TIDMCSFG
RNS Number : 9229E
CSF Group PLC
22 July 2016
Embargoed until 7am 22 July 2016
This announcement contains inside information
CSF Group plc
("CSF" or "the Group")
FINAL RESULTS
CSF Group (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 full year
results for the year ended 31 March 2016.
Financial highlights:
-- Group revenue of RM84.0m (GBP15.0m*) (FY2015:
RM81.8m (GBP14.6m*))
-- Loss before tax of RM33.0m (GBP5.9m*) compared
to the loss before tax of RM31.8m (GBP5.7m*)
in FY2015
-- EPS loss of 22.70 sen (loss 4.04p*) per share
(FY2015: loss 19.47 sen (loss 3.47p*) per
share)
-- Closing cash position as at 31 March 2016
of RM43.6m (GBP7.8m*) (FY2015: RM29.2m (GBP5.2m*))
Operational highlights:
-- Completed negotiations with the freeholder
of CX1, CX2 and CX5 data centres to restructure
the lease rental payments in December 2015
and heads of terms agreed (announced on 14
December 2015)
-- Currently finalizing a debt settlement agreement
and supplement lease agreement to improve
operating cash flow
-- Continuing to pursue a pipeline of potential
customers and marketing activities
-- Ongoing discussions with several potential
customers
-- Enhanced marketing efforts focusing on
potential customers and resellers
* The translation of the financial statements into pro forma
balances in pounds Sterling is included solely for convenience. The
pro forma balances in pounds Sterling are stated, as a matter of
arithmetical computation only, on the basis of all balances being
translated from Ringgit Malaysia into pounds Sterling at the rate
prevailing on 31 March 2016 of RM5.6130 : GBP1.00. This translation
should not be construed as meaning that the Ringgit Malaysia
amounts actually represent, or have been or could be translated
into the stated number of pounds Sterling.
For further information, please contact:
CSF Group
Phil Cartmell, Chairman +603 8318 1313
Allenby Capital (Nominated Adviser
and Broker)
Nick Naylor / David Hart / Alex +44 (0) 20 3328
Brearley 5656
CHAIRMAN'S STATEMENT
Overview of the Year
The Group incurred a loss for the financial year ended 31 March
2016 as both the CX2 and CX5 data centres have not yet attained the
optimum level of occupancy. However, the Group achieved a
significant improvement in reducing the gross loss from RM28.6m
(GBP5.1m*) in FY2015 to RM1.5m (GBP0.3m*) in the current financial
year. Notwithstanding the significant reduction in the gross loss,
the Group reported a higher net loss of RM36.3m (GBP6.5m*) for the
current year as compared to a net loss of RM31.2m (GBP5.6m*) in
FY2015, which was mainly attributable to a general provision for
doubtful debts to cover the inherent risks associated with trade
receivables that are expected to be collected over a longer period
of time, mitigated by a net decrease in the provision for onerous
leases due to revisions in the outlook of the data centre rental
business over the longer term.
The reduction in gross loss in the current year is mainly
attributable to the management's commendable effort in completing
the restructuring of the lease rental payments on CX1, CX2 and CX5,
with the revised lease rental rates having commenced on 1 January
2016. In addition, additional rental revenues were contributed by a
new customer at Block A of CX5 and an existing customer taking
additional capacity at Block B of CX5.
The Group had a closing cash position of RM43.6m (GBP7.8m*) at
the year end and approximately RM32.3m (GBP5.8m*) tied up as
working capital relating to the development of CX5, which is
expected to be collected progressively in line with the expiry of
the warranty period of certain components of the fit-out works, up
to the second quarter of calendar year 2017. The reasonably healthy
cash reserve was mainly attributable to the repayment during the
financial year of RM27.9m (GBP5.0m*) of the cash advances initially
given by the Group to the developer of CX5.
As reported in the half year announcement, 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 Group is in process of finalising the debt settlement
agreement and the supplemental lease agreement. With the revised
lease rental payment, operating cash flow is expected to improve
significantly.
Current Trading
The Group's immediate focus is to fill the available capacity of
the CX2 and CX5 data centres. The Board and management team
continue to follow-up on a number of key strategic initiatives and
pursue the pipeline of potential customers and business alliances.
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 are working tirelessly to reduce the
burn rate of our cash reserves. The Board will continue to ensure
that there is no significant cash outlay other than the 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.
In view of the accumulated losses of the Group, the Board is not
recommending the payment of a dividend.
Data Centre Rental
The Group now has 406,000 sq ft of data centre space and more
than 20 MW of IT power capacity in Malaysia.
During the year, a new tenancy contract was secured for Block A
of CX5 and an existing customer commissioned additional capacity at
Block B of CX5. The aforementioned events contributed positively to
the Group's financial results. The Group is actively pursuing new
customers directly and working closely with a network of resellers
and business partners to fill in the remaining available capacity
at CX2 and CX5 to a sustainable level.
The Group commissioned a fibre optic cable linking CX1, CX2 and
CX5 during the year, thereby enhancing the connectivity of the
Group's data centres which is expected to create more opportunities
to market the Group's data centre capacity. The management is now
exploring the formation of business alliances to further enhance
and extend the connectivity of the Group's data centres.
Maintenance, Design and Fit-out of Data Centres
The management continues to pursue new contracts to enhance our
recurring maintenance revenue streams and other design and fit-out
projects revenue.
Outlook
The Board will continue to support the efforts of the management
in implementing its stated business strategies which it believes
will place the Group on a solid foundation from which it can return
to profitability in the future.
The Board believes that the initiative to secure customers for
the data centre rental business is absolutely critical to the
viability of the Group's business. In this regard, the Board will
support the management's efforts in marketing and securing the
remaining space available at the Group's data centres.
The priority for the Board and management is to conserve the
Group's cash reserves, secure customers for the data centre rental
business, and strive to improve operational efficiency in order to
reduce costs.
The Board is cautiously optimistic that the Group's financial
results will improve in the next financial year.
Phil Cartmell
Chairman
22 July 2016
CHIEF FINANCIAL OFFICER'S REVIEW
Introduction
The Group incurred a net loss of RM36.3m (GBP6.5m*) for FY2016
as compared to a net loss of RM31.2 (GBP5.6m*) in FY2015 which
translated to basic loss per share ("LPS") of 22.70 sen (4.04p*) as
compared to a basic ("LPS") of 19.47 sen (3.47p*) in FY2015.
The higher net loss for FY2016 included higher bad debt
provisions of RM30.0m (GBP5.4m*) as compared to RM0.8m (GBP0.2m*)
in FY2015 mainly due to a general provision for doubtful debts to
cover the inherent risks associated with trade receivables that are
expected to be collected over a longer period of time. In addition,
there was a net decrease in the provision for onerous leases of
RM10.9m (GBP1.9m*) in FY2016 as compared to a decrease of RM9.1m
(GBP1.6m*) in FY2015 due to revisions in the outlook of the data
centre rental business over the longer term.
The Group's closing cash position increased from RM29.2m
(GBP5.2m*) as at 31 March 2015 to RM43.6m (GBP7.8m*) as at the
year-end, mainly due to the repayment of RM27.9m (GBP5.0m*) of the
cash advances by the developer of CX5 upon the completion of Block
C of CX5.
Based on the Group's unrestricted cash and bank balances at the
financial year end of RM43.6m (GBP7.8m*), the restricted cash of
RM14.1m (GBP2.5m*) and the net current assets balance of RM95.7m
(GBP17.0m*) and taking into consideration the financial
projections, including cash flows, for the period up to 31 March
2018, the Board believes that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Financial results
The financial results of the Group are summarised below:
Proforma*
2016 2015 2016 2015
RM'000 RM'000 GBP'000 GBP'000
Total Group Revenue 83,987 81,790 14,963 14,572
Gross loss (1,529) (28,637) (272) (5,101)
Gain on disposal
of joint venture - 17,002 - 3,029
Allowance for doubtful
debts, net (30,050) (842) (5,354) (150)
Reduction of contingent
consideration 950 910 169 162
Impairment of goodwill - (3,750) - (668)
Impairment of tangible
assets reversal 13,100 - 2,334 -
Net movement on onerous
leases 10,950 9,113 1,951 1,624
Share of loss after
tax of jointly-controlled
entity - (1,309) - (233)
Loss from operations (25,910) (24,792) (4,616) (4,416)
Net finance income/
(cost) 274 777 49 138
Unwinding of discounts
on provision (7,650) (7,813) (1,363) (1,392)
Net foreign exchange
gain / (loss) 291 (12) 52 (2)
Loss before tax (32,995) (31,840) (5,878) (5,672)
Tax (3,331) 686 (593) 122
Foreign currency
translation (363) (182) (65) (32)
Total comprehensive
loss for the financial
year (36,689) (31,336) (6,536) (5,582)
(22.70 (19.47
Basic LPS sen) sen) (4.04p) (3.47p)
Weighted average
number of ordinary
shares for basic
EPS ('000) 160,029 160,029 160,029 160,029
Proforma*
2016 2015 2016 2015
Key Performance Indicators
Gross loss margin (1.8%) (35.0%) (1.8%) (35.0%)
(Loss) / Profit from
operations (excluding
gain on sale of property,
plant and equipment,
gain on disposal
of joint venture,
allowance for doubtful
debts, impairment
of tangible assets,
net movement on onerous
leases and share
of loss after tax
of jointly-controlled
entity and associate)
margin (23.7%) (56.2%) (23.7%) (56.2%)
Trade receivables
turnover (days) 442 460 442 460
Trade payables turnover
(days) 84 86 84 86
Quick ratio 7.0 4.8 7.0 4.8
Revenue
(Proforma*)
(2016) (2015) (2016) (2015)
(RM'000) (RM'000) (GBP'000) (GBP'000)
(Data centre rental
income) (63,959) (58,604) (11,395) (10,441)
(Maintenance income) (8,579) (11,254) (1,528) (2,005)
--------- --------- ---------- ----------
(72,538) (69,858) (12,923) (12,446)
(Design and development
of data centre facilities
income) (11,449) (11,932) (2,040) (2,126)
--------- --------- ---------- ----------
(Total Group revenue) (83,987) (81,790) (14,963) (14,572)
--------- --------- ---------- ----------
The total revenue recorded remained broadly unchanged at RM84.0m
(GBP15.0m*) as compared to RM81.8m (GBP14.6m*) in FY2015.
The increase in data centre rental revenue of RM5.4m (GBP0.9m*)
was mainly attributable to new customers secured during the year
and a higher utilization of data centre capacity by certain
existing customers. The decrease in maintenance revenue of RM2.7m
(GBP0.5m*) was mainly attributable to the non-renewal of a
comprehensive maintenance contract which expired in the second
quarter of the financial year.
Gross loss
The Group recorded a gross loss margin of 1.8% in the current
financial year as compared to a gross loss margin of 35.01% in
FY2015. This gross loss margin was mainly attributable to the data
centre rental segment as tabulated below:
Proforma*
2016 2016 2016 2015
RM'000 RM'000 GBP'000 GBP'000
Data centre rental
revenue 63,959 58,604 11,395 10,441
Direct expenses (77,518) (95,829) (13,810) (17,073)
Gross loss on data
centre rental (13,559) (37,225) (2,415) (6,632)
Gross loss margin
on data centre rental (21.2%) (63.5%) (21.2%) (63.5%)
The lower gross loss margin on data centre rental of 21.2% as
compared to 63.5% in FY2015 was mainly due to the lower lease
rental cost recorded after the Group completed the restructuring of
the lease rental payments.
Loss from operations
The Group recorded a loss from operations of RM25.9m (GBP4.6m*)
compared to a loss from operations of RM24.8m (GBP4.4m*) in 2015,
as analysed below:
Proforma*
2016 2015 2016 2015
RM'000 RM'000 GBP'000 GBP'000
Operating loss from
data centre rental,
maintenance, and
design and development
of data centre facilities (20,860) (45,916) (3,716) (8,180)
Gain on disposal
of joint venture - 17,002 - 3,029
Allowance for doubtful
debts, net (30,050) (842) (5,354) (150)
Reduction of contingent
consideration 950 910 169 162
Impairment of goodwill - (3,750) - (668)
Impairment of tangible
assets reversal 13,100 - 2,334 -
Net movement on onerous
leases 10,950 9,113 1,951 1,624
Share of loss after
tax of jointly-controlled
entity - (1,309) - (233)
Total operating loss (25,910) (24,792) (4,616) (4,416)
----------- ----------- ---------- ----------
Notwithstanding the lower gross loss as explained above, the
operating loss was higher mainly due to general provision for
doubtful debts of RM30.0m (GBP5.4m*) to cover the inherent risks
associated with trade receivables that are expected to be collected
over a longer period and decrease in net provision for onerous
leases of RM10.9m (GBP1.9m*) in FY2016 due to revisions in the
longer-term outlook of the data centre rental business. In
addition, the Group recorded a reversal of impairment of tangible
assets of RM13.1m (GBP2.3m*) as a consequence of the restructured
lease rental terms of CX2.
In the prior year, the Group recorded a gain of RM17.0m
(GBP3.0m*) on the disposal of an interest in a jointly-controlled
entity.
Net finance cost
Net finance cost increased from RM7.0m (GBP1.3m) to RM7.4m
(GBP1.3m) as a result of the interest incurred to the freeholder
for the debt settlement (as described above).
Taxation
The Group recorded a tax charge for the year in spite of
reporting a loss for the year mainly due to tax payable by a
profitable subsidiary which was not subject to group tax
relief.
Earnings per share
Basic and diluted loss per share ("LPS") was 22.70 sen (4.04p*)
compared to a LPS of 19.47 sen (3.47p*) in 2017. The weighted
average number of shares during the year used for both the basic
and diluted LPS calculations is 160,028,667 (2015:
160,028,667).
Dividends
The Board does not propose any payment of dividends in respect
of the current financial year.
Cash and treasury
Proforma*
2016 2015 2016 2015
RM'000 RM'000 GBP'000 GBP'000
Cash used in operations
before working capital
movements and net
finance income /
cost (23,559) (49,785) (4,197) (8,870)
Working capital movements 7,500 29,417 1,336 5,241
Net finance cost
/ income 7,376 7,036 1,314 1,254
----------- ----------- ---------- ----------
(8,683) (13,332) (1,547) (2,375)
Repayment of loans
by the owner of a
development project 27,936 20,000 4,977 3,563
Repayment by the
jointly-controlled
entity - 8,921 - 1,589
Capital expenditure (4,083) (5,792) (727) (1,032)
Acquisition of a
subsidiary - (1,440) - (256)
Net cash from other
investing activities 1,484 1,766 264 314
----------- ----------- ---------- ----------
Net cash inflow before
financing activities 16,654 10,123 2,967 1,803
Net cash from financing
activities (2,264) (780) (403) (139)
---------- ----------
Net cash inflow 14,390 9,343 2,564 1,664
----------- ----------- ---------- ----------
The Group recorded a lower net cash used by operations before
working capital movements and net finance cost of RM23.6m
(GBP4.2m*) and positive movement in working capital of RM7.5m
(GBP1.3m*), which was mainly due to lower lease rental payments on
CX1, CX2 and CX5 in line with the restructured lease rental terms,
whereby the lease rental payments shall be lower in the earlier
years and progressively increasing thereafter.
The balance of the trade receivable relating to the CX5 project
of RM32.3m (GBP5.8m*) million is due to 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
second quarter of calendar year 2017. The Group provided for an
allowance for doubtful debts for all long outstanding receivables
exceeding six months based on Group policy. The provision also
includes a portion of the receivable outstanding in respect of the
CX5 project.
The developer of CX5 repaid the final RM27.9m (GBP5.0m*) of the
cash advances provided by CSF in June 2015.
Post Balance Sheet Events
The revised lease rental agreement and the debts settlement
agreement with the freeholder is in the process of being finalised
as at date of this report.
Critical accounting judgement and key sources of estimation
uncertainty
The areas of critical accounting judgement and key sources of
estimation uncertainty are disclosed in Note 1 (vi) as below.
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 (v).
Lee, King Loon
Chief Financial Officer
22 July 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2016
Proforma
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2016 2015 2016 2015
Note RM'000 RM'000 GBP'000 GBP'000
Revenue 83,987 81,790 14,963 14,572
Cost of sales (85,516) (110,427) (15,235) (19,673)
----------- ----------- ----------- -----------
Gross loss (1,529) (28,637) (272) (5,101)
Other operating income 105 266 18 47
Net loss on sale of
property, plant and
equipment - (46) - (8)
Gain on disposal of
other investment 3 - 1 -
Gain on disposal of
joint venture - 17,002 - 3,029
Share of loss after
tax
* joint venture - (1,309) - (233)
----------- ----------- ----------- -----------
Administrative expenses (19,388) (16,966) (3,454) (3,023)
Bad debts written
off (51) (301) (9) (54)
Net allowance for
doubtful debts (30,050) (842) (5,354) (150)
Impairment of goodwill - (3,750) - (668)
Reduction of contingent
consideration 950 910 169 162
Impairment of tangible
assets reversal 13,100 - 2,334 -
Net movement on onerous
leases 4 10,950 9,113 1,951 1,624
Management restructuring
cost - (232) - (41)
----------- ----------- ----------- -----------
Total operating expenses (24,489) (12,068) (4,363) (2,150)
Operating loss (25,910) (24,792) (4,616) (4,416)
Finance income 1,481 1,748 264 311
Net foreign exchange
gain/(loss) 291 (12) 52 (2)
----------- ----------- ----------- -----------
Interest payable on
bank loans, overdrafts
and finance lease (1,207) (971) (215) (173)
Unwinding of discounts
on provisions 4 (7,650) (7,813) (1,363) (1,392)
----------- ----------- ----------- -----------
Finance costs (8,857) (8,784) (1,578) (1,565)
----------- ----------- ----------- -----------
Loss before tax (32,995) (31,840) (5,878) (5,672)
Tax (3,331) 686 (593) 122
----------- ----------- ----------- -----------
Loss for the financial
year (36,326) (31,154) (6,471) (5,550)
Other comprehensive
income
Foreign currency translation (363) (182) (65) (32)
----------- ----------- ----------- -----------
Total comprehensive
loss for the financial
year (36,689) (31,336) (6,536) (5,582)
=========== =========== =========== ===========
EPS
* Basic (Malaysian sen) (22.70) (19.47) (4.04)p (3.47)p
* Diluted (Malaysian sen) (22.70) (19.47) (4.04)p (3.47)p
All results derive from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2016
Proforma
As at As at As at As at
31 March 31 March 31 March 31 March
2016 2015 2016 2015
RM'000 RM'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 25,640 13,446 4,568 2,396
Interest in associate - - - -
Other Investments 155 153 28 27
Goodwill - - - -
Trade receivables 360 566 64 101
Deferred tax asset - 1,969 - 351
---------- ----------
26,155 16,134 4,660 2,875
---------- ---------- ---------- ----------
Current assets
Inventories 1,781 2,054 317 366
Trade and other receivables 64,503 108,925 11,491 19,406
Current tax assets 175 242 31 43
Restricted cash 14,055 13,095 2,504 2,333
Cash and cash equivalents 45,823 31,379 8,164 5,590
126,337 155,695 22,507 27,738
---------- ---------- ---------- ----------
Total assets 152,492 171,829 27,167 30,613
========== ========== ========== ==========
Current liabilities
Trade and other payables 44,338 73,130 7,899 13,029
Current tax liabilities 854 - 152 -
Bank borrowings 1,164 1,164 207 207
Obligations under
finance leases 140 140 25 25
46,496 74,434 8,283 13,261
---------- ---------- ---------- ----------
Non-current liabilities
Obligations under
finance leases 165 305 29 54
Bank borrowings 334 1,498 60 267
Trade and other payables 67,492 17,830 12,024 3,177
Deferred tax liabilities 232 - 41 -
Onerous lease provision 57,900 61,200 10,315 10.903
---------- ---------- ---------- ----------
126,123 80,833 22,469 14,401
---------- ---------- ---------- ----------
Total liabilities 172,619 155,267 30,752 27,662
========== ========== ========== ==========
Net (liabilities)/assets (20,127) 16,562 (3,585) 2,951
========== ========== ========== ==========
Equity
Share capital 78,936 78,936 14,063 14,063
Share premium account 104,499 104,499 18,617 18,617
Shares held under
Employee Benefit
Trust (2,300) (2,300) (410) (410)
Other reserve (66,153) (66,153) (11,785) (11,785)
Share option reserve - 4,117 - 733
Translation reserve (766) (403) (137) (72)
Accumulated loss (134,343) (102,134) (23,933) (18,195)
---------- ---------- ---------- ----------
Total (capital deficiency)/equity (20,127) 16,562 (3,585) 2,951
========== ========== ========== ==========
CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended 31 March 2016
Proforma Proforma
Year Year ended
Year ended Year ended ended 31 March
31 March 31 March 31 March 2015
2016 2015 2016 GBP'000
RM'000 RM'000 GBP'000
Net cash used in operating
activities (8,683) (13,332) (1,547) (2,375)
----------- ----------- ----------- -------------
Investing activities
Interest received 1,481 1,748 264 311
Repayment of advances
from joint venture - 8,921 - 1,589
Repayment of advances
from the owner of a
development project 27,936 20,000 4,977 3,563
Additions to property,
plant and equipment (4,083) (5,792) (727) (1,032)
Net proceeds from sale
of property, plant and
equipment - 18 - 3
Proceeds from sale of
other investment 3 - - -
Purchase of new subsidiary,
net of cash - (1,440) - (256)
----------- ----------- ----------- -------------
Net cash generated from
investing activities 25,337 23,455 4,514 4,178
----------- ----------- ----------- -------------
Financing activities
Repayments of obligations
under finance leases (140) (140) (25) (25)
(Increase)/Decrease
in restricted cash (960) 136 (171) 24
Repayment of borrowings (1,164) (776) (207) (138)
Net cash used in financing
activities (2,264) (780) (403) (139)
----------- ----------- ----------- -------------
Net increase in cash
and cash equivalents 14,390 9,343 2,564 1,664
Cash and cash equivalents
at beginning of financial
year 29,182 19,839 5,199 3,534
----------- ----------- ----------- -------------
Cash and cash equivalents
at end of financial
year 43,572 29,182 7,763 5,198
=========== =========== =========== =============
CONSOLIDATED STATEMENT OF CASH FLOW (Cont'd)
For the year ended 31 March 2016
Proforma
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2016 2015 2016 2015
RM'000 RM'000 GBP'000 GBP'000
Loss for the financial
year (36,326) (31,154) (6,471) (5,550)
Adjustments for:
Allowance for slow
moving inventories 482 361 86 64
Allowance for diminution
of investment (2) 19 - 3
Allowance for doubtful
debts 30,050 842 5,354 150
Bad debts written off 51 301 9 54
Depreciation of property,
plant and equipment 4,989 4,107 889 732
Impairment of goodwill - 3,750 - 668
Reduction of contingent
consideration (950) (910) (169) (162)
Reversal of impairment
of tangible
assets (13,100) - (2,334) -
Interest expense 8,857 8,784 1,578 1,565
Interest income (1,481) (1,748) (264) (311)
Gain on disposal of
joint venture - (17,002) - (3,029)
Net loss on sale of
property, plant and
equipment - 46 - 8
Gain on disposal of
other investment (3) - (1) -
Foreign currency translation (363) (182) (65) (32)
Share of loss after
tax of jointly controlled
entity - 1,309 - 233
Onerous leases (10,950) (9,113) (1,951) (1,623)
Tax 3,331 (686) 593 (122)
----------- ----------- ----------- -----------
Operating cash outflows
before movements in
working capital (15,415) (41,276) (2,746) (7,352)
(Increase)/Decrease
in inventories (209) 563 (37) 100
(Increase)/Decrease
in receivables (13,411) 7,484 (2,389) 1,333
Increase in payables 21,120 21,370 3,762 3,807
----------- ----------- ----------- -----------
Cash used in operations (7,915) (11,859) (1,410) (2,112)
Interest paid (559) (599) (100) (107)
Income taxes paid (209) (874) (37) (156)
----------- ----------- ----------- -----------
Net cash used in operating
activities (8,683) (13,332) (1,547) (2,375)
=========== =========== =========== ===========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Shares
Share premium held Other Share Translation Accumulated
Capital account under reserve option reserve loss Total
RM'000 RM'000 Employee RM'000 reserve RM'000 RM'000 RM'000
Benefit RM'000
Trust
RM'000
At 1 April 2014 78,936 104,499 (2,300) (66,153) 4,117 (221) (70,980) 47,898
Total
comprehensive
loss for the
year - - - - - (182) (31,154) (31,336)
At 31 March
2015 78,936 104,499 (2,300) (66,153) 4,117 (403) (102,134) 16,562
Expiry of share
options - - - - (4,117) - 4,117 -
Total
comprehensive
loss for the
year - - - - - (363) (36,326) (36,689)
At 31 March
2016 78,936 104,499 (2,300) (66,153) - (766) (134,343) (20,127)
========= ========= ========== ========= ========== ============= ============= ===========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
PROFORMA
Share Shares Share
Proforma Share premium held Other option Translation Accumulated
Capital account under reserve reserve reserve loss Total
GBP'000 GBP'000 Employee GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Benefit
Trust
GBP'000
At 1 April 2014 14,063 18,617 (410) (11,785) 733 (40) (12,645) 8,533
Total
comprehensive
loss for the
year - - - - - (32) (5,550) (5,582)
At 31 March
2015 14,063 18,617 (410) (11,785) 733 (72) (18,195) 2,951
Expiry of share
options - - - - (733) - 733 -
Total
comprehensive
loss for the
year - - - - - (65) (6,471) (6,536)
At 31 March
2016 14,063 18,617 (410) (11,785) - (137) (23,933) (3,585)
========= ========= ========== ========== ========== ============= ============= ==========
1. General information
The Preliminary Announcement and the final accounts of the Group
were approved by the Board of Directors on 22 July 2016. The
financial information set out in this Preliminary Announcement does
not constitute the Group's statutory accounts for the year ended 31
March 2016 but is derived from those accounts. The statutory
accounts for 2016 will be delivered to the Jersey Registrar of
Companies in September 2016. The auditors have reported on the 2016
accounts and their report was unqualified and did not draw
attention to any matters by way of emphasis.
(i) Basis of preparation
The consolidated financial statements of CSF Group plc, for the
year ended 31 March 2016 have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the EU.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria, this announcement does not itself contain
sufficient information to comply with IFRS. The Company expects to
publish full financial statements that comply with IFRS on or
before 30 September 2016.
(ii) Pro forma
The inclusion of pro forma balances in pounds Sterling is
included solely for convenience. The pro forma balances in pounds
Sterling are stated, as a matter of arithmetical computation only,
on the basis of all balances being translated from Malaysian
Ringgits into pounds Sterling at the rate prevailing on 31 March
2016 of RM5.6130: GBP1.00. This translation should not be construed
as meaning that the Malaysian Ringgit amounts actually represent,
or 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 2016, as
described in those financial statements.
(iv) Forward-looking statements
Certain statements in these condensed consolidated 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 Group's business activities, together with the factors
likely to affect the future development, performance and position
are set out in the Chairman's Statement. The financial position of
the Group, its cash flows and liquidity positions are described in
the Chief Financial Officer's Review. In addition, the notes to
financial statements include foreign currency risk management,
interest rate risk management, credit risk management and liquidity
risk management.
As at 31 March 2016, the Group's cash and cash equivalents
excluding deposits held on behalf of the Employee Benefit Trust
stand at RM43.6 million.
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:
-- 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 are
monitoring closely its cost and looking at ways to improve the
operation and procurement process including working closely with
its suppliers to reduce the overall cost;
-- The Group has completed the restructuring with the freeholder
on the lease rental payments on CX1, CX2 and CX5, with the revised
lease rental rates commencing on 1 January 2016 whereby the lease
rental payments shall be lower in the earlier years and
progressively increasing thereafter. The outstanding lease rental
accrued up to 31 December 2015 will be settled over an extended
period;
-- The Group received significant cash receipts of RM31.4
million upon the completion of block C of CX5 in June 2015 and
progressively received RM6.0 million of trade receivables relating
to the CX5 project during the year. The balance of amounts
receivable relating to the CX5 project of RM32.3 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 second quarter of calendar year
2017. The directors note that the receipt of proceeds of the
remaining balance of CX5 project is governed by existing
contractual arrangements;
-- The funding requirements of existing and proposed new ventures and/or projects.
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 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 financial
statements for the year ended 31 March 2016.
(vi) Critical accounting judgement and key sources of estimation uncertainty
Critical judgements in applying the Group's accounting
policies
In the process of applying the Group's accounting policies, the
Directors must make estimates and assumptions that affect the
amounts recognised in the financial statements. Several of these
estimates and judgments are related to matters that are inherently
uncertain as they pertain to future events. These estimates and
judgments are evaluated at each reporting date and are based on
historical experience, internal controls, advice from external
experts and other factors, including expectations of future events
that are believed to be reasonable under the circumstances. The
resulting accounting estimates may vary from the actual results.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are as follows:
Revenue recognition
Revenue from the installation, integration and fit-out of
equipment is recognised over the period of the related fit-out
activity, which requires the Directors to consider the costs
incurred to the balance sheet date and estimate the costs to
completion of the contract. The estimation of costs to complete on
contracts is judgemental and requires an estimate of the cost of
materials, labour hours and cost, and time to complete. The
estimate of the total costs to complete is based on historical
experience and status of each project. The estimates are reviewed
regularly and revised as necessary. Any significant change in these
estimates will result in a change to the revenue recognition and
the margin for future periods.
Provision for bad and doubtful debts
The provision for bad and doubtful debts includes the assessment
of amounts receivable on an individual and collective basis. For
individual provisions, events and circumstances such as breaching
credit terms, evidence of the debtor experiencing financial
difficulties, and potentially the probability of the debtor
entering bankruptcy or financial reorganisation are considered.
Based on these indicators a judgment is made whether a provision is
required. In respect of a collective assessment, the estimation of
the future settlement profile of trade receivables is judgemental
and includes consideration of past experience in collecting
payments, an increase in the number of delayed payments past the
credit period as well as observable changes in the economic
conditions that correlate with default on receivables.
The Group made general allowance for doubtful debts pertaining
to trade receivables aged six months and above.
Recoverability of amounts owing from IDCB
Trade receivables includes an aggregate amount of RM32.3m due
from IDCB, the developer of the CX5 data centre. Subsequent to the
financial year end, the Group received RM3.0 million. The balance
of cash receipts of RM29.3 million is due to receive 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 second quarter of calendar year 2017. The recoverability of
the remaining amount due from IDCB is dependent on the completion
of certain milestones anticipated in the legal agreements, which
contemplates recovery over the next financial year. This represents
a significant receivable on the Group's balance sheet, there is
inherent risk in both the recoverability of the receivables and the
timing of associated receipts.
The Group has made provision for doubtful debts pertaining to
trade receivables aged six months and above including IDCB to cover
the inherent risks associated with trade receivables that are
expected to be collected over a longer period of time.
Onerous lease assessment
The Group's business model is to lease data centres, and as such
the Group is 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. If this is not the
case, then the data centre lease rental contract could be
onerous.
In order to calculate onerous lease obligations the directors
are required to estimate the future tenancy profile of a data
centre, which is inherently judgemental as the unexpired terms of
the leases for nine years and the estimate may vary as a result of
changes in the utilisation and price of a data centre's space.
Impairment of property, plant and equipment
The Group assesses whether there are any indicators of
impairment for all non-financial assets at each reporting date.
Non-financial assets are tested for impairment when there are
indications that the carrying amounts may not be recoverable.
When value in use calculations are undertaken, the directors are
required to estimate the expected future cash flows from the assets
or cash generating unit and choose a suitable discount rate in
order to calculate the present value of those cash flow. The
estimate may vary depends on the market interest rate, utilisation
and price of the data centre space.
Deferred tax asset recognition
The Group recognises deferred tax assets to the extent that it
is probable that taxable profits will be available to utilise the
asset. At each balance sheet date, the Directors review the
forecast taxable profits of the Group to assess the recoverability
of the deferred tax asset. To the extent that it is no longer
probable that sufficient taxable profits will be available, the
carrying amount of the deferred tax asset is reduced.
2. 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, the maintenance of data centres and imputed
interest on loans to data centre developers.
Revenue on design and development activity is 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 where sales
invoiced exceed the cost 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.
3. 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 facilities.
Year ended 31 March 2016 Data centre Design and development
rental Maintenance of data centre facilities Consolidated
RM'000 RM'000 RM'000 RM'000
Revenue 63,959 8,579 11,449 83,987
Cost of sales (77,518) (2,733) (5,265) (85,516)
------------ ------------ --------------------------- -------------
Gross profit / (loss) (13,559) 5,846 6,184 (1,529)
Other operating income 65 - 40 105
Administrative cost (5,081) (655) (618) (6,354)
Allowance for doubtful debts (571) - (29,479) (30,050)
Allowance for slowing stock - - (482) (482)
Allowance for diminution of investment - - 2 2
Bad debts written off - - (165) (165)
Unwinding of discounts on provision (7,650) - - (7,650)
Onerous leases 10,950 - - 10,950
Staff costs (4,746) (645) (863) (6,254)
Segment depreciation (21) (16) (68) (105)
------------ ------------ --------------------------- -------------
Segment result (20,613) 4,530 (25,449) (41,532)
Non-trade bad debts written back 114
Reduction of contingent consideration 950
Corporate cost (6,195)
Finance income 1,481
Gain on disposal of other investment 3
Reversal of impairment loss 13,100
Net foreign exchange gain 291
Finance costs (1,207)
-------------
Loss before tax (32,995)
Tax (3,331)
-------------
Loss for the financial year (36,326)
Other comprehensive income
Foreign currency translation (363)
-------------
Total comprehensive loss for
the financial year (36,689)
=============
Year ended 31 March 2015 Data centre Design and development
rental Maintenance of data centre facilities Consolidated
RM'000 RM'000 RM'000 RM'000
Revenue 58,604 11,254 11,932 81,790
Cost of sales (95,829) (5,313) (9,285) (110,427)
------------ ------------ --------------------------- -------------
Gross profit / (loss) (37,225) 5,941 2,647 (28,637)
Other operating income - - 266 266
Administrative cost (3,635) (572) (635) (4,842)
Allowance for doubtful debts (655) - (187) (842)
Allowance for slowing stock - - (361) (361)
Allowance for diminution of investment - - (19) (19)
Unwinding of discounts on provision (7,813) - - (7,813)
Onerous leases 9,113 - - 9,113
Staff costs (4,132) (938) (981) (6,051)
Segment depreciation (31) (23) (100) (154)
------------ ------------ --------------------------- -------------
Segment result (44,378) 4,408 630 (39,340)
Bad debts written off (301)
Impairment of goodwill (3,750)
Reduction of contingent consideration 910
Management restructuring costs (232)
Corporate cost (5,539)
Finance income 1,748
Gain on disposal of joint venture 17,002
Net foreign exchange loss (12)
Loss on disposal of property, plant and
equipment (46)
Share of loss of jointly controlled entity (1,309)
Finance costs (971)
-------------
Loss before tax (31,840)
Tax 686
-------------
Loss for the financial year (31,154)
Other comprehensive income
Foreign currency translation (182)
Total comprehensive loss for
the financial year (31,336)
=============
4. Onerous leases
As at As at
31 March 31 March
2016 2015
RM'000 RM'000
Movement in provision of
onerous leases
At start of financial year 61,200 62,500
Additional provision during
the financial year 26,063 29,025
Utilisation of provision (37,013) (38,138)
Unwinding of discount 7,650 7,813
At end of financial year 57,900 61,200
========= =========
The Group's business model is to lease data centres and commit
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. The unexpired terms of the leases is nine years
with an option to extend by an additional 16 years.
5. Earnings per share
The calculations for earnings per share, based on the weighted
average number of shares, are shown in the table below.
Year Year
ended ended
31 March 31 March
2016 2015
Net loss for the financial
year after taxation attributable
to members (RM'000) (36,326) (31,154)
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 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.
6. Dividend
The Board does not propose any payment of dividends in respect
of the current financial year.
7. Contingencies
The Group holds a number of guarantees with various banks in
respect of banking facilities as follows:
As at As at
31 March 31 March
2016 2015
RM'000 RM'000
Bank guarantees 25,037 27,549
-ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BLGDRIXDBGLB
(END) Dow Jones Newswires
July 22, 2016 02:00 ET (06:00 GMT)
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