expired in November 2014.
Revenue from the design and fit-out of data centre facilities
decreased from RM8.8m (GBP1.3m*) in H1 2015 to RM2.5m (GBP0.4m*)
mainly due to the completion of the final phase of the CX5 project
in the previous financial year.
Gross loss margin
The Group incurred a higher gross loss margin of 66.2% (H1 2015:
gross loss margin of 26.5%) mainly due to the lease rental expenses
on Block C of CX5 which commenced in May 2015 and the non-renewal
of a tenancy contract at CX2 which expired in November 2014.
Profit from operations
Profit from operations for the financial period amounted to
RM1.2m (GBP0.2m*) (H1 2015 loss from operations: RM2.5m
(GBP0.4m*)). The profit was mainly attributable from reversal and
utilisation of provision of onerous lease of RM23.0m (GBP3.5m*) and
reversal of impairment of tangible assets of RM13.1m
(GBP2.0m*).
Cash and working capital
As at 30 September 2015 the Group had cash and cash equivalents
of RM46.7m (GBP7.0m*). The Group incurred a higher net operating
cash outflow of RM6.6m (GBP1.0m*) compared to a net operating cash
outflow of RM2.7m (GBP0.4m*) in H1 2015 mainly due to higher
operating cost with the commencement of the lease of Block C of CX5
in May 2015 and the delay in collection of trade receivables.
The net cash flow generated from investing activities of RM27.1m
(GBP4.1m*) was mainly due to the repayment of advances by CX5
project owner of RM27.9m (GBP4.2m*) in June 2015 and partially
offset by the utilisation of RM1.5m (GBP0.2m*) to purchase
additional plant and equipment.
Critical accounting judgment and key sources of estimation
uncertainty
The areas of critical accounting judgment and key sources of
estimation uncertainty as disclosed on pages 41 to 43 of the
Group's Annual Report for the year ended 31 March 2015 remain valid
for the six months ended 30 September 2015.
Post balance sheet event
The significant post balance sheet event relates to the terms of
the restructured lease rental commitments and is described in Note
13.
Going concern
These financial statements have been prepared on a going concern
basis. The directors' consideration of going concern and the
associated uncertainties are provided in Note 1.
Lee King Loon
Chief Financial Officer
CSF Group plc
* The proforma balances in pounds Sterling are included solely
for convenience. The proforma balances in pounds Sterling are
stated, as a matter of arithmetical computation only, on the basis
of all current and prior year balances being translated from
Malaysian Ringgits into pounds Sterling at the rate prevailing on
30 September 2015 of RM6.6715 : GBP1.00. This translation should
not be construed as meaning that the Malaysian Ringgit amounts
actually represent, have been, or could be converted into the
stated number of pounds Sterling.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months ended 30 September 2015
Proforma Proforma
6 months 6 months 6 months 6 months
to 30 September to 30 September to 30 September to 30 September
2015 2014 2015 2014
Note RM'000 RM'000 GBP'000 GBP'000
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 4 34,072 47,523 5,107 7,123
Cost of sales (56,622) (60,140) (8,487) (9,014)
Gross loss (22,550) (12,617) (3,380) (1,891)
Other operating
income 8 4 1 1
Gain on disposal
of joint venture - 17,001 - 2,548
Share of loss
after tax
- joint venture 5 - (1,309) - (196)
----------------- ----------------- ----------------- -----------------
Administrative
expenses (8,088) (9,549) (1,211) (1,431)
Net allowance
for doubtful debts (1,160) 488 (174) 73
Bad debts written
off (51) (379) (8) (57)
Reversal of impairment
of tangible assets 13,100 - 1,964 -
Reduction of contingent
consideration 950 - 142 -
Provision for
onerous leases 6 23,025 3,906 3,451 585
Total operating
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expenses 27,776 (5,534) 4,164 (830)
Operating profit
/ (loss) 5,234 (2,455) 785 (368)
Finance income 686 467 103 70
----------------- ----------------- ----------------- -----------------
Interest payable
on bank loans,
overdrafts and
finance leases (317) (470) (48) (70)
Unwinding of discounts
on provisions (3,925) (3,906) (573) (585)
Finance costs (4,142) (4,376) (621) (655)
Profit / (loss)
before tax 1,778 (6,364) 267 (953)
Tax (619) (279) (93) (42)
Profit / (loss)
for the financial
period 1,159 (6,643) 174 (995)
Other comprehensive
income
Foreign currency
translation (704) 29 (106) 4
Total comprehensive
income for the
period 455 (6,614) 68 (991)
EPS
* Basic (sen) 7 0.72 (4.15) 0.11 p (0.62) p
* Diluted (sen) 7 0.72 (4.15) 0.11 P (0.62) P
----------------- -----------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2015
Proforma Proforma
As at As at
As at As at 30 September 31
30 September 31 March 2015 March
Note 2015 2015 GBP'000 2015
RM'000 RM'000 GBP'000
(unaudited) (audited) (unaudited) (unaudited)
Non-current assets
Property, plant and equipment 25,716 13,446 3,855 2,015
Interest in associate - - - -
Other investments 153 153 23 23
Trade receivables 566 566 85 85
Deferred tax asset 1,510 1,969 226 295
27,945 16,134 4,189 2,418
Current assets
Inventories 2,355 2,054 353 308
Trade receivables 58,403 61,121 8,754 9,162
Other receivables 8 23,681 47,804 3,549 7,166
Current tax assets 311 242 47 36
Restricted cash 15,434 13,095 2,313 1,963
Cash and cash equivalents 48,946 31,379 7,337 4,703
149,130 155,695 22,353 23,338
Total assets 177,075 171,829 26,542 25,756
Current liabilities
Trade and other payables 94,900 73,130 14,225 10,962
Current tax liabilities 3 - 1 -
Bank borrowings 1,164 1,164 174 174
Obligations under finance
leases 140 140 21 21
96,207 74,434 14,421 11,157
Non-current liabilities
Obligations under finance
leases 223 305 33 46
Bank borrowings 916 1,498 137 225
Trade and other payables 20,712 17,830 3,105 2,672
Onerous leases 6 42,000 61,200 6,295 9,173
63,851 80,833 9,570 12,116
-------------- ----------- -------------- ------------
Total liabilities 160,058 155,267 23,991 23,273
============== =========== ============== ============
Net assets 17,017 16,562 2,551 2,483
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2015
Proforma Proforma
As at As at
As at As at 30 September 31
30 September 31 March 2015 March
Note 2015 2015 GBP'000 2015
RM'000 RM'000 GBP'000
(unaudited) (audited) (unaudited) (unaudited)
Equity/ (deficit)
Share capital 78,936 78,936 11,832 11,832
Share premium 104,499 104,499 15,663 15,663
Shares held under Employee
Benefit Trust (2,300) (2,300) (345) (345)
Other reserve (66,153) (66,153) (9,916) (9,916)
Share option reserve 4,117 4,117 617 617
Translation reserve (1,107) (403) (166) (60)
Accumulated loss (100,975) (102,134) (15,134) (15,308)
Total equity 17,017 16,562 2,551 2,483
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the 6 months ended 30 September 2015
Proforma Proforma
6 months 6 months 6 months ended
6 months ended ended ended 30 September
30 September 30 September 30 September 2014
2015 2014 2015 GBP'000
RM'000 RM'000 GBP'000
(unaudited) (unaudited) (unaudited) (unaudited)
Net cash used in operating
activities (Note 9) (6,601) (2,695) (989) (404)
Investing activities
Interest received 686 467 103 70
Capital expenditure (1,485) (3,291) (223) (493)
Repayment of advances from
joint venture - 8,921 - 1,337
Repayment of advances from
the owner of a development
project 27,936 20,000 4,189 2,998
Proceeds from sale of property,
plant and equipment - 18 - 3
Net cash generated from investing
activities 27,137 26,115 4,069 3,915
Financing activities
Repayment of obligations
under finance leases (82) (70) (13) (10)
(Increase) / decrease in
restricted cash (2,339) 1,025 (351) 154
Repayment of borrowings (582) (194) (88) (29)
Net cash (used in) / generated
from financing activities (3,003) 761 (452) 115
Net increase in cash and
cash equivalents 17,533 24,181 2,628 3,626
Cash and cash equivalents
at beginning of financial
period (Note 10) 29,182 19,839 4,374 2,974
Cash and cash equivalents
at end of financial period 46,715 44,020 7,002 6,600
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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For the 6 months ended 30 September 2015
Shares held under Employee Benefit Trust
RM'000 Translation
Share capital Share premium (unaudited) Other reserve Share option reserve Accumulated loss reserve Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
At 1 April 2014 78,936 104,499 (2,300) (66,153) 4,117 (70,980) (221) 47,898
Loss for the
period - - - - - (6,643) 29 (6,614)
At 30 September
2014 78,936 104,499 (2,300) (66,153) 4,117 (77,623) (192) 41,284
At 1 April 2015 78,936 104,499 (2,300) (66,153) 4,117 (102,134) (403) 16,562
Profit for the
period - - - - - 1,159 (704) 455
At 30 September
2015 78,936 104,499 (2,300) (66,153) 4,117 (100,975) (1,107) 17,017
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 6 months ended 30 September 2015
Proforma
Shares held under Employee Benefit Trust
GBP'000 Translation
Share capital Share premium (unaudited) Other reserve Share option reserve Accumulated loss reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
At 1 April 2014 11,832 15,663 (345) (9,916) 617 (10,639) (33) 7,179
Loss for the period - - - - - (995) 4 (991)
At 30
September 2014 11,832 15,663 (345) (9,916) 617 (11,634) (29) 6,188
At 1 April 2015 11,832 15,663 (345) (9,916) 617 (15,308) (60) 2,483
Profit for the period - - - - - 174 (106) 68
At 30
September 2015 11,832 15,663 (345) (9,916) 617 (15,134) (166) 2,551
Notes 1 to 14 form an integral part of the condensed
consolidated interim financial results.
1. General information
These preliminary announcement and condensed consolidated
interim financial results were approved for issue by the Board of
Directors on 11 December 2015 and are unaudited.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs), this announcement does not itself contain
sufficient information to comply with IFRSs. The Group published
full financial statements that comply with IFRSs in March 2015,
which were approved by the Board of Directors on 2 July 2015 and
delivered to the Jersey Registrar of Companies in September 2015.
The auditor reported on those accounts was unqualified but did
contain an emphasis of matter as described below.
In forming their opinion on the financial statements, which was
not qualified, the auditors considered the adequacy of the
disclosure made in the financial statements concerning the Group's
ability to continue as a going concern and the basis of calculation
of the onerous lease provision.
The preliminary announcement does not include the adjustments
that would result if the company was unable to continue as going
concern.
(i) Basis of preparation
The annual financial statements of the Group are prepared in
accordance with IFRSs as adopted by the European Union. The
condensed consolidated interim financial results have been prepared
in accordance with the accounting policies the Group intends to use
in preparing its next annual financial statements. The condensed
consolidated interim financial results should be read in
conjunction with the annual financial statements for the year ended
31 March 2015, which have been prepared in accordance with IFRSs as
adopted by the European Union.
(ii) Proforma
The proforma balances in pounds Sterling are included solely for
convenience. The proforma balances in pounds Sterling are stated,
as a matter of arithmetical computation only, on the basis of all
current and prior year balances being translated from Malaysian
Ringgits into pounds Sterling at the rate prevailing on 30
September 2015 of RM6.6715 : GBP1.00 This translation should not be
construed as meaning that the Malaysian Ringgit amounts actually
represent, have been or could be converted into the stated number
of pounds Sterling.
(iii) Basis of accounting
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 31 March 2015, as
described in those financial statements.
Taxes on income in interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
1. General information (Cont'd)
(iv) Forward-looking statements
Certain statements in these condensed consolidated interim
financial results are forward-looking. Although the Group believes
that the expectations reflected in these forward-looking statements
are reasonable, we can give no assurance that these expectations
will prove to have been correct. Because these statements involve
risks and uncertainties, actual results may differ materially from
those expressed or implied by these forward-looking statements.
(v) Going concern
The Directors have prepared financial projections, including
cash flows, for a period up to 31 March 2018. The projections
include sensitivity testing to consider a reasonable worst case
scenario. Based on these projections and taking into consideration
the current financial position of the Group and future capital and
lease commitments, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the annual
financial statements. In reaching this conclusion the directors
have paid particular attention to the following factors:
-- As at 30 September 2015, the Group's cash and cash
equivalents excluding deposits held on behalf of the Employee
Benefit Trust stand at RM46.7 million;
-- The positive progress that is already being made in
restructuring the business and the heightened focus on cash
management;
-- The existing cash reserves of the business, and the fact that
the Group has low levels of bank borrowings with low financial
covenants;
-- The Group's business model is to lease its data centres as
opposed to outright ownership. As a result, the Group is committed
to regular lease rental payments, which constitute a significant
proportion of the Group's cost base. The Group therefore needs to
achieve a certain level of tenant occupancy to cover the minimum
lease and other costs of ownership of a given data centre;
-- The Group has already secured new tenants for part of CX5 and
is in active discussions with a number of other potential tenants
to secure an adequate level of occupancy;
-- Due to changes in the data centre rental market, current
market rentals have declined. In this regard, the Group engaged in
active negotiations to restructure the operating lease rental of
CX1, CX2 and CX5 and the freeholder has agreed in December 2015 to
revise the existing lease rental terms with effect from 1 January
2016;
-- The Group received significant cash receipts of RM31.4
million on the advances and trade receivables from the CX5 project
owner upon the completion of Block C of CX5 in June 2015. The
balance of amounts receivable relating to the CX5 project of RM36.9
million is due to be received progressively in line with the expiry
of the warranty period of certain components of the fit-out works
relating to CX5, which is expected to end in the first half of the
financial year ending 31 March 2018;
-- The funding requirements of existing and proposed new
ventures and/or projects.
1. General information (Cont'd)
(v) Going concern (Cont'd)
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Given prevailing market conditions and the current levels of
occupancy in the Group's data centres, the Group is forecast to
continue to make operating losses and have operating cash outflows.
The Board is continuing to review the Group's business model with
the aim of establishing sustainable profitable trading.
Notwithstanding the foregoing, the financial projections show that
with the completion of the restructuring of the lease rental
commitments, the Group will be able to sustain its working capital
requirements for a period of not less than 18 months. However, the
Group will need to secure additional revenues in order to achieve a
sustainable business model. On this basis they continue to adopt
the going concern basis.
The directors note that the receipt of proceeds of the remaining
balance of CX5 project is governed by existing contractual
arrangements and that based on the current status of the
development and discussions with the project owner they have no
reason to believe that the receipt of proceeds will be subject to
significant delay or other issue. Notwithstanding the foregoing,
the Directors are of the view that the Group will be able to meet
its working capital requirements for a period of not less than 18
months even without the collection of the aforementioned
proceeds.
Premised on the above and taking into consideration the current
financial position, future capital and lease commitments of the
Group, the directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing the consolidated half-yearly
financial statements for the period ended 30 September 2015. The
financial statements do not include the adjustments that would
result if the company was unable to continue as a going
concern.
2. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 March each year. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to the
effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to
bring the accounting policies used into line with those used by the
Group. All intra-group transactions, balances, income and expenses
are eliminated on consolidation.
2. Basis of consolidation (Cont'd)
Under the purchase method of accounting, the cost of an
acquisition is measured as the aggregate of the fair values of the
assets acquired, liabilities incurred or assumed and equity
instruments issued at the date of exchange. The excess of
acquisition cost over the net fair value of the identifiable
assets, liabilities and contingent liabilities represents goodwill,
while the shortfall is immediately credited to the consolidated
income statement.
Goodwill is reviewed annually for impairment or more frequently
if events or changes in circumstances indicate that the carrying
value may be impaired.
3. Revenue recognition and contract accounting
Revenue represents amounts receivable for work carried out in
the rental of data centre space (including reimbursement for
electricity consumed by customers), design and development of data
centre facilities and the maintenance of data centres.
Revenue from design and development is recognised in the
consolidated statement of comprehensive income based on the stage
of completion which is determined based on the contract costs
incurred for work performed to date in proportion to the estimated
total contract costs and recognised over the period of the activity
and in accordance with the underlying contract. Revenue is measured
by reference to the fair value of consideration received or
receivable from customers. Cost overspends on design and
development are recognised as they arise and cost under-spends
recognised when it is known with reasonable certainty the final
position of the relevant contract. Where design and development
projects are in progress and sales invoiced exceed the value of
work completed, the excess is shown as deferred income, within
other financial assets. When it is probable that total fit-out
costs will exceed contract revenue, the expected loss is recognised
as an expense immediately.
Income from support and maintenance agreements and the rental of
data centre space is recognised on a straight line basis over the
period of the related activity. Data centre space is rented out
under operating leases.
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4. Segment reporting
The management regularly reviews segment information based on
the key products and services provided to its customers; rental of
data centre space, maintenance (including) support of data centres,
and the design and development of data centre.
Data centre Design and development of data
6 months ended rental centre Consolidated
30 September 2015 RM'000 Maintenance RM'000 RM'000 RM'000
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 26,826 4,794 2,452 34,072
Cost of Sales (53,669) (1,289) (1,664) (56,622)
Gross profit (26,843) 3,505 788 (22,550)
Other operating income 6 - 2 8
Onerous leases 23,025 - - 23,025
Administrative cost (1,224) (1,062) (1,201) (3,487)
Allowance for doubtful debts (804) - (647) (1,451)
Write back of doubtful debts - - 291 291
Bad debts written off - - (165) (165)
Staff costs (1,318) (603) (629) (2,550)
Segment depreciation (10) (8) (34) (52)
Segment result (7,168) 1,832 (1,595) (6,931)
Bad debts written back 114
Corporate costs (2,809)
Reversal of impairment of
tangible assets 13,100
Reduction of contingent
consideration 950
Gain on foreign exchange 810
Finance income 686
Finance cost (4,142)
Profit before tax 1,778
Tax (619)
Profit for the financial period 1,159
Other comprehensive income
Foreign exchange loss (704)
Total comprehensive income for
the period 455
4. Segment reporting (continued)
Data centre Design and development of data
6 months ended rental centre Consolidated
30 September 2014 RM'000 Maintenance RM'000 RM'000 RM'000
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 33,473 5,238 8,812 47,523
Cost of Sales (50,143) (2,234) (7,763) (60,140)
Gross profit (16,670) 3,004 1,049 (12,617)
Other operating income - - 4 4
Onerous leases 3,906 - - 3,906
Administrative cost (1,869) (603) (823) (3,295)
Allowance for doubtful debts (102) - - (102)
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Write back of doubtful debts 346 - 244 590
Loss on disposal of plant and
equipment (46) - - (46)
Staff costs (2,370) (391) (735) (3,496)
Segment depreciation (14) (10) (44) (68)
Segment result (16,819) 2,000 (305) (15,124)
Bad debts written off (379)
Corporate costs (2,436)
Loss on foreign exchange (208)
Gain on disposal of joint
venture 17,001
Share of loss of jointly
controlled entity (1,309)
Finance income 467
Finance cost (4,376)
Loss before tax (6,364)
Tax (279)
Loss for the financial period (6,643)
Foreign exchange gain 29
Total comprehensive income for
the period (6,614)
5. Joint venture
Six months Six months
ended ended
30 September 30 September
2015 2014
RM'000 RM'000
(unaudited) (unaudited)
Share of loss after tax - joint venture - 1,309
The prior year loss represents the share of result of the
Group's former investment in PT Cyber CSF, which is incorporated in
Jakarta, Indonesia. The Group owned 49% of the equity interest in
the entity. On 22 May 2014, the Group completed the disposal of its
entire interest in PT Cyber CSF including the settlement of the net
receivable owed by PT Cyber CSF.
6. Onerous leases
As at As at
30 September 31 March
2015 2015
Movement in provision of onerous leases RM'000 RM'000
(unaudited) (audited)
At start of financial period/ year 61,200 62,500
(Reversal) / additional provision (4,519) 29,025
Utilisation of provision (18,506) (38,138)
Unwinding of discount 3,825 7,813
At end of financial period/ year 42,000 61,200
The Group's business model is to lease data centres and
committed to lease rentals and certain other costs of ownership. As
such, the Group needs to achieve a certain level of rental income
from tenants over the life of the data centre lease such that
revenue received will exceed costs.
The provision of onerous leases in the financial statements
represents the present value of the future lease payments that the
Group is presently obliged to make under non-cancellable operating
lease contracts, less revenue expected to be earned on the lease.
The estimate may vary as a result of changes in the utilisation of
the data centres. Based on the restructured lease rental
commitments, the unexpired term of the leases is approximately 9
years.
The onerous lease provision included in long term liabilities
has been calculated based on the restructured terms of the lease
rental of CX1, CX2 and CX5, and based on the assumption that the
rental revenue of the Group increases progressively over the future
period. This is a significant judgement which is considered to
represent a material uncertainty.
7 Earnings per share
The calculation for earnings per share, based on the weighted
average number of shares, is shown in the table below:
Six months Six months
ended ended
30 September 30 September
2015 2014
(unaudited) (unaudited)
Net profit / (loss) for the financial
period after taxation attributable
to members (RM'000) 1,159 (6,614)
Weighted average number of ordinary
shares for basic earnings per share
('000) 160,029 160,029
Weighted average number of ordinary
shares for diluted earnings per share
('000) 160,029 160,029
The number of ordinary shares for diluted earnings per share is
the weighted average number of ordinary shares of CSF Group plc
that would have been in issue. The calculation of the diluted
earnings per share does not assume conversion, exercise or other
issue of potential ordinary shares that would increase the net
profit or decrease the net loss per share. As the Group is
currently in a loss making position than the inclusion of potential
ordinary shares associated with share options in the diluted loss
per share calculation would serve to decrease the net loss per
share. On that basis, no adjustment has been made for diluted loss
per share.
8. Other receivable (current)
As at As at
30 September 31 March
2015 2015
RM'000 RM'000
(unaudited) (audited)
Advances to the project owner of CX5
data centre - 27,936
Deposits, prepayment and other receivables 23,681 19,868
23,681 47,804
During this period, the Group received repayment of advances of
RM27.9 million from the project owner of CX5 data centre in line
with the completion of block C of CX5.
9. Note to the cash flow statement
6 months 6 months
ended 30 ended 30
September September
2015 2014
RM'000 RM'000
(unaudited) (unaudited)
Profit / (loss) for the financial period 1,159 (6,643)
Adjustments for:
Allowance for doubtful debts 1,451 102
Allowance for doubtful debts written back (291) (590)
Bad debts written off 51 379
Depreciation of property, plant and equipment 2,315 1,881
Foreign currency translation (704) 29
Gain on disposal of joint venture - (17,001)
Loss on disposal of property, plant and
equipment - 46
Interest expense 4,142 4,376
Interest income (686) (467)
Share of loss after tax of jointly controlled
entity - 1,309
Reversal of impairment of tangible assets (13,100) -
Reduction of contingent consideration (950) -
Onerous leases (23,025) (3,906)
Tax 620 279
Operating cash outflow before movements
in working capital (29,018) (20,206)
Increase in inventories (301) (512)
(Increase) / decrease in receivables (2,309) 6,130
Increase in payables 25,570 12,630
Cash used in operations (6,058) (1,958)
Interest paid (317) (470)
Income taxes paid (226) (267)
Net cash used in operating activities (6,601) (2,695)
10. Cash and cash equivalents
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