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Myanmar Strategic Holdings Ltd Interim Results

23/07/2021 7:00am

UK Regulatory (RNS & others)


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TIDMSHWE

RNS Number : 2111G

Myanmar Strategic Holdings Ltd

23 July 2021

23 July 2021

Myanmar Strategic Holdings Ltd.

("MSH" or the "Company")

Interim Results for the six months ended 31 March 2021

The Board of Myanmar Strategic Holdings Ltd. (LSE: SHWE), the independent developer and operator of consumer businesses located in Myanmar and Vietnam, is pleased to announce its unaudited interim results for the six-month period ended 31 March 2021.

FINANCIAL HIGHLIGHTS

All dates refer to the six-month financial period ended 31 March 2021, unless otherwise stated. The six-month financial period from 1 October 2019 to 31 March 2020, is referred to as "6M'20".

-- Group revenues for the six-month financial period ended 31 March 2021 increased 175% year-on-year ("YOY") to US$7.6 million, of which 65% derived from Education and 35% from Services (6M'20: 70% derived from Services, 28% from Education and 2% from Hospitality). The increase in the Group's revenue is due to (i) the consolidation of Wall Street English Vietnam ("WSE Vietnam") since the completion of its acquisition on 14 July 2020 and (ii) the growth of the Wall Street English Myanmar ("WSE Myanmar") owned business following the review and amendment of the existing management agreements.

-- The Group's net loss for the six-month financial period ended 31 March 2021 amounted to US$2.9 million (6M'20: US$1.6 million), primarily due to (i) the continued impact of COVID-19 on the Myanmar and Vietnam operations, (ii) the disruption linked to the military takeover initiated in Myanmar on 1 February 2021 (the "State of Emergency"), (iii) a subdued tourism market impacting the Hospitality division and (iv) the increase in amortisation of right-of-use assets arising from the consolidation of the WSE Vietnam leases and four new leases entered in respect of the WSE Myanmar language centres.

-- The Group's net comprehensive loss for the six-month financial period ended 31 March 2021 was US$3.1 million (6M'20: US$1.6 million).

-- As a result of cost control and cash flow management initiatives, financial resources were carefully administered and operating cash outflow for the six-month financial period ended 31 March 2021 amounted to US$1.1 million (6M'20: US$0.9 million), a limited increase considering the Group's considerable growth in size.

-- Underlying revenues, an indicator of the volume of business generated by the managed and owned businesses, increased 71% YOY to ca. US$8.2 million (6M'20: US$4.8 million) for the six-month financial period ended 31 March 2021, of which 67% derived from Education and 33% from Services.

-- The COVID-19 pandemic continues to significantly affect the Group's operations resulting, among others, in (i) temporary closures of in-person operations across both its Education and Hospitality divisions and (ii) higher operating costs in its Services division. The global COVID-19 response remains fluid as countries adopt different COVID-19 restrictions and vaccination policies. Therefore, the Group cannot reasonably project the full extent of the COVID-19 impact going forward.

-- As a result of Myanmar's State of Emergency, since 1 February 2021 Yangon American International School ("Yangon American"), WSE Myanmar and Auston College ("Auston") were subjected to temporary closures and shifted to online service delivery due to the general unrest and worsening security environment. Conversely, EXERA continued to operate and registered a marked increase in the demand for security, secured logistics and risk management services. Operations across all divisions have stabilised since May 2021.

-- The diversification of the Group's operations between Myanmar and Vietnam mitigates the overall COVID-19 and single-country exposure of the Group.

-- The Company maintains a loan facility of up to US$7.0 million with MACAN, the Company's corporate shareholder, and has drawn down US$5.0 million at the date of this report (US$4.5 million as at 31 March 2021). Management has assessed that there are sufficient mitigating actions within the control of the Group, such as the significant reduction of operational activities of non-profitable business segments, re-negotiation of lease contracts with landlords to secure lease concession and unutilised credit facilities for its working capital requirements for the next 12 months from the date of this report.

OPERATIONAL HIGHLIGHTS

Education

-- Through its Education division, the Group is currently active in (i) English language learning (Wall Street English Myanmar and Vietnam), (ii) higher education (Auston College Myanmar) and (iii) K-12 international school (Yangon American International School).

-- As a result of the COVID-19 outbreak affecting the education sector, the Group renegotiated the key terms of its operating and management agreements with its related party, TED Limited ("TED"). Effective 1 October 2020, E Partners, a wholly owned-subsidiary of the Group, leased four language centres from TED to operate and manage its own Wall Street English language learning centres and Auston College in Myanmar. These education businesses will therefore be owned businesses and contribute to the Group's revenues.

-- E Partners will continue to provide operating, management and technical support services for TED's existing student contracts for a fee over the next 24 months. Therefore, these legacy businesses will continue to be treated as managed businesses and generate management fees to the Group.

-- Group revenues from the owned and managed education businesses for the six-month financial period ended 31 March 2021 amounted to US$7.3 and US$1.0 million (6M'20: US$2.2 and US$2.6 million), respectively. The increase is mainly due to (i) the consolidation of WSE Vietnam since the completion of its acquisition on 14 July 2020 and (ii) the growth of the WSE Myanmar owned business following the review and amendment of the existing management agreements.

-- As at 31 March 2021, the number of Wall Street English centres and students by country are as follows:

 
                           Number of WSE retail       Number of WSE students 
                                  centres                      ('000) 
                         6 months ended   6 months   6 months ended   6 months 
                                            ended                       ended 
                         31 March 2021    31 March   31 March 2021    31 March 
                                            2020                        2020 
 Vietnam 
  (Owned business)              7            N/A           4.8           N/A 
 Myanmar 
  (Owned and 
  managed businesses)           4             4            1.6           1.8 
                        ---------------  ---------  ---------------  --------- 
  Total                        11            4            6.4           1.8 
                        ---------------  ---------  ---------------  --------- 
 

-- The Group continues to seek opportunities to expand its WSE centres as the sole franchisee in Vietnam and with its remaining exclusive franchise rights of six years in Myanmar.

-- MSH owns and operates the Yangon American International School ("Yangon American"), a Myanmar Investment Commission-approved international school operating on a campus of over 3,000 sqm. Its planned capacity is 400 students and its enrolment for academic year 2020-2021 was ca. 70 students (6M'20: 50 students).

-- In July 2021, Yangon American was recognised as an official International Baccalaureate Primary Years Programme ("IB PYP") school by the International Baccalaureate Organization. The IB PYP programme, which was established by the International Baccalaureate Educational Foundation in 1997 and is now taught in 109 countries, is designed for students aged 3 through 12 and focuses on the child as an "inquirer", developing their natural curiosity, both in and out of the classroom. Yangon American is the only IB PYP school in Myanmar.

-- During the six-month financial period ended 31 March 2021, the education businesses generated underlying revenues of US$5.5 million (6M'20: US$2.2 million). Due to COVID-19 and the State of Emergency, movement restrictions and school closures were experienced, which in turn resulted in slower recruitment of students and delivery of classes through home-based learning. The State of Emergency also lead to certain foreign investors and operators re-assessing their investments in Myanmar and to the suspension of leading international schools within Yangon American's vicinity, which will provide opportunities for student recruitment.

Services

-- EXERA is an internationally-managed provider of security and risk management services, operating exclusively in Myanmar. As at 31 March 2021, EXERA has an experienced workforce of over 1,700 (6M'20: 1,300) security officers and provides a range of integrated security, guarding, protective services, journey management, training, and nationwide risk consulting, to a wide range of international and local clients.

-- Its customer base includes multi-national corporations, large oil and gas companies, established local businesses and governmental bodies and international organisations such as WFP, UNHCR, UNICEF, the Embassy of the Republic of Singapore and the EU mission. EXERA's services are essential to the continued presence of these organisations in Myanmar throughout the current political and economic instability.

-- The Group's revenues arising from the rendering of services for the six-month financial period ended 31 March 2021 were US$2.7 million (6M'20: US$2.0 million). Revenue growth was attributable to (i) the successful renegotiation of certain key contracts and (ii) the renewed demand for high quality integrated security and risk management services, particularly following the State of Emergency in Myanmar. The ability to secure new customers is mainly due to EXERA's competitive advantage as the only company in Myanmar with ISO 18788 Management System for Private Security Operations, ISO 9001, OHSAS 18000, and ANSI/ASIS PSC 1 accreditation.

Hospitality

-- Under the Hospitality division, the Group manages four boutique hostels with 474 beds and 108 rooms in four locations across Bagan, Mandalay and Nyaung Shwe, the most popular tourist destinations in Myanmar.

-- Management and technical assistance fees contributed to the Group for the six-month financial period ended 31 March 2021 were US$6,800 (6M'20: US$45,000), a significant decrease due to the continued COVID-19 restrictions where domestic and international travel in Myanmar remains limited.

-- To address the continued underperformance of Myanmar's tourism and to offset the currently challenging operating environment in Myanmar, the Group's remains focused on reducing operating costs and generating operational synergies. It is worth noting that through its boutique hostels the Group provides livelihood for hundreds of individuals in developing communities in Bagan and Inle Lake. Management takes great pride and acknowledges its role as a responsible long-term investor in these communities.

New Business Development

-- MSH continues to develop its business network and expand its pipeline within the Group's existing sectors (e.g. Services, Education and Hospitality) and new sectors (e.g. Technology). As the Group gradually builds a stronger presence on-the-ground in Vietnam, the Group intends to seek new opportunities throughout Asia to diversify the Group's geographical exposure.

-- Management also routinely conducts in-depth studies of new sectors (e.g. Healthcare, Retail and Financial Services) to determine whether to allocate additional human and financial resources to selected initiatives.

The Group's minority investments include, among others:

-- Myanmar Investments International Limited ("MIL"): in September 2020, MSH purchased a minority stake of 897,500 shares in MIL at an average price of US$0.68 per MIL ordinary shares for a total consideration of US$0.61 million, of which US$0.46 million was satisfied in cash and US$0.15 million through the issuance of 7,629 new MSH shares. MIL is a Myanmar-focused investment company listed on the AIM market of the London Stock Exchange with investments in the telecommunications and financial sectors. As at 31 March 2021, the quoted share price was US$0.61 per share and the unaudited net asset value reported by MIL was US$0.74 per share.

Myanmar Macro-Economic Highlights

-- According to the World Bank, Myanmar's economy is estimated to have grown by 1.7% in 2020, a significant decrease from the growth rate of 6.8% achieved the previous year.(1)

-- In 2021, COVID-19 and the State of Emergency have resulted in a material shock to GDP growth; long-term effects of which are yet to be ascertained. In March 2021, the World Bank revised its forecast for Myanmar's GDP to contract 10% in 2021 - a sharp reversal from the World Bank's previous economic update in October 2020 when it predicted Myanmar's economy would grow by 5.9%.(1)

-- The Myanmar kyat has depreciated against the US dollar which resulted in an increase in prices of fuel and some other basic items. The economic outlook is highly uncertain, with a wide range of possible scenarios. Any future recovery in domestic activity will likely be contingent on a rebound in mobility and the restoration of key services, including financial services. The trade and foreign investment outlook will depend on the reactions of international investors and governments. Furthermore, the extent of the recovery will also be dependent on the efforts to control and tackle the pandemic by increasing the speed of its vaccination programme.

Vietnam Macro-Economic highlights

-- Vietnam is experiencing rapid demographic and social change. Its population currently at 98 million is expected to expand to 120 million by 2050. Based on the 2019 Population Census Report, 55.5% of the population is under 35 years of age, with a life expectancy of 76 years, the highest among countries in the region at similar income levels. Vietnam's emerging middle class is approximately 13% of the population and is expected to reach 26% by 2026. (2)

-- Vietnam's human capital index ("HCI") is at 0.69, representing that a child born in Vietnam today will be 69% as productive when fully grown. (2) This figure is higher than the average for East Asia and the Pacific region and lower middle-income countries. There is also a need to upgrade the skills of the workforce to create productive jobs at a large scale in the future, as Vietnam positions itself as an alternative manufacturing hub to China.

-- When COVID-19 hit Vietnam in early 2020, the World Bank worked with Vietnam in its national response strategy from health crisis management to fostering a resilient recovery. The World Bank Group also provided a grant to Vietnam which enables the country to increase its COVID-19 testing capacity to 84 laboratories nationwide reducing the turnaround time for COVID-19 test from 24-48 hours to 4-6 hours. This contributed to Vietnam's successful containment of the COVID-19 outbreak at the end of 2020. For a country of 98 million people, it only registered 1,465 infected cases with 35 deaths while managing to post a positive GDP growth.(2) A surge in cases has been recorded in June and July 2021, leading to lockdowns in Hanoi and Ho Chi Minh, among other cities.

-- The Asian Development Bank forecasts 6.7% GDP growth in 2021 and 7.0% in 2022, one of the fastest growth rates across ASEAN. Inflation is forecasted at 3.8% and 4.0% respectively.

(1) (https://pubdocs.worldbank.org/en/537621563917606875/mpo-mmr.pdf)

(2 https://www.worldbank.org/en/country/vietnam/overview)

Enrico Cesenni, Chief Executive Officer of Myanmar Strategic Holdings, said:

"I am very pleased to report that over the six-month financial period ended 31 March 2021, Myanmar Strategic Holdings has continued to grow, notwithstanding the complex social, economic and political environment in both Myanmar and Vietnam.

"Since its inception MSH has targeted sectors that positively contribute to the overall development of the countries in which we operate, creating jobs and alleviating poverty. Within these sectors we aim to build businesses that embody the best terms of business, environmental, social and governance practices.

"The recent political upheaval has once again brought to light the importance of responsible business dealings. Since its inception, the Group has not worked with sanctioned individuals or companies. Before engaging with any customer, the Group conducts extensive diligence checks on the counterpart's activities, ownership and business associates. Group-wide know-your-client ("KYC") and anti-bribery trainings are conducted routinely and for all employees.

"Throughout the COVID-19 pandemic and most recently the military takeover in Myanmar, our team remained on the ground and implemented several initiatives aimed at containing any potential pandemic spread and ensuring continued services across more than 200 sites.

"Our employees have shown incredible resilience and ingenuity through a series of disruptions which included, among others, movement restrictions, the imposition of martial laws and the temporary suspension of internet and mobile services. Most employees have agreed to voluntary material reductions in salaries to support the Group's businesses and protect the surrounding communities, hence the disruption to our employees' livelihood was limited.

"MSH's core portfolio of operating businesses in multiple industries in Myanmar and Vietnam has enabled the Group to diversify and protect itself from several external shocks. While our operating loss for the period has widened due to the temporary closure of our education businesses in Myanmar in February and March 2021, all businesses were fully operational from the end of April 2021 and were experiencing the positive effect of pent-up demand in June and July 2021.

"Myanmar's continued State of Emergency is of great concern to Management and shareholders. We remain very concerned about the use of violence against any individual and condemn, to the greatest extent, the use of lethal force against the people of Myanmar.

"While we are acutely aware of the complex political and social environments that MSH operates in, we continue to maintain an optimistic stance on Southeast Asia's economic prospects, and we are confident of our ability to drive sustainable and responsible investments in the region. As economic development continues, Management will increasingly focus on businesses targeting the population's primary needs such as education, security and healthcare.

"At its core, MSH has always focused on the delivery of services that can improve the livelihoods of the populations it serves and acting as a responsible sustainable operator and investor in the markets in which it works. We believe that our responsible engagement with local communities and the relevant stakeholders is more important now than ever before.

"Our permanent capital structure backed by truly patient capital positions MSH as a trusted long-term partner in emerging economies.

"We would like to take this opportunity to thank shareholders for their continued support and all members of staff across the Group for their hard work and sacrifices through these challenging, uncertain and upsetting times.

"We look forward to updating shareholders on our progress in due course."

For more information please visit www.ms-holdings.com or contact:

 
 Myanmar Strategic Holdings Ltd. 
  Richard Greer, Independent Non-Executive     richardgreer@me.com 
  Chairman                                     enrico@ms-holdings.com 
  Enrico Cesenni, Founder and CEO 
 Allenby Capital Limited (Broker) 
  Nick Athanas 
  Nick Naylor                                 +44 (0)20 3328 5656 
 Yellow Jersey PR (Financial PR) 
  Henry Wilkinson 
  Matthew McHale                              +44 ( 0)20 3004 9512 
 
 
                                                Unaudited           Unaudited 
                                                 6 months            6 months 
                                                    ended               ended 
                                            31 March 2021       31 March 2020 
                                                      US$                 US$ 
 
  Revenue                                       7,647,891           2,781,116 
  Other income                                      6,766                  93 
  Employee benefits expense                   (6,202,746)         (2,557,346) 
  Other expenses                              (2,170,454)         (1,123,492) 
 
  Adjusted EBITDA                               (718,543)           (899,629) 
  Amortisation expense on right-of-use 
   assets                                     (1,331,375)           (187,240) 
  Interest expense on lease liabilities         (355,685)           (142,654) 
 
  Adjusted EBITDA after Impact 
   of Right-of-Use Assets                     (2,405,603)         (1,229,523) 
  One-off expenses pursuant to 
   deal-related expenses and loss 
   on write-off                                         -            (68,577) 
  Depreciation expense                          (246,594)           (161,798) 
  Finance cost                                   (93,945)            (78,124) 
  Impairment of trade and other                 (103,207)                   - 
   receivables 
  Amortisation expense                          (113,270)            (62,550) 
  Loss before income tax                      (2,962,619)         (1,600,572) 
  Income tax                                       17,611              10,383 
                                           --------------  ------------------ 
  Loss for the financial period               (2,945,008)         (1,590,189) 
                                           --------------  ------------------ 
 
  Loss for the period attributable 
   to: 
     Owners of the Company                    (2,885,464)         (1,587,660) 
     Non-controlling interests                   (59,544)             (2,529) 
                                           --------------  ------------------ 
                                              (2,945,008)         (1,590,189) 
                                           ==============  ================== 
 
  Loss per share attributable 
   to owners of the 
   Company (US$) 
 
     *    Basic and diluted (US$)                  (1.03)              (1.28) 
                                           ==============  ================== 
 

FINANCIAL REVIEW

-- The underlying revenues generated by the Group in relation to the owned and managed businesses grew to US$8.2 million for the six-month period ended 31 March 2020 (6M'20: US$4.8 million), an increase of ca. 71% YOY.

-- This was driven primarily by the increase in the student fees arising from the Owned Business for Wall Street Myanmar and the consolidation of Wall Street Vietnam's results. The increase in revenue was partially mitigated by a significant decline in technical support service fees in the Hospitality division due to the COVID-19-related domestic and international travel restrictions.

RESULTS OF OPERATIONS

-- The Group registered revenue growth of 175% against the previous period and correspondingly, employee benefits expenses and other expenses grew respectively at 143% and 93% YOY.

-- The Group's Adjusted EBITDA loss shows a clearer picture of the performance of the operations, reduced to US$0.7 million for the six-month financial period ended 31 March 2021 (6M'20: US$0.9 million).

-- Including the amortisation of right-of-use assets and the interest expense on lease liabilities, the Group's Adjusted EBITDA loss amounted to US$2.4 million for the six-month financial period (6M'20: US$1.2 million). The significant increase is mainly due to the four new retail WSE Myanmar leases entered with related party (TED Limited) for the operations of the WSE Myanmar Owned Business and the consolidation of the WSE Vietnam language centres.

-- Direct and indirect Full Time Employees ("FTEs") increased to over 2,200 (ca. 1,700 as at 31 March 2020), of which ca. 60 FTEs (Mar'20: 400) were employed within the operations under management and ca. 2,140 FTEs (Mar'20: 1,300) were employed in the owned operations. The growth was mainly due to the expansion of EXERA's operations, consolidation of WSE Vietnam and the Owned Business for WSE Myanmar.

 
                                         Unaudited        Unaudited 
                                    6 months ended   6 months ended 
                                     31 March 2021    31 March 2020 
 Underlying revenues                           US$              US$ 
 
    Managed businesses 
    Hospitality (Ostello Bello)             18,595          617,633 
    Education (Legacy: WSE, 
     Auston)                               951,302        1,962,072 
                                   ---------------  --------------- 
    Total managed businesses               969,897        2,579,705 
                                   ===============  =============== 
 
    Owned Businesses 
    Services (EXERA)                     2,707,920        1,957,985 
    Education (WSE, Auston, 
     Yangon American)                    4,567,955          284,165 
                                   ---------------  --------------- 
    Total owned businesses               7,275,875        2,242,150 
                                   ---------------  --------------- 
 
    Total underlying revenues            8,245,772        4,821,855 
                                   ===============  =============== 
 

UNDERLYING REVENUES

-- The Underlying Revenues are an indicator of the total volume of business generated in each division. The operating businesses managed and owned by the Group generated revenues ("Underlying Revenues") of US$8.2 million for the six-month period ended 31 March 2021 (6M'20: US$4.8 million), an increase of ca. 71% YOY. The significant revenue growth is mainly due to (i) the re-negotiation of the operating and management agreements with its related party (TED Limited) which resulted in a significant contribution in the owned business for Wall Street Myanmar and a concurrent decrease in the WSE managed business and (ii) the half-year effects arising from the consolidation of Wall Street Vietnam's results.

-- Additionally, the State of Emergency declared in Myanmar led to an increase in demand for high-quality integrated security and risk management services, which contributed to the 39% revenue growth rate from the Services division.

LIQUIDITY AND CAPITAL RESOURCES

As at 31 March 2021, the Group's cash and cash equivalents amounted to US$2.5 million, compared to US$0.2 million as at 31 March 2020, an increase of US$2.3 million.

Net cash used in operating activities amounted to US$1.1 million (6M'20: US$0.9 million) increased marginally, considering the Group is significantly larger than the previous financial period following the consolidation of WSE Vietnam and the WSE Myanmar Owned business.

The Group advanced US$0.3 million to the owners of the relevant managed operations to fund refurbishment expenses, improvements and general working capital mainly for the Managed Hospitality business. Such advances are unsecured and interest free and there is a risk that the Group may not be repaid some or all of these monies.

Financing activities recorded a net cash outflow mainly due to repayments of lease liabilities, which increased due to the four new WSE Myanmar language centres leased from a related party and lease payments for the language centres leased for WSE Vietnam. The increase in outflow was mitigated by an additional loan from Macan Pte. Ltd., a corporate shareholder, of US$1.5 million.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the financial period from 1 October 2020 to 31 March 2021

 
                                                                            Unaudited       Unaudited 
                                                                             6 months        6 months 
                                                                                ended           ended 
                                                                             31 March        31 March 
                                                                                 2021            2020 
                                                               Note               US$             US$ 
 
   Revenue                                                       4          7,647,891       2,781,116 
   Other income                                                                 6,766              93 
   Employee benefits expense                                     5        (6,202,746)     (2,557,346) 
   Depreciation expense                                          9          (246,594)       (161,798) 
   Amortisation expense                                        10, 11     (1,444,645)       (249,790) 
  Other expenses                                                          (2,170,454)     (1,192,069) 
  Loss allowance on trade and other                                         (103,207)               - 
   receivables 
   Finance cost                                                  6          (449,630)       (220,778) 
 
   Loss before income tax                                        7        (2,962,619)     (1,600,572) 
   Income tax credit                                             8             17,611          10,383 
 
   Loss for the period                                                    (2,945,008)     (1,590,189) 
 
   Other comprehensive income: 
   Items that may be reclassified subsequently 
    to profit 
    or loss: 
   Exchange difference in translation                                        (37,259)               - 
    of foreign operations 
 
      Items that will not be reclassified subsequently to 
        profit or loss: 
  Changes in fair value of equity instruments 
   at FVOCI                                                      12         (123,611)               - 
 
  Other comprehensive income for the 
   period,                                                                  (160,870)               - 
   net of tax 
                                                                       --------------  -------------- 
 
  Total comprehensive income                                              (3,105,878)     (1,590,189) 
                                                                       ==============  ============== 
 
   Loss for the period attributable to: 
     Owners of the Company                                                (2,885,464)     (1,587,660) 
     Non-controlling interests                                               (59,544)         (2,529) 
                                                                       --------------  -------------- 
                                                                          (2,945,008)     (1,590,189) 
                                                                       ==============  ============== 
 
   Total comprehensive income attributable 
    to: 
   Owners of the Company                                                  (3,046,334)     (1,587,660) 
   Non-controlling interests                                                 (59,544)         (2,529) 
                                                                       --------------  -------------- 
                                                                          (3,105,878)     (1,590,189) 
 
   Loss per share attributable to the 
    owners of the 
    Company (US$) 
 
     *    Basic and diluted (US$)                                17            (1.03)          (1.28) 
                                                                       ==============  ============== 
 

The above condensed interim consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2021

 
                                                   Unaudited        Audited 
                                                       As at          As at 
                                               31 March 2021   30 September 
                                                                       2020 
                                        Note             US$            US$ 
 
       ASSETS 
       Non-current assets 
       Plant and equipment               9           933,885      1,157,024 
       Intangible assets                 10        6,648,272      6,733,180 
       Right-of-use assets               11       11,356,582      9,310,027 
       Financial assets at FVOCI         12          551,963        675,574 
       Other receivables                 13          521,220        520,892 
       Total non-current assets                   20,011,922     18,396,697 
                                              --------------  ------------- 
 
       Current assets 
       Inventories                                   109,647         33,498 
       Trade and other receivables       13        3,089,240      2,393,068 
       Cash and cash equivalents                   2,501,552      3,941,413 
       Total current assets                        5,700,439      6,367,979 
                                              --------------  ------------- 
       Total assets                               25,712,361     24,764,676 
                                              ==============  ============= 
 
       LIABILITIES AND EQUITY 
       Liabilities 
       Non-current liabilities 
       Contract liabilities              4           386,475        282,650 
       Shareholder's loan                14        4,812,152      3,218,207 
       Lease liabilities                          10,295,300      7,384,391 
       Deferred tax liabilities                      217,923        245,731 
                                              --------------  ------------- 
       Total non-current liabilities              15,711,850     11,130,979 
                                              --------------  ------------- 
 
       Current liabilities 
       Trade and other payables          15        2,257,365      2,363,108 
       Contract liabilities              4         5,167,107      4,898,069 
       Lease liabilities                           1,144,929      1,960,731 
       Income tax payables                            32,759              - 
       Total current liabilities                   8,602,160      9,221,908 
                                              --------------  ------------- 
       Total liabilities                          24,314,010     20,352,887 
                                              --------------  ------------- 
 
       Equity 
       Share capital                     16       20,553,638     20,553,638 
       Accumulated losses                       (19,392,383)   (16,517,220) 
       Other reserves                                268,051        346,782 
                                              --------------  ------------- 
       Equity attributable to owners 
        of the Company                             1,429,306      4,383,200 
       Non-controlling interests                    (30,955)         28,589 
                                              --------------  ------------- 
       Total equity                                1,398,351      4,411,789 
                                              --------------  ------------- 
       Total liabilities and equity               25,712,361     24,764,676 
                                              --------------  ------------- 
 
 

The above condensed interim consolidated statement of financial position should be read in conjunction with the accompanying notes.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the financial period from 1 October 2020 to 31 March 2021

 
 Unaudited                                                      6 months ended 31 March 2021 
 
                                                                                                          Equity 
                                                     Share                 Foreign                  attributable    Non-controlling 
                              Share      Equity     option        Fair    Exchange    Accumulated             to                            Total 
                                                                 value                                 owners of 
                                                                                                             the 
                            capital    reserves    reserve     reserve     reserve         losses        Company           interest        Equity 
                  Note          US$         US$        US$         US$         US$            US$            US$                US$           US$ 
 
 
 Equity 
 Balance as at 
  1 
  October 
  2020                   20,553,638   (118,061)    610,737    (87,180)    (58,714)   (16,517,220)      4,383,200             28,589     4,411,789 
 
 Total 
 comprehensive 
 income for the 
 financial 
 period: 
                        -----------  ----------  ---------  ----------  ----------  -------------  -------------  -----------------  ------------ 
 Loss for the 
  financial 
  period                          -           -          -           -           -    (2,885,464)    (2,885,464)           (59,544)   (2,945,008) 
 Other 
  comprehensive 
  income                          -           -          -   (123,611)    (37,259)              -      (160,870)                  -     (160,870) 
                        -----------  ----------  ---------  ----------  ----------  -------------  -------------  -----------------  ------------ 
                                  -           -          -   (123,611)    (37,259)    (2,885,464)    (3,046,334)           (59,544)   (3,105,878) 
 
 Liquidation of 
  a subsidiary                    -    (10,301)          -           -           -         10,301              -                  -             - 
 
 Contribution 
 by 
 owners of the 
 Company 
 Recognition of 
  share-based 
  payments         5              -           -     92,440           -           -              -         92,440                  -        92,440 
 
 Balance as at 
  31 
  March 2021             20,553,638   (128,362)    703,177   (210,791)    (95,973)   (19,392,383)      1,429,306           (30,955)     1,398,351 
                        -----------  ----------  ---------  ----------  ----------  -------------  -------------  -----------------  ------------ 
 
 
 
 Unaudited                                               6 months ended 31 March 2020 
 
                                                                                   Equity 
                                                                             attributable           Non- 
                              Share      Equity       Share    Accumulated             to    controlling         Total 
                                                     option                     owners of 
                                                                                      the 
                            capital    reserves     reserve         losses        Company       interest        Equity 
                  Note          US$         US$         US$            US$            US$            US$           US$ 
 
 
 Equity 
 Balance as at 
  1 October 
  2019                   14,016,058   (118,061)     438,022    (9,546,392)      4,789,627         48,748     4,838,375 
 Effect of 
  adoption of 
  IFRS 
  16                              -           -           -         26,380         26,380              -        26,380 
                        -----------  ----------  ----------  -------------  -------------  -------------  ------------ 
 Balance as at 
  1 October 
  2019, as 
  restated               14,016,058   (118,061)     438,022    (9,520,012)      4,816,007         48,748     4,864,755 
 
 Loss for the 
  financial 
  period, 
  representing 
  total 
  comprehensive 
  income for 
  the financial 
  period                          -           -           -    (1,587,660)    (1,587,660)        (2,529)   (1,590,189) 
 
 Contribution 
 by owners of 
 the Company 
 Recognition of 
  share-based 
  payments         5              -           -      96,041              -         96,041              -        96,041 
 
 Balance as at 
  31 March 2020          14,016,058   (118,061)     534,063   (11,107,672)      3,324,388         46,219     3,370,607 
                        ===========  ==========  ==========  =============  =============  =============  ============ 
 
 

The above condensed interim consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

For the financial period from 1 October 2020 to 31 March 2021

 
                                                        Unaudited        Unaudited 
                                                         6 months   6 months ended 
                                                            ended 
                                                         31 March    31 March 2020 
                                                             2021 
                                               Note           US$              US$ 
 
 
        Operating activities 
      Loss before income tax                          (2,962,619)      (1,600,572) 
 
      Adjustments for: 
      Interest income                                     (5,772)             (93) 
      Lease concession                          7       (200,000)                - 
      Share-based compensation                  5          92,440           96,041 
      Interest expense on lease liabilities     6         355,685          142,654 
      Interest expense on loan due from 
       corporate 
       shareholder                               6         93,945           78,124 
      Impairment loss on trade and other 
       receivables                              13        103,207                - 
      Plant and equipment written off           7               -           39,396 
      Depreciation of plant and equipment       9         246,594          161,798 
      Amortisation of right-of-use assets       11      1,331,375          187,240 
      Amortisation of intangible assets         10        113,270           62,550 
       Unrealised exchange difference                      89,534                - 
                                                     ------------  --------------- 
      Operating cash flows before working 
       capital 
       changes                                          (742,341)        (832,862) 
      Working capital changes: 
      Trade and other receivables                       (496,363)        (286,762) 
      Inventories                                        (76,149)                - 
      Contract liabilities                                344,728           90,351 
      Trade and other payables                          (120,053)          144,830 
                                                     ------------  --------------- 
      Cash used in operations                         (1,090,178)        (884,443) 
      Interest received                                     5,772               93 
      Income tax refund/(paid)                             22,562             (52) 
      Net cash flows used in operating 
       activities                                     (1,061,844)        (884,402) 
                                                     ------------  --------------- 
 
      Investing activities 
      Purchase of plant and equipment           9        (33,663)         (42,016) 
      Advances to related parties                       (308,269)        (382,997) 
      Advances to third parties                                 -         (32,743) 
      Net cash flows used in investing 
       activities                                       (341,932)        (457,756) 
                                                     ------------  --------------- 
 
 
                                                        Unaudited       Unaudited 
                                                         6 months        6 months 
                                                            ended           ended 
                                                    31 March 2021   31 March 2020 
                                             Note             US$             US$ 
 
 Financing activities 
 Drawdown of shareholder's loan               14        1,500,000       1,000,000 
 Principal payment for lease liabilities              (1,146,456)       (337,346) 
 Interest payment for lease liabilities                 (355,685)       (142,654) 
 Net cash (used in)/generated from 
  financing activities                                    (2,141)         520,000 
                                                   --------------  -------------- 
 
 Net changes in cash and cash equivalents             (1,405,917)       (822,158) 
 Effect of exchange rate changes 
  on cash and cash equivalents                           (33,944)               - 
 Cash and cash equivalents at beginning 
  of financial year/period                              3,941,413       1,060,485 
 
 Cash and cash equivalents at end 
  of financial period                                   2,501,552         238,327 
                                                   ==============  ============== 
 

The above condensed interim consolidated statement of cash flows should be read in conjunction with the accompanying notes.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the financial period from 1 October 2020 to 31 March 2021

   1        CORPORATE INFORMATION 

Myanmar Strategic Holdings Limited (the "Company") (Registration Number 201302159D) is a public company limited by shares incorporated and domiciled in Singapore with its principal place of business and registered office at 80 Raffles Place #32-01, UOB Plaza, Singapore 048624. The Company's ordinary shares are traded on the Main Market of the London Stock Exchange under the ticker symbol SHWE.

The condensed interim consolidated financial statements as at and for the six-month financial period ended 31 March 2021 comprise the Company and its subsidiaries (collectively, the "Group"). The primary activities of the Company are investments and trading in Myanmar and Vietnam related projects.

For Management purposes, the Group is organised into business units based on its services, and has four reportable operating segments as follows:

a) Hospitality - Provision of consultancy, advisory and project management services in the leisure and hospitality sectors in Myanmar;

b) Education - Provision of English language training, kindergarten to primary school education (K-12 education), consultancy, advisory and project management services in the education sector in Myanmar and in Vietnam;

c) Services - Provision of integrated security services, consultancy, advisory and project management services in the service sector in Myanmar; and

d) Others - Corporate services to provide management and marketing support to respective entities of the Group.

These operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker who is responsible for allocating resources and assessing the performance of the operating segments.

   1.1   BASIS OF PREPARATION 

The condensed interim consolidated financial statements as at and for the six months financial period ended 31 March 2021 have been prepared in accordance with International Accounting Standards ("IAS") 34 Interim Financial Reporting as adopted by the European Union.

The condensed consolidated interim financial statements do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the annual report for the financial period from 1 April 2019 to 30 September 2020 ("financial period ended 2020") which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance of the Group since the last annual financial statements for the financial period from 1 April 2019 to 30 September 2020 which can be found on the Company's website at www.ms-holdings.com .

The consolidated financial statements of the Group are presented in United States dollar ("US$") which is the functional currency and the presentation currency for the consolidated financial statements.

   2       SIGNIFICANT ACCOUNTING POLICIES 

The condensed financial statements have been prepared under historical cost convention, except as disclosed in the accounting policies in the Group financial statements for the financial period ended 2020.

Changes in accounting policy

A number of new or amended standards became applicable for the current reporting period. The adoption of these new or amended standards did not result in substantial changes to the Group's accounting policies and had no material effect on the amounts reporting for the current or previous financial period.

IFRSs issued but not yet effective

Certain new accounting standards and interpretations have been issued but not yet effective for the current financial year ended 30 September 2021 and have not been early adopted by the Group. The Group expect that the adoption of these IFRSs, if applicable, will have no material impact on the financial statements in the period of initial application.

   3       USE OF JUDGEMENTS AND ESTIMATES 

In preparing the condensed interim financial statements, Management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by Management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the financial period from 1 April 2019 to 30 September 2020.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

There have been no material revisions to the nature and amount of estimates of amounts reported in prior periods, except those necessitated by the changing circumstances of the COVID-19 pandemic and Myanmar's State of Emergency.

   3.1   SEASONAL OPERATIONS 

The Group's businesses were not affected significantly by seasonal or cyclical factors during the financial period.

   3.2   SIGNIFICANT EVENTS AND TRANSACTIONS 
   a)   Renegotiation of commercial terms with a related party 

As a result of the COVID-19 outbreak and the worsening of the overall trading conditions in the education sector, the Group renegotiated the key terms of its operating and management agreement with a related party, TED Limited.

Effective 1 October 2020, E Partners, a wholly-owned subsidiary of the Group, leased four language centres from TED to operate and manage its own Wall Street English language learning centres and Auston College in Myanmar. This resulted in additions to the rights-of-use assets (Note 11) and leases liabilities of US$3,442,698 as at 1 October 2020.

E Partners will continue to provide operating, management and technical support services for TED's existing student contracts for a fee over the next 24 months.

   3.2   SIGNIFICANT EVENTS AND TRANSACTIONS (CONTINUED) 

b) Myanmar's State of Emergency Impact and Coronavirus ("COVID-19")

On 1 February 2021, the Myanmar military announced, via the military-owned news channel Myawaddy News, that it had declared a state of emergency for a period of up to one year.

In the short aftermath of the military takeover, the Group's businesses were disrupted intermittently due to (i) outages in telecommunication, (ii) imposition of martial law in certain townships, (iii) widespread demonstrations and, subsequently, (iv) increased security risks. The political situation is evolving daily and the outcome and long-term effects remain unclear at this stage. There is also the potential negative effect of a third COVID-19 wave in Myanmar to consider.

During February and March 2021, the Group's schools in Myanmar experienced temporary closures and staff worked from home to reduce any potential risk to our students and our employees. In April 2021, physical operations resumed across all businesses.

Throughout the period, the Group continued to deliver its essential integrated security services to embassies, NGOs and national infrastructure. EXERA further invested in its risk management function to remain the leading source of security-related insights in Myanmar.

While the political outlook remains uncertain, economic activity has slowly resumed. Management is monitoring several risk factors:

   --    The rise of an insurgence campaign resulting in daily explosions across the country; 
   --    The disruption of the global and local supply chain, potentially resulting in hyperinflation; 
   --    The weakening of the banking financial system and limited access to cash; and 
   --    Exchange rate volatility. 

As vaccination rates across ASEAN remain low, governments are likely to routinely impose movement and opening restrictions to reduce any pandemic spread. For example, new waves of COVID-19 are affecting both Myanmar and Vietnam in June and July 2021. While this may continue to negatively impact sales, the Group has developed best-in-class online teaching capabilities and is now able to switch to fully online and / or remote operations within hours.

Currently, the Group's main priority is to maintain financial flexibility, stability and liquidity through mitigating actions within the Group's control which are not limited to the following:

   i.      Delay of planned expansion of language centres and capital expenditures in Myanmar; 

ii. Renegotiation of lease agreements to secure lease concession, lease reductions and deferment of payments;

iii. Reduction in staff costs for divisions significantly affected, in particular the Hospitality division and through rationalisation of its corporate functions; and

   iv.   Reallocation of the Group's resources to ensure diversification by industry and geography. 

The Group will maintain financial discipline to conserve cash and maintain liquidity. The diversification of the Group's operations between Myanmar and Vietnam should help mitigate the overall COVID-19 and geographical risk exposure to the Group.

As Myanmar's State of Emergency remains in place as at the date of issuance of the condensed interim consolidated financial statements, the Group cannot reasonably ascertain the full extent of the probable impact of the disruptions on its operating and financial performance for the financial year ending 30 September 2021.

The Group will closely monitor the developments in Myanmar and provide regular updates to its shareholders who remain supportive of the Group's efforts and initiatives.

   4          REVENUE AND SEGMENT INFORMATION 

Disaggregation of revenue

The Group has disaggregated revenue into various categories in the following table which is intended to:

-- depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors; and

   --    enable users to understand the relationship with revenue segment information provided. 
 
                          Hospitality               Education                Services                  Total 
                      Unaudited  Unaudited                  Unaudited  Unaudited  Unaudited  Unaudited 
                       6 months   6 months       Unaudited   6 months   6 months   6 months   6 months       Unaudited 
                          ended      ended        6 months      ended      ended      ended      ended        6 months 
                       31 March   31 March           ended   31 March   31 March   31 March   31 March           ended 
                           2021       2020   31 March 2021       2020       2021       2020       2021   31 March 2020 
                            US$        US$             US$        US$        US$        US$        US$             US$ 
 
         Rendering 
          of 
          services            -          -               -          -  2,707,920  1,957,985  2,707,920       1,957,985 
         Technical 
          support 
          service 
          fees            6,857     45,000               -    172,056          -          -      6,857         217,056 
         Management 
          fees                -          -         361,409    193,679          -          -    361,409         193,679 
         Royalty 
          income              -          -               -    124,481          -          -          -         124,481 
         New centre 
          fee                 -          -           3,750      3,750          -          -      3,750           3,750 
         Student 
          fees                -          -       4,567,955    284,165          -          -  4,567,955         284,165 
                          6,857     45,000       4,933,114    778,131  2,707,920  1,957,985  7,647,891       2,781,116 
                      =========  =========  ==============  =========  =========  =========  =========  ============== 
 
         Timing of 
         transfer of 
         services 
  Point in time               -          -               -          -    144,446    179,836    144,446         179,836 
  Over time               6,857     45,000       4,933,114    778,131  2,563,474  1,778,149  7,503,445       2,601,280 
                      ---------  ---------  --------------  ---------  ---------  ---------  ---------  -------------- 
                          6,857     45,000       4,933,114    778,131  2,707,920  1,957,985  7,647,891       2,781,116 
                      =========  =========  ==============  =========  =========  =========  =========  ============== 
 
   4          REVENUE AND SEGMENT INFORMATION (CONTINUED) 

The timing of revenue recognition would affect the amount of revenue and deferred revenue (advances from customers) recognised as at the reporting date in the statement of financial position.

 
                                Unaudited       Audited 
                                 31 March  30 September 
                                     2021          2020 
                                      US$           US$ 
 
         Contract liabilities 
         Deferred revenue       5,553,582     5,180,719 
                                =========  ============ 
 
   a)    Significant changes in contract liabilities are as detailed below: 
 
                                                          Unaudited       Audited 
                                                           31 March  30 September 
                                                               2021          2020 
                                                                US$           US$ 
 
              Balance at beginning                        5,180,719       230,983 
              Cash received in advance of performance 
               and not 
               recognised as revenue 
                                                        -----------  ------------ 
 
                *    Acquisition of subsidiary                    -     4,538,077 
 
                *    Additions                            4,787,859     3,664,305 
                                                        -----------  ------------ 
                                                          4,787,859     8,202,382 
              Revenue recognised during the financial 
               period                                   (4,414,996)   (3,252,646) 
              Balance at end                              5,553,582     5,180,719 
                                                        ===========  ============ 
 
   b)    Remaining performance obligations 

Non-current deferred revenues are in respect of cash received in advance of performance which will be recognised according to the following:

i. Deferred revenues for new centres will be recognised over the remaining exclusive rights to develop and operate ranging from 6 to 8 (30 September 2020: 6.5 to 8.5) years.

ii. Student fees for Wall Street English language training and primary school education are generally collected 1 to 12 months and 1 to 9.5 years (30 September 2020: 1 to 12 months and 1 to 10 years) respectively in advance of performance with reference to the individual terms of the student contracts. Deferred revenues from student fees are recognised over the duration of the respective courses and the remaining contract period ranging from 1 to 7.5 years (30 September 2020: 1 to 8).

   4          REVENUE AND SEGMENT INFORMATION (CONTINUED) 
 
                                   Hospitality        Education         Services          Others            Total 
                                           US$              US$              US$             US$              US$ 
 
   1 October 2020 to 
    31 March 2021 
 
   Revenue                               6,857        4,933,114        2,707,920               -        7,647,891 
                                  ============  ===============  ===============  ==============  =============== 
   Cost of services 
    and royalties                    (152,611)   (3,067,365)(*)   (1,972,830)(*)               -      (5,192,806) 
                                                                                       (781,447) 
   Other expenses                    (166,191)      (3,735,244)        (740,596)            (**)      (5,423,478) 
   Interest income                           -            5,772                -               2            5,774 
   Segment loss                      (311,945)      (1,863,723)          (5,506)       (781,445)      (2,962,619) 
   Income tax benefit                        -            7,176           10,435               -           17,611 
                                  ------------  ---------------  ---------------  --------------  --------------- 
   Loss for the year                 (311,945)      (1,856,547)            4,929       (781,445)      (2,945,008) 
                                  ============  ===============  ===============  ==============  =============== 
 
   Other non-cash items: 
   Depreciation of plant 
    and equipment                      (7,582)        (230,457)          (8,152)           (403)        (246,594) 
   Amortisation of right-of-use 
    asset                                    -      (1,250,985)         (80,390)               -      (1,331,375) 
   Amortisation of intangible 
    assets                                   -                -         (70,160)        (43,110)        (113,270) 
   Impairment of trade 
    and other receivables                    -        (103,207)                -               -        (103,207) 
                                  ============  ===============  ===============  ==============  =============== 
 
   Reportable segment 
    assets as at 31 March 
    2021                                90,995       20,146,346        3,865,118       1,057,939       25,160,398 
  Investment in FVOCI                        -                -                -         551,963          551,963 
  Total Group's assets                                                                                 25,712,361 
                                  ============  ===============  ===============  ==============  =============== 
 
   Included in the segment 
    assets: 
  Additions: 
  Right-of-use assets                        -        3,088,394          354,304               -        3,442,698 
                                  ============  ===============  ===============  ==============  =============== 
 
   Reportable segment 
    liabilities as at 
    31 March 2021                     (29,082)     (17,432,877)      (1,309,455)     (5,324,673)     (24,096,087) 
  Deferred tax liabilities                   -        (214,445)          (3,478)               -        (217,923) 
  Total Group's liabilities                                                                          (24,314,010) 
 
 

* Cost of services and royalties from "Education" and "Services" segments comprise mainly employee benefits expenses amounting to US$2,294,150 and US$1,797,508, respectively for the financial period ended 31 March 2021.

** Other expenses from the "Others" segment comprise mainly employee benefit expenses of US$447,475 for the financial period ended 31 March 2021.

   4          REVENUE AND SEGMENT INFORMATION (CONTINUED) 
 
                                     Hospitality        Education         Services          Others            Total 
                                             US$              US$              US$             US$              US$ 
 
       1 October 2019 to 
        31 March 2020 
 
       Revenue                            45,000          778,131        1,957,985               -        2,781,116 
                                    ============  ===============  ===============  ==============  =============== 
       Cost of services 
        and royalties                          -        (181,625)   (1,476,618)(*)               -      (1,658,243) 
       Other expenses                  (213,398)   (1,458,979)(#)        (536,175)       (514,986)      (2,723,538) 
       Interest income                         8               20                5              60               93 
                                    ------------  ---------------  ---------------  --------------  --------------- 
       Segment loss                    (168,390)     (862,453)(^)         (54,803)       (514,926)      (1,600,572) 
       Income tax 
        benefit                           10,383                -                -               -           10,383 
                                    ------------  ---------------  ---------------  --------------  --------------- 
       Loss for the year               (158,007)        (862,453)         (54,803)       (514,926)      (1,590,189) 
                                    ============  ===============  ===============  ==============  =============== 
 
       Other non-cash items: 
        Depreciation of 
         plant and equipment            (11,646)        (133,591)         (16,270)           (291)        (161,798) 
        Amortisation of 
         right-of-use asset                    -        (187,240)                -               -        (187,240) 
        Amortisation of 
         intangible assets                     -         (17,507)         (45,043)               -         (62,550) 
                                    ============  ===============  ===============  ==============  =============== 
 
         Reportable segment 
          assets as at 
          30 September 2020              128,389       19,274,966        2,615,444       2,070,303       24,089,102 
         Investment in FVOCI                   -                -                -         675,574          675,574 
         Total Group's assets                                                                            24,764,676 
                                    ============  ===============  ===============  ==============  =============== 
 
        Included in the 
         segment assets: 
        Additions: 
        Plant and equipment                1,168           34,000            6,848               -           42,016 
 
        Reportable segment 
         liabilities as at 
         30 September 2020             (383,503)     (15,496,729)        (585,959)     (3,640,965)     (20,107,156) 
        Deferred tax liabilities               -        (231,818)         (13,913)               -        (245,731) 
        Total Group's liabilities                                                                      (20,352,887) 
 
 

* Cost of services and royalties from "Education" and "Services" segments comprise mainly employee benefit expenses amounting to US$140,109 and US$1,459,693 for the financial period ended 31 March 2020.

# Other expenses from the "Education" segment comprise mainly employee benefit expenses amounting to US$678,395, respectively for the financial period ended 31 March 2020.

^ The loss from the "Education" segment includes the loss from Yangon American International School amounting to US$771,420 for the financial period ended 31 March 2020.

   4          REVENUE AND SEGMENT INFORMATION (CONTINUED) 

Geographical information

The Group's business segments operate in three main geographical areas. Revenue is based on the country in which the customers are located. Segmental non-current assets consist primarily of non-current assets other than financial instruments and deferred tax assets. Segment non-current assets are shown by geographical area in which the assets are located.

 
                                           Unaudited      Unaudited 
                                            6 months       6 months 
                                               ended          ended 
                                       31 March 2021  31 March 2020 
                                                 US$            US$ 
 
          Revenue 
          Myanmar                          3,633,617      2,781,116 
          Vietnam                          4,014,274              - 
                                       -------------  ------------- 
                                           7,647,891      2,781,116 
                                       =============  ============= 
 
                                           Unaudited        Audited 
                                            31 March   30 September 
                                                2021           2020 
                                                 US$            US$ 
 
          Segment non-current assets 
          Singapore                          125,129          178,051 
          Myanmar                          8,536,561        5,804,293 
          Vietnam                         10,277,049       11,217,887 
                                          18,938,739       17,200,231 
                                       =============  =============== 
 

Non-current assets consist of plant and equipment, intangible assets and right-of-use assets (30 September 2020: same) in the statement of financial position of the Group.

   5          EMPLOYEE BENEFITS EXPENSE 
 
                                                  Unaudited       Unaudited 
                                                   6 months        6 months 
                                                      ended           ended 
                                              31 March 2021   31 March 2020 
                                                        US$             US$ 
 
     Salaries and bonuses*                        6,110,117       2,433,931 
     Contributions to defined contribution 
      plans                                             189          27,374 
     Share-based compensation                        92,440          96,041 
                                                  6,202,746       2,557,346 
                                             --------------  -------------- 
 

*Included in these expenses are Director's fees and remuneration.

   6              FINANCE COST 
 
                                            Unaudited      Unaudited 
                                             6 months       6 months 
                                                ended          ended 
                                        31 March 2021  31 March 2020 
                                                  US$            US$ 
 
       Interest expenses on: 
 
  *    Lease liabilities                      355,685        142,654 
 
         *    Loan from a shareholder          93,945         78,124 
                                        -------------  ------------- 
                                              449,630        220,778 
                                        =============  ============= 
 
   7            LOSS BEFORE INCOME TAX 

In addition to the charges and credits disclosed elsewhere in the financial statements, the loss before income tax includes the following charges:

 
                                                       Unaudited       Unaudited 
                                                        6 months        6 months 
                                                           ended           ended 
                                                   31 March 2021   31 March 2020 
                                                             US$             US$ 
 
      Lease concession granted(1)                      (200,000)               - 
      Professional fees                                  331,167         230,035 
      Credit charges for education services              182,931               - 
      Hotel related operating expenses                   152,611               - 
      Academic expenses                                  529,416               - 
      Short term lease expense                           114,728         117,031 
      Royalty expenses                                    61,705         140,110 
      Expenses pursuant to the on-going listing           81,711          72,114 
     Travelling expenses                                  50,999          41,806 
      Marketing expenses                                 534,119          21,756 
      Plant and equipment written off                          -          39,396 
      Software license and subscription fees              36,896          16,515 
                                                  ==============  ============== 
 
 

(1) The variable lease payments are related to additional rent concessions received from landlord due to the COVID-19 pandemic.

   8          INCOME TAX EXPENSE 

The corporate income tax rate applicable to the Company and its subsidiaries in Singapore is at 17% (31 March 2020: 17%). The Group has significant operations in Myanmar and Vietnam, for which the corporate income tax rate applicable are 25% (31 March 2020: 25%) and 20% (31 March 2020: not applicable) respectively.

Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

The Group calculates the period income tax expense using the tax rate that would be applicable to the expected total annual earnings of the respective entities. The material components of the income tax expense in the condensed interim consolidated statement of profit or loss are:

 
                                                                           Unaudited      Unaudited 
                                                                            6 months       6 months 
                                                                               ended          ended 
                                                                       31 March 2021  31 March 2020 
                                                                                 US$            US$ 
         Current income tax 
 
           *    (Under)/over provision in respect of prior financial 
                periods                                                     (10,197)         10,383 
 
         Deferred income tax 
 
           *    current financial period                                      27,808              - 
         Total income tax credit recognised in 
          profit or loss                                                      17,611         10,383 
                                                                       =============  ============= 
 
   9          PLANT AND EQUIPMENT 

During the six-month financial period ended 31 March 2021, the movements in the net carrying amount of plant and equipment are summarised below.

 
                                         Unaudited       Unaudited 
                                          6 months        6 months 
                                             ended           ended 
                                     31 March 2021   31 March 2020 
                                               US$             US$ 
 
  Purchase of plant and equipment           33,663          42,016 
  Depreciation for the period            (246,594)       (161,798) 
                                    ==============  ============== 
 
   10           INTANGIBLE ASSETS 
 
                                 Area development       Set-up fee                     Customer- 
                                       and centre        and brand  Computer software    related 
                                             fees   licensing fees            licence     assets   Goodwill      Total 
                                              US$              US$                US$        US$        US$        US$ 
 
         31 March 2021 
         Cost 
 
         Balance as at 1 
          October 2020                    395,372           40,000            103,904    273,913  6,291,859  7,105,048 
         Write-off                              -          (2,500)                  -          -          -    (2,500) 
         Adjustment                             -                -             22,167          -          -     22,167 
         Foreign exchange 
          difference                        3,646                -                515          -     27,142     31,303 
                                 ----------------  ---------------  -----------------  ---------  ---------  --------- 
         Balance as at 31 March 
          2021                            399,018           37,500            126,586    273,913  6,319,001  7,156,018 
                                 ----------------  ---------------  -----------------  ---------  ---------  --------- 
 
         Accumulated 
         amortisation and 
         impairment 
         Balance as at 1 
          October 2020                     65,875           40,000             47,731    218,262          -    371,868 
         Amortisation                      59,537                -             11,994     41,739          -    113,270 
         Write-off                              -          (2,500)                  -          -          -    (2,500) 
         Adjustment                             -                -             22,167          -          -     22,167 
         Foreign exchange 
          difference                        2,545                -                396          -          -      2,941 
                                 ----------------  ---------------  -----------------  ---------  ---------  --------- 
         Balance as at 31 March 
          2021                            127,957           37,500             82,288    260,001          -    507,746 
                                 ----------------  ---------------  -----------------  ---------  ---------  --------- 
 
         Net carrying amount 
         Balance as at 31 March 
          2021                            271,061                -             44,298     13,912  6,319,001  6,648,272 
                                 ================  ===============  =================  =========  =========  ========= 
 
   10           INTANGIBLE ASSETS (CONTINUED) 
 
                                 Area development       Set-up fee                     Customer- 
                                       and centre        and brand  Computer software    related 
                                             fees   licensing fees            licence     assets   Goodwill      Total 
                                              US$              US$                US$        US$        US$        US$ 
 
         30 September 2020 
         Cost 
 
         Balance as at 1 April 
          2019                            200,000           40,000             35,487    273,913  1,438,990  1,988,390 
         Acquisition of 
          subsidiary                      179,227                -             22,529          -  4,514,304  4,716,060 
         Additions                              -                -             44,198          -          -     44,198 
         Foreign exchange 
          difference                       16,145                -              1,690          -    338,565    356,400 
                                 ----------------  ---------------  -----------------  ---------  ---------  --------- 
         Balance as at 30 
          September 2020                  395,372           40,000            103,904    273,913  6,291,859  7,105,048 
                                 ----------------  ---------------  -----------------  ---------  ---------  --------- 
 
         Accumulated 
         amortisation and 
         impairment 
         Balance as at 1 April 
          2019                             35,833            4,000             19,819     89,130          -    148,782 
         Amortisation                      30,042            6,000             27,912    129,132          -    193,086 
         Impairment loss                        -           30,000                  -          -          -     30,000 
                                 ----------------  ---------------  -----------------  ---------  ---------  --------- 
         Balance as at 30 
          September 2020                   65,875           40,000             47,731    218,262          -    371,868 
                                 ----------------  ---------------  -----------------  ---------  ---------  --------- 
 
         Net carrying amount 
         Balance as at 30 
          September 2020                  329,497                -             56,173     55,651  6,291,859  6,733,180 
                                 ================  ===============  =================  =========  =========  ========= 
 
   10        INTANGIBLE ASSETS (CONTINUED) 

For presentation purposes, the carrying amounts of goodwill (excluding computer software/license) are allocated to the respective CGU have been group to the following segments:

 
                               Education               Security services                Total 
                     31 March  30 September      31 March    30 September   31 March  30 September 
                         2021          2020          2021            2020       2021          2020 
                          US$           US$           US$             US$        US$           US$ 
 
         Goodwill   4,880,011     4,852,869     1,438,990       1,438,990  6,319,001     6,291,859 
                    =========  ============  ============  ==============  =========  ============ 
 
 
   11        RIGHTS-OF-USE ASSETS 

During the six months financial period ended 31 March 2021, the movements in the net carrying amount of rights-of-use assets are summarised below.

 
                                      Unaudited         Audited 
                                          As at           As at 
                                  31 March 2021    30 September 
                                                           2020 
                                            US$             US$ 
 
 
  Additions                           3,442,698       6,174,925 
  Amortisation for the period       (1,331,375)       (937,703) 
                                ===============  ============== 
 
   12      FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME ("FVOCI") 
 
                                                             Unaudited             Audited 
                                                                 As at               As at 
                                                         31 March 2021   30 September 2020 
                                                                   US$                 US$ 
 
         Balance at beginning                                  675,574             150,000 
         Additions                                                   -             612,754 
         Fair value recognised in other comprehensive 
          income                                             (123,611)            (87,180) 
         Balance at end                                        551,963             675,574 
                                                        ==============  ================== 
 

Details of the investments are as follows:

 
  Quoted equity instrument 
         - London Stock Exchange (AIM)   551,963  675,574 
                                         =======  ======= 
 

The Group designated investments in quoted equity security to be measured at fair value (Level 1) through other comprehensive income ("FVOCI") as at reporting dates. The Group intends to hold investments for long-term for appreciation in value as well as strategic investment purposes.

The FVOCI are denominated in United States dollar as at reporting date.

   13     TRADE AND OTHER RECEIVABLES 
 
                                                            Unaudited        Audited 
                                                                As at          As at 
                                                        31 March 2021   30 September 
                                                                                2020 
                                                                  US$            US$ 
 
         Current 
         Trade receivables 
         Third parties                                        881,765        694,598 
         Related party                                      1,265,085        893,234 
                                                       --------------  ------------- 
         Total trade receivables                            2,146,850      1,587,832 
 
         Other receivables 
         Related party                                      3,918,366      3,506,890 
         Less: Loss allowances                            (3,498,947)    (3,395,740) 
                                                       --------------  ------------- 
                                                              419,419        111,150 
         Third parties                                        280,327        280,327 
         Less: Loss allowances                              (280,327)      (280,327) 
                                                       --------------  ------------- 
                                                                    -              - 
         Advances                                                   -          2,927 
         Sundry receivables                                   169,835        143,846 
         Deposits                                              52,489         51,644 
         Prepayments                                          300,647        495,669 
                                                       --------------  ------------- 
         Total other receivables                              942,390        805,236 
         Total trade and other receivables (current)        3,089,240      2,393,068 
                                                       --------------  ------------- 
 
         Non-current 
         Deposits                                             521,220        520,892 
                                                       --------------  ------------- 
         Total other receivables (non-current)                521,220        520,892 
                                                       --------------  ------------- 
 
         Total trade and other receivables                  3,610,460      2,913,960 
         Add: Cash and cash equivalents                     2,501,552      3,941,413 
         Less: Prepayments                                  (300,647)      (495,669) 
         Financial assets at amortised costs                5,811,365      6,359,704 
                                                       ==============  ============= 
 
 

Trade and other receivables

Trade receivables are non-interest bearing and are generally on a 15 to 60 (30 September 2020: 15 to 60) days credit term. They are measured at their original invoice amounts which represent their fair value on initial recognition.

The trade and non-trade amounts due from related parties of US$1,265,085 (30 September 2020: US$893,234) and US$3,918,366 (30 September 2020: US$3,506,890) are amounts due from a company where a Director of the subsidiaries has beneficial interests.

Amounts due from related parties are non-trade in nature, unsecured, interest-free and are repayable on demand.

   13     TRADE AND OTHER RECEIVABLES (CONTINUED) 

Expected credit loss allowances

   i.    Amount due from a related party 

As at reporting date, loss allowances of US$3,498,947 (30 September 2020: US$3,395,740) was made for the non-trade amounts due from a related party in respect of payments made on behalf and advances for the operation of the managed language centres in Myanmar. Based on the financial information of the related party, continuous losses is expected and the likelihood of recovery is in doubt.

   ii.   Amount due from third parties 

In prior years, allowance for impairment of receivables from third parties of US$280,327 was made in respect of advances to the owners of the hostels under management as two of the hostels under management experienced continuous losses and recoverability is in doubt.

The Group may commit to provide annual or monthly advances to the owners of the managed hostels pursuant to each operation and management agreement. If the managed hostels do not meet the agreed performance measures, such advances are recognised as hostel related operating expenses in the profit or loss.

   14     SHAREHOLDER'S LOAN (UNSECURED) 

On 1 July 2019, the Group secured a loan facility of up to US$3,000,000 with its corporate shareholder. The loan facility is repayable no later than 30 June 2022 and may be repayable earlier at the Group's discretion and bears semi-annual interest at 6% per annum. As at reporting date, the loan has been fully drawn down by the Group.

On 23 March 2020, the corporate shareholder has granted the Group an additional loan facility of up to US$4,000,000 based on similar interest rate and repayment terms as the initial loan facility. During the financial period, the Group has drawn down US$1,500,000 within the additional loan facility (US$2.0 million as at the date of this report).

As at 31 March 2021, the Group accrued interest due to shareholder amounted to US$312,152 (30 September 2020: US$218,207).

   15     TRADE AND OTHER PAYABLES 
 
                                                           Unaudited        Audited 
                                                               As at          As at 
                                                       31 March 2021   30 September 
                                                                               2020 
                                                                 US$            US$ 
 
         Trade payables 
         Third parties                                       468,007        687,020 
                                                      --------------  ------------- 
 
         Other payables 
         Third parties                                        38,515        293,477 
         A corporate shareholder                               3,222          4,180 
         Accruals                                          1,747,621      1,378,431 
                                                      --------------  ------------- 
         Total other payables                              1,789,358      1,676,088 
                                                      --------------  ------------- 
         Total trade and other payables                    2,257,365      2,363,108 
         Add: 
         Lease liabilities                                11,440,229      9,345,122 
         Shareholder's loans                               4,812,152      3,218,207 
                                                      --------------  ------------- 
         Financial liabilities carried at amortised 
          cost                                            18,509,746     14,926,437 
                                                      ==============  ============= 
 

Trade amounts due to third parties are unsecured, non-interest bearing and are on a 15 to 45 (30 September 2020: 15) days credit term.

The non-trade amounts due to third parties and a corporate shareholder are unsecured, interest-free and repayable on demand.

   16     SHARE CAPITAL 
 
 
 
 
                              Unaudited         Audited    Unaudited         Audited 
                                  As at           As at        As at           As at 
                               31 March    30 September     31 March    30 September 
                                   2021            2020         2021            2020 
                                  Number of shares               US$             US$ 
 Issued and fully paid 
   ordinary shares: 
  Ordinary shares 
 At beginning of financial 
  period                      2,804,920       2,478,041   20,553,638      14,016,058 
 Shares issued during 
  the financial period                -         326,879            -       6,537,580 
 At end of financial 
  period                      2,804,920       2,804,920   20,553,638      20,553,638 
                             ----------  --------------  -----------  -------------- 
 

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares have no par value and carry one vote per share without restrictions.

The Company did not declare any dividend in respect of the financial period from 1 October 2020 to 31 March 2021 and financial period from 1 April 2019 to 30 September 2020.

   17     LOSS PER SHARE 

The calculation of the basic and diluted loss per share attributable to the ordinary equity holders of the Company is based on the following data:

 
                                                          Unaudited      Unaudited 
                                                           6 months       6 months 
                                                              ended          ended 
                                                      31 March 2021  31 March 2020 
 
         Numerator 
         Loss for the financial period attributable 
          to the 
           owners of the parent (US$)                   (2,885,464)    (1,587,660) 
                                                      =============  ============= 
 
         Denominator 
         Weighted average number of ordinary shares 
          for the 
           purposes of basic and diluted loss per 
            share                                         2,804,920      1,242,415 
                                                      =============  ============= 
 
         Loss per share (US$) 
         Basic and diluted                                   (1.03)         (1.28) 
                                                      =============  ============= 
 
 

In the current financial period and previous financial period, diluted loss per share is the same as the basic loss per share because the dilutive potential ordinary shares to be exercised are anti-dilutive as the effect of the shares conversion would be to decrease the loss per share.

   18     SIGNIFICANT RELATED PARTY TRANSACTIONS 

During the financial period, in addition to the information disclosed elsewhere in these financial statements, the Group entered into the following significant transactions with related parties at rates and terms agreed between the parties:

 
                                                    Unaudited       Unaudited 
                                                     6 months        6 months 
                                                        ended           ended 
                                                31 March 2021   31 March 2020 
                                                          US$             US$ 
 
       With related parties*: 
 
         *    Technical support service fees                -         172,056 
 
         *    Management fee                          361,409         193,679 
 
         *    Royalty fee                                   -         124,481 
 
            With a Director of the 
             subsidiaries: 
 
         *    Professional fees                        54,000          39,000 
                                               ==============  ============== 
 

*Related parties refer to entities where a Director of the subsidiaries have beneficial interests.

   19     FAIR VALUE MEASUREMENT 

Financial instruments and measurements

Financial instruments not measured at fair value

Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables (excluding prepayments) and trade and other payables. Due to their short-term nature, the carrying amount of these current financial assets and financial liabilities measured at amortised costs approximate their fair value.

The carrying amounts of the non-current loan due to a shareholder approximates its fair value as the fixed interest rate approximates market interest rates for such liabilities.

The quoted equity security is traded in an active market and its fair value is based on the last quoted market prices at the reporting date.

There were no transfers between levels during the period.

   20     SUBSEQUENT EVENTS 

a) On 18 May 2021, Mr Jonathan Kolb was appointed as an Executive Director on the Board of Directors of the Company in the role of Chief Financial Officer. Jonathan was appointed as the Company's Chief Financial Officer in July 2020 in a non-Board position and has been one of the Company's key executives since 2015.

b) On 14 April 2021, in lieu of cash payments, annual bonuses payable to certain key management personnel and Directors of the Company relating to the financial period ended 30 September 2020 were satisfied through issuance of 41,000 new ordinary shares of the Company at a price of US$6.00 per ordinary shares (being the Company's closing bid price as at 13 April 2021) with no par value and at a fair value of US$246,000.

c) As at the date of this report, Wall Street English, Auston and Yangon American, are experiencing temporary closures of in-person activities due to COVID-19 restrictions. Management reasonably expects such restrictions to be lifted by August 2021.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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