SHWE.L Regulatory News (SHWE)

26 July 2018

Myanmar Strategic Holdings Ltd.

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

Results for the 12-month period ended 31 March 2018

The Board of Myanmar Strategic Holdings Ltd. (LSE: SHWE), the independent developer and operator of consumer businesses located in Myanmar, one of the fastest growing economies in the world, is pleased to announce its audited results for the 12-month period ended 31 March 2018.

Copies of the annual report and accounts for the 12-month period ended 31 March 2018 will be posted to shareholders shortly and an electronic copy of the annual report and accounts will shortly be made available on the Company's website.

HIGHLIGHTS

Financial Highlights

All dates refer to the Financial Year Ended 31 March 2018 ("2018") unless otherwise stated.

· Group revenues increased 140% year-on-year ("YOY") to US$791,870, of which 77% derived from Education and 23% from Hospitality.

· EBITDA loss decreased by 20% YOY to US$1.5 million (2017: US$1.9 million).

· Net loss reduced by 13% to US$2.1 million (2017: US$2.4 million).

· Underlying revenues of managed businesses increased 130% YOY to ca. US$3.2 million of which 47% derived from Education and 53% from Hospitality.

· The Company's shares were successfully admitted to trading on the Main Market of the London Stock Exchange on 22 August 2017. The price at admission was US$10 per share giving a market capitalisation of US$22.7 million on admission.

· The Company raised US$1.0 million (50,000 new shares at a price of US$20 per share) as part of its share issuance programme announced on 19 March 2018.

Operational Highlights

Education

· Group revenues arising from the management of the education businesses for the year were US$611,870 (2017: US$93,074).

· Through its Education division, the Group currently manages two English language centres under Pearson's well-established Wall Street English ("WSE") brand. During the period, these centres generated contracted sales (being the volume sold) of US$2.4 million and underlying revenues of US$1.5 million.

· WSE has established itself as the leading private English language education provider in Myanmar. As at 31 March 2018, WSE served over 1,100 students across two centres, its flagship centre in Junction Square and a newly opened centre in City Mall St. John.

· As announced on 11 April 2018, a third WSE centre is expected to open by the end of August 2018, it will span 350 square metres and will be located in the popular Myanmar Plaza mall in central Yangon, Myanmar's largest city and economic hub.

· The Group continues to seek opportunities to expand the WSE franchise as it holds the exclusive rights to develop a further seven WSE centres (up to a total of 10) over the next eight years.

Hospitality

· Management and technical assistance fees to the Group for the year were US$180,000 (2017: US$227,000). The decline in fees was mainly due to a broader decline in tourist arrivals in Myanmar linked to 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 84,824 and the underlying revenues of managed businesses were US$1.7 million (2017: US$1.2 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.

· While Myanmar's international visitor arrivals for the first five months of 2018 have increased marginally (+2%) vs. the previous period (Source: Myanmar's Ministry of Hotels and Tourism), arrivals from Asian tourists have been on the rise (+13%) thanks to sustained increases from China (+32%) and Thailand (+19%).

· Management maintains a positive stance on the long-term prospects of the Myanmar tourism sector and is pursuing expansion opportunities in both established tourist hubs (e.g. Yangon and Ngapali) and upcoming destinations (e.g. Hpa'An and Ngwe Saung).

New Business Development

· As demonstrated by the post period events listed below, MSH continues to develop its business network and expand its pipeline within both existing sectors (e.g. Hospitality and Education) and new sectors (e.g. Technology and Services).

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

Post Period End Events

Acquisition of EXERA, a leading safety and security services provider in Myanmar

· On 26 May 2018, the Group's subsidiary Myanmar Strategic Services Pte. Ltd. exchanged contracts for the acquisition of the entire issued share capital of Exera Myanmar Limited and Exera Journey Management Limited (together "EXERA"), one of Myanmar's leading safety and security services providers by number of guards, for a consideration of US$2.2 million ("EXERA Acquisition"). The acquisition completed in May 2018.

· EXERA is an internationally managed provider of security and risk management services, operating exclusively in Myanmar. Through its experienced workforce of ca. 1,000 guards, EXERA provides guarding, protective services, transportation, training, and risk consulting, to a wide range of international and local clients nationwide. Its customer base includes multi-national corporations, large oil and gas companies, established local businesses and governmental bodies and international organisations such as WFP, UNHCR, UNICEF and the EU.

· Additional details have been provided within the Operational Review.

Strategic Joint Venture with Auston Institute of Management for the opening of a private school in Yangon

· On 6 April 2018, MSH formed a joint venture (the "JV") with Auston Institute of Management ("Auston"), an operator of private schools in Singapore and Sri Lanka that prepares students for careers in Engineering, IT Technology and Project Management through higher education learning. Under the joint venture, MSH and Auston will set-up and operate a private school in Yangon.

· As part of the agreement, entered into on 6 April 2018, MSH will provide the required funding (estimated to be in the region of US$500,000) for the first private educational institution, while Auston will contribute the industry knowledge, curriculum and management capabilities.

· Following the initial capital contribution, MSH will hold a 70% stake in the JV with the remaining 30% being held by Auston.

· Additional details have been provided within the Operational Review.

Strategic Minority Investment in NEXLABS, one of Myanmar's fastest growing digital consulting companies

· On 21 May 2018, MSH agreed to make a strategic minority investment worth a total of US$150,000 in NEXLABS.

· Founded in 2013 in Yangon by Ye Myat Min, one of Forbes Asia's 30 under 30 in 2016. Currently employing over 80 experienced professionals, NEXLABS is one of Myanmar's leading digital consulting firms.

Share issuance program and issuance of 153,500 shares at a price of US$20 per share

· On 7 June 2018, 153,500 new ordinary shares were admitted to trading, pursuant to the Company's announced subscription to raise US$3.07 million.

Partnership with MCTA:RVi academy Mandalay to provide English language training

· On 20 July 2018, MSH announced a partnership with MCTA:RVi Academy Mandalay to provide English language training within the premises of MCTA's Mandalay campus.

· Under the agreement, MSH will receive a management fee linked to the operating performance of the operations managed by MSH under the partnership with MCTA. The cost of setting up and operating the centre will be entirely absorbed by MSH.

Myanmar Macroeconomic Highlights

· Robust economic growth despite unrest in relation to the conflicts in Rakhine State, of which the Company is acutely aware. Estimated average annual GDP growth rate of ca. 7% in 2018-2019 (Source: Asian Development Bank).

· Continued significant interest from regional strategic players as demonstrated, for example, by the buyout of 75% of Myanmar Distillery Co., the producer of whisky Grand Royal, and its supply chain by Thai Bev for US$742 million in October 2017.

· The New Myanmar Companies Law was approved in November 2017 which, among a number of positive changes, will allow foreign investor participation in local companies of up to 35%. The new legislation will be implemented in August 2018.

· Further liberalisation of retail trading regulation. In May 2018, the Myanmar Ministry of Commerce issued a notification allowing wholly foreign-owned companies and joint ventures with foreign shareholdings to engage in retail and wholesale trading in Myanmar, subject to compliance with certain minimum investment criteria and various restrictions.

· Expected simplification of tax regulations as demonstrated by the abolishment of the local 2% withholding tax obligations in July 2018.

· Appointment of U Soe Win, former managing partner of Deloitte Myanmar, as the new Finance Minister of Myanmar in June 2018.

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

"I am pleased to announce our maiden full year results since our successful IPO and admission to the Main Market of the London Stock Exchange."

"The results clearly highlight the substantial progress the Group has made in developing the scale and breadth of its Myanmar-focused businesses. During the financial year ended 31 March 2018 and in the subsequent months, we completed a number of transformative transactions and investments and announced further developments within our existing businesses as well as expansion into new sectors. The progress made has further strengthened our position in this exciting economy and bolstered our ability to act as a developer, manager and consolidator in Myanmar's consumer sector."

"We are confident that our growth strategy, focusing on opportunities for expansion in sectors addressing the consumer's primary needs, will not only provide value to our shareholders but also clearly benefit the local Myanmar economy and business environment."

CHAIRMAN'S STATEMENT

Strategy

Myanmar Strategic Holdings's vision is to become the leading developer and manager of consumer businesses in Myanmar while maintaining an asset light strategy.

Since the Company's inception, our focus has been on building committed and experienced management teams capable of starting and growing businesses, while benefiting from the tailwinds of a positive macroeconomic environment. I am very pleased to report that all the businesses we manage are now past the initial start-up phase and are growing at a rapid pace. We are confident that this growth will continue, both organically and through potential acquisitions.

Focused diversification is and will remain at the core of our strategy as it allows MSH to stabilise its expected growth while at the same time capitalising on the opportunities currently available in Myanmar's dynamic economy. In line with this strategy, in May 2018 MSH concluded the acquisition of EXERA, one of Myanmar's leading providers of security and risk management services.

Board's responsibility

The Board is fully aware of the responsibility that it carries in ensuring that all of our businesses operate in a manner that reflects our corporate and social responsibility to all of our stakeholders. We target sectors that positively contribute to the overall development of Myanmar and within these sectors we aim to build businesses that embody the best-in-class terms of business, environmental, social and governance practices.

The Board and the Group's management actively promote sustainability and diversity as we believe it is a core strategic advantage that will enable the Group to maintain its leading competitive position going forward. Equal opportunities are promoted across the Group and we are proud to report that female representation across our workforce already exceeds 50%. Adequate training programs are being established across the Group to foster an environment where talent can emerge and flourish.

We are committed to enhancing our sustainability reporting starting from the next financial year.

Outlook

In the financial year ended 31 March 2018 MSH strengthened the foundations of its businesses within Education and Hospitality by scaling up operations and hiring key personnel including experienced divisional CEOs.

The next twelve months will be dedicated to growing the Company's businesses within the existing sectors and successfully integrating its first acquisition, EXERA.

In the following years, as Myanmar's economy develops further, management will increasingly focus on businesses targeting the population's primary needs such as education, security and healthcare.

While we are acutely aware of the tragic events in Rakhine, we continue to maintain an optimistic stance on Myanmar's economic prospects and we aim to contribute to its positive development as a responsible investor in the region.

The Board wants to thank our shareholders, for their continued support and encouragement, and our staff and partners, for their relentless commitment and effort.

Given the strong foundations built by the team over the years, I am very confident that Myanmar Strategic Holdings is best positioned to capture and leverage an amazing opportunity in Myanmar.

RICHARD GREER

Non-Executive Chairman

25 July 2018

OPERATIONAL REVIEW

Hospitality Division

The Group's objective is to become a leading independent hospitality operator in Myanmar by initially focusing on boutique hostels and expanding into other categories as new opportunities are identified.

The Group generates revenues through management fees, technical assistance fees, royalty fees and other one-off fees ("Fees to the Group") from the operations it manages. These fees are variable in nature and typically linked to the operating performance and, ultimately, revenue generation of the underlying managed operations (hereby reported as "Underlying Revenues").

During the financial period the Group signed up a fourth boutique hostel, the second in New Bagan. The property re-opened as Ostello Bello Bagan Pool in November 2017, featuring 58 beds across 13 rooms with en-suite bathrooms. Following the opening of this fourth hostel, the Group now manages 474 beds over 108 rooms in four hostels across three of the most popular tourist destinations in Myanmar.

The four hostels under management generated underlying revenues of US$1.7 million (2017: US$1.2 million) and Fees to the Group of US$180,000 (2017: US$227,000) for the financial year ended 31 March 2018. In line with the previous year all the Fees to the Group for the Hospitality division were generated by Ostello Bello Bagan as the other three properties were still in a start-up phase. The US$47,000 decline in the fees generated by Ostello Bello Bagan was due, primarily, to a contraction in its underlying revenues by ca. US$131,400 (-15% vs. the previous financial year) which was partially offset by a range of cost control initiatives and operational synergies.

The properties sold 84,824 beds (2017: 51,154) generating a revenue per bed of US$19.8 (2017: US$24.2). While there was limited impact to revenues in the six months to 30 September 2017, the properties experienced a more sustained decline in both occupancy rates and prices per bed in the six months to 31 March 2018. This decline, linked to an overall slowdown in Myanmar's tourism market, was partially offset by the increase in ancillary products, such as travel and tours, sold to guests.

While international visitor arrivals for the first five months of 2018 have shown moderate growth (+2%), arrivals from Western Europe and North America have declined significantly (Source: Myanmar's Ministry of Hotel and Tourism), respectively -26% and -14%. This trend is expected reverse in 2018-2019 as the unrest in Rakhine State moves towards a long- term resolution and has been partially offset by an increase in Asian visitor arrivals (+13%).

The Group intends to expand its boutique hostel model across Myanmar focusing on core locations (such as Bagan, Mandalay and Inle Lake/Nyaung Shwe) and secondary locations (Hpa-An, Hsipaw, Pyin Oo Lwin, Mrauk-U, Nat Ma Taung and Ngwe Saung). Management is in advanced negotiations in order to add new locations for the current financial year.

Education division

The Group's objective is to become one of the leading private operators of educational institutions in Myanmar through the identification and expansion of opportunities in the sector, focusing initially on English language learning.

The Group generates revenues through management fees, technical assistance fees, royalty fees and other one-off fees ("Fees to the Group") from the operations it manages. These fees are variable in nature and typically linked to the operating performance and, ultimately, the revenue generation of the underlying managed operations (hereby reported as "Underlying Revenues").

During the period the Group's Education division managed two English language centres under the well-established Wall Street English brand. As at 31 March 2018, total active students amounted to ca.1,100.

The flagship Wall Street English centre opened in Yangon at Junction Square Shopping Centre in February 2017 and spans five floors over 800 sqm. The second Wall Street English centre opened in Yangon at City Mall St. John in December 2017 and is located on an open floor of ca. 600 sqm.

The establishment of the Groups' third Wall Street English centre was confirmed and announced in April 2018 and is due to open in August 2018. The centre will span 350 square metres and will be located in the popular Myanmar Plaza mall in Yangon.

Finally, pursuant to a strategic partnership with MCTA:RVi Academy Mandalay announced in July 2018, WSE has agreed to provide English language training within the premises of MCTA's Mandalay campus.

Over the financial year ended 31 March 2018, the Wall Street English business generated contracted sales (being the volume sold) of US$2.4 million (2017: US$265,000), underlying revenues of US$1.5 million (2017: US$33,000) and fees and royalties to the Group of US$611,870 (2017: US$93,074).

From an operational perspective, we are proud to report that Myanmar currently ranks as one of the top countries in the Wall Street English network in terms of student progress: student satisfaction is key to establishing Wall Street English as the leading English language education provider in Myanmar.

Management is in the process of assessing further growth opportunities for Wall Street English business in order to meet the average development targets stated under the area development agreement with Pearson of approximately one new centre per year up to a total of ten centres.

Further sub-franchising opportunities in Myanmar will be evaluated in due course.

Post period events

In April 2018, MSH formed a strategic joint venture ("JV") with Auston Institute of Management ("Auston"), an operator of private schools in Singapore and Sri Lanka that prepares students for careers in Engineering, IT Technology and Project Management through higher education learning. Under the JV, MSH and Auston agreed to establish and operate a private school in Yangon.

As part of the agreement, MSH will provide the required funding (estimated to be in the region of US$500,000) for the first private educational institution, while Auston will contribute the industry knowledge, curriculum and management capabilities. Following the initial capital contribution, MSH holds a 70% stake in the incorporated joint ventures, MS Auston Pte. Ltd., with the remaining 30% being held by Auston.

The institution, named Auston College Myanmar is located in the Junction Square Shopping Centre complex, in close proximity to the Company's flagship Wall Street English centre and spans over 700 square metres. The school commenced operations in May 2018 and has welcomed its first students to the foundation program in July 2018. At run-rate, management expects to serve up to 400 students.

New business development

The New Business Development division analyses, develops and seeks to incubate new projects across the consumer sector in Myanmar.

Since incorporation the Group has evaluated a large number of projects sponsored both by domestic and foreign entrepreneurs in a wide range of sectors including, among others, services, retail, healthcare, telecoms and renewable energy.

The Group will continue to pursue an asset light strategy and focus predominantly on addressing the population's primary needs in sectors such as security and healthcare.

The Group will carefully evaluate potential minority investments, should the appropriate strategic opportunities arise, as demonstrated by the acquisition of a strategic minority in NEXLABS.

The following transactions were finalised in May 2018, post period end:

Strategic Minority Investment in NEXLABS, one of Myanmar's fast growing digital consulting firms

· On 21 May 2018, MSH agreed to make a strategic minority investment in digital consulting firm, NEXLABS, to a value of US$150,000.

· Founded in 2013 in Yangon by Ye Myat Min, one of Forbes Asia's 30 under 30 in 2016. Currently employing over 80 experienced professionals, NEXLABS is a leading digital consulting firm based in Myanmar. NEXLABS helps international companies customise their service to the local market, assists local businesses to understand how they could be adopting digital technology to grow more efficiently and works collaboratively with entrepreneurs to build new digital business models and products.

· The services offered by NEXLABS include developing websites and applications, creating bespoke solutions, managing brand identity and social media as well as analyzing customer insights. Its customers include Yoma Bank, Singapore Tourism Board, Wave Money, City Mart Holdings, Wall Street English, Total, the European Union delegation and other local and international enterprises.

Acquisition of EXERA, a leading provider of security and risk management services in Myanmar

· On 26 May 2018, MSH's subsidiary Myanmar Strategic Services Pte. Ltd. exchanged contracts for the acquisition of the entire issued share capital of EXERA (comprised of Exera Myanmar Limited and Exera Journey Management Limited (together "EXERA")), one of Myanmar's leading safety and security services providers by number of guards, for a consideration of US$2.2 million ("EXERA Acquisition").

· The consideration for the EXERA Acquisition has been satisfied through: (i) the payment of US$2.0 million in cash on completion funded from the Group's existing cash resources; and (ii) the issue of 7,408 new ordinary shares in the Company at a price of US$27 per share (the "Consideration Shares"), representing approximately US$0.2 million. The acquisition was completed in May 2018.

· EXERA is an internationally managed safety and security services provider operating exclusively in Myanmar. Through its experienced workforce of ca. 1,000 guards, EXERA provides guarding, protective services, transportation, training, and risk consulting, to a wide range of international and local clients nationwide.

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

· EXERA's continuous commitment to operational excellence is backed by several international process standards such as ISO 9001, OHSAS 18000, and ISO 14000.

SUSTAINABILITY AND DIVERSITY

Diversity

Maintaining diversity at all levels is pivotal to the Group's success. Myanmar Strategic Holdings believes that an inclusive, service-oriented culture is fundamental to attracting and retaining skilled and talented people, generate long-term value to its shareholders and make lasting and meaningful contributions to the surrounding communities.

As at 31 March 2018, the Group directly and indirectly employed approx. 250 full- time employees ("FTEs") (incl. 230 FTEs employed within the businesses under management) with 16 nationalities. Female representation exceeded 50% of the total workforce, a remarkable achievement for a market at this stage of development.

With regards to gender pay, we believe that men and women with similar roles and similar responsibilities should be paid equally. At this stage we are not aware of any gap between the pay of male and female employees.

While the representation of female employees in senior management roles is already significant, Myanmar Strategic Holdings remains committed to increase participation of women in senior roles by developing specific training and talent programmes in line with the organisation's size and stage.

Environment

Myanmar Strategic Holdings is very aware of the environment it operates in. Its managed Hospitality operations are spread across Bagan, Nyaung Shwe and Mandalay, some of the country's most beautiful and untarnished touristic sights.

The preservation of the natural environment and respect for the local community is key to the Group's long- term sustainability. In its operations, MSH seeks to have as low an impact on its surroundings as possible, limiting the use of plastic and sorting waste. During the course of 2018, Ostello Bello substituted plastic water bottles with water jars and joined the "No Straw" and "Bring your own bottle" campaigns. Furthermore, MSH's staff frequently participate in local litter collection initiatives such as "Trash hero" in Mandalay and environmental workshops in Bagan.

MSH will seek to introduce similar initiatives across the Group during the course of the next financial year. Our ultimate objectives are to reduce overall plastic usage and eradicate single-use plastics.

Community

In addition to reducing its environmental footprint, the Group remains also committed to contributing to the development of Myanmar's society. MSH works closely with village leaders to support the communities in which it operates and has sponsored multiple activities benefiting the local communities including, among others, health and safety trainings such as the Red Cross' first aid training.

Ostello Bello often partners with leading international NGOs to promote sustainable development. For example, all Ostello Bello locations offer MBoutik souvenirs manufactured by independent women producers in villages across Myanmar.

MBoutik is a social enterprise initiative of Action Aid Myanmar, whereby women were trained in artisan crafts of weaving, tailoring, jewelry making and rattan, with the ultimate objective of promoting women's and local communities' development.

Through its Wall Street English language centers, MSH is also contributing to accelerating capacity building through the provision of English language courses. A partnership with the Directorate of Investment and Corporate Administration to train ten of its senior officials was announced in July 2018.

MSH's management and its Board are committed to enhance sustainability reporting starting from the next financial year.

Summary

2018 has been a transformational year for Myanmar Strategic Holdings. As expected, the listing on the London Stock Exchange in August 2017 accelerated the execution of our growth strategy, both within existing sectors (i.e. Hospitality and Education) as well as into exciting new sectors (i.e. Security and Technology).

As the Myanmar economy continues to grow at an estimated rate of 7% per year, MSH will increasingly target the population's primary needs such as education, security and, potentially, healthcare.

MSH will continue to establish high quality brands and operations in Myanmar, build on these foundations and further consolidate each sector. While expanding, management will implement cost control initiatives and identify synergies to enhance the Group's profitability going forward.

Enrico Cesenni

Chief Executive Officer

25 July 2018

FINANCIAL REVIEW

The fees generated by the Group in relation to the businesses under management grew to US$791,870 for the financial year ended 31 March 2018 (a 140% increase over the previous period). The six fold increase in the fees generated by Wall Street English offset the 21% decline in the fees generated by Ostello Bello Bagan.

The Group reduced its EBITDA losses to US$1.5 million for the financial year ended 31 March 2018 vs. US$1.9 million for the previous period.

Net loss amounted to US$2.1 million for the financial year ended 31 March 2018 vs. US$2.4 million for the previous period.

Results of operations

The Group recorded an EBITDA loss of ca. US$1.5 million for the financial year ended 31 March 2018 (vs. US$1.9 million for the previous financial year). The sustained growth in revenues (+140% vs. the previous year) contributed to balance higher employee benefit expenses (+145% vs. the previous year) linked to the recruitment of divisional CEOs and the scale-up of central functions such as Group finance. It is worth noting that share-based compensation expenses represented ca. 15% of the Group's employee benefit expenses.

Cost initiatives were introduced across the Group, contributing to a significant decrease in other expenses, particularly rents, travelling expenses and professional fees.

Direct and indirect Full Time Employees ("FTEs") increased to ca. 250 (171 as at 31 March 2017 and 69 as at 31 March 2016), including ca. 230 FTEs employed within the operations under management. The growth was primarily due to the expansion of the head office and new operations under management, namely Ostello Bello Bagan Pool and Wall Street English City Mall.

During the period the Company completed its initial public offering on the Main Market of the London Stock Exchange. The Company raised US$0.4 million in addition to the US$3.8 million raised through mandatory convertible bonds in March 2017 and July 2017. The expenses pursuant to the listing application recognised in the financial year amounted to ca. US$361,000 (vs. ca. US$429,000 in the previous period).

A share issuance programme of up to 400,000 new ordinary shares at a minimum price of US$20 per share over a period of twelve months was announced on 19 March 2018. 50,000 new ordinary shares were issued on 26 March 2018 at a price of US$20 per share, resulting in a subscription of US$1,000,000.

In line with the Group's dividend policy, the Board is not declaring the payment of a dividend.

The operating businesses managed by the Group generated revenues ("Underlying Revenues") of US$3.2 million for the financial year ended 31 March 2018 (2017: US$1.4 million), an increase of ca. 130% YOY. The growth of the existing businesses (three boutique hostels and one English language centre) was further enhanced by (i) the opening of Ostello Bello Bagan Pool in November 2017 and (ii) the opening of a second Wall Street English centre in December 2017.

The operating businesses managed by the Group generated Fees to the Group of US$791,870 in the financial year ended 31 March 2018 (140% increase vs. the previous financial year). The Fees to the Group comprised of US$611,870 fees generated by Wall Street English and US$180,000 generated by Ostello Bello Bagan. No fees were generated by the other hostels as they are still in a start-up phase and their growth has not been as fast as Ostello Bello Bagan due to the weaker tourism market.

The operations under management for the financial year ended 31 March 2017 included two Indian restaurants. These Food and Beverage activities were discontinued in March 2017 as they were not generating the targeted Fees to the Group and were deemed by management to be non-core.

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.

With regards to the Group's financing activities, the Group's principal sources of liquidity in the financial year ended 31 March 2018 have been (i) the issuance of ordinary shares, (ii) the issuance of convertible bonds and (iii) the cash generated by the managed businesses.

During the period, the net reduction in cash and cash equivalents was US$1,092,845. This negative trend was mainly due the negative operating cash flow and the continued investments in the managed operations as demonstrated by the increase in advances to related parties and third parties for the build-up of the second Wall Street English centre and Ostello Bello Bagan Pool.

Outlook

The Company's ambition is to become the leading developer and manager of consumer businesses in Myanmar.

In line with this vision, management is looking at opportunities to grow the Group through both organic and acquisitive means, in sectors which target the population's primary needs. The Group will continue to pursue an asset light strategy and increase the portfolio of businesses under management.

As the scale the operations under management grows, the Group may decreasingly rely on external financing and instead finance its organic growth through the Fees to the Group generated by the managed operations.

Management will also continue to build and upskill the relevant human resources to sustain and accelerate the Group's growth. Operational and financial sustainability are key strategic priorities communicated at all levels within the organisation.

Notwithstanding the recent political and economic turmoil, the Board and management continue to remain positive on the overall macroeconomic environment underpinning the broader investment opportunity.

Dennis Yeo

Chief Financial Officer

25 July 2018

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018

GENERAL

Myanmar Strategic Holdings Limited (the "Company") (Registration Number 201302159D) is a public company limited by shares incorporated and domiciled in Singapore with its principal place of business and registered office 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 is investment and trading in Myanmar related 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. The ultimate controlling party is Enrico Cesenni.

SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PREPARATION

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.

In the current financial year, the Group has adopted all the new and revised IFRS that are relevant to its operations and effective for the current financial year. 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 years.

IAS 7 (AMENDMENTS) DISCLOSURE INITIATIVE

The amendments require additional disclosures to enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

The Group adopted these amendments on 1 April 2017 and the additional disclosures have been included in the statement of cash flows.

IFRS and IFRIC issued but not yet effective

At the date of authorisation of these financial statements, the following IFRS and IFRIC of the IASB that may be relevant to the Group were issued but not yet effective and have not been adopted early in these financial statements:

Consequential amendments were also made to various standards as a result of these new or revised standards.

The management anticipates that, based on the Group's current operations, the adoption of the above IFRS and IFRIC in future periods will not have a material impact on the financial statements of the Group in the period of their initial adoption except as discussed below.

IFRS 9 FINANCIAL INSTRUMENTS

IFRS 9 supersedes IAS 39 Financial Instruments: Recognition and Measurement with new requirements for the classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting.

Classification and measurement

Under IFRS 9, financial assets are classified into financial assets measured at fair value or at amortised cost depending on the Group's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Fair value gains or losses will be recognised in profit or loss except for certain equity investments, for which the Group can elect to recognise the gains and losses in other comprehensive income. Debt instruments that meet the Solely Payments of Principal and Interest contractual cash flow characteristics test and where the Group is holding the debt instrument to both collect the contractual cash flows and to sell the financial assets can also be measured at fair value through other comprehensive income.

IFRS 9 carries forward the recognition, classification and measurement requirements for financial liabilities from IAS 39, except for financial liabilities that are designated at fair value through profit or loss, where the amount of change in fair value attributable to change in credit risk of that liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, IFRS 9 retains the requirements in IAS 39 for de-recognition of financial assets and financial liabilities.

The Group has completed its preliminary assessment of the classification and measurement of its financial assets and financial liabilities and does not expect any significant changes to the classification and measurement of its financial assets and liabilities currently measured at amortised cost.

Impairment

IFRS 9 introduces a new forward-looking impairment model based on expected credit losses to replace the incurred loss model in IAS 39. This determines the recognition of impairment provisions as well as interest revenue. For financial assets at amortised cost or debt instruments at fair value through other comprehensive income, the Group will now always recognise (at a minimum) 12 months of expected losses in profit or loss. Lifetime expected losses will be recognised on these assets when there is a significant increase in credit risk after initial recognition under the three-stage model or from initial recognition if the simplified model is applied.

The new impairment requirements are expected to result in changes to and likely increases in impairment loss allowances on trade and other receivables, due to earlier recognition of credit losses. The Group expects to adopt the simplified model for its trade receivables and will record an allowance for lifetime expected losses from initial recognition. For other receivables due from third parties and related parties, the Group will initially provide for 12 months expected losses under the three-stage model.

The Group is currently finalising the policies and procedures in determining how to estimate expected credit losses and the sources of forward-looking data, and evaluating the tax implications arising from the above change in impairment model.

Transition

The Group plans to adopt IFRS 9 in the financial year beginning on 1 April 2018 with retrospective effect in accordance with the transitional provisions and intends to elect not to restate comparatives for the previous financial year and will include additional disclosures in its financial statements in the year when IFRS 9 is adopted.

IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS

IFRS 15 introduces a comprehensive model that applies to revenue from contracts with customers and supersedes all existing revenue recognition requirements under IFRS. The model features a five-step analysis to determine whether, how much and when revenue is recognised, and two approaches for recognising revenue: at a point in time or over time. The core principle is that an entity recognises revenue when control over promised goods or services is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 also introduces extensive qualitative and quantitative disclosure requirements which aim to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

On initial adoption of this standard, the Group has preliminarily assessed that there will be no significant impact on the timing and pattern on the revenue recognition.

The Group plans to adopt IFRS 15 in the financial year beginning 1 April 2018 with full or cumulative retrospective effect in accordance with transitional provisions and will include the required additional disclosures in its financial statements for that financial year.

The Group's interim accounts for the 6 months ended 30 September 2018 will be prepared in accordance with IFRS 9 and IFRS 15.

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.

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.

REVENUE RECOGNITION

Revenue is measured at the fair value of the consideration received or receivable. Revenue is presented net of discounts, other similar allowances and sales related taxes.

Management fees

Management fees earned from hostels and language centres managed by the Group, usually under long-term contracts with the hostel and language centre owners, are recognised when services are rendered with reference to the terms of the contracts. The fees are incentive fees, which are based on the hostels' and language centres' profitability.

Technical support service fees

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

Royalty fee

Royalty fee income is recognised 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.

EMPLOYEE BENEFITS

Retirement benefit costs

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state- managed retirement benefit schemes, such as the Singapore Central Provident Fund and Myanmar Social Security Benefit, are dealt with as payments to defined contribution plans where the Group's obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

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

The Group issues equity-settled share-based payments to certain employees.

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.

Fair value is measured using the Black-Scholes pricing model.

The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

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 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 year 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 TRANSLATION

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. Non- monetary 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.

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 calculated using the straight-line method to allocate the depreciable amounts of the assets over their estimated useful lives as follows:

The carrying values of plant 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 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

Computer software licence

Acquired computer software licence is initially capitalised 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 recognised as an expense as incurred.

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

Area development fees

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

The area development fees 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 and financial liabilities are recognised on the statements of financial position when the Group becomes a party to the contractual provisions of the instrument.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial instrument and allocating the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period, to the net carrying amount of the financial instrument.

Financial assets

All financial assets are initially recognised at fair value, plus transaction costs which are initially recognised at fair value.

The Group classifies its financial assets as loans and receivables. The classification depends on the nature and purpose for which these financial assets were acquired and is determined at the time of initial recognition.

Loans and receivables

Non-derivative financial assets which have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost, using the effective interest method, less impairment. Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

The Group's loans and receivables in the statements of financial position comprise trade and other receivables (excluding prepayments and advances for hostel operations) and cash and cash equivalents.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each financial year. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the investment have been impacted.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amounts of all financial assets are reduced by the impairment loss directly with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

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 loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the financial assets at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Derecognition 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.

On derecognition, any difference between the carrying amount and the sum of proceeds received and amounts previously recognised in other comprehensive income is recognised in profit or loss.

FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS

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

The Group classified its financial liabilities as other financial liabilities.

OTHER FINANCIAL LIABILITIES

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, with interest expense recognised on an effective yield basis.

Convertible bonds

Convertible bonds with conversion option are accounted for as financial liability with an embedded equity conversion derivative based on the terms of the contract. On issuance of convertible bonds, the embedded option is recognised at its fair value as derivative liability with subsequent changes in fair value recognised in profit or loss. The remainder of the proceeds is allocated to the liability component that is carried at amortised cost until the liability is extinguished on conversion or redemption. When an equity conversion option is exercised, the carrying amounts of the liability component and the equity conversion option are derecognised with a corresponding recognition of share capital.

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 in the statement of financial position comprise of cash on hand, cash at bank and demand deposits which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

LEASES

Operating leases

Rentals payable under operating leases (net of any incentives received from lessors) are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

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.

Changes in the estimated timing or amount of the expenditure or discount rate are recognised in profit or loss when the changes arise.

SEGMENT REPORTING

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group Chief Executive Officer who makes strategic decisions.

LOSS PER SHARE

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

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