TIDMGSH
RNS Number : 9497X
Green & Smart Holdings plc
16 August 2018
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
16 August 2018
Green & Smart Holdings plc
("Green & Smart" or "the Company" or "the Group")
Final Results for the Year ended 30 September 2017
Green & Smart Holdings plc (AIM: GSH), a renewable energy
company generating power from biogas captured through the treatment
of palm oil mill effluent (POME) in Malaysia, announces its final
audited results for the year ended 30 September 2017.
Financial Summary
-- Revenue was RM45.34m (2016: RM67.38m)
-- Gross profit was RM11.67m (2016: RM17.06m)
-- Gross margin was 25.7% (2016: 25.3%)
-- Operating loss was RM1.90m (2016: profit of RM10.13m)
-- Loss before tax was RM2.70m (2016: profit of RM9.93m)
-- Cash and cash equivalents at 30 September 2017 were RM0.10m (2016: RM2.15m)
Operational Summary
-- Transformational year as the Group became an Independent
Power Producer. However, as stated previously, acceleration of
projects was hampered due to lack of funds
-- Over the past two years, Green & Smart has built seven
biogas plants including two fully-owned plants. It has become one
of the largest providers of biogas-based renewable energy in
Malaysia
-- Post-year end, the Group entered into an agreement and raised
c.RM17.0m (c.GBP3.21m) gross via a subscription from Serba Dinamik
International Ltd, a wholly-owned subsidiary of Serba Dinamik
Holdings Berhad, a Malaysia-based investment holding company with a
market value of approximately GBP1bn
Fully-Owned Power Producing Projects
-- Established itself as the only company in Malaysia to operate
plants with two different biogas systems under the Feed-in-Tariff
(FiT) mechanism
-- First fully-owned biogas power plant at Kahang commenced
selling power to the national utility at the full tariff rate
-- Completed the commissioning and, post-year end, secured the
certificate of initial operation date ("IOD") for the Group's
second fully-owned biogas power plant, the 2.0MW Malpom plant; and
the Group continues to expect to secure the certificate of
commercial operation date ("COD") thus allowing the Group to sell
power to the national utility at the full tariff rate
EPCC Projects
-- Completed construction of two biogas power plants owned by
Megagreen Energy Sdn Bhd ("MGE"), bringing the total number of
plants built for MGE to five
-- Awarded a RM12.85m contract from MGE for construction and
maintenance of bio-polishing facilities on the sites of the five
FiT-approved biogas power plants
-- Commenced work on four Concord Green Energy Sdn Bhd ("CGE")
greenfield biogas-based power generation plants. However, since
year end, these projects were temporarily suspended and are
expected to recommence upon an arrangement being finalised with
CGE
Mr. Saravanan Rasaratnam, Chief Executive Officer of Green &
Smart, said:
"We have made significant strides in advancing our strategy to
become the leading provider of biogas-based renewable energy in
Malaysia. We are proud that Green & Smart is the only company
in Malaysia with two biogas power plants operating two different
systems and running under the Feed-in-Tariff mechanism, and one of
only a few fully-integrated providers and operators.
"As we stated previously, our ability to grow and deliver on our
projects is dependent on funding. Thanks to our recent fundraising,
we can now commence work on our third fully-owned plant as well as
progress our other fully-owned plants. As a result, and with the
underlying drivers of the business showing no sign of abating, the
Board is confident of returning to growth next year and of
delivering shareholder value in the long-term."
Enquiries
Green & Smart Holdings plc
Saravanan Rasaratnam, Chief Executive
Officer
Navindran Balakrishnan, Chief Operations
Officer +603 2095 0024
-----------------
Cantor Fitzgerald Europe (Nominated Adviser
and Broker)
-----------------
Phil Davies, Richard Salmond +44 20 7894 7000
-----------------
Luther Pendragon Ltd (Financial PR)
-----------------
Claire Norbury, Alexis Gore +44 20 7618 9100
-----------------
Copies of the Company's annual report and accounts are available
on the Company's website at www.greennsmart.com.my and copies will
be posted to shareholders on 21 August 2018.
Operational Review
The year to 30 September 2017 was transformational for the Group
as it became an independent power producer providing renewable
energy to the national grid generated by its flagship biogas plant
located in Kahang, Johor. The Group also progressed its second
fully-owned biogas power plant and, while the speed of development
on some of the Group's other projects was less than initially
expected, Green & Smart advanced its strategy to become one of
the largest providers of biogas-based renewable energy in
Malaysia.
Green & Smart designs and builds biogas power generation
plants. The plants capture greenhouse gases from palm oil mill
waste in Malaysia, which in turn is converted to electricity
typically to be sold under 16-year electricity Feed-in-Tariffs
("FiT"). The Group works with major crude palm oil producers,
including the world's largest producer FELDA Berhad ("FELDA"), and
operates two business models: build, own, operate ("BOO") and that
of engineering, construction and commissioning ("EPCC") contractor
for third parties.
Fully-Owned Power Producing Projects
Green & Smart has established a pipeline of biogas power
plants projects that it will build, own and operate on land in
close proximity to palm oil mills. Under the BOO model, the Group
contracts with mill owners to finance and build plants for the
generation and sale of electricity to electric utilities - Tenaga
Nasional Berhad ("TNB"), a government-controlled company and
largest electric utility in Malaysia, or Sabah Electricity Sdn Bhd
("SESB"), the local utility in the Sabah state of Malaysia - under
the FiT regime using waste from the mills made available by the
mill owners.
During the year, the Group received the formal commercial
operation certificate ("COD") from the authorities for its first
fully-owned biogas plant, the 2.0MW Kahang biogas plant located in
the state of Johor, which allows power to be sold to the national
utility at the full tariff rate. The Kahang plant, which is an
anaerobic digester tank-based system, is currently transmitting
power to the national grid and generating revenue.
Green & Smart made significant progress on its second
fully-owned biogas power plant, the 2.0MW Malpom plant in Nibong
Tebal, Penang. During the year, the Group completed the
commissioning and interconnection works and, post year end, the
initial operation date ("IOD") certification was secured. Work is
progressing in securing the formal commercial operation certificate
("COD") from the authorities, which will allow power to be sold to
the national utility at the full tariff rate.
The Malpom plant is the Group's first specialised self-contained
lagoon-based system, which has been developed for mills with space
constraints that prevent them from setting up a conventional biogas
power plant. The biogas production process at Malpom has been
successfully optimised to maximise the efficiency of biogas
capture, which has resulted in the plant generating more gas than
expected with current readings reaching c. 2.3MW. The excess power
produced from the extra gas will be channeled towards reducing the
plant's operating and maintenance expenditure.
As previously stated, due to financial constraints, progress was
slower than initially expected on the other five fully-owned biogas
power plants, but these will now be accelerated following the
recent raising of c.RM17.0m through the subscription of new shares
by Serba Dinamik International Ltd.
EPCC Projects
Green & Smart is also an EPCC contractor on biogas projects
developed by Megagreen Energy ("MGE") and Concord Green Energy
("CGE") and additionally will provide operational and maintenance
support for the first sixteen years of the project's life.
During the year, the Group completed the construction, under
EPCC contract with MGE, of two plants. Thereafter, the Group was
awarded a further EPCC contract of RM12.85m from MGE for the
construction and maintenance of bio-polishing facilities at these
sites as well as at the three plants that the Group completed in
the prior financial year.
The bio-polishing facilities will biologically treat the
industrial waste water, such as through electro-coagulation, to
remove recalcitrant carbon, reduce the biochemical oxygen demand
and improve the colour residue of POME in the treated waste
water.
The Group commenced the delivery of this new contract during the
year with the completion of the construction due to occur in this
current financial year. Thereafter, MGE will progress it
application for the IOD and COD for all five of the FiT-approved
biogas power plants and the Group will start to receive revenue
under its operations & maintenance contracts when the IODs are
received.
Additionally, during the year the Group commenced work, under
its EPCC contract with CGE, on four biogas-based power generation
plants. As previously stated, due to financial constraints,
progress was slower than initially expected and work has been
temporarily suspended, awaiting the Company finalising an
arrangement with CGE. The Company remains confident in reaching an
agreement.
Financial Review
The Group's financial performance for the year to 30 September
2017 was mixed as growth in the first half was counteracted by
weakness in the second six months. As stated previously, financial
constraints impacted the ability of the Group to progress certain
projects to completion that would have enabled the generation of
anticipated revenue. However, the success in raising c.RM17.0m from
Serba Dinamik International Ltd will enable Green & Smart to
accelerate these projects going forward.
Revenue
Revenue for the twelve months ended 30 September 2017 was
RM45.34m (2016: RM67.38m), with the decline due to a lower level of
income generated under EPCC contracts, which was slightly mitigated
by the contribution from sales of power from the Group's
fully-owned Kahang biogas power plant. The reduction in revenue
from EPCC contracts was primarily due to financial constraints at
CGE, which prevented the continuation of contract works on existing
EPCC contracts for the build and operation of biogas power
plants.
Gross Profit
Gross margin for the financial year to 30 September 2017 was
25.7% (2016: 25.3%), whilst gross profit decreased to RM11.67m
(2016: RM17.06m) largely due to the lower revenues and increase in
construction costs as the Group progressed the building of its
fully-owned biogas power plants.
Profit and EBITDA
Operating loss was RM1.90m (2016: profit of RM10.13m) with the
reduction primarily due to the lower level of revenue and also an
increase in operating costs largely due to provision for impairment
on receivables and investments, full year provision for
depreciation and an increase in professional and advisory costs.
The impairments were made on the amounts due from MGE and CGE.
EBITDA decreased to a loss of RM0.816m (2016: profit of
RM10.18m).
Earnings Per Share
On a consolidated level, the Group's basic loss per share for
the year ended 30 September 2017 was RM0.009 (2016: earnings per
share of RM0.0893) based on the weighted number of ordinary
shares.
Taxation
Green & Smart Sdn Bhd, the operating entity of the Group, is
a BioNexus Status Company, granted by the Malaysian Bioeconomy
Development Corporation Sdn Bhd (formerly known as Biotechnology
Corporation Sdn Bhd). This company is entitled to income tax
exemption of the statutory business income derived from approved
activities over five consecutive years of assessment commencing
from the first year in which Green & Smart Sdn Bhd generates
statutory income from relevant approved activities. The tax
exemption will expire in the financial year ending 30 September
2018. Thereafter Green & Smart Sdn Bhd is subject to a
concessionary tax rate of 20% for the following 10 years on its
taxable profits.
Cash Flow
Cash and cash equivalents at 30 September 2017 were RM0.095m (30
September 2016: RM2.15m), with the reduction reflecting the use of
monies towards the building of fully-owned biogas plants and for
working capital purposes.
During the year, the Group received an investment of RM6m
(approx. GBP1.14 m at RM5.25 to 1GBP conversion rate) through the
issue of new ordinary shares to Malaysian Technology Development
Corporation Sdn Bhd, a company wholly-owned by the sovereign wealth
fund of the Government of Malaysia that was established to promote
and support the commercialisation of technology in Malaysia. The
Group also successfully raised GBP552,759 by way of a private
placement of 6,141,778 shares. Additionally, the Group entered into
a 12-month loan of approximately RM1.4m (GBP250,000) with Charles
Street Securities Europe LLP. Additionally, post-year end, the
Group entered into an agreement and raised c.RM17.0m (approximately
GBP3.21m) gross via a subscription for 51,806,000 shares from Serba
Dinamik International Ltd.
At 30 September 2017, the Group had debtors of RM76.79m in the
form of MGE and CGE before allowance for impairment. Payments of
approximately RM29m were received from these parties during the
year, which was encouraging, but additional contract billings for
the works undertaken during the year had the effect of increasing
the overall debtor position compared with the same point of the
prior year from RM55.29m to RM76.79m.
Due to ongoing financial constraints experienced by CGE and the
potential liabilities to which the Group and its Directors would be
subject pursuant to CGE's debt financing arrangements, the
Directors decided during the year, to limit this exposure by
disposing of the Group's equity interest in CGE at cost for a cash
consideration of RM1.25m. The Group's investment has been
derecognised and the disposal proceeds recognised as a receivable.
In addition, the Directors consider that the investment in MGE no
longer meets the definition of an associated undertaking and the
cost of the Group's investment has been fully impaired and
reclassified as an investment in a related entity with a carrying
value of nil.
Post-year end, the Group continued to seek to recover monies
from MGE and CGE and received postdated cheques of RM9.0m in
addition to direct payments being made to suppliers of the Company
of RM3.0m. The Directors believe that these debts are recoverable,
however, having considered the age profile of the receivable
amounts, the Directors have decided to provide RM5.2m for
impairment of receivables and investments.
Outlook
The ability of the Group to advance its pipeline of fully-owned
projects is very much dependent on the availability of adequate
funding and financing. Post-year end, the Group raised c.RM17.0m
(approximately GBP3.21m) gross via a subscription from Serba
Dinamik International Ltd, a wholly-owned subsidiary of Serba
Dinamik Holdings Berhad, a Malaysia-based investment holding
company with a market value of approximately GBP1bn. However, the
Group was expecting this investment in the early part of 2018 and,
as a result of the delay, it had to slow down the pace of its
operations to a minimum. This had a direct impact on the Group's
ability to complete the connection of its second fully-owned plant
and commence generating material revenues from it. Consequently,
the Group expects to report materially reduced revenues and profit
in the current financial year.
The economics of the Malpom plant remain robust. In 2019, it is
expected to be running at full capacity and generating revenues at
the full tariff rate of approximately c.RM570,000 per month, with a
total of c.RM112m over the full term of its 16-year contract under
the FiT mechanism. The Group's first biogas plant is generating
revenues and is expected to generate approximately c.RM104m over
the remaining term of its contract.
With the Malpom plant due to commence selling power to the
national grid at the full tariff rate, alongside the Kahang plant,
and the positive developments regarding the Group's financing, the
Board remains confident of returning growth next year. Looking
further ahead, with the underlying growth drivers of the business
showing no sign of abating, the Board is confident of delivering
sustained long-term growth and shareholder value.
GREEN & SMART HOLDINGS plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September
Audited Audited
2017 2016
ASSETS Note RM'000 RM'000
NON-CURRENT ASSETS
Intangible assets 5 899 954
Investment in associates 6 - 26
Property, plant and equipment 7 36,544 27,700
Total non-current assets 37,443 28,680
------------------------ -----------------------
CURRENT ASSETS
Trade and other receivables 8 1,875 1,071
Amount owing by contract customers 10 401 551
Amount owing by related parties 9 71,662 55,422
Cash and cash equivalents 11 95 2,153
Total current assets 74,033 59,197
------------------------ -----------------------
Total assets 111,476 87,877
======================== =======================
EQUITY
Stated capital 12 43,954 35,142
Foreign translation reserve (2,987) (2,657)
Retained profit 10,311 13,007
Merger reserve (4,028) (4,028)
Total shareholders' equity 47,250 41,464
Non-controlling interests 44 47
Total equity 47,294 41,511
------------------------ -----------------------
CURRENT LIABILITIES
Trade and other payables 13 48,140 34,676
Amount owing to contract customers 10 - 150
Short-term borrowings 14 11,161 1,930
Total current liabilities 59,301 36,756
------------------------ -----------------------
NON-CURRENT LIABILITY
Government grant income 16 124 136
Amount owing to related parties 9 2,555 -
Long-term borrowings 18 476 8,578
Amount owing to directors 19 1,726 896
Total non-current liabilities 4,881 9,610
------------------------ -----------------------
Total liabilities 64,182 46,366
------------------------ -----------------------
Total liabilities and equity 111,476 87,877
======================== =======================
The notes to the financial statements form an integral part of
these financial statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 15 August 2018 and were signed on its
behalf by:
Saravanan Rasaratnam Navindran Balakrishnan
GREEN & SMART HOLDINGS plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September
Audited Audited
2017 2016
Note RM'000 RM'000
Revenue 20 45,344 67,375
Cost of sales (33,673) (50,318)
Gross profit 11,671 17,057
Other income 280 197
Less: operating expenses
Listing costs - (1,936)
Administrative expenses (13,830) (5,070)
Other expenses (19) (119)
(13,849) (7,125)
Operating (loss)/profit (1,898) 10,129
Finance cost 21 (800) (45)
Share of result in associate undertakings,
net of tax - (156)
(Loss)/profit before taxation 22 (2,698) 9,928
Income tax expense 23 (1) -
(Loss)/profit for the year (2,699) 9,928
------------------------- ------------------------
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit
or loss:
Exchange difference on translation of foreign
operations (330) (2,657)
Total comprehensive (loss)/income (3,029) 7,271
========================= ========================
(Loss)/profit for the year attributable
to: -
- Owners of the company (2,696) 9,929
- Non-controlling interest (3) (1)
(2,699) 9,928
========================= ========================
Total comprehensive (loss)/income attributable
to: -
- Owners of the company (3,026) 7,272
- Non-controlling interest (3) (1)
(3,029) 7,271
========================= ========================
(Loss)/earnings per share:
Basic (RM, cents) 25 (0.94) 8.93
Diluted (RM, cents) 25 (0.94) 8.89
========================= ========================
The notes to the financial statements form an integral part of
these financial statements.
All amounts are derived from continuing operations.
GREEN & SMART HOLDINGS plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 30 September
Share Foreign Merger Retained Attributable Non- Total
capital translation reserve profit to owners controlling equity
reserve of the Company interest
Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Balance as at 1
October 2015 - - 5,041 3,078 8,119 48 8,167
Profit for the
year - - - 9,929 9,929 (1) 9,928
Other
comprehensive
income
Translation of
foreign
operations - (2,657) - - (2,657) (2,657)
--------- ------------- --------- --------- ---------------- ---------------- --------
Total
comprehensive
income - (2,657) - 9,929 7,272 (1) 7,271
--------- ------------- --------- --------- ---------------- ---------------- --------
Transaction with
owners
Issuance of
shares on Group
reconstruction 12 13,069 - (9,069) - 4,000 - 4,000
Issuance of
placing shares 12 22,073 - - - 22,073 - 22,073
Balance at 30
September 2016 35,142 (2,657) (4,028) 13,007 41,464 47 41,511
--------- ------------- --------- --------- ---------------- ---------------- --------
Loss for the
year - - - (2,696) (2,696) (3) (2,699)
Other
comprehensive
income
Translation of
foreign
operations - (330) - - (330) - (330)
--------- ------------- --------- --------- ---------------- ---------------- --------
Total
comprehensive
loss - (330) - (2,696) (3,026) (3) (3,029)
--------- ------------- --------- --------- ---------------- ---------------- --------
Transactions
with owners
Issuance of
placing shares 12 8,812 - - - 8,812 - 8,812
Balance at 30
September 2017 43,954 (2,987) (4,028) 10,311 47,250 44 47,294
--------- ------------- --------- --------- ---------------- ---------------- --------
The notes to the financial statements form an integral part of
these financial statements.
GREEN & SMART HOLDINGS plc
CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended 30 September
Audited Audited
2017 2016
Note RM'000 RM'000
CASH FLOW FROM OPERATING ACTIVITIES
(Loss)/profit before taxation (2,698) 9,928
Adjustments for:
Amortisation of intangible assets 55 55
Depreciation of equipment 1,029 147
Impairment on investment in associates 26 -
Impairment on amount owing by associates 5,197 -
Impairment on other receivables 114 -
Government grant income (13) (13)
Share of loss of associate - 156
Gain on disposal of investment (250) -
Interest expenses 795 9
--------------- ---------------
Cash flow from operating activities before working
capital changes 4,255 10,282
Decrease/(increase) in trade and other receivables (918) 1,180
Increase in trade and other payables 13,198 14,219
Increase in amount owing by/to contract customers - (2,072)
Increase in amount owing by related parties (17,632) (43,215)
--------------- ---------------
Cash flow used in/(from) operating activities (1,097) (19,606)
Tax paid (1) -
Interest paid (795) (9)
--------------- ---------------
NET CASH FLOW USED IN/ (FROM) OPERATING ACTIVITIES (1,893) (19,615)
--------------- ---------------
CASH FLOW FOR INVESTING ACTIVITIES
Investment in associates 6 (1,000) -
Purchase of plant and equipment (9,933) (15,260)
--------------- ---------------
NET CASH FLOW USED IN INVESTING ACTIVITIES (10,933) (15,260)
--------------- ---------------
CASH FLOW FOR FINANCING ACTIVITIES
Issuance of new ordinary shares 2,809 19,416
Issuance of redeemable convertible preference
shares 6,000 4,000
Advances from directors 830 -
Repayment of hire purchase obligations (82) (42)
Drawdown of short term loans 1,493 1,921
Repayment of term loans (282) (465)
--------------- ---------------
NET CASH FLOW FROM FINANCING ACTIVITIES 10,768 24,830
--------------- ---------------
Net decrease in cash and cash equivalents (2,058) (10,045)
Cash and cash equivalents at the beginning of
the year 2,153 12,198
--------------- ---------------
Cash and cash equivalents at the end of the year 11 95 2,153
--------------- ---------------
The notes to the financial statements form an integral part of
these financial statements.
GREEN & SMART HOLDINGS plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER 2017
1. GENERAL INFORMATION
Green & Smart Holdings plc ("the Company") was incorporated
as a public limited company in Jersey with registration number
119200 on 7 August 2015. The registered office of the Company is 12
Castle Street, St. Helier, Jersey JE2 3RT, Channel Islands.
The Company is listed on the AIM market of the London Stock
Exchange. The Company's nature of operations is to act as the
holding company of a group of subsidiaries that are involved in
research and development, provision of professional engineering
consultancy and process design services in the areas of industrial
biotechnology, pollution control and renewable energy; and
engineering, procurement and construction of various waste
treatment plants/systems; and development, commercialisation,
operation and maintenance of renewable energy plants.
The consolidated financial statements include the financial
statements of the Company and its controlled subsidiaries (the
"Group") as follows:
Place of Registered
Name incorporation address Principal activity Effective interest
2017 2016
---------------- ------------ -------------------- ---------- ---------
Green & Smart Venture
Sdn Bhd Malaysia Note 1 Holding company 100% 100%
---------------- ------------ -------------------- ---------- ---------
Green & Smart Sdn
Bhd Malaysia Note 1 EPCC contractor 100% 100%
---------------- ------------ -------------------- ---------- ---------
Own & operate
Our Energy Group Biogas Power
(M) Sdn Bhd Malaysia Note 2 Plants 51% 51%
---------------- ------------ -------------------- ---------- ---------
Note 1 - registered address: 3-2, 3rd Mile Square, No.151, Jalan
Kelang Lama, Batu 3 1/2 , 58100 Kuala Lumpur.
Note 2 - registered address: 54B Damai Complex, Jalan Lumut,
50400 Kuala Lumpur.
2. basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
("IFRS") issued by the International Accounting Standards Board
("IASB"), including related interpretations issued by the
International Financial Reporting Interpretations Committee
("IFRIC").
As permitted by Companies (Jersey) Law 1991 only the
consolidated financial statements are presented.
The financial statements are presented in RM unless otherwise
stated, and is the currency of the primary economic environment in
which the Group operates. All values are rounded to the nearest
thousand ringgit ("RM'000") except where otherwise indicated.
Going Concern
The financial statements are required to be prepared on the
going concern basis unless it is inappropriate to do so.
The Directors, having considered "Going Concern and Liquidity
Risk: Guidance for Directors of UK Companies" issued by The
Financial Reporting Council in 2016, consider the going concern
basis of preparation to be appropriate in preparing the financial
statements. The key conclusions are summarised below.
The Group made a loss for the year of RM2.70m (2016: profit of
RM9.93m) and recorded a net cash outflow from operating activities
of RM1.89m (2016: RM19.62m). At the reporting date the Group held
cash and cash equivalents of RM0.095m (2016: RM2.15m) and had
current liabilities of RM59.30m (2016: RM36.76m).
As described in note 9, amounts of RM76.8m due to the Group from
related parties comprise uncollected brought forward balances due
from Megagreen Energy of approximately RM21.6m (2016: RM35m) and
Concord Green Energy of approximately RM3.9m (2016: RM20.2m).
Further debts arose during the financial year from ongoing
contracts works of approximately RM25.4m and approximately RM19.4m
from Megagreen Energy and Concord Green Energy respectively. After
the end of the reporting year, the Group has received postdated
cheques of RM9.0m in relation to outstanding receivables and a
direct payment of RM3.0m has been made to suppliers of the Group by
Megagreen.
Although the Directors consider the amounts owing to be
recoverable in full, the uncollected receivables have led to the
net cash outflows from operating activities referred to above
which, together with capital expenditure of approximately RM9.4m in
the year, led to a requirement for additional working capital at
the balance sheet date. In the event that the aggregate amounts of
approximately RM76.8m (2016: RM55m) owing from Megagreen Energy and
Concord Green Energy remain substantially uncollected, the Group
will require additional working capital finance. Because of the
payment history of these accounts, this represents a material
uncertainty in relation to going concern.
The Group raised approximately RM9.12m of net new finance
through a private placement program in the year ended 30 September
2017, in addition to a short-term loan of approximately RM1.41m
from a UK lender and approximately RM2.04m from its parent
company.
As described in note 35, on 19 July 2018 the Company announced
that it had raised approximately RM17m (GBP3.2m) via the
subscription for 51,806,000 new common shares by Serba Dinamik
International Ltd, at a price of approximately 6.19 pence per share
(the "Subscription"). The net proceeds of the Subscription will be
used to advance the development of the Company's third fully-owned
biogas power plant at Minyak and for working capital purposes.
The Directors have prepared financial projections and plans for
a period of at least 12 months from the date of approval of these
financial statements, taking into account the proceeds of the
Subscription, and have considered the mitigating actions that could
be taken in the event that the anticipated receipts from Megagreen
Energy and Concord Green Energy are not forthcoming in accordance
with the assurances provided to the Directors by management of
those undertakings.
Based on their review of those financial projections and plans,
the Directors consider the going concern basis of preparation to be
appropriate.
If the Group was unable to secure sufficient funding to enable
it to continue on a going concern basis then adjustments would be
necessary to write down assets to their recoverable amounts,
reclassify fixed assets and long-term liabilities as current and
provide for additional liabilities.
New standards, amendments to and interpretations to published
standards not yet effect
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective and, in
some cases, have not yet been adopted by the EU.
IFRS 9 will impact the measurement of financial instruments,
whilst IFRS 15 may have an impact on revenue recognition and
related disclosures and IFRS 16 will impact the treatment of an
operating lease and its presentation.
The Group plans to adopt these new standards on the required
effective date. In the case of IFRS 15 this will be in the
financial year ending 30 September 2019. The majority of the
Group's revenue is driven by contract revenue. The Group currently
recognises revenue from contracts on a percentage completion basis.
The Directors are reviewing current and pipeline contracts in order
to assess the potential impact of IFRS 15 and developing
appropriate systems, internal controls, policies and procedures
necessary to collect information for the purpose of disclosure as
required by IFRS 15. Revenue from the sale of power is currently
recognised on delivery and IFRS 15 is not expected to result in a
material change to this.
The adoption of IFRS 16 is not expected to have a material
impact on the Group's reported results. The future minimum lease
payments under the non-cancellable operating leases is
approximately RM2.8m (see note 29).
3. basis of COnSOLIDATION
The consolidated financial statements comprise the financial
information of the Company and its subsidiaries made up to the end
of the reporting year. Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power over the investee. The consolidated financial
statements present the results of the Company and its subsidiaries
and joint arrangements as if they formed a single entity.
Inter-company transactions and balances between Group companies are
therefore eliminated in full. The financial information of
subsidiaries is included in the Group's financial statements from
the date that control commences until the date that control
ceases.
On 6 May 2016, the Company entered into agreements with all of
the shareholders of Green & Smart Ventures Sdn Bhd ("G&S
Venture") for a share for share exchange regarding the ordinary
shares in Green & Smart Holdings plc and ordinary shares in
G&S Venture. As a result of this transaction, the ultimate
shareholders in the Company received shares in Green & Smart
Holdings plc in direct proportion to their original shareholdings
in G&S Venture.
The acquisition of G&S Venture by the Company was that of a
re-organisation of entities which were under common control. As
such, that combination also falls outside the scope of IFRS 3
'Business Combinations' (Revised 2008). The Directors have,
therefore, decided that it is appropriate to reflect the
combination using the merger basis of accounting in order to give a
true and fair view. No fair value adjustments were made as a result
of that combination.
Therefore, although the Group reconstruction completed in May
2016, the consolidated financial statements are presented as if the
Group structure has always been in place, including the activity
from incorporation of the Group's principal subsidiaries. All
entities had the same management as well as controlling
shareholders. Accordingly, the comparative amounts for the year
ended 30 September 2016 are presented on a proforma basis.
4. SIGNIFICANT ACCOUNTING POLICIES
4.1 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated by the
directors and management and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The estimates
and judgements that affect the application of the Group accounting
policies and disclosures, and have a significant risk of causing a
material adjustment to the carrying amounts of assets, liabilities,
income and expenses are discussed below: -
a) Impairment of assets
When the recoverable amount of an asset is determined based on
the estimate of the value-in-use of the cash-generating unit to
which the asset is allocated, the management is required to make an
estimate of the expected future cash flows from the cash-generating
unit and also to apply a suitable discount rate in order to
determine the present value of those cash flows.
b) Impairment of trade and other receivables
An impairment loss is recognised when there is objective
evidence that a financial asset is impaired. Management
specifically reviews its loans and receivable financial assets and
analyses historical bad debts, customer concentrations, customer
creditworthiness, current economic trends and changes in the
customer payment terms when making a judgement to evaluate the
adequacy of the allowance for impairment losses. Where there is
objective evidence of impairment, the amount and timing of future
cash flows are estimated based on historical loss experience for
assets with similar credit risk characteristics. If the expectation
is different from the estimation, such difference will impact the
carrying value of receivables.
As described in note 9, amounts of approximately RM76.8m due to
the Group from related parties, comprising uncollected brought
forward balances due from Megagreen Energy of approximately RM21.6m
(2016: RM35m) and Concord Green Energy of approximately RM3.9m
(2016: RM20.2m). Further debts arose during the financial year from
ongoing contracts works of approximately RM25.4m and approximately
RM19.3m from Megagreen Energy and Concord Green Energy
respectively. Having reviewed the third-party funding arrangements
now in place for both Megagreen Energy and Concord Green Energy and
having received assurances from the management of Megagreen Energy
in relation to the timing of payments over the next twenty-four
months, the Directors consider the amounts owing to be recoverable
in full.
Nevertheless, having considered the ageing profile of the
amounts involved, the Directors have provided for impairment on
certain of those receivables.
c) Construction contracts
As described in note 4.14, the Group's accounting approach
reflects a sound judgement as potential losses on contract are
being considered and reflected with its probability immediately
upon occurrence while contract revenue which cannot be estimated
reliably is realised only after confirmed by written agreement. The
carrying amounts of the Group's construction contracts due
from/(to) customers at the end of the reporting year are disclosed
in note 10 including any allowance for impairment if there is a
material uncertainty to fully recover costs of each contract.
4.2 functional and foreign currencies
a) Transactions and balances
Transactions in foreign currencies are converted into the
respective functional currencies on initial recognition, using the
exchange rates approximating those ruling at the transaction dates.
Monetary assets and liabilities at the end of the reporting period
are translated at the rates ruling as of that date. Non-monetary
assets and liabilities are translated using exchange rates that
existed when the values were determined. All exchange differences
are recognised in profit or loss.
b) Foreign operations
Assets and liabilities of foreign operations are translated to
RM at the rates of exchange ruling at the end of the reporting
period. Revenues and expenses of foreign operations are translated
at exchange rates approximating those ruling at the dates of the
transactions. All exchange differences arising from translation are
taken directly to other comprehensive income and accumulated in
equity under the foreign exchange translation reserve. On the
disposal of a foreign operation, the cumulative amount recognised
in other comprehensive income relating to that particular foreign
operation is reclassified from equity to profit or loss.
4.3 financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
4.3.1 Financial Assets
On initial recognition, financial assets are classified as
either financial assets at fair value through profit or loss,
held-to-maturity investments, loans and receivables financial
assets, or available-for-sale financial assets, as appropriate. The
Group currently holds financial assets as:
a) Loans and receivables financial assets
Trade receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are
classified as loans and receivables financial assets, using the
effective interest method less impairment. Interest is recognised
by applying the effective interest method, except for short-term
receivables when the recognition of interest would be
immaterial.
4.3.2 Financial Liabilities
All financial liabilities are initially measured at fair value
plus directly attributable transaction costs and subsequently
measured at amortised cost using the effective interest method
other than those categorised as fair value through profit or
loss.
Financial liabilities are classified as current liabilities
unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date.
4.3.3 Equity Instruments
Instrument classified as equity are measured at cost and are not
remeasured subsequently.
a) Ordinary shares
Incremental costs directly attributable to the issue of new
ordinary shares or options are shown in equity as a deduction, net
of tax, from proceeds.
b) Redeemable convertible preference shares ("RCPS")
The redeemable convertible preference shares are regarded as
compound financial instruments, consisting of a liability component
and an equity component. The component of redeemable convertible
preference shares that exhibits characteristics of a liability is
recognised as a financial liability in the statements of financial
position, net of transaction costs. The dividends on those shares
are recognised as interest expense in profit or loss using the
effective interest method.
On issuance of the redeemable convertible preference shares, the
fair value of the liability component is determined using a market
rate for an equivalent non-convertible debt and this amount is
carried as a financial liability in accordance with the Group's
accounting policy.
The residual amount, after deducting the fair value of the
liability component, is the equity component and is included in
equity, net of transaction costs. The equity component is not
remeasured subsequent to initial recognition.
Transaction costs are apportioned between the liability and
equity components of the redeemable convertible preference shares
in proportion to their initial carrying amounts.
4.3.4 Derecognition
A financial asset or part of it is derecognised when, and only
when, the contractual rights to the cash flows from the financial
asset expire or the financial asset is transferred to another party
without retaining control or substantially all risks and rewards of
the asset. On derecognition of a financial asset, the difference
between the carrying amount and the sum of the consideration
received (including any new asset obtained less any new liability
assumed) and any cumulative gain or loss that had been recognised
in equity is recognised in profit or loss.
A financial liability or a part of it is derecognised when, and
only when, the obligation specified in the contract is discharged
or cancelled or expires. On derecognition of a financial liability,
the difference between the carrying amount of the financial
liability extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in profit or loss.
4.4 investment in associate undertakings
An associate is an entity in which the Group has significant
influence but not control or joint control. This is generally the
case where the Group holds between 20% and 50% of the voting
rights. Investments in associates are accounted for using the
equity method of accounting, after initially being recognised at
cost.
Under the equity method of accounting, the investments are
initially recognised at cost and adjusted thereafter to recognise
the Group's share of the post-acquisition profits or losses of the
investee in profit or loss, and the Group's share of movements in
other comprehensive income of the investee in other comprehensive
income. Dividends received or receivable from associates and joint
ventures are recognised as a reduction in the carrying amount of
the investment.
When the Group's share of losses in an equity-accounted
investment equals or exceeds its interest in the entity, including
any other unsecured long-term receivables, the Group does not
recognise further losses, unless it has incurred obligations or
made payments on behalf of the other entity.
The carrying value of the investments in associates are reviewed
for impairment at the end of the reporting period if events or
changes in circumstances indicate that the carrying values may not
be recoverable. The cost of the investment includes transaction
costs.
However, as described in note 6, the investment in associate
undertakings were written off and the resulting gain on disposal
was duly reflected in the consolidated accounts.
4.5 Property, Plant and Equipment
a) Owned Assets
Items of property, plant and equipment are stated at cost less
accumulated depreciation and any accumulated impairment losses, if
any. The cost of an asset comprises its purchase price and any
directly attributable costs of bringing the asset to the location
and condition for its intended use.
b) Depreciation
Depreciation is charged to profit or loss (unless it is included
in the carrying amount of another asset) on the straight-line basis
to write off the depreciable amount of the assets net of the
estimated residual values over their estimated useful lives.
Capital work in progress is depreciated from the date it is ready
to use. Depreciation of an asset does not cease when the asset
becomes idle or is retired from active use unless the asset is
fully depreciated. The principal annual rates used for this purpose
are:-
Estimated
Useful Lives
Office equipment 5 -10 years
--------------
Furniture and fittings 5 -10 years
--------------
Plant & machinery 20 years
--------------
Renovation 5 -10 years
--------------
Industrial building 50 years
--------------
The depreciation method, useful lives and residual values are
reviewed, and adjusted if appropriate, at the end of each reporting
period to ensure that the amounts, method and periods of
depreciation are consistent with previous estimates and the
expected pattern of consumption of the future economic benefits
embodied in the items of the property, plant and equipment.
c) Subsequent expenditure
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when the cost
is incurred and it is probable that the future economic benefits
associated with the asset will flow to the Group and the cost of
the asset can be measured reliably. The carrying amount of parts
that are replaced is derecognised. The costs of the day-to-day
servicing of property, plant and equipment are recognised in profit
or loss as incurred. Cost also comprises the initial estimate of
dismantling and removing the asset and restoring the site on which
it is located for which the Group is obligated to incur when the
asset is acquired, if applicable.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected from its
use. Any gain or loss arising from de-recognition of the asset is
recognised in profit or loss. The revaluation reserve included in
equity is transferred directly to retained profits on retirement or
disposal of the asset.
4.6 intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible
assets are carried at cost less accumulated amortisation and any
accumulated impairment losses (note 5). The useful lives of
intangible assets are assessed to be either finite or
indefinite.
Intangible assets with finite lives are amortised on
straight-line basis over the estimated economic useful lives and
assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite useful
life are reviewed at least at each financial year end.
The amortisation expense on intangible assets with finite useful
lives is recognised in the profit or loss in the expense category
consistent with the function of the intangible asset.
a) Trademark
Trademarks are stated at cost less accumulated amortisation and
any impairment losses (note 5). Trademarks are tested for
impairment annually or more frequently if the events or changes in
circumstances indicate that the carrying value may be impaired
either individually or at cash generating unit level.
b) Research and development expenditure
Research expenditure is recognised as an expense when it is
incurred.
Development expenditure is recognised as an expense except that
costs incurred on development projects are capitalised as
non-current assets to the extent that such expenditure is expected
to generate future economic benefits. Such development expenditure
is capitalised if, and only if an entity can demonstrate all of the
following:
(i) its ability to measure reliably the expenditure attributable to the asset under development;
(ii) the product or process is technically and commercially feasible;
(iii) its future economic benefits are probable;
(iv) its intention to complete and the ability to use or sell
the developed assets; and
(v) the availability of adequate technical, financial and other
resources to complete the asset under development.
Capitalised development expenditure is measured at cost less
accumulated amortisation and impairment losses, if any. Development
expenditure initially recognised as an expense is not recognised as
assets in the subsequent period.
The development expenditure is amortised on a
straight-line-method over its expected useful life when the
products are ready for sale or use. In the event that the expected
future economic benefits are no longer probable of being recovered,
the development expenditure is written down to its recoverable
amount.
4.7 Impairment
a) Impairment of Financial Assets
All financial assets (other than those categorised at fair value
through profit or loss), are assessed at the end of each reporting
period whether there is any objective evidence of impairment as a
result of one or more events having an impact on the estimated
future cash flows of the asset. For an equity instrument, a
significant or prolonged decline in the fair value below its cost
is considered to be objective evidence of impairment.
An impairment loss in respect of held-to-maturity investments
and loans and receivables financial assets is recognised in profit
or loss and is measured as the difference between the asset's
carrying amount and the present value of estimated future cash
flows, discounted at the financial asset's original effective
interest rate.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed through profit or loss to
the extent that the carrying amount of the financial asset at the
date the impairment is reversed does not exceed what the amortised
cost would have been had the impairment not been recognised.
b) Impairment of Non-Financial Assets
The carrying values of assets, other than those to which IAS 36:
Impairment of Assets does not apply, are reviewed at the end of
each reporting period for impairment when there is an indication
that the assets might be impaired. Impairment is measured by
comparing the carrying values of the assets with their recoverable
amounts. The recoverable amount of the assets is the higher of the
assets' fair value less costs to sell and their value--in--use,
which is measured by reference to discounted future cash flow.
An impairment loss is recognised in profit or loss
immediately.
When there is a change in the estimates used to determine the
recoverable amount, a subsequent increase in the recoverable amount
of an asset is treated as a reversal of the previous impairment
loss and is recognised to the extent of the carrying amount of the
asset that would have been determined (net of amortisation and
depreciation) had no impairment loss been recognised. The reversal
is recognised in profit or loss immediately.
4.8 Income Taxes
Income tax for the year comprises current and deferred tax.
Current tax is the expected amount of income taxes payable in
respect of the taxable profit for the reporting period and is
measured using the tax rates that have been enacted or
substantively enacted at the end of the reporting period, and any
adjustment to tax payable in respect of previous financial
years.
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial
statements.
Deferred tax liabilities are recognised for all taxable
temporary differences other than those that arise from the initial
recognition of an asset or liability in a transaction which is not
a business combination and at the time of the transaction, affects
neither accounting profit nor taxable profit.
Deferred tax assets are recognised for all deductible temporary
differences, unused tax losses and unused tax credits to the extent
that it is probable that future taxable profits will be available
against which the deductible temporary differences, unused tax
losses and unused tax credits can be utilised. The carrying amounts
of deferred tax assets are reviewed at the end of each reporting
year and reduced to the extent that it is no longer probable that
sufficient future taxable profits will be available to allow all or
part of the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset is
realised or the liability is settled, based on the tax rates that
have been enacted or substantively enacted at the end of the
reporting year.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when the deferred income taxes relate
to the same taxation authority.
Deferred tax relating to items recognised outside profit or loss
is recognised outside profit or loss. Deferred tax items are
recognised in correlation to the underlying transactions either in
other comprehensive income or directly in equity. Deferred tax
arising from a business combination is included in the resulting
goodwill or excess of the acquirer's interest in the net fair value
of the acquiree's identifiable assets, liabilities and contingent
liabilities over the business combination costs.
4.9 Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand, bank balances,
demand deposits, bank overdrafts and short-term, highly liquid
investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value
with original maturity periods of three months or less.
4.10 Employee Benefits
(a) Short-term benefits
Wages, salaries, paid annual leave and sick leave, bonuses and
non-monetary benefits are measured on an undiscounted basis and are
recognised in profit or loss and included in the development costs,
where appropriate, in the year in which the associated services are
rendered by employees of the Group.
(b) Defined contribution plans
The Group's contribution to defined contribution plans are
recognised in profit or loss in the year to which they relate. Once
the contributions have been paid, the Group has no further
liability in respect of the defined contribution plans.
4.11 Revenue and Other Income
(i) Revenue from construction contracts
Revenue from construction contracts is recognised based on the
methods as described in note 4.14(i).
(ii) Sale of goods
Revenue from the sale of goods is recognised upon delivery of
products and customers' acceptance, if any.
(iii) Government grants
Grants that compensate the Group for expenses incurred are
recognised in profit or loss on a systematic basis over the period
necessary to match them with the related costs which they are
intended to compensate for.
Grants that compensate the Group for the costs of assets are
recognised in profit or loss on a systematic basis over the
expected life of the related asset.
(iv) Revenue from Sale of Electricity
Revenue from the sale of electricity generated from the
renewable energy plant is recognised as and when the electricity is
delivered to the off-taker, based on the invoiced value of sale of
electricity, computed at a predetermined rate. Accrued unbilled
revenues are reversed in the following month when actual billing
occurs.
4.12 Borrowing Costs
Borrowing costs, directly attributable to the acquisition,
construction or production of a qualifying asset, are capitalised
as part of the cost of those assets, until such time as the assets
are ready for their intended use or sale. Capitalisation of
borrowing costs is suspended during extended periods in which
active development is interrupted.
All other borrowing costs are recognised in profit or loss as
expenses in the period in which they are incurred.
Investment income earned on the temporary investment of specific
borrowing pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
4.13 Contingent liabilities
A contingent liability is a possible obligation that arises from
past events and whose existence will only be confirmed by the
occurrence of one or more uncertain future events not wholly within
the control of the Group. It can also be a present obligation
arising from past events that is not recognised because it is not
probable that an outflow of economic resources will be required or
the amount of obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the
notes to the financial statements. When a change in the probability
of an outflow occurs so that the outflow is probable, it will then
be recognised as a provision.
4.14 Construction contracts
(i) Contract revenue
Contract revenue is recognised on the percentage of completion
method based on works performed. The stage of completion is
measured by reference to the actual cost incurred to date to
estimated total cost for each contract.
Where the outcome of a contract cannot be reliably estimated,
contract revenue is recognised to the extent of contract costs
incurred that are likely to be recoverable. Contract costs are
recognised as expenses in the period in which they are
incurred.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognised as an expense
immediately.
(ii) Amount due from / (to) customer for contract work
Amount due from / (to) customer for contract work is the net
amount of cost incurred for construction and contract-in-progress
plus profit attributable to contract-in-progress less foreseeable
losses, if any, and progress billings. Contract cost incurred to
date include costs directly related to the contract or attributable
to contract activities in general and costs specifically chargeable
to the customer under the terms of the contract.
5. INTANGIBLE ASSETS
Trademarks Patents Total
RM'000 RM'000 RM'000
Cost
At 1 October 2015 1,319 8 1,327
Addition - - -
At 30 September 2016 1,319 8 1,327
Addition - - -
At 30 September 2017 1,319 8 1,327
----------------------- ------------------------ -----------------------
Trademarks Patents Total
RM'000 RM'000 RM'000
Accumulated depreciation
At 1 October 2015 315 3 318
Charge for the year 54 1 55
At 30 September 2016 369 4 373
Charge for the year 54 1 55
At 30 September 2017 423 5 428
----------------------- ------------------------ -----------------------
Net book value
At 30 September 2017 896 3 899
----------------------- ------------------------ -----------------------
At 30 September 2016 950 4 954
----------------------- ------------------------ -----------------------
(a) Trademark
The trademarks "GRASS", "POME-MAS" and "GREENPAK" are registered
in Malaysia in respect of patented wastewater and bio-waste
treatment technologies. These trademarks have been granted for an
indefinite period, however, they are being amortised over ten (10)
years in line with Management's best estimate of their expected
useful life.
(b) Patent and/or Product/Technology development expenditure
The Group has a continuous program of development initiatives
for wastewater and bio-waste treatment systems/technologies.
Development expenditure are capitalised as patent and amortised
over a twenty (20) year period which commensurate with the
availability of the sales or use of the developed
products/technologies.
The Group's capitalisation policy for patents and any other
development expenditure requires the periodic review of the
carrying values to determine if there has been impairment in
value-based expected future cash flows. If it is determined that
the carrying value exceeds the recoverable amount, the carrying
value of the asset is written down to the recoverable amount.
6. INVESTMENT IN ASSOCIATES
2017 2016
RM'000 RM'000
At 1 October 26 182
Capital injection in CGE 1,000 -
Disposal (1,000)
Impairment loss (26) -
Share of loss of associate - (156)
At 30 September - 26
--------------------- ---------------------
Carrying value of investment in associates
Concord Green Energy Sdn Bhd - -
(CGE)
Megagreen Energy Sdn Bhd (MGE) - 26
Country of Effective equity
Name of associate Principal activity incorporation interest
2017 2016
Own & operates
Concord Green Energy Bio-gas power
Sdn Bhd ("CGE") plants Malaysia - 25%
Own & operates
Megagreen Energy Bio-gas power
Sdn. Bhd. ("MGE") plants Malaysia 15% 15%
On 11 November 2014, the Group entered into a Shareholder's
Agreement with MGE which entitled a Director of the Group to be
appointed to the Board of MGE. As a result, it is deemed that from
this point the Group could exert significant influence on the
financial and operating policies of MGE, and therefore MGE has been
accounted for as an associate despite an interest of less than
20%.
During the financial year, the Group contributed a capital
investment of RM1m in response to a cash call required by CGE. In
September 2017, a decision was made to dispose of the Group's
equity interest in CGE for a cash consideration of RM1.25m. The
Group's investment has been derecognised and the disposal proceeds
recognised as a receivable.
In addition, as the Group was unable to procure the management
accounts of MGE, the Directors consider that this investment no
longer meets the definition of an associated undertaking. The cost
of the Group's investment has been fully impaired and reclassified
as an investment in a related entity with a carrying value of
nil.
7. PLANT AND EQUIPMENT
Furniture Renovation Office Equipment Capital Industrial Motor Vehicle Total
& Fittings Work in Building
Progress
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At Cost
At 1 October
2016 163 456 141 26,371 - 732 27,863
Addition - 19 32 9,888 - 75 10,014
Adjustment (4) (131) (6) - - - (141)
Reclassified
to Industrial
Building - - - (21,587) 21,587 - -
At 30
September
2017 159 344 167 14,672 21,587 807 37,736
------------------------ ------------------------ ------------------------ --------------------- ---------------------- ----------------------- -----------------------
Less:
Accumulated
Depreciation
At 1 October
2016 15 35 26 - - 87 163
Charge for the
year 17 23 26 - 810 153 1,029
At 30
September
2017 32 58 52 - 810 240 1,192
------------------------ ------------------------ ------------------------ --------------------- ---------------------- ----------------------- -----------------------
Carrying
Amount
At 30
September
2017 127 286 115 14,672 20,777 567 36,544
------------------------ ------------------------ ------------------------ --------------------- ---------------------- ----------------------- -----------------------
Furniture Renovation Office Equipment Capital Industrial Motor Vehicle Total
& Fittings Work in Building
Progress
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At Cost
At 1 October
2015 75 124 25 11,542 - - 11,766
Addition 88 332 116 14,829 - 732 16,097
At 30
September
2016 163 456 141 26,371 - 732 27,863
------------------------ ------------------------ ------------------------ --------------------- ---------------------- ----------------------- -----------------------
Less:
Accumulated
Depreciation
At 1 October
2015 3 4 9 - - - 16
Charge for the
year 12 31 17 - - 87 147
At 30
September
2016 15 35 26 - - 87 163
------------------------ ------------------------ ------------------------ --------------------- ---------------------- ----------------------- -----------------------
Carrying
Amount
At 30
September
2016 148 421 115 26,371 - 645 27,700
------------------------ ------------------------ ------------------------ --------------------- ---------------------- ----------------------- -----------------------
7. PLANT AND EQUIPMENT (CONT'D)
(a) Included in the assets of the Group at the end of the
reporting period were motor vehicles with a total net book value of
RM 566,628 (2016: RM 645,100), which were acquired under hire
purchase terms.
(b) Capital work-in-progress represents biogas power plant under
construction. It is subject to depreciation only when completed and
ready for use. Total capitalised interest included in the
work-in-progress amounts to RM546,202 (2016: RM376,637). During the
year, a fully constructed biogas plant, amounting to approximately
RM21,587,000, was reclassified as an industrial building with a
depreciation policy as set out in note 4.5 (b).
(c) Industrial building with carrying amount of approximately
RM20,777,000 (2016: RM NIL) and Capital Work in Progress with
carrying amount of approximately RM14,672,000 (2016: RM26,371,000)
are pledged against the banking facility (note 17).
(d) Acquisition of plant and equipment: -
2017 2016
RM'000 RM'000
Cash paid to acquire property, plant
and equipment 9,933 15,260
--------------------- -------------------
8. TRADE AND OTHER RECEIVABLES
2017 2016
RM'000 RM'000
Trade receivables 104 -
Other receivables 1,768 622
Less: allowance for impairment loss (414) (300)
1,458 322
Prepayment 42 376
Deposit 375 373
1,875 1,071
----------------------- -----------------------
Allowance for impairment losses
Opening balance (300) (300)
Addition during the year (114) -
Closing balance (414) (300)
----------------------- -----------------------
a) The Group's normal credit terms range from 90 to 120 days
(2016: 90 to 120 days). Other credit terms are assessed and varied
on a case-by-case basis.
b) Trade and other receivables that are individually determined
to be impaired relate to customers that have defaulted on payments
or the amount due from third parties considered irrecoverable.
9. AMOUNTS OWING BY / (TO) RELATED PARTIES
Party Relationship Trade Receivables Other Receivables Other Payables Total
RM'000 RM'000 RM'000 RM'000
2017
Megagreen
Energy Sdn Related
Bhd party 48,660 2,485 - 51,145
Concord
Green
Energy Sdn Related
Bhd party 24,398 1,250 - 25,648
73,058 3,735 - 76,793
Less: Allowance for
impairment loss (5,197) - - (5,197)
67,861 3,735 - 71,596
Makmur
Hidro Related
Sdn Bhd. party 66 - 66
67,861 3,801 - 71,662
----------------------- ----------------------- ----------------------- -----------------------
K2M
Ventures
Sdn Bhd Ultimate - - (2,555) (2,555)
holding
co.
- - (2,555) (2,555)
----------------------- ----------------------- ----------------------- -----------------------
67,861 3,801 (2,555) 69,107
----------------------- ----------------------- ----------------------- -----------------------
Party Relationship Trade Receivables Other Receivables Other Payables Total
RM'000 RM'000 RM'000 RM'000
2016
Megagreen
Energy Sdn
Bhd Associate 35,069 - - 35,069
Concord
Green
Energy Sdn
Bhd Associate 20,221 - - 20,221
55,290 - - 55,290
----------------------- ----------------------- ----------------------- -----------------------
Makmur
Hidro Related
Sdn Bhd. party - 63 - 63
Saravanan
Rasaratnam Director - 35 - 35
K2M
Ventures
Sdn Bhd Ultimate - 34 - 34
holding
co.
- 132 - 132
----------------------- ----------------------- ----------------------- -----------------------
55,290 132 - 55,422
----------------------- ----------------------- ----------------------- -----------------------
2017 2016
RM'000 RM'000
Allowance for impairment losses
Opening balance - -
Movement for the year 5,197 -
Closing balance 5,197 -
--------------------- ---------------------
Amounts owing by related parties principally comprise
uncollected balances due from Megagreen Energy Sdn Bhd ("MGE") and
Concord Green Energy Sdn Bhd ("CGE"). The amounts due are
collectible in cash, have arisen in the ordinary course of the
business of the Group and are subject to credit terms of 30 days.
The amounts owing are analysed as follows:
2017 2016
RM'000 RM'000
Not past due 47,041 20,221
Past due by less than 3 months - 18,126
Past due by less than 3 -
6 months - 8,016
Past due by 6 months and above 26,017 8,927
73,058 55,290
------------------- ---------------------
Post-year end, the Group has received postdated cheques of
RM9.0m in addition to a direct payment of RM3.0m to suppliers of
the Company by MGE. Having considered the ageing profile of the
amounts in question, the Directors have made a provision of RM5.2m
against certain of the receivables.
10. DUE FROM / (TO) CUSTOMERS FOR CONSTRUCTION CONTRACTS
2017 2016
RM'000 RM'000
Aggregate cost incurred to
date 52,669 20,782
Add: attributable profits 18,386 5,895
71,055 26,677
Less: progress billings (70,654) (26,276)
401 401
------------------- ----------------------
Represented by:
Amounts owing by contract
customers 401 551
Amounts owing to contract
customers - (150)
At 30 September 2017, the Group had trade amounts owing by
related parties and from contract customers of approximately
RM76.79m (2016: RM55.3m). These amounts are due from MGE and
CGE.
11. CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the cash flow statement
comprise the following amounts:
2017 2016
RM'000 RM'000
Cash and bank balances 95 2,153
------- -------
12. STATED CAPITAL
No. of shares RM'000
Issued and Fully Paid-Up
1 October 2015 2 -
Issuance of shares:
On 20 January 2016 100 -
On 6 May 2016 - share exchange
agreement 232,222,120 13,069
On 6 May 2016 - on AIM admission 44,444,445 24,531
Less: transaction costs - (2,458)
30 September 2016 276,666,667 35,142
-------------------------- -----------------------
Issuance of shares:
On 19 December 2016 10,761,367 6,000
On 19 June 2017 6,141,778 3,083
Less: transaction costs - (271)
30 September 2017 293,569,812 43,954
-------------------------- -----------------------
Pursuant to a resolution of the Board which form part of the
Group's restructuring exercise in preparation for the Company's
listing on the AIM market London Stock Exchange, the Company had on
20 January 2016 acquired the complete interest in Green & Smart
Ventures Sdn Bhd via the issuance of 100 Ordinary Shares.
Pursuant to a resolution of the Board and in accordance with the
terms as specified in the Share Exchange Agreement dated 6 May
2016, which form part of the Group's restructuring exercise in
preparation for the Company's listing on the AIM market London
Stock Exchange, the Company on 6 May 2016 completed the share
exchange exercise by issuing and allotting 232,222,120 Ordinary
Shares.
On 6 May 2016, the Company issued a further 44,444,445 Ordinary
Shares (representing 16.06% of the Company's enlarged share
capital) at 9 pence per Ordinary Share to raise GBP4,000,000, in
conjunction with the Admission to AIM of the Company's enlarged
share capital. The costs associated with the share issue, amounting
to GBP424,518 have been deducted from the Company's stated
capital.
On 19 December 2016, the Company issued a further 10,761,367
Ordinary Shares at a subscription price of 10.62 pence per
Subscription Share pursuant to a Share Swap Agreement dated the
same to MTDC. This followed the conversion by MTDC of 6,000,000
Preference Shares in Green & Smart Sdn Bhd, acquired pursuant
to an Investment Agreement dated 16 December 2016. At that date of
the share issuance, MTDC holds 19,476,367 shares in the Company,
amounting to 6.78% of the enlarged issued share capital of the
Company, which stood at 287,428,034.
During the financial year on 19 June 2017, the Company issued a
further 6,141,778 Ordinary Shares (representing approximately 2.1%
of the Company's issued share capital as enlarged by the Shares) at
9p per Ordinary Share to raise approximately RM3.12 million
(GBP552,759, at an exchange rate of RM5.6461 to GBP1) and 5,848,664
five year warrants (exercisable at 9.25 pence per share) to
subscribe in aggregate up to 5,848,664 Shares.
At 30 September 2017, the Company's issued share capital was
293,569,812 ordinary shares.
Redeemable convertible preference shares ("RCPS")
In 2016, Green & Smart Sdn Bhd issued 4,000,000 redeemable
convertible preference shares of RM0.10 each, for RM1.00 each. On 6
May 2016, pursuant to the Share Exchange Agreement, these
redeemable convertible preference shares were converted into the
equity of Green & Smart Sdn Bhd prior to it being share swapped
with the equity of Green & Smart Holdings plc.
13. TRADE AND OTHER PAYABLES
2017 2016
RM'000 RM'000
Trade payable 15,016 33,857
GST payables 2,612 -
Contract cost 29,399 -
Net wages 187 -
Other payable and accruals 926 819
48,140 34,676
------------------- ----------------------
The normal credit terms granted to the Group by the suppliers
are 90 days (2016: 90 days) from invoice date.
Included in sundry payable is an amount of RM NIL (2016:
RM237,246) payable for purchase of plant & equipment (note
7(d)).
14. SHORT TERM BORROWINGS
2017 2016
RM'000 RM'000
Mezzanine loan 1,412 -
Hire purchase payables (note
15) 81 70
Term loans (note 17) 9,668 1,860
11,161 1,930
------- -------
On 25 April 2017, the Group procured a 12-month mezzanine loan
of approximately RM1.4m (GBP250,000) with a UK-based lender at an
interest of 1% per month for working capital purposes. As at year
end, the principle remains outstanding.
15. HIRE PURCHASE PAYABLES
2017 2016
RM'000 RM'000
Minimum hire purchase payments:
- not later than one year 110 98
- later than one year and not later
than five years 440 393
- later than five years 133 185
683 676
Less: Future finance charges (126) (118)
557 558
----------------------- -----------------------
Current
Not later than one year (note
14) 81 70
Non-current (note 18)
Later than one year and not later
than five years 421 321
Later than five years 55 167
476 488
557 558
----------------------- -----------------------
The hire purchase payables of the Company at the end of the
reporting period bore effective interest rates ranging from 5.20%
to 5.36% (2016: 5.20% - 5.36%).
16. DEFERRED GRANT INCOME
The Group received a government grant in financial years 2007
and 2008 which was provided for the project "Greenpak", to develop
a new individual septic tank using Upflow Anaerobic Sludge Blanket
principle. The grant income is amortised on a systematic basis over
the useful life of the related patent.
During the financial year ended 30 September 2017, an amortised
amount of RM12,500 was recognised (2016: RM12,500) as other income
in profit or loss.
17. TERM LOAN
2017 2016
RM'000 RM'000
Current (note 14)
Not later than one year 9,668 1,860
Non-Current (note 18)
Later than 1 year and not later
than 2 years - 1,860
Later than 2 years and not later
than 5 years - 5,580
Later than 5 years - 650
- 8,090
9,668 9,950
--------------------- ----------------------
The term loans are secured against: -
(i) Capital work-in-progress as disclosed in note 7(c) to the financial statement;
(ii) Fixed and floating charge over present and future assets;
(iii) A guarantee by Credit Guarantee Corporation Berhad ("CGC");
(iv) Corporate guarantee from holding company; and
(v) Joint and several guarantees by the directors.
During the current financial year, due to financial constraints
the Group delayed its repayment on the term loans. Because the
lender is in a position to declare the term loans outstanding of
RM9,668,127 as immediately due and payable as at 30 September 2017,
the entire term loans was reclassified as a current liability. On
17 October 2017, the Group received a supplemental letter of offer
from the lender to vary the terms and conditions of the facility
and reschedule the repayment period.
18. LONG TERM BORROWINGS
2017 2016
RM'000 RM'000
Hire purchase payables (note
16) 476 488
Term loans (note 17) - 8,090
476 8,578
---------------------- ----------------------
19. AMOUNT OWING TO DIRECTORS
The amount owing to directors in unsecured, interest free with
no fixed terms of repayment.
20. REVENUE
Revenue represents contract revenue recognised based on
percentage of completion method and the net invoiced value of goods
sold, after allowances for returns and trade discounts.
2017 2016
RM'000 RM'000
Contract revenue recognised based
on percentage of completion method 44,378 67,375
Net invoiced value of power sold 966 -
45,344 67,375
---------------------- -------------------
21. FINANCE COSTS
2017 2016
RM'000 RM'000
Bank charges 5 7
Bank guarantee charges - 29
Hire purchase interest 18 9
Short term loan interest 155 -
Term loan interest 622 -
800 45
------------------------ ------------------------
22. PROFIT / (LOSS) BEFORE TAXATION
2017 2016
RM'000 RM'000
Profit/(loss) before taxation is
arrived at after charging/(crediting):-
Auditors' remuneration
Fees payable to Company's auditor and
its associates
for the audit of the consolidated financial
statements 337 236
Non-audit fees payable to Company's auditor relating
to the transaction services 15 600
Allowance for impairment losses:
-
Investment in associates 26 -
Amount owing by associates 5,197 -
Other receivables 114 -
Amortisation of intangible assets 55 55
Depreciation of equipment 1,029 147
Rental of premises 152 156
Rental of equipment 8 13
Rental of motor vehicles 243 229
Unrealised loss on foreign exchange 86 -
Realised gain on foreign exchange (13) (175)
Waiver of debt (506) -
Government grant income (13) (13)
23. INCOME TAX EXPENSE
The Company is regarded as resident for tax purposes in Jersey
and on the basis that the Company is neither a financial service
company nor a utility company for the purpose of the Income Tax
(Jersey) Law 1961, as amended, the Company is subject to income tax
in Jersey at a rate of zero per cent.
Green & Smart Sdn Bhd ("G&S") is granted BioNexus status
by a government agency, namely the Malaysian Biotechnology
Corporation Sdn. Bhd. Therefore, G&S is entitled to tax
exemption on the statutory business income derived from approved
activities over five consecutive years of assessment commencing
from the first year in which G&S generates statutory income
from the relevant approved activities.
A reconciliation of income tax expense applicable to the profit
before taxation at the statutory tax rate to income tax expense at
the effective tax rate of the Group is as follows: -
2017 2016
RM'000 RM'000
(Loss)/profit before taxation (2,698) 9,928
---------------------- ---------------------
Tax at the statutory tax rate of 24% (2016:24%) (647) 2,383
Tax effect
of:
Non-deductible expenses 2,420 111
Unrelieved tax losses - 39
Tax rate differential - 762
Tax exempt
income (4,470) (3,295)
Under provision of income tax in the previous - -
financial year
Income tax expenses for the year 1 -
---------------------- ---------------------
Domestic income tax is calculated at the Malaysian statutory tax
rate of 24% (2016: 24%) of the estimated assessable profit for the
financial year.
Subject to the agreement of the Inland Revenue Board, at 30
September 2017, the Group has deferred tax assets not recognised in
the financial statements for the following item under the liability
method:-
2017 2016
RM'000 RM'000
Unabsorbed tax losses 1,260 1,260
--------------------- ---------------------
No deferred tax assets are recognised in the financial
statements for the above item as it is not probable that taxable
profits will be available against which the deductible temporary
differences can be utilised. The unused tax losses do not expire
under current tax legislation. The availability of unused tax
losses for offsetting against future taxable profits in Malaysia
are subject to there being no substantial changes in shareholdings
of the subsidiary undertakings under the Income Tax Act 1967 and
the application of guidelines issued by the tax authorities.
24. RELATED PARTY TRANSACTIONS
(a) Identities of Related Parties
Parties are considered to be related to the Company if the
Company has the ability, directly or indirectly, to control or
jointly control the party or exercise significant influence over
the party in making financial and operating decisions, or vice
versa, or where the Company and the party are subject to common
control.
In the year ended 30 September 2016, Megagreen Energy and
Concord Green Energy were considered to be associated undertakings
by virtue of the Group's shareholding of 15% and 25% respectively
and the exercise by the Group of significant influence. Although
the Group has disposed of its 25% holding in Concord Green Energy
and no longer considers that it exercises significant influence
over Megagreen Energy, those shareholdings persisted in the year
ended 30 September 2017 and the relationships are therefore
disclosed as related parties.
In addition to the information detailed elsewhere in the
financial statements, the Company has related party relationships
with its directors, key management personnel and entities within
the same group of companies.
(b) Other than those disclosed elsewhere in the financial
statements, the Group also carried out the following significant
transactions with the related parties during the financial year:
-
2017 2016
RM'000 RM'000
Megagreen Energy Sdn. Bhd.
- Contract revenue 25,060 47,154
- Amounts owing by related parties 47,383 35,069
Concord Green Energy Sdn. Bhd.
- Contract revenue 19,318 20,221
- Amounts owing by related parties 24,213 20,221
Amount owing (to) K2M Ventures
Sdn. Bhd (2,555) 34
Amount owing from Makmur Hidro 66 63
Net amount owing (to) Saravanan Rasaratnam (396) (219)
Amount owing (to) Navindran Balakrishnan (593) (451)
Included in amount owing to K2M Ventures Sdn Bhd is a loan of
approximately RM2.04m (GBP355,000) which is interest free with no
fixed terms of repayment.
(c) Compensation of key management personnel
The remuneration of directors and other members of key
management personnel during the year are as follows: -
2017 2016
RM'000 RM'000
Short-term employee benefits 1,673 397
Defined contribution plan (EPF) 167 91
1,840 488
----------------------- -----------------------
Included in the total key management
personnel
compensation are:-
Directors' remuneration 1,077 877
Executive Directors' Fees 455 241
Non-Executive Directors' Fees 455 241
1,987 1,359
----------------------- -----------------------
The highest paid of emoluments to the director is disclosed in
the remuneration report.
25. EARNINGS PER SHARE
The calculation of earnings per share is based on the following
earnings and number of shares:
2017 2016
(Loss)/profit attributable
to the owners of the company
(RM'000) (2,696) 9,929
Weighted average shares in
issue for 286,273,137 111,147,571
basic earnings per share
Adjustment for:
Warrants instruments 2,845,503 536,702
Weighted average shares in
issue for
diluted earnings per share 289,118,640 111,684,274
----------------- ---------------------
Basic earnings per share (RM
- cent) (0.94) 8.93
Diluted earnings per share
(RM - cent) (0.94) 8.89
----------------- ---------------------
Diluted EPS amounts are calculated by dividing the profit or
loss for the year attributable to equity holders of the Group by
the weighted average number of ordinary shares outstanding during
the period plus the weighted average number of ordinary shares that
would be issued on conversion of all the dilutive potential
ordinary shares and issued warrants into ordinary shares. The
potential ordinary shares are anti-dilutive and therefore the
diluted loss per share has not been calculated.
26. RESERVES
(a) Foreign currency translation reserves
The foreign exchange translation reserves arose from the
translation of the financial information of foreign subsidiaries
and are not distributable by way of dividends.
(b) Merger reserves
The accounting treatment for Group reorganisation is scoped out
of IFRS 3. Accordingly, as required under IAS 8 - Accounting
Policies, Changes in Accounting Estimates and Errors, the Group has
referred to current UK GAAP to assist its judgement in identifying
a suitable accounting policy. The introduction of the new holding
company has been accounted for as a capital reorganisation using
the merger accounting principles prescribed under current UK GAAP.
Therefore, the consolidated financial statements of Green &
Smart Holdings plc are presented as if the Company has always been
the holding company for the Group.
The use of merger accounting principles has resulted in a
balance on Group capital and reserves that have been classified as
a merger reserve and included in the Group's shareholders' funds.
The consolidated financial statements include the results of the
Company and all its subsidiary undertakings made up to the same
accounting date.
27. Contingencies
No provisions are recognised on the following matters as it is
not probable that a future sacrifice of economic benefits will be
required or the amount is not capable of reliable measurement:-
2017 2016
RM'000 RM'000
Corporate guarantee given to licensed
banks for credit facilities granted
to a related party 33,446 36,807
------- -------
The Group has provided Megagreen Energy with a corporate
guarantee in support of a loan facility. As the Group has only a
15% interest in Megagreen, it has no effective control over whether
any claim may be made under this guarantee. Credit Guarantee
Corporation Malaysia Berhad has confirmed that repayment of the 60%
of the amount borrowed by Megagreen under the facility is
guaranteed by Credit Guarantee Corporation Malaysia Berhad up to
June 2025 pursuant to the Green Technology Financing Scheme -
established by the Malaysian government. On that basis, the
Directors expect the exposure of G&S under the guarantee to be
limited to approximately RM14.1m (2016: RM14.1m).
28. CAPITAL COMMITMENT
At 30 September, the Group had the following capital commitments
in respect to plant & equipment:
2017 2016
RM'000 RM'000
Approved and contracted for construction
of plant and equipment 11,880 21,024
------- -------
29. OPERATING LEASE COMMITMENT
The Company leases a number of office premises, motor vehicles
and equipment under non-cancellable operating leases. The future
minimum lease payments under the non-cancellable operating leases
are as follows: -
2017 2016
RM'000 RM'000
Not later than one year 306 323
Later than one year and not later
than five years 987 1,291
Later than five years 1,543 1,521
2,836 3,135
---------------------- ----------------------
30. OPERATING SEGMENTS
(a) Operating segments
Operating segments are prepared in a manner consistent with the
internal reporting provided to the management as its chief
operating decision maker in order to allocate resources to segments
and to assess their performance. Currently the Group operates under
two operating segments providing consulting and contract services
to customers in the renewable energy sector and the supply of power
to National Grid.
Information on geographical segments is not presented as the
Group operates wholly in Malaysia where all of its assets and
liabilities are located.
The information provided to management for the reportable
segments during each year is as follows:
Consulting
Business Segments & contract Power Others Total
RM'000 RM'000 RM'000 RM'000
2017
Consulting and contract
revenues 44,378 - - 44,378
Power sold - 966 - 966
Group revenues 44,378 966 - 45,344
Gross Profit/(Loss) 12,491 (1,326) - 11,165
Net Profits/(Loss) (1,186) (1,510) - (2,696)
Segment Assets 72,097 36,704 2,675 111,476
Segment Liabilities 36,809 15,347 12,026 64,182
Capital Expenditure - 9,872 - 9,872
Depreciation and amortisation 269 815 219 1,029
Consulting
Business Segments & contract Power Others Total
RM'000 RM'000 RM'000 RM'000
2016
Consulting and contract
revenues 67,375 - - 67,375
Power sold - - - -
Group revenues 67,375 - - 67,375
Gross Profit/(Loss) 17,057 - - 17,057
Net Profits/(Loss) 9,928 - - 9,928
Segment Assets 55,791 - 32,086 87,877
Segment Liabilities 33,857 - 12,509 46,366
Capital Expenditure - 16,097 - 16,097
Depreciation and amortisation 147 - - 147
(b) Information about major customers
During the year, the following customers contributed more than
10% of the revenue for the Group:
2017 2016
RM'000 RM'000
Megagreen Green Sdn Bhd 25,060 47,154
Concord Green Energy Sdn Bhd 19,318 20,221
44,378 67,375
------------------- -------------------
31. WARRANT INSTRUMENTS
2017 2016
Average exercise Number Average exercise Number
price per warrants of warrants price per warrants of warrants
At 1 October 0.09p 1,383,333 - -
Granted during
the year 0.0925p 5,848,680 0.09p 1,383,333
Exercised during
the year - - - -
Forfeited during
the year - - - -
As at 30 September 0.092p 7,232,013 0.09p 1,383,333
-------------------- ------------------- -------------------- -------------------
On 6 May 2016, the Company granted 1,383,333 warrants to S.P.
Angel Corporate Finance LLP, the Company's nominated adviser, at
the exercise price of 9 pence each with expiring date of 5
years.
On 19 June and 28 June 2017, the Company issued 5,848,680
warrants to subscribers to a private placing arranged by Charles
Street Securities Europe LLP ("CSS") and to CSS as part of the fee
arrangements for arranging the placement. Of the total warrants
issued, 2,777,778 were issued to CSS as fees payable in connection
with that placement. The warrants issued to subscribers are outside
the scope of IFRS2. In accordance with IFRS2 the fair value of the
warrants issued as fees for the placement services provided has
been estimated as RM220,000. This has been recognised within the
stated capital component of equity as the costs were directly
incurred in raising the related equity funds.
32. ULTIMATE CONTROLLING PARTIES
Although K2M Ventures Sdn Bhd held 50.02% of the Company's share
capital at the reporting date, as that entity is jointly controlled
by Saravanan Rasaratnam and Navindran Balakrishnan, the Directors
consider there is no ultimate controlling party.
33. FINANCIAL INSTRUMENTS
The Group's activities are exposed to a variety of market risk
(including foreign currency risk, interest rate risk and equity
price risk), credit risk and liquidity risk. The Group's overall
financial risk management policy focuses on the unpredictability of
finance market and seek to minimise potential adverse effects on
the Group's financial performance by having in place adequate
financial resources for the development of the Group's business
whilst managing its market risk, credit risk and liquidity
risk.
The Group holds the following financial instruments:
2017 2016
RM'000 RM'000
Financial Assets
Loans and receivables
Trade receivables 104 -
Other receivables and deposits 1,729 695
Amount owing by contract customers 401 551
Amount owing by related parties 71,662 55,422
Cash and bank balances 95 2,153
73,991 58,821
----------------------- ----------------------
Financial Liabilities
Other financial liabilities
Trade payables 15,016 33,857
Other payables and accruals 33,124 819
Amount owing to contract customers - 150
Amount owing to related parties 2,555 -
Amount owing to directors 1,726 896
Hire purchase payables 557 558
Term loans 11,080 9,950
64,058 46,230
----------------------- ----------------------
33.1 Financial Risk Management Policies
The following sections provide details on the Group's exposure
to the abovementioned financial risks and the objectives, policies
and processes for the management of these risks.
33.1.1 Market Risk
(a) Foreign Currency Risk
The Group is exposed to foreign currency risk on transactions
and balances that are denominated in currencies other than
functional currency. The currencies giving rise to this risk are
primarily the United States Dollar ("USD") and Great British Pound
("GBP"). Foreign currency risk is monitored closely on an on-going
basis to ensure that the net exposure is at an acceptable level. At
the end of the reporting period, the Group does not have any
derivative financial instruments used to hedge foreign currency
risk.
33. FINANCIAL INSTRUMENTS (CONT'D)
33.1.1 Market Risk (cont'd)
The Group exposure to foreign currency risk, based on the
carrying amounts at the reporting date is as follows:
USD GBP EURO RM TOTAL
2017 RM'000 RM'000 RM'000 RM'000 RM'000
Financial Assets
Trade receivables - - - 104 104
Other receivables and
deposit - 26 - 1,703 1,729
Amount owing by
contract customers - - - 401 401
Amount owing by
related
parties - - - 71,662 71,662
Cash and bank balance 1 13 - 81 95
1 39 - 73,951 73,991
------------------------ ----------------------- ------------------------ ------------------------ ------------------------
Financial Liabilities
Trade payables 3,153 1,586 3,332 6,945 15,016
Other payables and
accruals - 334 - 32,790 33,124
Amount owing to
related
parties 2,005 - - 550 2,555
Amount owing to
directors - 1,217 - 509 1,726
Hire purchases - - - 557 557
Term loans - 1,412 - 9,668 11,080
5,158 4,549 3,332 51,019 64,058
------------------------ ----------------------- ------------------------ ------------------------ ------------------------
Net financial
assets/(liabilities) (5,157) (4,510) (3,332) 22,932 9,933
Less: Net financial
liabilities
denominated
in the Company's
functional currency - - - (22,932) (22,932)
Currency exposure (5,157) (4,510) (3,332) - (12,999)
------------------------ ----------------------- ------------------------ ------------------------ ------------------------
33. FINANCIAL INSTRUMENTS (CONT'D)
33.1.1 Market Risk (cont'd)
USD GBP EURO RM TOTAL
2016 RM'000 RM'000 RM'000 RM'000 RM'000
Financial
Assets
Other
receivables
and
deposits - - - 695 695
Amount owing
by contract
customers - - - 551 551
Amount owing
by related
parties - - - 55,422 55,422
Cash and bank
balance 1 1,874 - 278 2,153
1 1,874 - 56,946 58,821
------------------------ ----------------------- ----------------------- ----------------------- -----------------------
Financial
Liabilities
Trade
payables 3,639 - 4,308 25,910 33,857
Other
payables and
accruals - - - 819 819
Amount owing
to contract
customers - - - 150 150
Amount owing
to directors - - - 896 896
Short term
loan - - - 558 558
Term loans - - - 9,950 9,950
3,639 - 4,308 38,283 46,230
------------------------ ----------------------- ----------------------- ----------------------- -----------------------
Net financial
liabilities (3,638) 1,874 (4,308) 18,663 12,591
Less: Net
financial
liabilities
denominated
in the
Company's
functional
currency - - - (18,663) (18,663)
Currency
exposure (3,638) 1,874 (4,308) - (6,072)
------------------------ ----------------------- ----------------------- ----------------------- -----------------------
33. FINANCIAL INSTRUMENTS (CONT'D)
33.1.1 Market Risk (cont'd)
(a) Foreign Currency Risk (cont'd)
The following details the sensitivity analysis of the Group's
profit after tax to a reasonably possible change in the foreign
currencies at the end of the reporting period with all other
variables held constant:
Increase/(Decrease)
2017 2016
RM RM
Effects on Profit After
Taxation
USD/RM
- strengthened by 1% (51) (36)
- weakened by 1% 51 36
GBP/RM
- strengthened by 1% 45 (19)
- weakened by 1% (45) 19
EUR/RM
- strengthened by 1% 33 (43)
- weakened by 1% (33) 43
A weakening of the above currencies against Ringgit Malaysia at
the reporting date would have had the equal but opposite effect on
the above currencies to the amounts shown above, with all other
variables held constant.
(b) Interest Rate Risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group's exposure to interest
rate risk arises mainly from interest-bearing financial
liabilities. The Group's policy is to obtain the most favourable
interest rates available. Any surplus funds of the Group will be
placed with licensed financial institutions to generate interest
income.
The sensitivity analysis is not presented as the sensitivity
impact is immaterial because the loan has a fixed interest rate
which is subsequently rolled-up into the principal.
(c) Equity Price Risk
The Group does not have any quoted investments and hence is not
exposed to equity price risk.
33.1.2 Credit Risk
The Group's exposure to credit risk, or the risk of
counterparties defaulting, arises mainly from trade and other
receivables. The Group manages its exposure to credit risk by the
application of credit approvals, credit limits and monitoring
procedures on an ongoing basis.
The Group uses ageing analysis to monitor the credit quality of
the trade receivables. Any receivables having significant balances
past due, which are deemed to have higher credit risk, are
monitored individually.
The Group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of the trade
and other receivables as appropriate. The main components of this
allowance are a specific loss component that relates to
individually significant exposures, and a collective loss component
established for groups of similar assets in respect of losses that
have been incurred but not yet identified (where applicable).
Impairment is estimated by management based on prior experience and
the current economic environment.
The Group provided a financial guarantee to financial
institutions for credit facilities granted to an associate
undertaking, as disclosed in note 27 to the financial statements.
The Group monitors its exposure to credit risk, or the risk of
counterparties defaulting, arises mainly from trade and other
receivables. The Group manages its exposure to credit risk by the
application of credit approvals, credit limits and monitoring
procedures on an on-going basis.
Credit risk concentration profile
The Group's major concentration of credit risks relates to the
amount owing by 2 (2016: 2) customers which constitutes
approximately 98% (2016: 100%) of its trade & other receivables
at the end of the reporting year.
The ageing analysis of receivables (including amount owing by
associates and amount owing by affiliates) and at the end of the
reporting year is disclosed in note 9.
At the end of the reporting year, trade receivables that are
individually impaired were those with significant long outstanding
obligations. These receivables are not secured by any collateral or
credit enhancement, but have nevertheless demonstrated that they
are meeting their obligations though payments have been
protracted.
33. FINANCIAL INSTRUMENTS (CONT'D)
33.1.3 Liquidity Risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group
maintains a level of cash and cash equivalents and bank facilities
deemed adequate by the management to ensure as far as possible,
that they will have sufficient liquidity to meet its liabilities
when they fall due.
The following table sets out the maturity profile of the
financial liabilities at the reporting date based on contractual
undiscounted cash flows:
Effective Contractual
interest undiscounted
rate Carrying amount cashflow Within 1 year 1-5 years
% RM'000 RM'000 RM'000 RM'000
2017
Trade
payables - 15,016 15,016 15,016 -
Other
payables
and
accruals - 33,124 33,124 33,124 -
Amount
owing to
related
parties - 2,555 2,555 2,555
Amount
owing to
directors - 1,726 1,726 - 1,726
Hire
purchase 6.4 -
payables 6.9 557 557 81 476
5.0 -
Term loans 8.0 11,080 11,080 11,080 -
64,058 64,058 61,856 2,202
---------------------- ---------------------- ----------------------- -----------------------
2016
Trade
payables - 33,857 33,857 33,857 -
Other
payables
and
accruals - 819 819 819 -
Amount
owing to
directors - 896 896 - 896
Hire
purchase 5.2 -
payables 5.4 558 558 70 488
5.0 -
Term loans 8.0 9,950 9,950 1,860 8,090
46,080 46,080 36,606 9,474
---------------------- ---------------------- ----------------------- -----------------------
33. FINANCIAL INSTRUMENTS (CONT'D)
33.1.4 Fair Values Measurements
The fair values of the financial assets and financial
liabilities maturing within the next 12 months approximated their
carrying amounts due to the relatively short-term maturity of the
financial instruments.
Fair Value of Financial Fair Value of Financial Instrument Total Carrying
Instrument
Carried at Fair Value Not Carried at Fair Value Fair Value Amount
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
2017
Term loans - - - - 11,080 - 11,080 11,080
Hire
purchase
payables - - - - 557 - 557 557
Amount
owing to
directors - - - - - 1,726 1,726 1,726
-------- -------- --------- ------- ---------------------- ---------------------- ---------------------- ----------------------
2016
Term loans - - - - 9,950 - 9,950 9,950
Hire
purchase
payables - - - - 558 - 558 558
Amount
owing to
directors - - - - - 807 807 896
-------- -------- --------- ------- ---------------------- ---------------------- ---------------------- ----------------------
33. FINANCIAL INSTRUMENTS (CONT'D)
33.1.4 Fair Values Measurements
Fair Value of Financial Instruments Not Carried at Fair
Value
The fair values, which are for disclosure purposes, have been
determined using the following basis:-
(i) The fair value of term loan with fixed interest rate is
determined by discounting the relevant cash flows using current
market interest rate for similar instruments at the end of the
reporting period. The interest rate (per annum) used to discount
the estimated cash flows is as follows:-
2017 2016
% %
Hire purchase payables 6.4-6.9 5.2
Term loan (fixed interest
rate) 5.0 5.0
======== =====
(ii) The carrying amount of term loan with variable interest
rate approximates its fair value.
(iii) The fair value of amount owing to directors (non-current)
is determined by discounting the relevant cash flows using current
market interest rates for similar instruments at rates of 4.5% per
annum.
34. Capital Risk Management
The Group manages its capital to ensure that it will be able to
maintain an optimal capital structure so as to support their
businesses and maximise shareholders' value. To achieve this
objective, the Group may make adjustments to the capital structure
in view of changes in economic conditions, such as adjusting the
amount of dividend payment, returning of capital to shareholders or
issuing new shares.
The Group manages its capital based on debt-to-equity ratio that
complies with debt covenants and regulatory, if any. The
debt-to-equity ratio is calculated as total borrowings from
financial institutions divided by total equity.
There was no change in the Group's approach to capital
management during the financial year.
The debt-to-equity ratio of the Group at the end of the
reporting year was as follows:
2017 2016
RM'000 RM'000
Hire purchase payables 557 558
Term loans 11,079 9,950
Less: Cash and bank balances (95) (2,153)
Net debt 11,541 8,355
------------------- -----------------
Total shareholders'
equity 47,250 41,464
------------------- -----------------
Debt-to-equity ratio 0.24 0.2
35. SIGNIFICANT EVENT OCCURING AFTER THE REPORTING PERIOD
On 19 July 2018, the Company announced that it had raised
approximately RM17m (GBP3.2m) via the subscription for 51,806,000
new common shares by Serba Dinamik International Ltd ("SDIL"), at a
price of approximately 6.19 pence per share (the
"Subscription").
The net proceeds of the Subscription will be used to advance the
development of the Company's third fully-owned biogas power plant
at Minyak and for working capital purposes. Payment to the Company
has been made in Malaysian Ringgit and calculated in accordance
with the rate of exchange for Pounds Sterling from Ringgit, quoted
by Bank Negara Malaysia (Central Bank of Malaysia) at 9.00 a.m.
(Malaysia time) on the date of payment. SDIL is a wholly-owned
subsidiary of a Malaysia-based investment holding company, Serba
Dinamik Holdings Berhad, which is focused on the energy services
industry and is listed on Bursa Malaysia (ticker: SDH:MK) and has a
market value of approximately GBP1bn.
Following the Subscription, SDIL holds 51,806,000 Common Shares,
representing approximately 15.0% of the enlarged issued share
capital of the Company.
Under the terms of the subscription agreement, SDIL is entitled
to appoint one executive Director to the Company's Board of
Directors for as long as SDIL holds at least 15% of the Company's
issued share capital. The appointment of the nominated executive
Director will be subject to the usual regulatory requirements for
an AIM listed company.
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.
END
FR FKPDNOBKDFFD
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August 16, 2018 02:00 ET (06:00 GMT)
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