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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Csf Group | LSE:CSFG | London | Ordinary Share | JE00B61NN442 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.70 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
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:
Hot Features
Premium
-- 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)
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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)
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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)
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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)
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Loss before tax (31,840)
Tax 686
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Loss for the financial year (31,154)
Other comprehensive income
Foreign currency translation (182)
Total comprehensive loss for
the financial year (31,336)
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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
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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
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July 22, 2016 02:00 ET (06:00 GMT)
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