SHWE.L Regulatory News (SHWE)

18 December 2019

Myanmar Strategic Holdings Ltd.

("MSH" or the "Company" or the "Group")

Interim Results for the six months to 30 September 2019

The Board of Myanmar Strategic Holdings (LSE: SHWE), an independent developer and manager of consumer businesses located in Myanmar, is pleased to announce its unaudited interim results for the six-month period ended 30 September 2019.

FINANCIAL HIGHLIGHTS

All dates refer to the financial period ended 30 September 2019 ("6M'19"), unless otherwise stated. The financial year ended 31 March 2019 is referred to as "2019".

·; Group revenues increased 40% year-on-year ("YOY") to US$2.6 million, of which 71% derived from Services, 25% from Education and 4% from Hospitality.

·; Received an investment permit from the Myanmar Investment Commission ("MIC") in April 2019 in relation to the Company's first international school, the Yangon American International School ("Yangon American"). Successfully opened the campus on budget in August 2019 with over 50 students of 17 nationalities.

·; Secured a strategic location for a new 650 square metres Wall Street English retail centre within the Mingalar Mandalay shopping complex in Mandalay. Announced the planned opening of the centre by January 2020, which remains on track.

·; Net loss for the period amounted to US$1.7 million (6M'18: US$0.9 million), primarily due to (i) the pre-opening operating losses of Yangon American of US$0.8 million impacting the Education division, and (ii) a subdued tourism market impacting the Hospitality division.

·; Underlying revenues, an indicator of the volume of business generated by the managed and owned businesses, increased 28% YOY to ca. US$3.9 million of which 47% derived from Services 43% from Education and 10% from Hospitality.

·; Secured loans of up to US$3 million with Macan Pte. Ltd. in July 2019, of which US$2 million was drawn immediately, to fund the Group's working capital and expansion plans.

OPERATIONAL HIGHLIGHTS

All dates refer to the financial period ended 30 September 2019 ("6M'19"), unless otherwise stated. The financial year ended 31 March 2019 is referred to as "2019".

Education

·; Group revenues arising from the owned and managed education businesses for the period were US$649,846 (6M'18: US$428,307).

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

·; Under the Wall Street English brand ("WSE"), the Group manages three retail English language centres and one corporate centre. As at 30 September 2019, WSE served over 1,600 registered students across its retail and corporate centres and has established itself as the leading private English language education provider in Myanmar.

·; A new WSE retail centre is expected to be opened in Mandalay in January 2020. The Group continues to seek opportunities to expand the WSE franchise as it holds the exclusive rights to develop a further six WSE retail centres (up to a total of 10) over the next seven years.

·; Within its higher education portfolio, MSH manages Auston College Myanmar ("Auston"), a private school offering foundation and diploma programs in engineering. The first campus opened in Yangon in May 2018, spans over three floors and covers 700 square metres.

·; In April 2019, the Group also received the MIC investment permit in relation to its first international school, the Yangon American International School ("Yangon American"). The school is centrally located in Yangon in a campus of over 3,000 square metres. Its planned capacity is 400 students and operations commenced in August 2019 with over 50 students. Yangon American is fully consolidated within the Group as an Owned Business within the Group's Education division and generated revenues of US$76,509 from its opening on 19 August 2019 to 30 September 2019

·; During the financial year, the education businesses generated underlying revenues of US$1.7 million (6M'18: US$ 1.3 million), yielding a 32% YOY growth.

Services

·; Group revenues arising from rendering of services for the period were US$1.8 million (for the financial year ended 31 March 2019: US$3.4 million; June 2018 to September 2018: US$1.3 million).

·; Through its Services division, the Group provides a range of integrated security, risk management, journey management and cash in transit services under the EXERA brand.

·; Acquired by the Group in May 2018, EXERA is an internationally managed provider of security and risk management services, operating exclusively in Myanmar through an experienced workforce of ca. 1,100 security officers as at 30 September 2019.

·; EXERA's customer base includes multi-national corporations, large oil and gas companies, established local businesses and governmental bodies and international organisations such as WFP, UNHCR, UNICEF and the EU.

·; Since its acquisition in May 2018, EXERA has retained ca. 80% of the contracts that have come up for renewal or retention. Since 1 April 2019 EXERA has won 12 new contracts with 11 customers.

·; In May 2019 EXERA was awarded the prestigious contract for the provision of security guarding services at the Singapore Embassy in Yangon for a period of three years. The total tendered price was ca. US$0.5 million for the initial period of three years.

Hospitality

·; Management and technical assistance fees to the Group for the period were US$90,000 (6M'18: US$90,000). The low level of management fees was mainly due to a broader decline in tourist arrivals in Myanmar linked to the political uncertainty and the conflicts in Rakhine State.

·; Under its Hospitality division, the Group manages four boutique hostels across three of the most popular tourist destinations in Myanmar. Following the opening of its fourth boutique hostel, Ostello Bello Bagan Pool, the Group raised the number of beds under management to 474, spread over 108 rooms in 4 locations across Bagan, Mandalay and Nyaung Shwe.

·; During the financial period, the number of beds sold amounted to 24,530 (6M'18: 25,841) and the underlying revenues of managed businesses were US$0.40 million (6M'18: US$0.45 million).

·; The Group's main focus is to maintain a strong operating performance and generate operational synergies to offset the currently challenging operating environment in the Myanmar tourism sector.

·; Management maintains a positive outlook on the long-term prospects of the Myanmar tourism sector and is cautiously pursuing expansion opportunities in both established tourist hubs (e.g. Yangon and Ngapali) as well as up-and-coming destinations (e.g. Hpa-An and Ngwe Saung).

·; In July 2019, Bagan was approved for inclusion on UNESCO's World Heritage List, more than two decades after it was first nominated. This strong vote of confidence is expected to drive an increase in overall tourism inflows in the next 12 months.

New Business Development

·; MSH continues to develop its business network and expand its pipeline within both existing sectors (e.g. Education, Services and Hospitality) and new sectors (e.g. Technology).

·; In May 2018, MSH agreed to make a strategic minority investment of US$150,000 in NEXLABS, one of Myanmar's leading digital consulting firms. The firm was founded in 2013 in Yangon by Ye Myat Min, named one of Forbes Asia's 30 under 30 in 2016 and employs over 80 experienced professionals. NEXLABS was awarded "Gold: Independent Agency of the Year (Cambodia, Laos and Myanmar)" by Campaign Asia in 2019 and Silver in 2018.

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

Myanmar Macro-Economic Highlights

·; The World Bank expects Myanmar's economic growth to pick up to 6.8% in 2018/2019. The Asian Development Bank expects similar rates of 6.6% for 2019 and 6.8% in 2020. This is testament to the stability of Myanmar's growth, despite unrest in relation to the conflict in Rakhine State, of which the Company is acutely aware.

·; Opening of the Myanmar insurance sector in April 2019, as Myanmar's government provisionally authorised five multinational insurance companies to establish wholly owned subsidiaries. Operations are expected to commence by the end of 2019.

·; Further liberalisation of the Myanmar banking and financial services sector announced. Awarded additional foreign bank branch licenses and allowed foreign banks to apply for and operate as a subsidiary of a foreign bank. In June 2019 the International Finance Corporation ("IFC") also converted a loan to Yoma Bank into a 5% equity shareholding.

·; Relaxation of visa requirements for citizens of Australia, Germany, Italy, Russia, Spain and Switzerland, with effect from 1 October 2019, and approval for inclusion of Bagan on UNESCO's World Heritage List in July 2019 expected to further boost international tourism arrivals.

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

"I am very pleased to announce the Company's interim results, which reflect our continued commitment to growth and operational excellence in our operations in Myanmar.

"Over the course of the financial period, MSH successfully launched its first international school, Yangon American, with over 50 students of 17 nationalities. While MSH has invested significant resources in Yangon American, we expect the school to provide an attractive contribution to the Group's margins over the next 18 to 24 months, as the student population grows.

"Wall Street English completed its full digital transformation in November 2019. The business is profitable and ready to scale further with the opening of an additional retail centre in Mandalay in January 2020.

"In the Services division, EXERA consolidated its client portfolio and won prestigious contracts, most notably, the security services contract awarded by the Singapore Embassy. EXERA has also expanded its product range by launching its integrated facilities management services, initially providing cleaning and facilities management services to Yangon American.

"Finally, the Company's Hospitality business is expected to gradually return to growth as international arrivals into Myanmar recover, thanks to stronger tourism inflows from other Asian countries.

"For the period ahead, Management will remain focused on further consolidating its leadership in its existing sectors and delivering synergies across its businesses.

"The Board is confident that the Company's consumer-focused businesses are well positioned both to contribute to, and also benefit from, the favourable outlook for economic growth in Myanmar, and we look forward to updating shareholders on our progress in due course."

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

FINANCIAL REVIEW

All dates refer to the financial period ended 30 September 2019 ("6M'19"), unless otherwise stated. The financial year ended 31 March 2019 is referred to as "2019".

·; The revenues generated by the Group in relation to the businesses owned and managed grew to US$2.6 million for the financial period ended 30 September 2019 (40% YOY increase) as a result of the acquisition of EXERA at the end of May 2018, the higher fees generated by the Education businesses under management, following the expansion of Wall Street English, and the launch of Yangon American.

·; The fees generated by the Group in relation to the businesses under management were US$0.7 million for the financial period ended 30 September 2019 (6M'18: US$0.5 million), a 23% YOY increase. The 27% YOY increase in the fees generated by Wall Street English was offset by the stable fees generated by Ostello Bello Bagan.

RESULTS OF OPERATIONS

·; The Group's Adjusted EBITDA loss, which excludes expenditure of a one-off nature and therefore shows a clearer picture of the performance of the operations, widened to US$1.2 million (6M'18: US$0.5 million), due to the pre-opening EBITDA loss of US$0.5 million incurred in relation to Yangon American.

·; Once including the depreciation expense and the interest expense in relation to the right of use assets, the Group's Adjusted EBITDA loss would further widen to US$1.5 million.

·; The Group's net loss amounted to US$1.7 million for the financial period ended 30 September 2019 vs. US$0.9 million for the previous financial period (2019: US$2.5 million loss)

·; While revenues grew by 40% vs. the previous period, the acquisition of EXERA and the expansion of the existing businesses, lead to a 62% YOY increase in employee benefit expenses and a 54% YOY increase in other expenses.

·; Direct and indirect Full Time Employees ("FTEs") increased to ca. 1,500 (ca. 1,400 as at 31 March 2019), of which ca. 300 FTEs (Mar'19: 300) were employed within the operations under management and ca. 1,200 FTEs (Mar'19: 1,100) were employed in the owned operations. The growth was driven by the opening of Yangon American and the expansion of the Wall Street English operation.

·; The surge in other expenses, was mainly due to the additional expenses in relation to hostel operating expenses of US$0.2 million (2019: US$0.3 million) and marketing expenses of US$0.1 million, most of which related to the launch of Yangon American. It is worth noting that EXERA's acquisition was completed on 28 May 2018.

UNDERLYING REVENUES

·; The Underlying Revenues are an indicator of the total volume of business generated in each division. The operating businesses managed and owned by the Group generated revenues ("Underlying Revenues") of US$3.9 million for the financial period ended 30 September 2019 (6M'18: US$3.0 million), an increase of ca. 28% YOY.

·; The growth of the existing Education and Hospitality businesses under management was driven by the ramp up of Wall Street English Myanmar, following (i) the opening of a third WSE retail centre in August 2018 and (ii) the launch of the MCTA:RVi WSE corporate centre in November 2018.

·; The businesses owned by the Group generated revenues of US$1.9 million for the financial period (US$1.3 million since EXERA's acquisition on 28 May 2018 to 30 September 2018 and US$3.4 million for the financial year ended 31 March 2019), of which US$1.8 million of Services (EXERA) and US$0.1 million of Education (Yangon American).

GROUP REVENUES

·; The operating businesses managed by the Group generated Fees to the Group of US$0.7 million in the financial period ended 30 September 2019 (6M'18: US$0.5 million). The Fees to the Group comprised of US$0.6 million fees generated by Wall Street English and US$0.1 million generated by Ostello Bello Bagan. No fees were generated by the other hostels and education businesses as they are still in a start-up phase.

·; Group revenues are formed by the Fees generated by the Managed Businesses and the Revenues generated by the Owned Businesses. Group revenues for the financial period ended 30 September 2019 amounted to US$2.6 million (+40% YOY) and were composed of US$0.7 million in fees generated by the Managed Businesses and US$1.9 million in revenues generated by the Owned Businesses.

·;

LIQUIDITY AND CAPITAL RESOURCES

·; With regards to the investing activities, the Group advances funds to the owners of the relevant managed operations to fund refurbishment expenses, improvements and general working capital. Such advances are unsecured and interest free and there is a risk that the Group may not be repaid some or all of these monies.

·; The significant growth in cash used in investing activities for the financial period ended 30 September 2019 was primarily due to refurbishment expenses in relation Yangon American. Purchase of plant and equipment for the period amounted to US$0.4 million.

·; With regards to the Group's financing activities, the Group's principal source of liquidity in the financial period ended 30 September 2019 has been a loan from the ultimate holding company. On 1 July 2019, the Company put in place a Loan Facility of up to US$3.0 million with its ultimate holding company, MACAN Pte. Ltd.. The Loan Facility is repayable on demand or no later than 3 years and may be repayable earlier at the Company's discretion and bears interest at 6.0% per annum, The Company has drawn down US$2.0 million since the year end.

·; During the financial period, the net reduction in cash and cash equivalents was US$1.7 million before the loan of US$2.0 million from Macan Pte Ltd. This negative trend was due to the negative operating cash flow and the continued investments in (i) the managed operations as demonstrated by the increase in advances to related parties and third parties for the expansion of Wall Street English and (ii) the growth of the owned operations as demonstrated by the investment in the Yangon American campus.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the financial period from 1 April 2019 to 30 September 2019

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2019

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the financial period from 1 April 2019 to 30 September 2019

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the financial period from 1 April 2019 to 30 September 2019

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the financial period from 1 April 2019 to 30 September 2019

These notes form an integral part of and should be read in conjunction with the accompanying interim condensed consolidated financial statements.

GENERAL

Myanmar Strategic Holdings Limited (the "Company") is a public company limited by shares incorporated and domiciled in Singapore with its principal place of business and registered office at 80 Raffles Place, #32-01, UOB Plaza 1, Singapore 048624. The Company was listed on the Main Market of the London Stock Exchange on 22 August 2017.

The principal activities of the Company are investment and trading in Myanmar related to investment projects.

The Company's immediate and ultimate holding company is MACAN Pte. Ltd., a company incorporated and domiciled in Singapore. Related companies in these financial statements refer to the members of the MACAN Pte. Ltd. Group.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 September 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual consolidated financial statements as at 31 March 2019.

The financial statements have been drawn up in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and are prepared under the historical cost convention, except as disclosed in the accounting policies below.

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

The preparation of financial statements in compliance with IFRS requires management to make judgements, estimates and assumptions that affect the Group's application of accounting policies and reported amounts of assets, liabilities, revenue and expenses. Although these estimates are based on management's best knowledge of current events and actions, actual results may differ from those estimates. The areas where such judgements or estimates have significant effect on the financial statements are disclosed in Note 3 to the financial statements.

The Group has adopted all the new and revised IFRS that are relevant to its operations and effective for the current financial period. The adoption of these new/revised IFRS did not result in changes to the Group's accounting policies and had no material effect on the amounts reported for the current or prior financial periods except as detailed below.

Adoption of new and amended standards and interpretations

The Group applied IFRS 16 retrospectively with the cumulative effect of initially applying this standard as an adjustment to the opening retained earnings as at 1 April 2019 (the "date of initial application"). The Group elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under IFRS 1-17 and IFRS 4 were not reassessed. The definition of lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 April 2019.

In applying the modified retrospective approach, the Group has taken advantage of the following practical expedients:

·; A single discount rate has been applied to portfolios of leases with reasonably similar characteristics;

·; Leases with a remaining term of twelve months from the date of initial application have been accounted for as short-term leases (i.e. not recognised on statement of financial position) even though the initial term of the leases from lease commencement date may have been more than twelve months;

·; Initial direct costs have not been included in the measurement of the right-of-use asset at the date of initial application;

·; For the purpose of measuring the right-of-use asset, hindsight has been used. Therefore, it has been measured based on prevailing estimates at the date of initial application and not retrospectively by making estimates and judgements (such as lease terms) based on circumstances on or after the lease commencement date.

As a lessee, the Group previously classified leases as finance or operating lease based on its assessment of whether the lease transferred substantially all the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases. For those low-value assets based on the value of the underlying asset when new and leases with a lease term of 12 months or less, the Group has elected not to recognise right-of-use assets and lease liabilities for these leases.

On adoption of IFRS 16, the Group recognised right-of-use assets and lease liabilities in relation to international school which had previously been classified as operating leases.

Lease liabilities from operating leases under the principles of IFRS 1-17 were measured at the present value of the remaining lease payments, discounted using lessee's incremental borrowing rate as at 1 April 2019.

The right-of-use assets were measured as follows:

All leases: the carrying amount is determined as if IFRS 16 being applied from the commencement date of the leases, subject to the practical expedients listed above.

Standards issued but not yet effective 

The Company has not adopted the following relevant standards and interpretations that have been issued but not yet effective:

The directors expect that the adoption of the other standards and interpretations above will have no material impact on the financial statements in the period of initial application.

Basis of consolidation and business combinations

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. Subsidiaries are entities over which the Group has control. The Group controls an investee if the Group has power over the investee, exposure to variable returns from the investee, and the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

Subsidiaries are consolidated from the date on which control is obtained by the Group up to the effective date on which control is lost, as appropriate.

Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions are eliminated on consolidation. Unrealised losses may be an impairment indicator of the asset concerned.

The financial statements of the subsidiaries are prepared for the same reporting period as that of the Company, using consistent accounting policies. Where necessary, accounting policies of subsidiaries are changed to ensure consistency with the policies adopted by other members of the Group.

Non-controlling interests in subsidiaries relate to the equity in subsidiaries which is not attributable directly or indirectly to the owners of the parent. They are shown separately in the consolidated statements of comprehensive income, financial position and changes in equity.

Non-controlling interests in the acquiree that are a present ownership interest and entitle its holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value, of the acquiree's identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

Basis of consolidation and business combinations

When the Group loses control of a subsidiary it derecognises the assets and liabilities of the subsidiary and any non-controlling interest. The profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.

Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or joint venture.

In the separate financial statements of the Company, investment in subsidiaries are carried at cost, less any impairment loss that has been recognised in profit or loss.

Business combinations and goodwill

Business combinations are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in profit or loss.

Each individual business combination, that are present ownership interests and entitle their holders to a proportionate share of net assets, are recognised by the Group on the acquisition date either at fair value, or at the proportionate share of the acquiree's identifiable net assets. Other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by another FRS.

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group's previously held equity interest in the acquiree (if any), over the net fair value of the acquiree's identifiable assets and liabilities is recorded as goodwill. In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date.

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the Group's cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

The cash-generating units to which goodwill have been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates.

Revenue recognition

Revenue is recognised when a performance obligation is satisfied. Revenue is measured based on consideration of which the Group expects to be entitled in exchange for transferring promised good or services to a customer, excluding amounts collected on behalf of third parties (i.e. sales related tax). The consideration promised in the contracts with customers are derived from fixed price contracts.

Deferred revenue comprises management fees, new centre fee and other advance consideration received from customers and a related party and student fees and ancillary fees earned in relation to the operation of the Yangon American International School. Deferred revenue is recognised as revenue when performance obligations under its contracts are satisfied.

Rendering of services

The Group provides security guarding, risk management, facilities management and security training services to the customer over a specified contract period. The performance obligation is satisfied over time as the customer simultaneously receives and consumes the benefits of the Group's performance in providing the security services. As the Group's efforts or inputs are expanded throughout the performance period, revenue is recognised on a straight-line basis over the specified contract period.

For certain contracts where the Group supplies security equipment and provides ad-hoc services such as journey management, revenue is recognised at point in time when goods and services are delivered.

Technical support service fees

Technical support service fees earned from hostel and language centres managed by the Group are recognised over time and when services are rendered with reference to the terms of the contracts. 

Management fees

Management fees earned from hostels, engineering college and language centres managed by the Group, under long-term contracts with the owners, are recognised over time as and when services are rendered with reference to the terms of the contracts. The fees are incentive fees, which are based on the profitability of these business operations and the amount of course modules to be delivered.

Royalty income

Royalty income is recognised over time on an accrual basis with reference to the terms of the "Wall Street English' Centre Franchise Agreement. Royalty is determined based on the agreed royalty rate and the annual total gross revenue of the managed language centres in Myanmar.

New centre fee

New centre fee for the opening of new "Wall Street English" language centre in Myanmar are recognised over the exclusive rights to develop and operate for a period of 10 years.

Student fees

Student fees include the tuition fees and ancillary fees earned in relation to the operation of the Yangon American International School in Yangon. Tuition fees are recognised over the duration of the course and when services are rendered with reference to the terms of the contract. Ancillary fees are recognised at point in time and over time, respectively when goods and services are delivered.

Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated undiscounted liability for annual leave expected to be settled wholly within 12 months from the reporting date as a result of services rendered by employees up to the end of the financial year.

Share-based payments

Equity-settled share-based payments are measured at fair value of the equity instruments (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period with a corresponding credit to the share-based payment reserve, based on the Group's estimate of the number of equity instruments that will eventually vest and adjusted for the effect of non-market-based vesting conditions. At the end of each financial year, the Group revises the estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period with a corresponding adjustment to the share-based payment reserve.

Taxes

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current income tax

The tax currently payable is based on taxable profit for the financial year. Taxable profit differs from profit reported as profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group's liability for current tax is recognised at the amount expected to be paid or recovered from the taxation authorities and is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and its subsidiaries operate by the end of the financial year.

Current income taxes are recognised in profit or loss, except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

Deferred tax

Deferred tax is recognised on all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each financial year and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Group operates by the end of the financial year.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the group expects to recover or settle its assets and liabilities.

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 they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Deferred tax is recognised in profit or loss, except when it relates to items recognised outside profit or loss, in which case the tax is also recognised either in other comprehensive income or directly in equity.

Sales tax

Revenue, expenses and assets are recognised net of the amount of sales tax except:

• when the sales taxation that is incurred on purchase of assets or services is not recoverable from the taxation authorities, in which case the sales tax is recognised as part of cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Foreign currency transactions and translations

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency ("foreign currencies") are recorded at the rate of exchange prevailing on the date of the transaction. At the end of each financial year, monetary items denominated in foreign currencies are retranslated at the rates prevailing as of the end of the financial year. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations (including comparatives) are expressed in United States dollar using exchange rates prevailing at the end of the financial year. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, are recognised initially in other comprehensive income and accumulated in the Group's foreign exchange reserve.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign exchange reserve.

On disposal of a foreign operation, the accumulated foreign exchange reserve relating to that operation is reclassified to profit or loss.

Plant and equipment

All items of plant and equipment are initially recognised at cost. The cost includes its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Dismantlement, removal or restoration costs are included as part of the cost if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the plant and equipment.

Subsequent expenditure on an item of plant and equipment is added to the carrying amount of the item if it is probable that future economic benefits associated with the item will flow to the Group and the cost can be measured reliably. All other costs of servicing are recognised in profit or loss when incurred.

Plant and equipment are subsequently stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is charged so as to write off the cost or valuation of assets, over their estimated useful lives, using the straight-line method, on the following bases:

Computers : 3 years

Furniture and fittings : 3 years

Motor Vehicles : 5 years

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The estimated useful lives, residual values and depreciation methods are reviewed, and adjusted as appropriate, at the end of each financial year.

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.

The gain or loss arising on disposal or retirement of an item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Intangible assets

Area development and centre fees

An area development fee is paid for the exclusive rights to develop and operate the 'Wall Street English' language centre in Myanmar while the centre fee is required to be paid in respect for the opening of a new "Wall Street English" language centre in Myanmar. The area development and centre fees are capitalized and amortised over the period of 10 years from the date operation commences and when the new centre commences operations respectively.

The area development and centre fees are initially capitalized at cost and subsequently measured at cost less any accumulated amortisation and any accumulated losses.

Set-up fee and brand licensing fee

Set-up fee is paid for the exclusive rights to develop and operate the 'Auston" college in Myanmar. Brand licensing fee is paid for the exclusive, irrecoverable, non-transferrable rights of use of the licenses intellectual property and trademark for the operations of the Auston college. The set-up and brand licensing fees are capitalized and amortised over the period of 10 years from the date operation commences.

The set-up and brand licensing fees are initially capitalized at cost and subsequently measured at cost less any accumulated amortisation and any accumulated losses.

Computer software license

Acquired computer software license is initially capitalized at cost which includes the purchase price (net of any discounts and rebates) and other directly attributable costs of preparing the software for its intended use. Direct expenditure which enhances or extends the performance of computer software beyond its specifications and which can be reliably measured is added to the original cost of the software. Costs associated with maintaining computer software are recognized as an expense is incurred.

Computer software license is subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss under the straight-line method over the estimated useful lives of 3 years.

Customer-related assets (Services segment)

Customer-related assets comprise customer contracts and customer relationship arising from business combinations and initially measured at fair value as at the date of acquisition. These assets are capitalized at fair value as at acquisition date and subsequently measured at cost less any accumulated amortisation and accumulated losses.

Amortisation is recognized in profit or loss on a straight-line basis over their estimated useful lives of 3 years.

Goodwill (Services segment)

Goodwill arising on the acquisition of a subsidiary or business represents the excess of the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisition date fair value of any previously held equity interest in the acquiree over the acquisition date fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognized at the date of acquisition.

Goodwill on subsidiary is recognized separately as intangible assets. Goodwill is initially recognized at cost and subsequently measured at cost less any accumulated impairment losses. 

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in the subsequent period.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gain or loss on disposal.

Intangible assets with finite useful lives are amortised over the estimated useful and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite useful lives is recognized in profit or loss or expected category consistent with the function of the intangible asset.

An item of intangible asset is derecognized upon disposal or when no future economic benefits are expected from its use of disposal. Any gain or loss on derecognition of the asset is included in profit or loss in the financial year the asset is derecognised.

Area development fees and centre fees - Wall Street English

An area development fee is paid for the exclusive rights to develop and operate the "Wall Street English" language centre in Myanmar. The area development fee is capitalised and amortised over the period of 10 years from the date operation commences.

Centre fees are required to be paid in respect of the opening of a new "Wall Street English" language centre in Myanmar. The centre fees paid are capitalised and amortised over the period of 10 years from the date when the respective centre commences operations.

The area development fees and centre fees are initially capitalised at cost and subsequently measured at cost less any accumulated amortisation and any accumulated losses.

Brand licensing Fees and Set up Fees - Auston College Myanmar

Brand license fee and set-up fee are paid for the rights to develop and operate the "Auston College" in Myanmar. The license fee is capitalised and amortised over the period of 10 years from the date of operation commences.

The brand license fee and set-up fee are initially capitalised at cost and subsequently measured at cost less any accumulated amortisation and any accumulated losses.

Impairment of non-financial assets

At the end of each financial year, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Financial instruments

Financial assets

The Group classifies its financial assets into one of the categories below, depending on the group's business model for managing the financial assets as well as the contractual terms of the cash flows of the financial asset. The Group shall reclassify its affected financial assets when and only when the Group changes its business model for managing these financial assets. The Group's accounting policy for each category is as follows:

Amortised cost

These assets arise principally from provision of services to customers, but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process, the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being presented in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. 

Impairment provisions for other financial assets are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether at each reporting date, there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

The Group's financial assets measured at amortised cost comprise trade and other receivables (excluding prepayment and advances for hostel operations) and cash and cash equivalents in the consolidated statement of financial position.

Financial asset at fair value through other comprehensive income ("FVOCI")

The Group has a strategic investment in the equity securities of an unlisted entity which is not accounted for as a subsidiary, associate or jointly controlled entity. The Group has made an irrevocable election to classify the investment at fair value through other comprehensive income rather than through profit or loss as the Group considers this measurement to be the most representative of the business model for these assets. They are carried at fair value with changes in fair value recognised in other comprehensive income and accumulated in the fair value through other comprehensive income reserve. Upon disposal, any balance within fair value through other comprehensive income reserve is reclassified directly to retained earnings

and is not reclassified to profit or loss.

Dividends are recognised in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment, in which case the full or partial amount of the dividend is recorded against the associated investment carrying amount.

Purchases and sales of financial assets measured at fair value through other comprehensive income are recognised on settlement date with any change in fair value between trade date and settlement date being recognised in the fair value through other comprehensive income reserve.

Derecoqnition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

Classification as debt or equity

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. The Company classifies ordinary shares as equity instruments.

Financial liabilities and equity instruments

Financial liabilities

The Group classifies all financial liabilities as subsequently measured at amortised cost.

Trade and other payables

Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, where applicable, using the effective interest method.

Loan from ultimate holding company

Interest-bearing loan from ultimate holding company is measured at fair value, net of transaction costs and is subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of the loan is recognised over the term of the borrowings in accordance with the Group's accounting policy for borrowing costs.

Loan due from ultimate holding company is presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case it is presented as non-current liabilities.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount and the consideration paid is recognised in profit or loss.

Cash and cash equivalents

Cash and cash equivalents comprise of cash at bank which are subject to an insignificant risk of changes in value. Cash and cash equivalents carried in the statement of financial position is classified and accounted for as financial asset at amortised cost under IFRS 9.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the financial year, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. The increase in the provision due to the passage of time is recognised in the statement of comprehensive income as finance expense.

LOSS PER SHARE

Basic loss per share is calculated by dividing the loss for the financial period/year attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial period/year.

In the previous financial period, diluted loss per share is the same as the basic loss per share because of the inclusion of potential ordinary shares for the convertible bonds is anti-dilutive.

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