A New Horizon .. . on gre en fields
A N N U A L R E P O R T 2 0 1 4
Zicom Group Limited
ABN 62 009 816 871 • ASX Code : ZGL
A New Horizon
from
green field investments
driven by
continuous innovations
disruptive technologies
open innovative culture
supported by
strong foundation businesses
strong financial position
strong engineering capabilities
network of clinical partnerships
outreach to global markets
Chairman’s Message
Dear Shareholders
The Group has hit an inflection point. Structural changes are necessary
to maintain the annual profit record in the last 10 years and to drive
sustainable future growth.
Impact from a convergence of factors has been felt in the Group’s
recent results. Profit growth faces tough challenges even when
total revenue continues to be maintained at healthy level due to
cost pressures and maturity of markets. Restructuring costs mainly
comprising gestation costs in technology development has further
compounded the situation.
INVESTING FOR THE FUTURE
Your Board views the restructuring costs as an investment into the
future. Growth in the dynamic global economy has been and will
continue to be driven by technology that enables high value-added
activities. Healthcare driven by a global aging population and fast
growing wealth in nations that were once laggards has potentials for
explosive growth. With its experiences in engineering and contract
manufacturing of medical devices, the Group is well placed to foray
into this sector. The Board has been very judicious in the Group’s
investments in technology and has so far only employed internal
resources to invest with no bank borrowings.
With this award, the Singapore government’s agency will co-invest
with the Group in growth stage medical technology start-ups. Each
party commits to a maximum investment amount of S$15m making
an available investment pool of S$30m. The Group is given options
to buy out the co-investors at cost plus nominal compound interest.
The Group has meanwhile forged partnerships with international
medtech accredited testing houses and overseas market development
experts.
A full eco-system from seed funding, mentoring, support
in
engineering, strategic planning, financial management to growth
stage funding and global commercialisation efforts has now been
built within the Group, as a capability to develop and grow technology
start-ups.
Segmental Revenue
CREATING A NEW HORIZON
A new horizon from green field investments has been created.
Our present investments in technologies generally de-risk, as the
technologies are successfully validated and relevant regulatory
approvals obtained. Opportunities to unlock value are emerging.
Return on Equity
Year Chart
CONTINUOUS INNOVATION TO STAY AHEAD
The Group’s capacity to invest in new technologies and develop a new
horizon is underscored by the continuing profitability of its foundation
businesses. The Group will therefore continue to innovate, develop
and expand its foundation businesses to stay ahead, while focusing to
develop and expand on new technologies.
APPRECIATION
I look forward to the new horizon enhancing shareholders’ value as a
return for shareholders’ support. I take this opportunity to thank my
management and employees in aligning their vision with the Board
and in diligently supporting its directions. I am grateful to my Board
members for their contributions.
ECO-SYSTEM FOR TECHNOLOGY INVESTMENTS
An innovative culture has now been developed in the Group. This
culture is permeating. To strengthen its journey ahead, the Group
last year won S$4.5m grant from a Singapore government agency
responsible for development of small and medium enterprises to
develop a medical technology translation business. The Group’s wholly
owned subsidiary, Zicom MedTacc Private Limited, has also been
awarded a private sector accelerator status in medtech technologies.
G L Sim
Chairman
1
ANNUAL REPORT 2014 Directors and Company Secretaries
Executive Directors
GIOK LAK SIM, FCPA
Chairman and Group Managing Director,
Age 68
KOK HWEE SIM, BSc, MSc
Executive Director, Age 36
KOK YEW SIM, BSc
Executive Director, Age 34
Experience and Expertise
Experience and expertise
Experience and expertise
Appointed to the Board on 5 April 1995.
Chairman and Managing Director of
Zicom Group Limited and Executive
Chairman of all its subsidiaries.
Experienced in public accounting,
corporate development, financial and
industrial management as well as
international trade.
Member of Strategic Advisory Panel,
Diagnostics Development Hub.
Member of Growth Oriented Enterprise
Advisory Panel, SPRING Singapore
Member of Incubator Advisory Board,
Singapore National Eye Centre
Singapore Ernst & Young Entrepreneur
of the Year (Industrial Products), 2008.
Appointed to the Board on 21 November
2007. As Executive Director of the
Group, his responsibilities include
human resource development, business
process improvements, restructuring
and acquisitions and treasury
management. On 1 September 2013,
Mr Sim was appointed Managing
Director of iPtec Pte Ltd, a wholly owned
subsidiary, principally engaged in
medical technology translation services.
He is also the Managing Director
of Zicom MedTacc Private Limited,
the medtech technology accelerator
investment company. Mr Sim graduated
with a Bachelor’s degree in Industrial
Engineering and Operations Research
from the University of Michigan with
Honours (Magna Cum Laude) and a
Master’s degree in Financial Engineering
from Columbia University, New York.
Mr Kok Hwee Sim is the eldest son of
the Chairman and Managing Director,
Mr G L Sim and director of substantial
shareholder, SNS Holdings Pte Ltd.
First appointed to the board as Alternate
Director to Mr Kok Hwee Sim on 5 July
2010 and made an Executive Director on
25 September 2014. Mr Sim is a Director
and Chief Executive Officer of Sys-Mac
Automation Engineering Pte Ltd (Sys-
Mac) and is responsible for Sys-Mac’s
growth strategies, overall administration
and management of its business and
operations. He is also a director of
iPtec Pte Ltd, the medtech translation
subsidiary, and Zicom MedTacc Private
Limited, the medtech technology
accelerator investment company. Mr Sim
will be instrumental in building the
Group’s capabilities to support medical
technologies. Mr Sim graduated with
a Bachelor’s degree in Electrical and
Electronics Engineering from the
University of Michigan with Honours
(Summa Cum Laude). He is the second
son of the Chairman and Managing
Director, Mr G L Sim and director of
substantial shareholder, SNS Holdings
Pte Ltd.
Other current directorships and former
directorships in last 3 years
Other current directorships and former
directorships in last 3 years
Other current directorships and former
directorships in last 3 years
Board member of SPRING Singapore
None
– appointed on 1 April 2014
None
Special responsibilities
Member of Nomination and
Remuneration Committee
Executive Chairman of all subsidiaries
Chairman of Curiox Biosystems Pte Ltd
Special responsibilities
Executive Director of Zicom Holdings
Pte Ltd and Director of its subsidiaries
Director of Curiox Biosystems Pte Ltd
Managing Director of iPtec Pte Ltd
Managing Director of Zicom MedTacc
Private Limited
Special responsibilities
Executive Director
in Zicom Holdings Pte Ltd
Director of Sys-Mac Automation
Engineering Pte Ltd and its subsidiaries
Director of Biobot Surgical Pte Ltd
Director of Zicom MedTacc Private Limited
Relevant interests in shares and options
as at date of signing the Directors’ Report
Relevant interests in shares and options
as at date of signing the Directors’ Report
Relevant interests in shares and options as
at date of signing the Directors’ Report
77,474,368 ordinary shares
1,258,180 ordinary shares and 280,000
options
1,070,253 ordinary shares and 280,000
options
2
ZICOM GROUP LIMITED Independent Directors
From left to right: Ian Robert Millard, Yian Poh Lim, Shaw Pao Sze, Frank Leong Yee Yew
IAN ROBERT MILLARD, FCA,
FAICD
Independent Director, Age 75
Experience and expertise
Appointed to the Board
on 23 November 2006.
Extensive experience in public
accounting and corporate
secretarial work. Fellow of
the Institute of Chartered
Accountants with 30 years as
a partner in major accounting
firms in Queensland and
a Fellow of the Australian
Institute of Company
Directors.
Other current directorships
and former directorships in
last 3 years
None
Special responsibilities
Chairman of Audit Committee
YIAN POH LIM, BSc, MSc
Independent Director, Age 68
SHAW PAO SZE
Independent Director, Age 70
Experience and expertise
Appointed to the Board on
19 February 2010. Mr Shaw
Pao Sze holds a Master
Foreign-Going Certificate
of Competency and has
extensive experiences in
maritime industry from
managing liner and ship
chartering services and
corporate planning in one of
the world’s largest shipping
lines and in consultancy
services for transport
engineering, maritime
and logistics planning for
infrastructure projects.
Other current directorships
and former directorships in
last 3 years
Synergy Metals Ltd (Australia)
– appointed 15 October 2010
FRANK LEONG YEE YEW,
MBA, FCA (ENGLAND &
WALES), FCA (SINGAPORE)
Independent Director, Age 71
Experience and expertise
Appointed to the Board
on 24 July 2006. Extensive
experience in auditing,
financial management and
corporate secretarial work,
having practised as a partner
in an audit firm and worked
as a company secretary,
finance manager and financial
controller in a leading property
development company and
involved in acquisitions and
major developments.
Other current directorships
and former directorships in
last 3 years
Independent Director of TTJ
Holdings Limited – appointed
11 January 2010
Special responsibilities
None
Special responsibilities
Member of Nomination and
Remuneration Committee
Member of Audit Committee
Non-executive Director of
Zicom Holdings Pte Ltd
Experience and expertise
Appointed to the Board on 24
July 2006. Yian Poh Lim has
more than 20 years of extensive
experience in the banking and
finance industry. In 1993, he
set up Yian Poh Associates,
a financial consultancy and
investment firm. He has been
an Honorary Commercial
Advisor to The Administrative
Committee of Jiaxing Economic
Development Zone, China since
2000. He is also a member
of the advisory panel of the
Singapore Food Manufacturers’
Association.
Other current directorships
and former directorships in
last 3 years
Independent Director of Casa
Holdings Limited
– appointed 4 November
2008
Independent Director of TTJ
Holdings Limited
– appointed 5 July 1996
Special responsibilities
Chairman of Nomination and
Remuneration Committee
Member of Audit Committee
Non-executive Director of
Zicom Holdings Pte Ltd
Relevant interests in shares
and options as at date of
signing the Directors’ Report
592,250 ordinary shares
Relevant interests in shares
and options as at date of
signing the Directors’ Report
488,000 ordinary shares
Relevant interests in shares
and options as at date of
signing the Directors’ Report
30,000 options
Relevant interests in shares
and options as at date of
signing the Directors’ Report
524,364 ordinary shares
3
ANNUAL REPORT 2014 Company Secretaries
SURENDRA KUMAR, CPA
Joint Company Secretary, Age 54
LIM BEE CHUN, JENNY, FCCA
Joint Company Secretary, Age 41
Experience and expertise
Experience and expertise
Mr Kumar is the Finance Manager of
Cesco Australia Limited and holds a
Bachelor’s degree in Commerce from
Auckland University and is a Certified
Practicing Accountant. He has had 30
years of experiences in auditing, industrial
and management accounting prior to
joining the Group in 2008.
Ms Jenny Lim has been the Group’s
Financial Controller since 2005. She is
a qualified accountant and a Fellow of
the Association of Chartered Certified
Accountants from the United Kingdom
since 1998. Ms Lim has over 10 years
of audit and tax experience in an
international public accounting firm prior
to joining the Group.
Other current directorships and former
directorships in last 3 years
Other current directorships and former
directorships in last 3 years
None
None
Special responsibilities
Special responsibilities
Director of Cesco Equipment Pty Limited
Company Secretary of Cesco Australia
Limited and Cesco Equipment
Pty Limited
Director of Zicom Pte Ltd
Company Secretary of Zicom Holdings
Pte Lte, Biobot Surgical Pte Ltd and
Curiox Biosystems Pte Ltd
Joint Company Secretary of all other
subsidiaries in Singapore except for
MTA-Sysmac Automation Pte Ltd
Relevant interests in shares and options
as at date of signing the Directors’ Report
Relevant interests in shares and options
as at date of signing the Directors’ Report
15,000 ordinary shares and 120,000
options
664,563 ordinary shares and 280,000
options
4
ZICOM GROUP LIMITED Corporate Chart
ZICOM GROUP LIMITED
ZICOM HOLDINGS PTE LTD
Singapore 100%
Investment Holding
CESCO AUSTRALIA LTD
Australia 100%
Concrete Mixers
HANGZHOU CESCO
MACHINERY CO LTD
China 100%
Concrete Mixers
ZICOM CESCO ENGINEERING
CO LTD
Thailand 100%
Concrete Mixers
ZICOM THAI HYDRAULICS
CO LTD
Thailand 100%
Hydraulics Systems
CESCO EQUIPMENT PTY LTD
Australia 100%
Engineered Products
ZICOM CESCO THAI CO LTD
Thailand 100%
Dormant
INVESTMENT HOLDING
COMPANY
CONSTRUCTION
EQUIPMENT
OFFSHORE MARINE,
OIL & GAS MACHINERY
PRECISION ENGINEERING &
TECHNOLOGIES
FOUNDATION ASSOCIATES
ENGINEERING PTE LTD
Singapore 100%
Foundation Equipment
FA GEOTECH EQUIPMENT
SDN BHD
Malaysia 100%
Foundation Equipment
ZICOM PTE LTD
Singapore 100%
Marine Deck Machinery
ZICOM EQUIPMENT PTE LTD
Singapore 100%
Oils & Gas Equipment
PT SYS-MAC INDONESIA
Indonesia 100%
Precision Engineering
SYS-MAC AUTOMATION
ENGINEERING PTE LTD
Singapore 100%
Precision Engineering & Automation
MTA-SYSMAC AUTOMATION
PTE LTD
Singapore 61%
Automation
ORION SYSTEMS INTEGRATION
PTE LTD
Singapore 84%
Semi-Conductor Equipment
INTEGRATED AUTOMATION
SYSTEMS PTE LTD
Singapore 100%
Dormant
BIOBOT SURGICAL PTE LTD
Singapore 92%
Medical Device
SAEDGE VISION SOLUTIONS
PTE LTD
Singapore 95%
Optic & Vision System Engineering
ZICOM MEDTACC
PRIVATE LIMITED
Singapore 100%
Medical Technology Accelerator
IPTEC PTE LTD
Singapore 100%
Medical Technology Translation
Services
ASSOCIATED COMPANY
Curiox Biosystems Pte Ltd
5
ANNUAL REPORT 2014 Key Management
Singapore
ZICOM PRIVATE LIMITED
JOINT MANAGING DIRECTORS
Juat Lim Sim
Hung Seah Tang
EXECUTIVE DIRECTORS
Kok Hwee Sim
Juat Khiang Sim
Hong Jun Zhang
Jenny Lim Bee Chun
ZICOM EQUIPMENT PTE LTD
MANAGING DIRECTOR
Rashed Choudhury
EXECUTIVE DIRECTOR
Khwaza Md Rezwanul
FOUNDATION ASSOCIATES ENGINEERING PTE LTD
MANAGING DIRECTOR
Jimmy Teoh Guan Hooi
EXECUTIVE DIRECTOR
Peck Hua Ng
SYS-MAC AUTOMATION ENGINEERING PTE LTD
MANAGING DIRECTOR
Juat Koon Sim
EXECUTIVE DIRECTORS
Kok Yew Sim - CEO
David Loh Chin Woon
Tony Low Boon Koon
MTA-SYSMAC AUTOMATION PTE LTD
MANAGING DIRECTOR
Juat Koon Sim
EXECUTIVE DIRECTORS
Kok Yew Sim - CEO
Tony Low Boon Koon
Bobby Owen Archer
Bryan Raymond Root
SAEDGE VISION SOLUTIONS PTE LTD
EXECUTIVE DIRECTORS
Kok Yew Sim - CEO
Bing Chiang Wong
ORION SYSTEMS INTEGRATION PTE LTD
EXECUTIVE DIRECTORS
Amlan Sen
Chin Guan Khaw
Siew Sarn Lau
BIOBOT SURGICAL PTE LTD
MANAGING DIRECTOR
Chew Loong Yap
IPTEC PTE LTD
MANAGING DIRECTOR
Kok Hwee Sim
EXECUTIVE DIRECTORS
Kok Yew Sim
Gary Lee Kim Hin
6
ZICOM MEDTACC PRIVATE LIMITED
MANAGING DIRECTOR
Kok Hwee Sim
EXECUTIVE DIRECTOR
Kok Yew Sim
Malaysia
FA GEOTECH EQUIPMENT SDN BHD
MANAGING DIRECTOR
Peck Hua Ng
EXECUTIVE DIRECTOR
Teck Meng Liew
Australia
CESCO AUSTRALIA LIMITED
MANAGING DIRECTOR
Gary Webster
CESCO EQUIPMENT PTY LTD
MANAGING DIRECTOR
Gary Webster
EXECUTIVE DIRECTORS
Surendra Kumar
Rick Pearce
Kenny Teh
Thailand
ZICOM CESCO ENGINEERING CO LTD
MANAGING DIRECTOR
Sammy Ng Siong Teck
DEPUTY MANAGING DIRECTOR
Saowaluke Phongchok
ZICOM THAI HYDRAULICS CO LTD
MANAGING DIRECTOR
Sammy Ng Siong Teck
DEPUTY MANAGING DIRECTOR
Saowaluke Phongchok
Indonesia
PT SYS-MAC INDONESIA
MANAGING DIRECTOR
Juat Koon Sim
EXECUTIVE DIRECTORS
Kok Yew Sim
David Loh Chin Woon
Boon Chye Seah
China
HANGZHOU CESCO MACHINERY CO LTD
MANAGING DIRECTOR
Chin Ming Tan
ZICOM GROUP LIMITED Directors’ Report 2014
Your directors present their report on the consolidated accounts of Zicom Group Limited for the year ended 30 June 2014.
Directors
The following persons were directors of Zicom Group Limited during the financial year and up to the date of this report. Directors
were in office for this entire period.
Mr. G L Sim
Mr. K H Sim
Mr. K Y Sim
Mr. Y P Lim
Mr. F Leong
Mr. I R Millard
Mr. S P Sze
(Chairman and Managing Director)
(Executive Director)
(Executive Director) (appointed on 25 September 2014)*
(Independent)
(Independent)
(Independent)
(Independent)
*Prior to his appointment, he was an Alternate Director to Mr. K H Sim.
Principal Activities
The Group’s principal activities comprise the manufacturing of deck machinery, offshore structures, fluid metering stations, process
plants, foundation equipment and concrete mixers, precision engineered machinery and services to the offshore marine, oil and
gas, construction, electronics, biomedical and agriculture industries.
Consolidated Results
The Group recorded the following consolidated results during the year as compared with those of previous year:
Key Financials
Revenue
Net profits after tax (NPAT)
Change (%)
- 4.9
- 41.1
Year ended 30 June 14
(S$ million)
Year ended 30 June 13
(S$ million)
113.95
4.08
119.85
6.93
The Group’s cash balances remain strong. As at 30 June 2014, the group’s total cash and bank balances were S$22.33m as compared
with S$21.36m as at 30 June 2013.
Dividends
The Group has decided to pay a final dividend of Australian cents 0.45 per share (2013: Australian cents 0.55) making the full year
dividends to 0.90 Australian cent per share. This final dividend will be paid out of Conduit Foreign Income under the provisions of
the Australian Income Tax Act. Accordingly, withholding tax will not apply to non-Australian residents.
The record date for the final dividend will be 14 November 2014 and is payable on 28 November 2014.
Review of Operations
The Group’s consolidated revenue for the full year is S$113.95m as compared with S$119.85m in the previous year, a decrease of
4.9%. The Group’s full year net consolidated profits after tax attributable to members to 30 June 2014 are S$4.08m as compared
with S$6.93m in the previous year, a decrease of 41.1%.
The net profit margin achieved for the full year is 3.6% as compared with 5.8% in the previous year, a drop of 2.2%.
Earnings per share dropped from Singapore 3.24 cents to 1.90 cents per share, a decrease of Singapore 1.34 cents.
Net tangible assets per share decreased slightly from Singapore 35.05 cents to 34.80 cents per share due mainly to translation loss
on consolidation arising from the depreciation in Thai Baht.
Return on equity, based on average of the opening and closing equity, for the year was 4.6% as compared to 8.1% in 2013.
The average rates for currency translation for revenue and expenses are A$1 to S$1.1521 (2013: S$1.2664) and for balance sheet
items A$1 to S$1.1739 (2013: S$1.1699).
7
ANNUAL REPORT 2014
Directors’ Report 2014
The results for the full year have been adversely affected by extended gestation costs of the Group’s start-up technologies,
restructuring costs, delays in project awards and losses suffered in the precision engineering sector caused by the protracted slump
in the electronic sector which has since recovered.
Notwithstanding set-backs during the year, the Group’s businesses remain resilient. Restructuring of the Group’s businesses will
continue in line with the Group’s focus on new directions to address an inflection point in the Group’s business structure so as to
achieve long term sustainable growth.
Although the economy in the United States continues to strengthen, global economic growth appears to be patchy in other parts
of the world. Some major economies show signs of inertia and appear fragile. The Group’s focus is to develop businesses and
directions that are capable of weathering any potential deceleration of the global economy caused by a loss in growth momentum
that may be compounded by a reduction in monetary quantitative easing.
Strategic Repositioning
Although the precision engineering sector suffered a set-back in the year just ended, the first in 8 years, the Group’s repositioning
is aimed to strengthen its business structure. The Group’s investment in technology is expected to generate a new and broader
revenue stream for this sector.
At the same time, the Group is undertaking a strategic review of its existing businesses on their long term growth sustainability.
Innovation capability to move up the value chain and scalability are factors for long term sustainability. In pursuit of this objective
the Board may consider structural changes that may result in unlocking some values to employ on opportunities that align with
the Group’s long term objective.
Revenue by Business Segments
The following is an analysis of the segmental results:
Revenue by Business Segments
Change (%)
Offshore Marine, Oil & Gas Machinery
Construction Equipment
Precision Engineering & Technologies
Industrial & Mobile Hydraulics
+ 14.2
+ 30.2
- 66.8
- 9.9
Year ended 30 June 14
(S$ million)
48.08
Year ended 30 June 13
(S$ million)
42.11
51.72
11.68
3.09
39.72
35.21
3.43
Offshore Marine, Oil & Gas Machinery
Demand in deck machinery by offshore vessels had been strong and is expected to remain robust in the coming year. The oil and
gas sector is recovering and we are confident of significant orders in the year. Management of such projects has been strengthened.
Orders for offshore structures for remote operated vehicles in sub-seas operations had been strong and are expected to remain so
in the year.
8
Winch on Board
Winch Assembly
ROV Launcher
ZICOM GROUP LIMITED Gas Process Plant
Trailer Mounted Mixer
Vibro hammer
We are confident that the demand momentum will be maintained in the next few years.
As at the end of the financial year just ended, total confirmed orders in hand to be delivered in the financial year 2015 for this
cluster were S$46.5m.
Construction Equipment
Revenue from construction equipment had increased by 30.2% in the current year from that of the previous year. The increase was
due to a substantial order held back at the end of the previous financial year caused by customers’ delay that was shipped in the
current year.
The concrete mixer business in Australia, Thailand and China had been profitable for the current year although growth had been
marginal. We expect order prospects for the year to be maintained with some improvements.
Demand for foundation equipment in Singapore and Malaysia is expected to strengthen in the coming years due to the increase in
infrastructure programs that have been rolled out.
As at the end of the financial year just ended, total confirmed orders in hand to be delivered in the financial year 2015 for this
cluster were S$6.3m.
Precision Engineering & Technologies
The precision engineering sector experienced a significant set-back in a 66.8% drop in revenue as compared to the previous
year mainly due to a protracted slump in the electronic sector. In the previous year the launch of new hand-held mobile devices
generated a huge demand for machines supplied by the Group. This had been the sector’s first set-back in 8 years. The slump in the
electronic sector had been broad-based. The sector has recovered and we expect to return to growth and profits next year.
The Group’s foray into medical technologies is to balance the sector’s over-reliance on the electronic industry which is volatile and
at the same time enables it to climb up the value chain.
This sector achieved an average of 46% compound annual growth in the last 5 years to 2013. With a balanced revenue stream, we
believe that compound growth is more sustainable.
The global semi-conductor industry is expected to grow by more than 4% in the next 5 years propelled by demand in hand-
held devices such as smart phones and tablet computers. Advances in medical information communication technology that
helps to accelerate advances in molecular sciences and surgical techniques are creating capability to meet the unmet needs of
better healthcare and personalized medicine. A global aging population together with growing affluence in developed countries
underscore demand in healthcare technology. These push factors are expected to maintain the momentum in demand for medical
technology and medical devices in the coming years.
As at the end of the financial year just ended, total confirmed orders in hand to be delivered in the financial year 2015 for this
cluster were S$11.7m.
Industrial & Mobile Hydraulics
This sector is made up of supply of hydraulic system drives and hydraulic services in support of our general core business activities
in hydraulic engineering. Variation in this sector is not significant.
9
ANNUAL REPORT 2014 Directors’ Report 2014
Foreign Exchange Exposure
The Group generally prices its sales in foreign currencies on forward rates. During the full year, we hedged our rates accordingly to
ensure our margins were maintained. The net loss attributable to foreign exchange during the current year is S$0.48m as compared
with an exchange loss of S$2.69m in the previous year.
Accounting Standards AASB 139 obliges us to fair value our outstanding foreign currency derivatives at the rates ruling on 30
June 2014. The net loss of S$0.48m included the imputed unrealised loss in the valuation of these derivatives as at 30 June 2014
amounting to S$0.17m (2013: S$2.41m).
Financial Position
The group’s financial position remains strong:
Classification
Net Assets
Net Working Capital
Cash in Hand and at Bank
Increase (+) / Decrease (-)
S$ million
As at 30 June 14
S$ million
As at 30 June 13
S$ million
+ 0.97
+ 0.14
+ 0.97
89.46
45.09
22.33
88.49
44.95
21.36
Gearing Ratios
The Group gearing ratio is 0% at the same ratio for the year ended 30 June 2013. Gearing ratio has been arrived at by dividing our
net interest bearing debts over total capital.
Return Per Share
The Group’s earnings and net tangible assets per share are as follows:
Classification
Decrease
Singapore Cents
2014
Singapore Cents
2013
Singapore Cents
Earnings Per Share
- 1.34
1.90
3.24
The weighted average ordinary shares used to compute basic earnings per share are 214,881,000 for this year and 213,798,000
shares for the previous year.
Classification
Decrease
Singapore Cents
As at 30 June 14
Singapore Cents
As at 30 June 13
Singapore Cents
Net Tangible Assets Per Share
- 0.25
34.80
35.05
Net tangible assets per share has dropped due to translation loss on consolidation arising from the depreciation in Thai Baht.
Capital Expenditure
For the year ending 30 June 2015, the Group plans to invest up to S$1.0m in equipment for a wholly owned subsidiary iPtec Pte Ltd
engaged in medical technology translation activities. Part of the investment is covered by a government grant.
Confirmed Orders
We have a total of S$64.8m (30 June 2013: S$56.0m) outstanding confirmed orders in hand as at 30 June 2014. A breakdown of
these outstanding confirmed orders is as follows:-
Offshore Marine, Oil & Gas Machinery
Construction Equipment
Precision Engineering & Technologies
Industrial & Mobile Hydraulics
Total
S$ m
46.5
6.3
11.7
0.3
64.8
These outstanding orders are scheduled for delivery in the financial year 2015. Prospects for on-going orders continue to be strong.
10
ZICOM GROUP LIMITED
Development of PET
The Group’s precision engineering technology (PET) cluster has been strengthened by a medical technology translation engineering
subsidiary that is being supported by S$4.5m government grant. The Group intends to build up this subsidiary into a core multi-
discipline specialist engineering company to support the Group’s development into the medtech industry. Apart from this the
Group is venturing into accelerator funding of growth medtech start-ups supported by its current internally developed capability
in medtech technology incubation, translation and commercialisation expertise as well as manufacturing capability. Pursuant to
this the Group’s newly formed wholly owned subsidiary, Zicom MedTacc Private Limited (MedTacc), has been appointed a private
sector accelerator by a government agency responsible for enterprise development. MedTacc and the government agency will each
commit S$15m making an investment pool of S$30m available to co-invest in growth phases medical technologies.
Progress on Technology Investments
The Group’s experiences in disruptive technologies have been a learning curve. Gestation for such technologies can be protracted.
However these initial experiences have accumulated into developed expertise in this field. Going forward we would expect that the
learning curve would be much shortened.
The Group made a prudent decision in not seeking bank borrowings for such investments. As a result the extended gestation has
not impacted on its financial strength or business operations. It will continue to remain prudent.
While gestation has been generally protracted, definitive progress towards commercialisation is gaining traction.
Orion Systems Integration Pte Ltd (Orion)
Orion’s Thermal Bonder for fine pitch flip chips has been accepted by the industry and is in the final evaluation by 2 of the world’s
leading chip assembly plants. The dynamic development in chip design has imposed on bonding machines to meet very exacting
demand in the trade. Evaluation by the industry accordingly calls for compliance to stringent and exacting standards which the
Orion’s Bonder is able to meet but at the expense of protracted gestation.
We expect to be able to launch full scale commercialisation of the Orion Thermal Bonder towards the fourth quarter of calendar
year 2014.
Biobot Surgical Pte Ltd (Biobot)
Biobot Surgical has set up its first Center of Excellence (COE) in USA in collaboration with New York University Langone Medical
Center in May 2014. The robot has obtained FDA approval. The COE is now focused to clinically validate, in collaboration with the
Singapore General Hospital, our latest software in MRI-US fusion which fuses MRI (Magnetic Resonance Imaging) with ultrasound
images to enable targeted biopsies that reduce the number of biopsy samples currently being taken to diagnose prostate cancer.
We aim to complete validation about end of 2014.
The robot has just received CE Mark approval. A COE is being set up in Germany with a partnering University Hospital. A COE in the
UK is also being considered with a partnering University Hospital.
Following the CE mark we are applying for Therapeutic Goods Administration (TGA)’s approval in Australia, Biobot plans to set up 3
COEs in the eastern states of Australia.
Biobot aims to set up all the above COEs by the first quarter of calendar year 2015.
Turnkey Ink-Jet Plant
Surgical Robot
Epoxy Dispensing Machines
11
ANNUAL REPORT 2014 Directors’ Report 2014
The COEs will partner Biobot in training and developing the robot’s applications in the various areas in which they are located to
support the robot’s use in those countries. The COEs will potentially partner Biobot in further research and development.
Biobot has obtained regulatory approvals for its older version of the robot. Regulatory authorities require the current version of
the robot for commercialisation which embodies several improvements and advance features to apply for new approvals. This has
caused a protracted gestation in the commercialisation of the product. We expect to fully commercialise our product in the second
quarter of calendar year 2015, after completion of the MRI-US fusion software validation by key opinion leaders in the first quarter
of 2015. This will position Biobot to launch a product with the latest integrated state-of-the art features that meet contemporary
clinical demands.
Curiox Biosystems Pte Ltd (Curiox)
Although the Curiox’s DropArray (DA) technology has achieved break-through and has been accepted by 10 of the top 25
pharmaceutical companies in the USA and Europe, adoption has been slow. The DA technology has proven to the industry that
it can achieve considerable costs savings in drug development costs as well as solving complex assay problems for the industry
which existing technology finds difficult to achieve or to do so at much higher costs. However, this has raised the bar for adoption
of our technology as the industry continues to seek more optimization from our technology which only extends our gestation. This
demand is driven by the disruptive nature of our technology which, on adoption, would require significant changes to existing
processes.
In view of the situation, we have re-strategised our approach and focused on areas where cost savings create more immediate
impactful value to the customers with minimum disruption to existing processes, whereby adoption is quicker although volume
is relatively lower. Break-through in this area has shown good promises. We aim to first achieve break-even and growth even if it is
at a slower pace in the next 6 months.
Curiox’s engagement with major pharmaceutical companies continues. It is confident that adoption will gain traction as its user
population increases. There is an established wide cross network of out-sourcing in research in the pharmaceutical industry.
Although the pharmaceutical industry is very conservative, as the DA technology permeates the industry, there will be less
psychological barrier to adoption and more willingness to change existing processes to embrace our technology. We aim to achieve
this break-through in the next 12 months while aiming to break-even in the next 6 months.
Prospects
The global economic environment for the year just ended has continued to be one of uncertainty. Although economic growth in the
United States appears sustainable, some major economies continue to splutter and showing signs of inertia in the face of potential
winding down of the monetary quantitative easing.
The Group aims to position itself to address such uncertainties and potential economic deceleration that may arise if adverse
factors converge.
Order prospects remain strong. As such, the Group continues to be confident of a profitable year in 2015.
Curiox DropArray Technology
Thermal Bonding machine
12
ZICOM GROUP LIMITED Directors’ Report 2014
Subsequent Events after the Balance Sheet Date
On 10 August 2014, Zicom Holdings Pte Ltd incorporated a wholly-owned investment holding subsidiary, Zicom MedTacc
Private Limited, with a paid up capital of $100,000.
On 27 August 2014, the directors of Zicom Group Limited declared a final unfranked dividend of 0.45 Australian cents
per share for the financial year ended 30 June 2014 which has not been provided for in the financial statements of the
current year.
On 25 September 2014, Zicom MedTacc Private Limited (“MedTacc”) was appointed a Medtech Accelerator by SPRING
Singapore (SPRING), a government agency responsible for enterprise development. As an appointed Medtech Accelerator,
SPRING will co-invest with MedTacc on growth phase medtech start-ups over the next 4 years on 1:1 basis. Both MedTacc
and SPRING shall commit S$15m each making a total investment pool of S$30m. SPRING will grant options to MedTacc
to acquire their investments at nominal compound rates per year in the event that the investment prove commercially
viable and value may be unlocked.
Environmental Regulations
The group is subject to environmental regulations under State and Federal legislations. The group holds environmental
licences for its manufacturing site in Brisbane. No significant material environmental incidents occurred during the year.
Change in directors
On 25 September 2014, Mr Kok Yew Sim ended his appointment as an alternate director to Mr Kok Hwee Sim and was
appointed an executive director of the Company. Mr Kok Yew Sim is a Director and Chief Executive Officer of Sys-Mac
Automation Engineering Pte Ltd (“Sys-Mac”) and is responsible for Sys-Mac’s growth strategies, overall administration
and management of its business and operations. Sys-Mac is the fulcrum point for our thrust into technologies. Mr Sim
is expected to helm our drive in this new direction taken by the Group and as such his appointment will facilitate his
contribution to the Board.
Meetings of directors
The number of meetings of the company’s board of directors and of each board committee held since the last Annual
General Meeting, and the number of meetings attended by each director were:
Giok Lak Sim
Kok Hwee Sim
Kok Yew Sim
Yian Poh Lim
Frank Leong Yee Yew
Ian R Millard
Shaw Pao Sze
Full meetings of directors
Audit
Nomination & Remuneration
Meetings of Committees
A
4
4
3
4
4
4
4
B
4
4
4
4
4
4
4
A
2
2
2
2
2
2
2
B
2
2
2
2
2
2
2
A
1
-
-
1
1
-
-
B
1
-
-
1
1
-
-
A = Number of meetings attended
B = Number of meetings held during the time the director held office or was a member of the committee during the year
Insurance or indemnification of officers
During the financial year, Zicom Group Limited paid a premium of A$8,562 to insure against liabilities of the directors and
officers of the reporting entity.
13
ANNUAL REPORT 2014 Directors’ Report 2014
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
against directors or officers in their capacities as officers of the reporting entity.
The policy also provides for certain statutory fines incurred by the reporting entity or officers, and protection for claims
made alleging a breach of professional duty arising out of an act, error or omission of the officers of the reporting entity.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of its terms of
its audit engagement agreement against claims by third parties arising from the audit. No payment has been made to
indemnify Ernst & Young during or since the financial year.
Retirement, election and continuation in office of directors
Mr S P Sze retires by rotation and being eligible, offers himself for re-election.
Mr Kok Yew Sim was appointed as an executive director on 25 September 2014 after the last Annual General Meeting.
In accordance with the Constitution, Mr Kok Yew Sim retires as a director at the next Annual General meeting and, being
eligible, offers himself for re-election.
Directors’ relevant interests in Zicom Group Limited
In accordance with S300(11) of the Corporations Act 2001, the relevant interests of the directors in the shares and options
of Zicom Group Limited as at the date of this report are unchanged to those disclosed within the financial statements as
at 30 June 2014.
Remuneration report (Audited)
This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group
in accordance with the requirements of the Corporations Act 2001 and its Regulations. This information has been audited
as required by section 308(3C) of the Act.
Key management personnel (KMP) of the Group are defined as those persons having authority and responsibility for
planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether
executive or otherwise) of the Group. Details of the KMP are set out in the following tables:
(i)
Directors
G L Sim
K H Sim
K Y Sim
Y P Lim
F Leong
I R Millard
S P Sze
(ii)
Executives
G H Teoh
J L Sim
H S Tang
J K Sim
14
(Chairman and Managing Director)
(Executive Director)
(Executive Director) (appointed on 25 September 2014)
(Independent)
(Independent)
(Independent)
(Independent)
(Managing Director of Foundation Associates Engineering Pte Ltd)
(Joint Managing Director of Zicom Pte Ltd)
(Joint Managing Director of Zicom Pte Ltd)
(Managing Director of Sys-Mac Automation Engineering Pte Ltd)
ZICOM GROUP LIMITED Directors’ Report 2014
The remuneration report is set out under the following main headings:
A
B
C
Principles used to determine the nature and amount of remuneration
Service Agreements
Details of remuneration
A
Principles used to determine the nature and amount of remuneration
A combined Nomination and Remuneration Committee has been formed. The members of the Nomination and
Remuneration Committee comprise of Mr Y P Lim as Chairman with Mr Frank Leong and Mr G L Sim as members.
The Nomination and Remuneration Committee had approved the Service Agreement of the group managing
director, Mr G L Sim and this was subsequently ratified by the full board.
The key principle of Zicom Group Limited’s remuneration policy is to ensure remuneration is set at levels that
will attract, motivate, reward and retain personnel to improve business results, having regard to the company’s
financial performance and financial position.
Non-executive directors
Remuneration of non-executive directors is determined by the directors within the maximum amount approved by
the shareholders. Each non-executive director receives a base fee of A$25,000 for being a director of the Group. An
additional fee of A$2,000 is also paid for each Board Committee of which a non-executive director sits and A$5,000
if the director is a Chair of a Board Committee. The payment of additional fees for serving on committees recognises
the additional time commitment and responsibilities of the non-executive directors who serve on one or more sub
committees. There is also an attendance fee of A$1,000 for each meeting attended by the non-executive director.
Non-executive directors are eligible to participate in the Zicom Employee Share and Option Plan (“ZESOP”). The
Board considers that there should be an appropriate mix of remuneration comprising cash and securities for all
Directors to link the remuneration of the Directors to the financial performance of the Company and to align the
interests of shareholders and all Directors. No options were granted to non-executive directors during the financial
year and none are proposed for consideration at the 2014 Annual General Meeting.
The board recommends that total directors’ fees for non-executive directors for the financial year ending 30 June
2015 be fixed at a maximum sum of A$150,000 (S$180,000) at the same level as the previous year.
Key management personnel – executive directors and senior executives
All remuneration paid to executive directors and senior executives comprises the following components:
l
l
l
l
Base pay and benefits;
Short term incentives;
Other remuneration such as superannuation,
Participation in the Zicom Employee Share and Option Plan.
The company’s policy does not allow transactions which limit the economic risk in participating in unvested
entitlements under equity-based remuneration schemes.
Base pay
The level of base pay is set so as to provide a level of remuneration which is appropriate to the position and is
competitive in the market. The remuneration of the executive directors is reviewed annually by the board and the
remuneration of senior executives is reviewed annually or on promotion by the managing director(s).
15
ANNUAL REPORT 2014 Directors’ Report 2014
Benefits
Senior executives receive benefits including health and disability insurance and car allowances.
Short term incentives
The objective of short term incentives is to reward the senior executives of the group with performance bonus
tied to a minimum profit threshold of the group companies. Such bonuses are paid within 90 days after the year
end and completion of audit. The minimum profit threshold is the lower of $500,000 or 15% of total shareholders’
funds as at the reporting date.
B
Service Agreements
Group Managing Director
The group managing director, Mr G L Sim is directly employed by Zicom Holdings Private Limited (“ZHPL”) and has
renewed his service agreement with ZHPL for another 5 years with effect from 1 July 2011. The group and Mr
Sim are required to give each other at least 6 months’ notice in the termination of the service agreement. Under
the terms of his service agreement, Mr Sim continues to be appointed as the Zicom Group Limited (“ZGL”) Group
Managing Director and Chairman as well as the Executive Chairman of all the operating subsidiaries.
Mr Sim is entitled to an annual review of his monthly salary if the company’s results exceed 15% return on
shareholders’ funds. Mr Sim has frozen his monthly salary since 2007. Mr Sim will continue to draw the monthly
salary at the 2007 level for the next 5 years from 1 July 2011 and waive all salary increments. Apart from this, all
other benefits, terms and conditions in his service agreement remain unchanged.
Mr Sim is paid a monthly salary and a car allowance. Mr Sim is entitled to a performance bonus not exceeding 5%
of the pre-tax consolidated profits of ZHPL upon achieving agreed minimum profit targets, being the only criterion
for his entitlement. ZHPL’s profits exceeded the target for the financial year just ended and will be paid a bonus
accordingly. Mr Sim has decided with the Nomination and Remuneration Committee that he shall only receive
4.4% of pre-tax consolidated profits of ZHPL as his performance bonus instead of his full entitlement at 5% so as to
allocate the balance of his entitlement to reward other outstanding senior executives who are otherwise not entitled
to profit sharing contractually. Accordingly, this 4.4% of pre-tax consolidated profits will be deemed to be 100% of his
entitlement for the current financial year. Mr Sim has likewise, in previous years, forgone part of his bonus.
Mr Sim is entitled to convert part of this performance bonus up to no more than 50% of the amount payable, into
shares of ZGL at the average of the closing prices of the last 5 trading days before the end of the relevant financial
year. However, such entitlement must be exercised within 7 working days after the financial year end. For the
current financial year, Mr Sim has elected to convert 50% of his performance bonus amounting to $102,328 (2013:
$nil) into ZGL shares, fully paid at A$0.22 per share. This is subject to shareholders’ approval.
Mr Sim is not paid any salary or fees by ZGL, Cesco Australia Limited (“CAL”) or any other group companies. In the
event CAL achieves the minimum pre-tax profits, Mr Sim will be paid a bonus not exceeding 5% of CAL’s profits.
During the financial year just ended, Mr Sim was not paid any bonus by CAL as the profit target was not achieved.
Senior Executives (directors of group companies)
Senior executives in key decision making are employed under rolling contracts. The company and these senior
executives are required to give each other 6 months’ notice to terminate the service contracts. The senior
executives are entitled to a monthly salary and a car allowance. Each year, each of the subsidiary companies,
allocates 10% of their pre-tax profits upon achieving agreed minimum profit targets, being the only criterion for
allocation of bonus to its eligible executives, as a “bonus pool”. The maximum entitlement capped for eligible
executives ranges from 2.5% to 5% of the pre-tax profits. Each year, the Nomination and Remuneration Committee
will decide the proportion payable to each of these eligible executives based on the number of eligible executives
entitled to the pool and any recommendation by management to reward any outstanding senior executives
who are otherwise not eligible contractually, to be specially rewarded. The decisions made by the Committee are
deemed to be 100% of their entitlement for the respective eligible executive for the relevant financial year.
16
ZICOM GROUP LIMITED Directors’ Report 2014
These senior executives are also entitled to convert part of their performance bonus, up to no more than 50%
of the amount payable, into shares in ZGL at the average of the closing prices of the last 5 trading days before
the end of the relevant financial year. However, such entitlement must be exercised within 7 working days after
the financial year end. For the financial year just ended, none of the executives elected to convert part of their
performance bonus into ZGL shares.
Zicom Employee Share and Option Plan
Options are granted under the Zicom Employee Share and Option Plan (“ZESOP”) which was approved by
shareholders on 23 November 2006.
A person is eligible to participate in ZESOP if he or she is a director or an employee of a group company. Approved
share options are allocated to each group company based on its profit contribution to the Group for the past 3
years. These options are then granted to employees based on individual performance and those with potentials in
that group company. This initiative strengthens the Group’s position to retain and attract talent so as to expand
and grow to improve the Group’s performance and enhance shareholders’ value.
The board may at any time make invitations to eligible employees to participate in the ZESOP. The invitation will
specify the total number of options each eligible employee may acquire, the exercise price, period and exercise
conditions. All options shall lapse upon the expiry of the exercise period as determined by the board or 10 years
after grant of the option whichever is earlier.
If an eligible participant ceases to be employed by any member of the group his or her options shall lapse. In the
event an eligible participant, who, by reason of death, or physical or mental incapacity or such other reasons as
the Board may approve, ceases to be an eligible participant before the participant has exercised all vested options
under ZESOP, then those options shall continue to be capable of being exercised in accordance with the rules.
Options granted under ZESOP carry no voting rights or entitlement to dividends.
Options are granted at no cost to employees. When exercised, each option is convertible into one ordinary share
which shall be credited as fully paid up and rank equally with all other fully paid ordinary shares.
During the current financial year, no share options (2013: 2,610,000) were granted. In the same period, employees
exercised options to acquire 195,000 (2013: 517,500) fully paid ordinary shares in Zicom Group Limited at a
weighted average exercise price of A$0.17 per share. 275,000 (2013: 1,277,500) share options expired during the
financial year.
There were 6,395,000 unissued ordinary shares under options at the reporting date and the date of this report.
Company Performance
The table below shows the performance of the Group for the past 5 financial years:
Earnings per share (Australian cents)
Dividend per share (Australian cents)
Closing share price (Australian cents)
Net tangible asset per share (Australian cents)
2014
1.65
0.90
22.00
29.64
2013
2.56
1.00
23.00
29.96
2012
2.83
1.00
15.00
26.49
2011
5.15
1.00
50.00
24.73
2010
4.02
0.85
12.50
23.53
17
ANNUAL REPORT 2014 Directors’ Report 2014
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ZICOM GROUP LIMITED
Directors’ Report 2014
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19
ANNUAL REPORT 2014
Directors’ Report 2014
Details of share options to key management personnel
Options granted to, vested, exercised or expired during the years 2014 and 2013 as well as outstanding options held as at
year end are shown in the tables below.
30 June 2014
Directors
G L Sim
K H Sim
K Y Sim
Y P Lim
F Leong
I R Millard
S P Sze
Executives
G H Teoh
J K Sim
J L Sim
H S Tang
30 June 2013
Directors
G L Sim
K H Sim
K Y Sim
Y P Lim
F Leong
I R Millard
S P Sze
Executives
G H Teoh
J K Sim
J L Sim
H S Tang
Balance at
1 July 2013 Granted
Options
exercised
Balance at
30 June 2014
Expired
Value of
options
granted
Value of
options
expired Exercisable
Not
Exercisable
–
380,000
380,000
25,000
25,000
25,000
30,000
280,000
–
280,000
280,000
1,705,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(100,000)
(100,000)
(25,000)
(25,000)
(25,000)
–
–
280,000
280,000
–
–
–
30,000
–
–
–
–
280,000
–
280,000
280,000
(275,000) 1,430,000
–
–
–
–
–
–
–
–
–
–
–
–
–
4,633
4,633
1,144
1,144
1,144
–
–
240,000
240,000
–
–
–
30,000
–
40,000
40,000
–
–
–
–
–
–
–
–
240,000
–
240,000
240,000
12,698 1,230,000
40,000
–
40,000
40,000
200,000
Balance at
1 July 2012 Granted
Options
exercised
Balance at
30 June 2013
Expired
Value of
options
granted
Value of
options
expired Exercisable
Not
Exercisable
–
300,000
300,000
75,000
75,000
75,000
30,000
–
80,000
80,000
–
–
–
–
–
–
–
(50,000)
(50,000)
(50,000)
–
–
–
–
–
–
–
–
–
380,000
380,000
25,000
25,000
25,000
30,000
–
8,696
8,696
–
–
–
–
–
–
–
–
–
–
–
–
300,000
300,000
25,000
25,000
25,000
30,000
–
80,000
80,000
–
–
–
–
200,000
–
400,000
300,000
1,755,000
80,000
–
80,000
80,000
400,000
–
–
–
–
(150,000)
280,000
–
–
–
280,000
(200,000)
(100,000)
280,000
(300,000) 1,705,000
8,757
–
8,757
8,757
43,663
200,000
–
–
–
200,000
20,694
10,347
200,000
31,041 1,305,000
80,000
–
80,000
80,000
400,000
The above options were granted under the Zicom Employee Share and Option Plan which was approved by shareholders
on 23 November 2006.
There were no alterations to the terms and conditions of options granted as remuneration since their grant date.
20
ZICOM GROUP LIMITED Directors’ Report 2014
Shareholdings of key management personnel as at 30 June 2014 and 30 June 2013 are as follows:
30 June 2014
Directors
G L Sim
K H Sim
K Y Sim
Y P Lim
F Leong
I R Millard
S P Sze
Executives
G H Teoh
J K Sim
J L Sim
H S Tang
30 June 2013
Directors
G L Sim
K H Sim
K Y Sim
Y P Lim
F Leong
I R Millard
S P Sze
Executives
G H Teoh
J K Sim
J L Sim
H S Tang
Balance as at
1 July 2013
Granted as
remuneration
Options
exercised
Net change
other
Balance as at
30 June 2014
77,474,368
1,258,180
1,070,253
488,000
524,364
592,250
–
50,000
20,091,937
6,407,767
2,470,699
110,427,818
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
77,474,368
1,258,180
1,070,253
488,000
524,364
592,250
–
50,000
20,091,937
6,407,767
2,470,699
110,427,818
Balance as at
1 July 2012
Granted as
remuneration
Options
exercised
Net change
other
Balance as at
30 June 2013
76,085,212
1,062,846
800,717
438,000
426,344
542,250
–
887,883
195,334
269,536
–
–
–
–
50,000
20,091,937
6,407,767
2,470,699
108,375,772
–
–
–
–
1,352,753
–
–
–
50,000
50,000
50,000
–
–
–
–
–
150,000
501,273
–
–
–
48,020
–
–
–
–
–
–
549,293
77,474,368
1,258,180
1,070,253
488,000
524,364
592,250
–
50,000
20,091,937
6,407,767
2,470,699
110,427,818
There were no other transactions and balances with key management personnel and their related parties during the year.
Legal Proceedings
No person has applied for leave of Court to bring proceedings on behalf of the consolidated entity or to intervene in
any proceedings to which the consolidated entity is a party for the purpose of taking responsibility on behalf of the
consolidated entity for all or any part of those proceedings.
21
ANNUAL REPORT 2014 Directors’ Report 2014
Non-Audit Services
There were no non-audit services provided by the entity’s auditor and related practices of the entity auditor, Ernst &
Young, during the year.
Auditor’s Independence Declaration
A copy of the auditor’s signed independence declaration as required under Section 307C of the Corporations Act 2001 is
attached to this report.
Rounding of Amounts
The company is an entity to which the Class Order 98/100 applies and accordingly, amounts in the financial statements
and directors’ report have been rounded to the nearest S$1,000 unless otherwise stated.
This report was made in accordance with a resolution of the board of directors.
GL Sim
Chairman/Managing Director
29 September 2014
22
ZICOM GROUP LIMITED Auditor’s Independence Declaration
to the Directors of Zicom Group Limited
In relation to our audit of the financial report of Zicom Group Limited for the financial year ended 30 June 2014, to the
best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the
Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
Ric Roach
Partner
29 September 2014
23
ANNUAL REPORT 2014A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young111 Eagle StreetBrisbane QLD 4000 AustraliaGPO Box 7878 Brisbane QLD 4001Tel: +61 7 3011 3333Fax: +61 7 3011 3100ey.com/auAuditor’s Independence Declaration to the Directors of Zicom GroupLimitedIn relation to our audit of the financial report of Zicom Group Limited for the financial year ended 30June 2014, to the best of my knowledge and belief, there have been no contraventions of the auditorindependence requirements of theCorporations Act 2001 or any applicable code of professionalconduct.Ernst & YoungRic RoachPartner29 September 2014A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young111 Eagle StreetBrisbane QLD 4000 AustraliaGPO Box 7878 Brisbane QLD 4001Tel: +61 7 3011 3333Fax: +61 7 3011 3100ey.com/auAuditor’s Independence Declaration to the Directors of Zicom GroupLimitedIn relation to our audit of the financial report of Zicom Group Limited for the financial year ended 30June 2014, to the best of my knowledge and belief, there have been no contraventions of the auditorindependence requirements of theCorporations Act 2001 or any applicable code of professionalconduct.Ernst & YoungRic RoachPartner29 September 2014 Corporate Governance Statement
Introduction
The Board of Directors is responsible for the Corporate Governance of Zicom Group Limited and its controlled entities
(referred to in this document as “the Company”). The Directors are focused on fulfilling their responsibilities individually
and as a Board to all of the Company’s stakeholders. This involves recognition of and a need to adopt principles of good
corporate governance having regard to the ASX Corporate Governance Council (CGC) published guidelines as well as its
corporate governance principles and recommendations.
The Company has reviewed its Corporate Governance procedures over the past year to ensure compliance with the
principles of good corporate governance.
At the end of this Corporate Governance Statement there is a table detailing the recommendations with which the
Company does not strictly comply.
A description of the Company’s practices in complying with the principles is set out below.
Principle 1: Lay Solid Foundations for Management and Oversight
The role of the Board is to lead and oversee the management and direction of the Company and its controlled entities.
After appropriate consultation with executive management the Board:
-
-
-
-
-
defines and sets the business objectives. It subsequently monitors performance and achievement of the
Company’s objectives;
oversees the reporting on matters of compliance with corporate policies and laws, takes responsibility for
risk management processes and reviews executive management of the Company;
monitors and approves business plans, financial performance and budgets, and available resources and
major capital expenditure initiatives of the Company;
maintains liaison with the Company’s auditor; and
reports to Shareholders.
Senior Executives and Executive Directors have letters of appointments or service contracts describing their terms of
office, duties, rights and responsibilities.
The performance of the board and key executives is reviewed regularly against both measureable and qualitative
indicators. The performance criteria against which directors and executives are assessed are aligned with the financial
and non-financial objectives of Zicom Group Limited. Directors whose performance is consistently unsatisfactory may be
asked to retire.
Principle 2: Structure the Board to Add Value
The recommendations of the Corporate Governance Council are that the composition of the Board be determined so as to
provide the Company with a broad base of industry, business, technical, administrative and corporate skill and experience
considered necessary to represent Shareholders and fulfil the business objectives of the Company.
The recommendations of best practice are that the majority of the directors and in particular the chairperson should be
independent. An independent director is one who:
does not hold an executive position;
is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a
substantial shareholder of the Company;
-
-
24
ZICOM GROUP LIMITED Corporate Governance Statement
-
-
-
-
-
has not within the last three years been employed in an executive capacity by the Company or other group
member, or been a director after ceasing to hold any such employment;
is not a principal of a significant professional adviser or a significant consultant of the Company or other
group member, or an employee materially associated with the service provided;
is not a significant supplier or customer of the Company or other group member, or an officer of, or
otherwise associated directly or indirectly with a significant supplier or customer;
has no significant contractual relationship with the Company or other group member other than as a
Director of the Company; and
is free from any interest and any business or other relationship which could, or could reasonably be
perceived to, materially interfere with the Director’s ability to act in the best interests of the Company.
Individual board members do not fulfil all of these criteria but the overall profile of the Board is considered the most
appropriate for the activities of the Company.
Details of the members of the Board, their experience, expertise, qualifications, term of office and independent status are
included in the “Board of Directors” section within the annual report.
Materiality thresholds in determining the independence of non-executive directors are:
-
-
A relationship that accounts for more than 10% of the Director’s gross income (other than director’s fees
paid by the company).
Where the relationship is with a firm, company or entity, in respect of which the Director (or any associate)
has more than a 20% shareholding if a private company or 2% if a listed company.
Mr G L Sim was appointed Managing Director of Zicom Group Limited commencing 1 July 2006, and Chairman of Zicom
Group Limited with effect from 23 November 2006. He is a major shareholder in Zicom Group Limited through his
interest in his family company, SNS Holdings Pte Ltd. Previously Mr Sim had been the major shareholder (through SNS
Holdings Pte Ltd) of Zicom Holdings Pte Ltd (“ZHPL”). Mr Sim has been the Managing Director of ZHPL since founding the
company and was appointed the Chairman of ZHPL on 17 August 2007, in line with his position as the Group chairman.
The Board has determined that Mr Sim is, and was not independent.
Mr Frank Leong has no relationships or interests that would affect his role as an independent director.
Mr Y P Lim has no relationships or interests that would affect his role as an independent director.
Mr Ian R Millard has no relationships or interests that would affect his role as an independent director.
Mr S P Sze has no relationships or interests that would affect his role as an independent director.
Mr K H Sim is an Executive Director and therefore is considered by the Board to be not independent.
Mr K Y Sim is an Executive Director and therefore is considered by the Board to be not independent.
Term of Office
The Company’s Constitution specifies that at the annual general meeting in every year, one third of the Directors for the
time being but not exceeding one-third (with the exception of the Managing Director) must retire from office by rotation.
25
ANNUAL REPORT 2014 Corporate Governance Statement
Independent Professional Advice
Directors and Board Committees have the right, in connection with their duties and responsibilities as Directors, to seek
independent professional advice at the Company’s expense. Prior written approval of the Chairman is required, and this
will not be unreasonably withheld.
Board Committees
The Company has a Nomination and Remuneration Committee and an Audit Committee, the details of which are set out
below:
Nomination and Remuneration Committee
The Nomination and Remuneration Committee is a combined committee, comprising of the following members:
l Mr Y P Lim (Chairman)
l Mr G L Sim
l Mr Frank Leong
The Committee has the responsibility for recruitment and evaluation of Board Members. In addition the committee
formulates the remuneration policies for the Board Members and Managing Director of the Group.
Audit Committee
The Audit Committee comprises of the following members:
l Mr Ian Millard (Chairman)
l Mr Frank Leong
l Mr Y P Lim
The Audit Committee operates in accordance with a charter. The main responsibilities of the Audit Committee are to:
l Review, assess and approve the annual report, the half year financial report and all other financial information
published by the Company or released to the market.
l Review the effectiveness of the Group’s internal control environment, including effectiveness and efficiency of
operations, reliability of financial reporting and compliance with applicable laws and regulations.
l Oversee the effective operation of the risk management framework.
l Recommend the appointment, removal and remuneration of the external Auditor, and review the terms of their
engagement, the scope and quality of their audit and assess their performance.
l Consider the independence and competence of the external Auditor on an ongoing basis.
l Review and monitor related party transactions and assess their propriety.
l Report on matters relevant to the committee’s role and responsibilities.
The Board and the Company Secretaries
The Company Secretaries are accountable to the Board and the appointment or removal of the Company Secretary is a
matter of the Board as a whole.
Each Director is entitled to access the advice and services of the Company Secretary.
26
ZICOM GROUP LIMITED Corporate Governance Statement
Principle 3: Promote Ethical and Responsible Decision-Making
Code of Conduct
Directors, officers, employees and consultants to the Company are required to observe high standards of behaviour and
business ethics on behalf of the Company and they are required to maintain a reputation of integrity on the part of both
the Company and themselves. The Company does not contract with or otherwise engage any person or party where it
considers integrity may be compromised.
Directors are required to disclose to the Board actual or potential conflicts of interest that may or might reasonably
be thought to exist between the interests of the director or the interests of any other party in so far as it affects the
activities of the Company. When applicable, directors are to act in accordance with the Corporations Act if a conflict
cannot be removed or it persists. Directors would be restricted from taking part in the decision making process or
discussions where that conflict does arise.
Directors are required to make disclosure of any share trading. The key principles of the Share Trading Policy are that
Directors and officers are prohibited to trade while in possession of unpublished price sensitive information and during
the following closed periods:
l
The period between 1 January and the release of the Company’s Half Year results to the Stock Exchange
l The period between 1 July and the release of the Company’s Full Year results to the Stock Exchange
l The twenty-four hours following an announcement of price sensitive information on the Stock Exchange
l Other periods as may be imposed by the Company when price sensitive, non-public information may exist
in relation to a matter
Price sensitive information is information that a reasonable person would expect to have a material effect on the price or
value of the company shares. The undertaking of any trading in shares must be notified to the Company Secretary who
makes disclosure to the ASX.
Diversity Policy
The Company does not have a written diversity policy, however, the Company recognises the importance of benefitting
from all available talent regardless of gender, age, ethnicity and cultural background. The Company promotes an
environment conducive to the appointment of well qualified employees, senior management and board candidates so
that there is appropriate diversity to maximise the achievement of corporate goals.
The Company has employees including executives from diversified cultural background and nationalities such as
Australians, Bangladeshis, Chinese, Indians, Indonesians, Filipinos, Malaysians, Burmese, New Zealanders, Singaporeans
and Thais. In addition, approximately 20% of the Company’s workforce is made up of female employees.
Principal 4: Safeguard Integrity in Financial Reporting
As stated above the Company’s Audit Committee is made up of independent directors.
To ensure the integrity of the Company’s financial reports, the managing director and the Group Financial Controller are
required to declare annually, in writing to the board, that the financial records of the Company for the respective financial
year have been properly maintained, the Company’s financial reports comply with accounting standards and present a
true and fair view of the Company’s financial condition and operational results.
Each member of the Board has access to the external Auditor and the Auditor has access to each Board member.
27
ANNUAL REPORT 2014 Corporate Governance Statement
Principal 5: Make Timely and Balanced Disclosure
The Joint Company Secretaries are persons responsible for overseeing and co-ordinating disclosure of information to the
ASX as well as communication with the ASX. This involves compliance with the continuous disclosure requirements of the
Listing Rules.
Principal 6: Respect the Rights of Shareholders
Pursuant to Principle 6, the Board’s objective is to promote effective communication with its shareholders at all times.
Zicom Group Limited is committed to:
-
-
-
Ensuring that shareholders and financial markets are provided with full and timely information about the
Company’s activities in a balanced and understandable way
Complying with continuous disclosure obligations contained in the ASX listing rules and the Corporations
Act in Australia
Communicate effectively with its shareholders and making it easier for shareholders to communicate with
the Company
To promote effective communication with shareholders and encourage effective participation at general meetings,
information is communicated to shareholders:
-
-
-
-
-
Through the release of information to the market via the ASX
Through the distribution of annual report and Notice of Annual General Meeting
Through shareholder meetings and investor relations presentations
Through letters and other forms of communications directly with shareholders when deemed necessary
Hosting all of the above on the Company website at www.zicomgroup.com
The external auditors are required to attend the Annual General Meeting and are available to answer any shareholder
questions about the conduct of the audit preparation of the audit report.
Principle 7: Recognise and Manage Risk
The Board is conscious of the need to continually maintain systems of risk management and controls in order to create
long-term shareholders value. In recognition of this, the board determines the Company’s risk profile and is responsible
for overseeing and approving risk management strategy and policies and internal controls. The Company has in place
policies and procedures for risk management which cover areas including workplace health and safety, control of key
resources, manufacturing, financial and other critical business processes. The operational risks are managed by senior
management level and escalated to the board for direction where the issue is exceptional, non-recurring or may have a
material financial or operational impact on the Company.
In accordance with Section 295A of the Corporations Act, the Group Managing Director (Chief Executive Officer
equivalent) and the Group Financial Controller (Chief Financial Officer equivalent) have provided a written statement to
the board that:
The view provided on the Company’s financial report is founded on a sound system of risk management and
internal compliance and control which implements the Board’s policies; and
The Company’s risk management and internal compliance and control system is operating efficiently and
effectively in all material respects.
-
-
28
ZICOM GROUP LIMITED Corporate Governance Statement
The board acknowledges that such internal control assurance are not absolute and can only be provided on a reasonable
basis after having made due enquiries. This is due to factors such as the need for judgement and the inherent limitations
in internal controls and therefore is not and cannot be designed to detect all weaknesses in control procedures.
Principle 8: Remunerate Fairly and Responsibly
As stated above, a Nomination and Remuneration Committee has been established by the board.
Details of the remuneration for Directors and Key Management Personnel can be found in the Directors Report within the
Annual Report.
The Group Managing Director and Group Executive Directors receive performance based remuneration. In addition,
the Group Managing Director has renewed his service agreement with the Group for a term of another 5 years from
1 July 2011. The other Directors do not receive any performance based remuneration and do not have contracts with the
Company that give them any form of certain tenure. One third of the Directors retire annually and are free to seek re-
election by Shareholders.
Each member of the Board has committed to spending sufficient time to enable them to carry out their duties as a
Director of the Company.
A maximum amount of remuneration for non-executive Directors is fixed by Shareholders in general meeting and can be
varied in the same manner. In determining the allocation (if any) the Board must take account of the time demands on
the Directors together with such factors as fees paid to other corporate directors and to the responsibilities undertaken
by them.
The Directors with the exception of Mr G L Sim were granted options after it was approved by the shareholders in an
Extraordinary General Meeting on 28 August 2008. The Board considers that there should be an appropriate mix of
remuneration comprising cash and securities for all Directors to link the remuneration of the Directors to the financial
performance of the Company. The Directors consider this remuneration policy to be a sensible and balanced policy which
aligns the interests of shareholders and all Directors. The hedging policy regarding unvested options is detailed within the
Directors’ Report.
29
ANNUAL REPORT 2014 Corporate Governance Statement
Departures from the Recommendations of the ASX Corporate Governance Council.
Recommendation
Number
1.1
1.2 and 2.5
Departure from Recommendation
Explanation for Departure
There
is no formalisation of the
separation of functions between the
Board and Management.
Throughout the reporting period the Board consisted
of a majority of non-executive Directors. Practices
followed are consistent with the Principle.
There
is no written process for
performance evaluation of the Board,
committees, individual Directors and
key executives.
The Nomination and Remuneration Committee
monitors, reviews and discusses the performance
of the Board and key executives and implements
changes where necessary.
2.2
2.3
3.3
5.1
6.1
The Chair
director.
is not an
independent
The Chair and Managing Director
positions are held by the same non-
independent director.
The Chairperson and Managing Director positions
are held by the same non-independent director. The
Board has chosen a director who has significant
experience in the business who will lead the
Company in the best interests of the shareholders.
The Board has agreed on the responsibilities and
division between Chairman and Managing Director.
There is no written Diversity Policy and
there are no established measureable
objectives for achieving gender diversity.
Although there are no written policies and
measureable objectives in place, practices followed
are consistent with the Principle.
There are no written policies and
procedures designed
to ensure
compliance with ASX Listing Rule
disclosure requirements.
Although there are no written policies in place, the
responsibility for compliance with the ASX Listing
Rules is handled by the Board, in conjunction with
the Company Secretaries.
The Company has no formally designed
or disclosed communication strategy
with Shareholders.
The Board is conscious of the need to keep
Shareholders and markets advised. The procedures
adopted within the Company, although not written,
are weighted towards informing Shareholders and
markets.
Given the nature and size of the Company, its
business interests and the involvement of all
Directors, all of whom have business management
skills, it was not considered necessary to establish
a written policy. The Company adheres to the
Recommendations under this Principle for
statements by senior management to the Board.
7.1 and 7.2
There has been no written
implementation of policy on risk
oversight and management or for senior
management to make statements to
the Board concerning those matters.
30
ZICOM GROUP LIMITED Consolidated Statement of Comprehensive Income
for the year ended 30 June 2014
(In Singapore dollars)
Revenue from continuing operations
Other operating income
Cost of materials
Employee, contract labour and related costs
Depreciation and amortisation
Property related expenses
Other operating expenses
Finance costs
Share of results of associates
Profit before taxation
Tax benefit
Note
2014
S$’000
2013
S$’000
5
5
5
6
112,083
118,733
1,870
1,116
(58,895)
(29,102)
(5,211)
(2,578)
(13,166)
(378)
(739)
3,884
31
(61,265)
(29,374)
(5,256)
(2,595)
(13,367)
(474)
(613)
6,905
303
Profit for the year from continuing operations after taxation
3,915
7,208
Other comprehensive income:
Items that may be subsequently reclassified to profit and loss
Foreign currency translation on consolidation
Effect of tax on other comprehensive income
Total comprehensive income
Profit/(loss) attributable to:
Equity holders of the Parent
Non-controlling interests
Profit for the year
Total comprehensive income/(loss) attributable to:
Equity holders of the Parent
Non-controlling interests
Earnings per share (cents)
Basic earnings per share
Diluted earnings per share
(515)
–
(515)
(326)
–
(326)
3,400
6,882
4,081
(166)
3,915
3,566
(166)
3,400
7
7
1.90
1.89
6,929
279
7,208
6,603
279
6,882
3.24
3.23
31
ANNUAL REPORT 2014 Consolidated Balance Sheet
as at 30 June 2014
(In Singapore dollars)
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Convertible loan receivable from an associate
Investment in an associate
Others
Current assets
Cash and bank balances
Inventories
Trade and other receivables
Prepayments
Tax recoverable
Assets held for sale
TOTAL ASSETS
Current liabilities
Payables
Interest-bearing liabilities
Provisions
Provision for taxation
Unearned income
Unrealised loss on derivatives
NET CURRENT ASSETS
Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions
TOTAL LIABILITIES
NET ASSETS
Equity attributable to equity holders of the Parent
Contributed equity
Reserves
Retained earnings
Non-controlling interests
TOTAL EQUITY
9
10
6
23
12
20
13
14
16
17
18
17
6
18
19
Note
2014
S$’000
30,784
14,792
2,418
459
1,804
1
50,258
22,328
27,758
39,061
626
–
–
89,773
2013
S$’000
33,101
13,212
1,943
919
2,578
1
51,754
21,355
21,829
34,832
546
109
524
79,195
140,031
130,949
30,701
12,105
966
336
400
173
44,681
45,092
2,758
2,745
390
5,893
50,574
89,457
37,593
(703)
51,703
88,593
864
89,457
20,747
9,459
1,138
431
64
2,411
34,250
44,945
5,147
2,622
443
8,212
42,462
88,487
37,623
(251)
50,099
87,471
1,016
88,487
TOTAL EQUITY AND LIABILITIES
140,031
130,949
32
ZICOM GROUP LIMITED Consolidated Statement of Changes in Equity
for the year ended 30 June 2014
(In Singapore dollars)
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33
ANNUAL REPORT 2014
Consolidated Statement of Cash Flows
for the year ended 30 June 2014
(In Singapore dollars)
Note
2014
S$’000
2013
S$’000
Cash flows from operating activities:
Operating profit before taxation
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Bad debts written off
Allowance for doubtful debts, net
Allowance for inventory obsolescence
Inventories written off
Interest expenses
Interest income
Property, plant and equipment written off
Intangible assets written off
Loss/(gain) on disposal of property, plant and equipment, net
Gain on disposal of assets held for sale
Trade payables written back
Provisions made, net
Cost of share-based payments
Share of results of associates
Unrealised loss on derivatives
Unrealised exchange difference
Operating profit before reinvestment in working capital
(Increase)/decrease in stocks and work-in-progress
Decrease/(increase) in projects-in-progress
(Increase)/decrease in debtors
Increase/(decrease) in creditors
Cash generated from operations
Interest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of asset held for sale
Increase in software development
Increase in development expenditure
Increase in patented technology
Investment in associate
(Increase)/decrease in amount due from associate
Subscription of convertible loan stocks
Acquisition of non-controlling interest
Net cash used in investing activities
34
9
10
5
5
5
5
5
5
5
5
5
5
18
9(b)
9(c)
10
10
12(a)
3,884
4,477
734
16
5
123
30
378
(179)
9
5
13
(260)
(50)
77
102
739
173
26
10,302
(4,998)
76
(1,287)
9,625
13,718
179
(374)
(418)
13,105
(2,007)
14
784
(227)
(2,007)
(86)
–
(1,140)
–
–
(4,669)
6,905
4,406
850
–
–
19
3
474
(152)
133
5
(54)
–
–
152
157
613
2,411
(8)
15,914
7,591
(5,024)
2,790
(12,167)
9,104
152
(477)
(1,032)
7,747
(2,320)
83
–
(530)
(1,390)
(34)
(453)
193
(919)
(595)
(5,965)
ZICOM GROUP LIMITED Consolidated Statement of Cash Flows
for the year ended 30 June 2014
(In Singapore dollars)
Note
2014
S$’000
2013
S$’000
Cash flows from financing activities:
(Decrease)/increase in amount due to directors
Repayments of bank borrowings
Dividends paid on ordinary shares
Dividends paid to non-controlling shareholders
Proceeds from exercise of employee share options
Proceeds from issue of shares
- by the Company to shareholders
- by subsidiary company to non-controlling interest
Proceeds from disposal of equity interest to non-controlling interest
Payment for minimum holding share buy-back
Repayment of hire purchase creditors
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
8
19
19
20
20
(3)
(2,956)
(2,489)
–
39
–
–
–
(90)
(2,250)
(7,749)
687
(87)
21,202
22
(1,188)
(2,742)
(97)
117
351
37
43
–
(1,263)
(4,720)
(2,938)
(101)
24,241
21,802
21,202
35
ANNUAL REPORT 2014 1.
Corporate information
This financial report of Zicom Group Limited (the “Company” or “Parent Entity”) and its subsidiaries for the year
ended 30 June 2014 was authorised for issue in accordance with a resolution of the directors on 25 September
2014.
Zicom Group Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly
traded on the Australian Securities Exchange.
The nature of the operations and principal activities of the Group are described in the Directors’ report.
2.
Summary of significant accounting policies
2.1
Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with
the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board (“AASB”). The financial report has also been
prepared on a historical cost basis except for derivative financial instruments which have been measured at
their fair values.
The financial report is presented in Singapore dollars and all values are rounded to the nearest thousand
dollars (S$’000) unless otherwise stated.
2.2
Statement of compliance
The financial report complies with Australian Accounting Standards and International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board.
(i)
Changes in accounting policies and disclosures
The Group has adopted the following new and amended Australian Accounting Standards and AASB
Interpretations as of 1 July 2013.
AASB 10 Consolidated Financial Statements
AASB 11 Joint Arrangements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement
AASB 119 Employee Benefits
AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting
Financial Assets and Financial Liabilities
AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual
Improvements 2009 – 2011 Cycle
AASB 2012-9 Amendment to AASB 1048 arising from the withdrawal of Australian
Interpretation 1039
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key
Management Personnel Disclosure Requirements [AASB 124]
AASB 1053 Application of Tiers of Australian Accounting Standards
The adoption of these standards and interpretations did not have any effect on the financial
performance or position of the Group.
36
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.2
Statement of compliance (cont’d)
(ii)
Accounting Standards and Interpretations issued but not effective
Certain Australian Accounting Standards and Interpretations have been recently issued or amended
but are not yet effective have not been adopted by the Group for the annual reporting period
ended 30 June 2014. Except for IFRS 15 and AASB 9 which the directors have yet to finalise their
assessment of the impact, the directors expect the adoption of these new and amended standards
and interpretations below will have no material impact on the financial statements in the period of
initial application.
AASB 2012 -3 Amendments to Australian Accounting Standards – Offsetting Financial Assets
and Financial Liabilities
AASB 9 Financial Instruments
AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial
Assets
AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and
Continuation of Hedge Accounting [AASB 139]
AASB 2013-5 Amendments to Australian Accounting Standards – Investment Entities
Annual Improvements to IFRSs 2010-2012 Cycle [IFRS 2, IFRS 3, IFRS 8, IAS 16, IAS 38, IAS 24]
AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework,
Materiality and Financial Instruments
Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciation and
Amortisation *
IFRS 15 – Revenue from Contracts with Customers *
* These IFRS amendments have not yet been adopted by AASB
2.3
Principles of consolidation
Basis of consolidation from 1 July 2010
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries
as at 30 June 2014. Control is achieved when the Group is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to affect those returns through its power over the
investee. Specially, the Group controls an investee if and only it the Group has:
l
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Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee)
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers
all relevant facts and circumstances in assessing whether it has power over an investee, including:
l
l
l
The contractual arrangement with the other vote holders of the investee
Right arising from other contractual arrangements
The Group’s voting rights and potential voting rights
37
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.3
Principles of consolidation (cont’d)
Basis of consolidation from 1 July 2010 (cont’d)
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there
are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when
the Group obtains control over the subsidiary and ceases when the Group losses control of the subsidiary.
Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included
in profit and loss from the date the Group gains control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the equity holders
of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling
interests having a deficit balance. When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group
assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction. If the Group loses control over a subsidiary, it:
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De-recognises the assets (including goodwill) and liabilities of the subsidiary
De-recognises the carrying amount of any non-controlling interests
De-recognises the cumulative translation differences recorded in equity
Recognises the fair value of the consideration received
Recognises the fair value of any investment retained
Recognises any surplus or deficit in profit or loss
Reclassifies the parent’s share of components previously recognised in other comprehensive income
to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly
disposed of the related assets or liabilities
2.4
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is
measured as the aggregate of the consideration transferred measured at acquisition date fair value and the
amount of any non-controlling interests in the acquiree. For each business combination, the Group elects
whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share
of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.
When the Group acquires a business, it assess the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and
pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host
contracts by the acquiree.
If the business combination is achieved in stages, the previously held equity interest is re-measured at its
acquisition date fair value and any resulting gain or loss is recognised in profit or loss. It is then considered
in the determination of goodwill.
38
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.4
Business combinations and goodwill (cont’d)
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the
acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument
and within the scope of AASB 139 Financial Instruments: Recognition and Measurement, is measured at fair
value with changes in fair value recognised either in profit or loss or as a change to other comprehensive
income. If the contingent consideration is not within scope of AASB 139, it is measured in accordance
with the appropriate AASB. Contingent consideration that is classified as equity is not re-measured and
subsequent settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred
and the amount recognised for non-controlling interests, and any previous interest held, over the net
identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of
the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the
assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts
to be recognised at the acquisition date. If the re-assessment still results in an excess of the fair value of the
net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or
loss.
After 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 each of the Group’s cash-generating units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
The cash-generating unit to which goodwill has been allocated is tested for impairment annually and
whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying
amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the
cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying
amount, an impairment loss is recognised in profit or loss. Impairment losses recognised for goodwill are
not reversed in subsequent periods.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed
of, the goodwill associated with the disposed operation is included in the carrying amount of the operation
when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is
measured based on the relative fair values of the disposed operation and the portion of the cash-generating
unit retained.
2.5
Operating segments
An operating segment is a component of an entity that engages in business activities from which it may
earn revenues and incur expenses (including revenues and expenses relating to transactions with other
components of the same entity), whose operating results are regularly reviewed by the entity’s chief
operating decision makers to make decisions about resources to be allocated to the segment and assess its
performance and for which discrete financial information is available.
Operating segments have been identified based on the information provided to the chief operating decision
makers – being the executive management team.
39
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.5
Operating segments (cont’d)
The group aggregates two or more operating segments when they have similar economic characteristics,
and the segments are similar in each of the following respects.
Nature of the products and services
Type or class of customer for the products and services
Methods used to distribute the products or provide the services, and
Nature of the regulatory environment
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately.
However, an operating segment that does not meet the quantitative criteria is still reported separately
where information about the segment would be useful to users of the financial statements.
Segment results include items directly attributable to a segment as well as those that can be allocated on
a reasonable basis. Unallocated items mainly comprise corporate assets, head office expenses, and income
tax assets and liabilities. Segment capital expenditure is the total costs incurred during the year to acquire
segment assets by geographical area that are expected to be used for more than one year.
2.6
Foreign currency translation
(a)
Functional and presentation currency
The presentation currency of Zicom Group Limited is Singapore dollars (S$). Each subsidiary in the
Group determines its own functional currency and items included in the financial statements of
each subsidiary company are measured using that functional currency.
(b)
Foreign currency transactions and balances
Transactions in foreign currencies are initially recorded in the functional currencies of the Company
and its subsidiaries at exchange rates ruling at the transaction dates. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance
sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency
are translated using the exchange rates as at the dates of the initial transaction. Non-monetary
items measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined.
Differences arising on the settlement or translation of monetary items are recognised in profit or
loss except for exchange differences arising on monetary items that form part of the Group’s net
investment in foreign operations, which are recognised initially in other comprehensive income and
accumulated under foreign currency translation reserve in equity.
(c)
Consolidated financial statements
On consolidation, the results and balance sheet of foreign operations are translated into Singapore
dollars using the following procedures:
l
l
Assets and liabilities are translated at the closing rate prevailing at reporting date; and
Income and expenses are translated at average exchange rates for the year, which
approximates the exchange rates at the dates of the transactions.
40
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.6
Foreign currency translation (cont’d)
(c)
Consolidated financial statements (cont’d)
The exchange differences arising on the translation are recognised in other comprehensive income.
On disposal of a foreign operation, the component of other comprehensive income relating to that
particular foreign operation is recognised in profit or loss.
2.7
Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. The cost of an item of property,
plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably. Such
cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-
term construction projects if the recognition criteria are met. When significant parts of property, plant
and equipment are required to be replaced at intervals, the Group recognises such parts as individual with
specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its
costs is recognised in the carrying amount of the plant and equipment as a replacement if the recognition
criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.
Subsequent to recognition, property, plant and equipment are measured at cost less accumulated
depreciation and accumulated impairment losses.
Freehold land has an unlimited useful life and is therefore not depreciated. Depreciation of an asset begins
when it is available for use and is computed on the straight-line basis over the estimated useful lives of the
assets as follows:
Leasehold properties
Buildings
Machinery
Office furniture and equipment
Leasehold improvements
Motor vehicles
Computers
over remaining period of the lease
expiring years 2039 to 2043
20 years
10 years
5 years
5 years
5 years
1 year
The carrying values of property, plant and equipment are reviewed for impairment when events or changes
in circumstances indicate that the carrying value may not be recoverable.
The residual value, useful life and depreciation method are reviewed at each financial year end and adjusted
prospectively, if appropriate.
An item of property, plant and equipment is de-recognised upon disposal or when no future economic
benefits are expected from its use. Any gain or loss on de-recognition of the asset is included in profit or
loss in the year the asset is de-recognised.
41
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.8
Intangible assets
Intangible assets acquired separately are measured initially at cost. The cost of an intangible asset acquired
in a business combination is its fair value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment
losses. Internally generated intangible excluding development and computer software costs are not
capitalised and related expenditure is recognised in profit and loss in the period in which such expenditure
is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite useful lives are amortised over their useful economic lives 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 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.
Intangible assets with indefinite useful lives or not yet available for use are not amortised end but are
tested for impairment annually or more frequently if the events and circumstances indicate that the
carrying value may be impaired either individually or at the cash-generating unit level. The assessment of
indefinite useful life is reviewed annually to determine whether it continues to be supportable. If not, the
change in useful life from indefinite to finite is made on a prospective basis.
Amortisation is calculated on a straight-line basis over the estimated useful lives of intangible assets as
follows:
Computer software
Customer list
Patented technology
Unpatented technology
Research and development costs
5 years
8 years
10 – 20 years
7 – 14 years
Research costs are expensed as incurred. Development expenditure on an individual project is recognised
only when the Group can demonstrate the technical feasibility of completing the intangible asset so that
it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the
asset will generate future economic benefits, the availability of resources to complete and the ability to
measure reliably the expenditure during the development. Amortisation begins when the development is
complete and the asset is available for use or sale. Any expenditure so capitalised is amortised over the
period of expected benefit from the related project.
Club membership
Club membership was acquired separately and is not amortised as it has an indefinite life.
Gains or losses from de-recognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised in profit or loss.
42
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.9
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment testing for an asset is required, the Group estimates the
asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to
sell and its value in use and is determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of assets. 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.
In determining fair value less cost to sell, recent market transactions are taken into account, if available.
If no such transaction can be identified, an appropriate valuation model is used. These calculations are
corroborated by valuation multiples, quoted share prices for publicly traded companies or other available
fair value indicators. Where the carrying amount of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. Impairment losses are recognised in
profit or loss.
The Group bases its impairment calculation on detailed budgets and forecast calculations which are
prepared separately for each of the Group’s cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally covering a period of five years. For longer
periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.
An assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses recognised for an asset other than goodwill may no longer exist or may
have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised
impairment loss is reversed only if there has been a change in the assumptions used to determine the
asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying
amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Reversal of an impairment loss is recognised in profit or loss.
2.10 Associates
An associate is an entity, over which the Group has significant influence. Significant influence is the power
to participate in the financial and operating policy decisions of the investee, but is not control or joint
control over those policies. The Group generally deems they have significant influence if they have over 20%
of the voting rights.
The Group’s investment in associate is accounted for using equity method from the date the Group obtains
significant influence until the date the Group ceases to have significant influence over the associate.
Under the equity method, investment in an associate is carried in the balance sheet at cost plus post-
acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate is
included in the carrying amount of the investment and is neither amortised nor tested for impairment.
The profit or loss reflects the Group’s share of the results of operations of the associate. Where there has
been a change recognised in other comprehensive income by the associate, the Group recognises its share
of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions
between the Group and the associate are eliminated to the extent of the interest in the associate.
43
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.10 Associates (cont’d)
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group
does not recognise further losses, unless it has incurred obligations or made payments on behalf of the
associate.
The reporting dates of the associate and the Group are identical and the associate’s accounting policies
conform to those used by the Group for like transactions and events in similar circumstances.
After application of the equity method, the Group determines whether it is necessary to recognise an
additional impairment loss on its investment in its associate. The Group determines at each reporting date
whether there is any objective evidence that the investment in the associate is impaired. If this is the case
the Group calculates the amount of impairment as the difference between the recoverable amount of the
associate and its carrying value and recognises the loss as “share of results of associates” in profit or loss.
Upon loss of significant influence over the associate, the Group measures and recognises any retained
investment at its fair value. Any difference between the carrying amount of the associate upon loss of
significant influence and the fair value of the retained investment and proceeds from disposal is recognised
in profit or loss.
2.11 Financial Instrument – Initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
(i)
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets at fair value through profit
or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as
derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial assets are recognised initially at fair value plus, in the case of financial assets not
recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition
of the financial asset.
Purchases or sales of financial assets that require delivery of assets within a time frame established
by regulations or convention in the market place (regular way trades) are recognised on the trade
date i.e., the date that the Group commits to purchase or sell the asset.
Subsequent measurement
For purpose of subsequent measurement financial assets are classified in four categories:
l
l
l
l
Financial assets at fair value through profit or loss
Loan and receivables
Held-to-maturity investments
Available-for-sale financial investments
44
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.11 Financial Instrument – Initial recognition and subsequent measurement (cont’d)
(i)
Financial assets (cond’t)
(a)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading
and financial assets designated upon initial recognition at fair value through profit and loss.
Financial assets are classified as held for trading if they are acquired for the purpose of selling
or repurchasing in the near term. Derivatives, including separated embedded derivatives are
also classified as held for trading unless they are designated as effective hedging instruments
as defined by AASB 139.
The Group has not designated any financial assets at fair value though profit or loss. Financial
assets at fair value through profit or loss are measured at fair value with net changes in fair
value presented as finance costs or finance income in profit or loss.
(b)
Loans and receivables
This category is the most relevant to the Group. Loan and receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market.
After initial measurement, such financial assets are subsequently measured at amortised cost
using the effective interest rate method, less impairment. Gains and losses are recognised in
profit or loss when the loans and receivables are derecognised or impaired, and through the
amortisation process.
(c)
Held-to-maturity investment
Non-derivative financial assets with fixed or determinable payments and fixed maturities are
classified as held to maturity when the Group has the positive intention and ability to hold
them to maturity. After initial measurement, held to maturity investments are measures at
amortised cost using the effective interest rate, less impairment. The Group did not have any
held-to-maturity investments during the years ended 30 June 2014 and 2013.
(d)
Available-for-sale (AFS) financial investments
AFS financial investment include equity investment and debt securities. Equity investments
classified as AFS are those that are neither classified as held for trading nor designated at fair
value through profit and loss. Debt securities in this category are those that are intended to
be held for an indefinite period of time and they may be sold in response to needs of liquidity
or changes in market conditions.
After initial measurement, AFS financial investments subsequently measured at fair value
with unrealised gains or losses recognised as other comprehensive income and credited in the
AFS reserve until the investment is de-recognised, at which time the cumulative gain or loss is
recognised in other operating income, or the investments is determined to be impaired, when
the cumulative loss is reclassified from the AFS reserve to profit or loss. Interest earned whilst
holding AFS financial investments is reported as interest income using effective interest rate
method.
Investments in equity instruments whose fair value cannot be reliably measured are
measured at cost less impairment loss.
45
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.11 Financial Instrument – Initial recognition and subsequent measurement (cont’d)
(i)
Financial assets (cond’t)
De-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily de-recognised when:
l
l
The rights to receive cash flows from the assets have expired; or
The Group has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party
under a “pass-through” arrangement; and either (a) the Group has transferred substantially
all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards
of ownership. When it has neither transferred nor retained substantially all of the risks and rewards
of the asset, nor transferred control of the asset, the Group continues to recognise the transferred
asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises
an associated liability. The transferred asset and the associated liability are measured on a basis that
reflects the rights and obligations that the Group has retained.
(ii)
Impairment of financial assets
The Group assesses, at each reporting date, whether there is objective evidence that a financial
asset or group of financial assets is impaired. An impairment exist if one or more events that has
occurred since the initial recognition of the asset (an incurred ‘loss event’) has an impact on the
estimated future cash flows of the financial asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include indications that the debtors or a group of debtors
is experiencing significant financial difficulty, default or delinquency in the interest or principal
payments, the probability that they will enter bankruptcy or other financial reorganisation and
observable data indicating that there is a measurable decrease in the estimated future cash flows,
such as changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether impairment
exists individually for financial assets that are individually significant, or collectively for financial
assets that are not individually significant. If the Group determines that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, it includes
the asset in a group of financial asset with similar credit risk characteristics and collectively assesses
them for impairment.
Assets that are individually assessed for impairment and for which an impairment loss is, or
continues to be, recognised are not included in a collective assessment of impairment.
The amount of any impairment loss identified is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows discounted at the financial
asset’s original effective interest rate.
46
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.11 Financial Instrument – Initial recognition and subsequent measurement (cont’d)
(ii)
Impairment of financial assets (cont’d)
Financial assets carried at amortised cost (cont’d)
The carrying amount of the asset is reduced through the use of an allowance account and the loss
is recognised in profit or loss. If, in a subsequent year, the amount of the estimated impairment
loss increases or decrease because of an event occurring after the impairment was recognised, the
previously recognised impairment loss is increased or reduced by adjusting the allowance account. If
a write-off is later recovered, the recovery is recognised in profit or loss.
(iii)
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through
profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in
an effective hedge, as appropriate.
All financial assets are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings, including
bank overdrafts and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit and loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling or
repurchasing in the near term. This category also includes derivative financial instruments entered
into by the Group that are not designated as hedging instruments in hedge relationships as defined
by AASB 139. Separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are
designated at the initial date of recognition, and only if the criteria in AASB 139 are satisfied. The
Group has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost using the effective interest rate method.
Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as
through the amortisation process.
47
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.11 Financial Instrument – Initial recognition and subsequent measurement (cont’d)
(iii)
Financial liabilities (cont’d)
De-recognition
A financial liability is re-recognised when the obligation under the liability is discharged or cancelled,
or expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the de-recognition of the original liability and the recognition
of a new liability. The difference in the respective carrying amounts is recognised in profit or loss.
(iv)
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance
sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
2.12 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value. These also include bank overdrafts which forms an integral part of the
Group’s cash management. Bank overdrafts are included within interest-bearing liabilities under current
liabilities in the balance sheet.
2.13
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the
inventories to their present location and condition are accounted for as follows:
-
-
Raw materials and trading stocks: purchase costs on a first-in first-out basis.
Finished goods and work-in-progress: costs of direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity.
When necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying
value of inventories to the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of
completion and the estimated costs necessary to make the sale.
2.14 Construction contracts
The Group principally operates fixed price contracts. Contract revenue and contract costs are recognised as
revenue and expenses, respectively, by reference to the stage of completion of the contract activity at the
balance sheet date, when the outcome of a construction contract can be estimated reliably.
The outcome of a construction contract can be estimated reliably when (i) total contract revenue can be
measured reliably; (ii) it is probable that the economic benefits associated with the contract will flow to the
entity; (iii) the costs to complete the contract and the stage of completion can be measured reliably; and (iv)
the contract costs attributable to the contract can be clearly identified and measured reliably so that the
actual costs incurred can be compared with prior estimates.
48
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.14 Construction contracts (cont’d)
Where the contract outcome cannot be measured reliably (principally during the early stages of a contract),
both contract revenue and expenses are not recognised until the contract outcome can be estimated reliably.
The stage of completion is measured by the proportion that contract costs incurred to date bear to the
estimated total contract cost. Only costs that reflect services performed are included in the estimated total
costs of the contract.
An expected loss on the construction contract is recognised as an expense immediately when it is probable
that total contract costs will exceed total contract revenue.
2.15 Fair value measurement
The Group measures financial instruments, such as forward currency options, at fair value at the reporting date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either:
i)
ii)
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be assessable to by the Group.
The fair value of an asset or liability is measured using the assumptions that the market participants would
use when pricing the asset or liability, assuming that the market participants act in their economic best
interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to
generate economic benefits by using the asset in its highest and best use by selling it to another market
participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and minimising
the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
l
l
l
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group
determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation
(based on the lowest level of input that is significant to the fair value measurement as a whole) at the end
of each reporting period.
49
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.16 Provisions
General
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a
past event, and it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it
is no longer probable that an outflow of economic resources will be required to settle the obligation, the
provision is reversed. If the effect of the time value of money is material, provisions are discounted using a
current pre- tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is
used, the increase in the provision due to the passage of time is recognised as a finance cost.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold or service provided. Initial
recognition is based on historical experience. The initial estimate of warranty-related costs is reviewed
annually and revised, if necessary.
Wages and salaries, annual leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled
within 12 months of the balance sheet date are recognised in respect of employees’ services up to the
reporting date and measured at the amounts expected to be paid when liabilities are settled.
Long service leave / retirement benefits
The liabilities for long service leave and retirement benefits, applicable to Australian and Thailand
subsidiaries respectively, are recognised in the provision for employee benefits and measured at the
present value of expected future payments to be made in respect of services provided by employees up
to the balance sheet date. Consideration is given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are discounted using market yields
at the reporting date on national government bonds with terms to maturity and currencies that match, as
closely as possible, the estimated future cash outflows.
2.17 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and
all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised
as income on a systematic basis over the period that the costs, which it is intended to compensate, are
expensed. Where the grant relates to an asset, it is deducted in arriving at the carrying amount of the asset.
2.18 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part
of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing
costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
50
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.19
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the
arrangement at inception date. The arrangement is assessed for whether fulfilment of the arrangement
is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset,
even if that right is not explicitly specified in the arrangement.
Group as a lessee
Finance leases that transfer substantially all the risks and benefits incidental to ownership of the leased
item to the Group, are capitalised at the inception of the lease at the fair value of the leased asset or, if
lower, at the present value of the minimum lease payments. Lease payments are apportioned between
the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged to profit or loss.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease
term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the
lease term.
Group as a lessor
Leases where the Group transfers substantially all the risks and benefits of ownership of the leased item is
accounted for in accordance with the Group’s policy for sales of goods as set out in note 2.21. Cost incurred
in connection with negotiating and arranging the finance lease is recognised as an expense when the
selling profit is recognised.
Leases where the Group retains substantially all the risks and rewards of ownership of the asset are
classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to
the carrying amount of the leased asset and recognised over the lease term on the same bases as rental
income. The accounting policy for rental income is set out in note 2.21.
2.20 Employee benefits
(a)
Defined contribution plans
The Group makes contributions to pension schemes as defined by the laws of the countries in which
it has operations.
Contributions are made by the Group, for its Australian subsidiaries, to employee accumulation
superannuation funds.
The Group’s companies in Singapore make contributions to the Central Provident Fund scheme, a
defined contribution pension scheme.
The subsidiary company incorporated and operating in the People’s Republic of China (“PRC”) is
required to provide certain staff pension benefits to its employees under existing PRC regulations.
Pension contributions are provided at rates stipulated by PRC regulators and are contributed to a
pension fund managed by government agencies, which are responsible for administering these
amounts for the subsidiary’s employees.
Contributions to defined contribution pension schemes are recognised as an expenses in the year in
which the related services is performed.
51
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.20 Employee benefits (cont’d)
(b)
Employee share option plan
Employees (including key management personnel) of the Group receive remuneration in the form
of share options as consideration for service rendered. The cost of these equity-settled share based
payment transactions with employees is measured by reference to the fair value of the options at the
date on which the options are granted. This cost is recognised in profit or loss, with a corresponding
increase in the share-based payments reserve, over the vesting period. The cumulative expenses
are recognised at each reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Group’s best estimate of the number of options that will ultimately vest.
The charge or credit to profit or loss for a period represents the movement in cumulative expense
recognised as at beginning and end of that period and is recognised in employee costs.
No expense is recognised for options that do not ultimately vest. The share-based payments reserve
is transferred to retained earnings upon expiry or forfeiture of the share options after its vesting
date. When the options are exercised, the share-based payments reserve is transferred to share
capital as new shares are issued.
2.21 Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group
and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is
measured at the fair value of the consideration received or receivable, taking into account contractually
defined terms of payment and excluding taxes or duty. The Group has concluded that it is acting as a
principal in all of its revenue arrangements. The specific recognition criteria described below must also be
met before revenue is recognised.
Sale of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the
goods have passed to the buyer, usually on delivery of the goods. Revenue is not recognised to the extent
where there are significant uncertainties regarding recovery of the consideration due or the possible return
of goods.
Revenue recognised on projects
Revenue on projects are recognised using the percentage of completion method. The stage of completion
is measured using the proportion of costs incurred to the estimated total costs to complete the project.
Losses, if any, are immediately recognised when their existence is foreseen.
Interest income
Interest income is recognised using the effective interest rate.
52
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.21 Revenue recognition (cont’d)
Dividends
Dividend income is recognised when the Group’s right to receive payment is established, which is generally
when shareholders approve the dividends.
Rental income
Rental income is accounted for on a straight-line basis over the lease terms. The aggregate cost of incentives
provided to lessees is recognised as a reduction of rental income over the lease term on a straight-line basis.
Commission income
Commission income is recognised on an accrual basis.
2.22 Taxation
(a)
Current tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted or substantively enacted at the balance
sheet date, in the countries where the Group operates and generates taxable income.
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 or directly in equity.
Management periodically evaluates positions taken in the tax returns with respect to situations
in which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.
(b)
Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the balance
sheet date between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred tax liabilities are recognised for all temporary differences, except:
-
-
When the deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
In respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse
in the foreseeable future.
53
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.22 Taxation (cont’d)
(b)
Deferred tax (cont’d)
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused
tax credits and unused tax losses to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, and the carry forward of unused tax credits and
unused tax losses can be utilised except:
-
-
When the deferred tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and
In respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred tax assets are recognised only to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or
part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each
balance sheet date and are recognised to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
year when the asset is realised or the liability is settled, based on tax rates and tax laws that have
been enacted or substantively enacted at the balance sheet date.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off
current income tax assets against current income tax liabilities and the deferred taxes relate to the
same taxable entity and the same taxation authority.
(c)
Goods and service tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax except:
-
Where the goods and services tax incurred on a purchase of assets or services is not
recoverable from the taxation authority, in which case the goods and services tax is
recognised as part of the 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 goods and services tax included.
The net amount of goods and services tax recoverable from, or payable to, the taxation authority is
included as part of receivables or payables on the balance sheet.
2.23 Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new shares
are deducted against share capital.
54
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.24 Related parties
A related party is defined as follows:
(a)
a person or a close member of that person’s family is related to the Group and Company if that person:
(i)
has control or joint control over the Company;
(ii)
has significant influence over the Company; or
(iii)
is a member of the key management personnel of the Group or Company or of a parent of the
Company.
(b)
An entity is related to the Group and the Company if any of the following conditions applies:
(i)
(ii)
the entity and the Company are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others).
one entity is an associate or joint venture of the other entity (or an associate or joint venture
of a member of a group of which the other entity is a member).
(iii)
both entities are joint ventures of the same third party.
(iv)
(v)
one entity is a joint venture of a third entity and the other entity is an associate of the third
entity.
the entity is a post-employment benefit plan for the benefit of employees of either the
Company or entity related to the Company. If the Company is itself such a plan, the
sponsoring employers are also related to the Company.
(vi)
the entity is controlled or jointly controlled by a person identified in (a).
(vii)
a person identified in (a) (i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity).
3.
Significant accounting judgements, estimates and assumptions
The preparation of the Group’s consolidated financial statements requires management to make judgements,
estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and
disclosure made. Uncertainty about these assumptions and estimates could result in outcomes that could require
a material adjustment to the carrying amount of the asset or liability affected in future periods.
(a)
Judgements made in applying accounting policies
(i)
Determination of control over investee
As at 30 June 2014, the Group holds 46.49% of equity interest in Curiox Biosystems Pte Ltd (“Curiox”)
and 918,652 convertible loan stocks which could potentially convert into a further 5.51% interest in
Curiox. It has been assessed that these potential rights are not substantive as they are not currently
exercisable. As the Group does not have the ability to direct relevant activities nor control the Board
but has significant influence over its financial and operating policy decisions, the investment in
Curiox is treated as an associated company as opposed to being a subsidiary company.
55
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 3.
Significant accounting judgements, estimates and assumptions (cont’d)
(b)
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year, are described below.
(i)
Useful lives of property, plant and equipment
The cost of property, plant and equipment is depreciated on a straight-line basis over its estimated
economic useful lives. Management estimates the useful lives of these property, plant and
equipment to be within 1 to 29 years. Changes in the expected level of usage and technological
developments could impact the economic useful lives and the residual values of these assets,
therefore, future depreciation charges could be revised. The carrying amount of the Group’s property,
plant and equipment at the balance sheet date is disclosed in Note 9 to the financial statements.
(ii)
Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all non-financial assets
at each balance sheet date. Goodwill and other intangibles with indefinite lives are tested for
impairment annually and at other times when such indicators exist. Other non-financial assets are
tested for impairment when there are indicators that the carrying amounts may not be recoverable.
When value in use calculations are undertaken, management must estimate the expected future
cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to
calculate the present value of those cash flows. Further details of the key assumptions applied in the
impairment assessment of goodwill are given in Note 10 to the financial statements.
(iii)
Impairment of loans and receivables
The Group assesses at each balance sheet date whether there is any objective evidence that a
financial asset is impaired. To determine whether there is objective evidence of impairment, the
Group considers factors such as the probability of insolvency or significant financial difficulties of the
debtor and default or significant delay in payments.
Where there is objective evidence of impairment, the amount and timing of future cash flows are
estimated based on historical loss experience for assets with similar credit risk characteristics. The
carrying amount of the Group’s loans and receivable at the balance sheet date is disclosed in note 21
to the financial statements.
(iv)
Construction contracts
The Group recognises contract revenue by reference to the stage of completion of the contract
activity at the balance sheet date, when the outcome of a construction contract can be estimated
reliably. The stage of completion is measured by reference to the proportion that contract costs
incurred for work performed to date bear to the estimated total contract costs. Significant
assumptions are required to estimate the total contract costs that will affect the stage of
completion. The estimates are made based on past experience and knowledge of the project
engineers. The carrying amounts of assets and liabilities arising from construction contracts at the
balance sheet date are disclosed in Note 15 to the financial statements.
56
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 3.
Significant accounting judgements, estimates and assumptions
(b)
Key sources of estimation uncertainty (cont’d)
(v)
Income taxes
The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved
in determining the provision for income taxes. There are certain transactions and computations for
which the ultimate tax determination is uncertain during the ordinary course of business. The Group
recognises liabilities for expected tax issues based on estimates of whether additional taxes will be
due. Where the final tax outcome of these matters is different from the amounts that were initially
recognised, such differences will impact the income tax and deferred tax provisions in the period in
which such determination is made. The carrying amount of the Group’s current tax payables and
deferred tax liabilities at 30 June 2014 was S$336,000 (2013: S$431,000) and S$2,745,000 (2013:
S$2,622,000) respectively. The Group also has deferred tax assets of S$2,418,000 (2013: S$1,943,000)
as at 30 June 2014.
4.
Segment information
Business segments
Identification of reportable segments
The group has identified its operating segments based on internal reports that are reviewed and used by the chief
operating decision maker and the executive management team in assessing performance and in determining the
allocation of resources. The operating segments are identified based on products and services as follows:
l
l
l
l
Offshore Marine, Oil and Gas Machinery – manufacture and supply of deck machinery, gas metering
stations, offshore structures for underwater robots and related equipment, parts and services.
Construction Equipment – manufacture and supply of concrete mixers and foundation equipment,
including equipment rental, parts and related services.
Precision Engineering and Technologies – manufacture of precision and automation equipment, medtech
equipment and products, medtech translation and engineering services.
Industrial and Mobile Hydraulics – supply of hydraulic drive systems, parts and services.
Inter-segment sales
Inter-segment sales are recognised based on internally set transfer price at arm’s length basis.
Unallocated revenue and expenses
Unallocated revenue comprises mainly non-segmental revenue. Unallocated expenses comprise mainly of non-
segmental expenses such as head office expenses.
57
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 4.
Segment information (cont’d)
Business segments (cont’d)
The following tables present revenue and profit information regarding operating segments for the years ended
30 June 2014 and 2013.
Offshore
marine, oil
and gas
machinery
S$’000
Precision
engineering
and
technologies
S$’000
Industrial
and mobile
hydraulics
S$’000
Construction
equipment
S$’000
Consolidated
S$’000
48,063
14
–
48,077
51,278
444
2
51,724
10,634
1,041
4
11,679
2,108
3
978
3,089
6,097
4,810
(4,761)
555
199
133
570
76
3,861
36
3,315
363
339
2,147
1,055
102
–
–
18
61
112,083
1,502
984
114,569
(984)
189
179
113,953
6,701
189
(2,068)
(739)
4,083
(378)
179
3,884
31
3,915
4,399
2,316
6,715
4,958
602
Year ended 30 June 2014
Revenue
Sales to external customers
Other revenue
Inter-segment sales
Total segment revenue
Inter-segment elimination
Unallocated revenue
Interest income
Total consolidated revenue
Results
Segment results
Unallocated revenue
Unallocated expenses
Share of results of associate
Profit before tax and finance cost
Finance costs
Interest income
Profit before taxation
Income tax benefit
Net profit after taxation
Other segment information
Capital expenditure
- property, plant and equipment
- intangible assets
Depreciation and amortisation
Other non-cash expenses
58
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 4.
Segment information (cont’d)
Business segments (cont’d)
Year ended 30 June 2013
Revenue
Sales to external customers
Other revenue
Inter-segment sales
Total segment revenue
Inter-segment elimination
Unallocated revenue
Interest income
Total consolidated revenue
Results
Segment results
Unallocated revenue
Unallocated expenses
Share of results of associates
Profit before tax and finance cost
Finance costs
Interest income
Profit before taxation
Income tax benefit
Net profit after taxation
Other segment information
Capital expenditure
- property, plant and equipment
- intangible assets
Depreciation and amortisation
Other non-cash expenses
Offshore
marine, oil
and gas
machinery
S$’000
Precision
engineering
and
automation
S$’000
Industrial
and mobile
hydraulics
S$’000
Construction
equipment
S$’000
Consolidated
S$’000
41,963
9
137
42,109
39,461
252
7
39,720
34,725
455
31
35,211
2,584
5
839
3,428
4,540
2,759
2,187
859
261
154
606
2,073
3,596
198
3,219
600
175
876
1,085
342
42
31
18
5
118,733
721
1,014
120,468
(1,014)
243
152
119,849
10,345
243
(2,748)
(613)
7,227
(474)
152
6,905
303
7,208
4,074
1,259
5,333
4,928
3,020
59
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 4.
Segment information (cont’d)
Geographical segments
The Group’s geographical segments for revenue and non-current assets are determined based on location of
customers and assets respectively.
The following table presents revenue and certain assets information regarding geographical segments for the
years ended 30 June 2014 and 2013.
Year ended 30 June 2014
Australia Malaysia Singapore
China
Revenue
S$’000
S$’000
S$’000
S$’000
United
States
S$’000
India
Bangladesh Thailand Others
Total
S$’000
S$’000
S$’000
S$’000
S$’000
Sales to external
customers
Other revenue
from external
customers
16,438
12,908
30,022
17,297
9,532
10,513
5,191
6,273
3,909
112,083
15
53
1,499
7
–
–
–
295
1
1,870
113,953
Other segment information
Segment non-
current assets
3,452
5,177
29,189
208
–
–
–
6,433
1,117
45,576
42
4
384
4,203
–
2,325
30
–
–
–
–
–
–
–
12
–
8
–
1,804
2,878
50,258
4,679
2,329
7,008
Investment in an
associate
Unallocated assets
Capital expenditure
- property, plant
and equipment
- intangible assets
60
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 4.
Segment information (cont’d)
Geographical segments (cont’d)
Year ended 30 June 2013
Australia Malaysia Singapore
China
Revenue
S$’000
S$’000
S$’000
S$’000
United
States
S$’000
India
Bangladesh Thailand Others
Total
S$’000
S$’000
S$’000
S$’000
S$’000
16,450
11,723
34,239
17,077
25,948
7
2,227
6,910
4,152
118,733
Sales to external
customers
Other revenue
from external
customers
47
7
945
10
Other segment information
Segment non-
current assets
3,882
4,379
29,962
243
Investment in an
associate
Unallocated assets
Capital expenditure
- property, plant
and equipment
- intangible assets
111
–
262
–
3,697
1,847
3
–
5.
Revenue, income and expenses
(i)
Revenue
Sales of goods
Rendering of services
Rental revenue
Revenue recognised on projects
–
–
–
–
–
–
–
–
–
34
73
1,116
119,849
–
7,304
543
46,313
2,578
2,863
51,754
4,234
2,014
6,248
–
–
98
167
63
–
Consolidated
2014
S$’000
63,923
6,614
5,927
35,619
112,083
2013
S$’000
76,094
6,860
6,335
29,444
118,733
61
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 5.
Revenue, income and expenses (cont’d)
(ii)
Other operating income
Interest income
Commission income
Gain on disposal of property, plant and equipment
Gain on disposal of asset held for sale
Service rendered
Government grants
Bad debts recovered
Trade discount received
Trade payables written back
Other revenue
(iii) Other operating expenses
Included in other operating expenses are the following:
Allowance for inventory obsolescence, net
Allowance for doubtful debts, net
Bad debts written off
Foreign exchange loss
Provision for product warranties, net
Loss on disposal of property, plant and equipment, net
Property, plant and equipment written off
Warranty expense charged directly to profit or loss
Inventories written off
Intangible assets written off
Consolidated
2014
S$’000
2013
S$’000
179
–
–
260
261
1,078
–
–
50
42
1,870
152
26
59
–
398
230
4
108
–
139
1,116
Consolidated
2014
S$’000
2013
S$’000
123
5
16
482
22
13
9
8
30
5
19
–
–
2,687
47
5
133
55
3
5
62
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars)
6.
Tax expense
Current income tax
- Current income tax charge
- Loss transferred under Group Relief Scheme
- Adjustments in respect of previous years
Deferred income tax
- Relating to the origination and reversal of temporary differences
- Adjustment in respect of previous years
Income tax benefit
Consolidated
2014
S$’000
2013
S$’000
1,065
(736)
(6)
(496)
142
(31)
1,392
(848)
(96)
(1,258)
507
(303)
A reconciliation between the tax expense and the product of accounting profit of the Group multiplied by the
applicable tax rate for the year ended 30 June was as follows:
Profit before taxation
Tax expense:
Tax at the domestic rates applicable to profits in the countries where the
group operates
Release of deferred tax liability on intangible assets
Non-deductible expenses
Non-taxable income
Partial tax exemption
Deferred tax asset not recognised
Recognition of deferred tax assets not previously recognised
Underprovision in prior years
Enhanced tax credits
Others
Tax benefit
Consolidated
2014
S$’000
2013
S$’000
3,884
6,905
992
(60)
520
(689)
(31)
404
(160)
136
(1,137)
(6)
(31)
1,402
(111)
530
(397)
(113)
265
(1,001)
411
(1,267)
(22)
(303)
The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.
63
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 6.
Tax expense (cont’d)
Deferred taxation as at 30 June relates to the following:
Consolidated balance
sheet
Consolidated statement of
comprehensive income
2014
S$’000
2013
S$’000
2014
S$’000
2013
S$’000
Deferred tax liabilities
Differences in depreciation
Intangible assets
Accrual for unconsumed leave
Provisions
Unutilised capital allowances
Unutilised tax losses
Deferred tax assets
Unutilised tax losses
Unutilised capital allowances
Provisions
Accrual for unconsumed leave
Differences in depreciation
Intangible assets
(2,285)
(479)
–
–
–
19
(2,745)
2,870
411
297
–
(360)
(800)
2,418
(2,386)
(636)
58
147
7
188
(2,622)
2,036
86
201
11
(28)
(363)
1,943
(97)
(157)
58
147
7
169
(840)
(325)
(96)
11
332
437
(354)
876
(48)
(22)
(147)
(7)
(188)
(1,529)
(78)
205
29
(170)
328
(751)
Consolidated
2014
S$’000
2013
S$’000
The directors estimate that the potential future income tax benefit at
30 June in respect of revenue tax losses not brought to account is
4,375
3,293
The benefit will only be obtained if –
(a)
(b)
the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable
the benefit to be realised;
the consolidated entity continues to comply with the conditions for deductibility imposed by tax legislation;
and
(c)
no changes in tax legislation adversely affect the consolidated entity’s ability to realise the benefit.
Tax Consolidation Legislation
Zicom Group Limited and its wholly owned Australian subsidiaries have not elected to form a tax consolidated
group.
64
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 7.
Earnings per share
Earnings per share are calculated by dividing the Group’s net profit attributable to equity holders of the Parent by
the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share are calculated by dividing the Group’s net profit attributable to equity holders of the
Parent by the adjusted weighted average number of ordinary shares which takes into account the effects of all
dilutive potential ordinary shares comprising share options granted to employees.
(a)
Earnings used in calculating basic and diluted earnings per share
Net profit attributable to equity holders of the Parent
(b) Weighted average number of ordinary shares for basic earnings
per share
Effect of dilution:
Share options
Adjusted weighted average number of ordinary shares
(c)
Earnings per share
Basic
Diluted
Consolidated
2014
S$’000
2013
S$’000
4,081
6,929
No. of shares (Thousands)
214,881
213,798
1,268
216,149
849
214,647
Singapore cents
1.90
1.89
3.24
3.23
There have been no transactions involving ordinary or potential ordinary shares between the reporting date and
the date of authorisation of these financial statements.
8.
Dividends
Declared and paid during the financial year:
- Final unfranked dividend for 2013: 0.55 Australian cents per share
- Interim unfranked dividend for 2014: 0.45 Australian cents per share
- Final unfranked dividend for 2012: 0.55 Australian cents per share
- Interim unfranked dividend for 2013: 0.45 Australian cents per share
Consolidated
2014
S$’000
2013
S$’000
1,377
1,112
–
–
2,489
–
–
1,488
1,254
2,742
Proposed but not recognised as a liability as at 30 June:
- Final unfranked dividend for 2014: 0.45 Australian cents per share
(2013: 0.55 Australian cents per share)
1,115
1,358
After the reporting date, the final dividend for 2014 was approved by the board of directors.
65
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars)
l
a
t
o
T
0
0
0
$
S
’
)
8
1
3
(
4
3
2
4
,
)
1
2
4
(
)
2
1
3
2
(
,
3
6
3
5
5
,
–
)
8
4
7
(
)
4
3
1
(
)
5
4
2
(
9
1
4
5
5
,
)
3
6
5
(
9
7
6
4
,
)
3
0
1
(
)
6
5
2
2
(
,
)
3
2
(
–
)
8
2
(
5
2
1
7
5
,
6
9
8
1
,
8
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66
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C
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars)
9.
Property, plant and equipment (cont’d)
(a)
The net book value of property, plant and equipment held under hire purchase are as follows:
Motor vehicles
Plant and equipment
Consolidated
2014
S$’000
177
3,681
3,858
2013
S$’000
240
5,008
5,248
Leased assets are pledged as security for the related finance lease liabilities.
(b)
During the year, the Group acquired property, plant and equipment with an aggregate cost of S$4,679,000
(2013: S$4,234,000) of which S$1,681,000 (2013: S$1,580,000) were acquired by means of hire purchase
financing. Cash payments of S$2,007,000 (2013: S$2,320,000) were made to purchase property, plant and
equipment. Included in additions is an amount of S$991,000 (2013: S$314,000) which was previously
included in stock but was converted and capitalised as fixed assets during the current financial year. In the
previous financial year, the balance of $20,000 included in additions was in relation to the provision for
reinstatement cost.
(c)
During the financial year, the Group disposed of property, plant and equipment with an aggregate net book
value of S$27,000 (2013: S$29,000). Sales proceeds amounting to S$14,000 (2013: S$83,000) were received
in cash.
(d)
During the financial year, the Group wrote off property, plant and equipment with an aggregate net book
value of approximately S$9,000 (2013: S$133,000).
(e)
The net book value of property, plant and equipment pledged as security are as follows:
Mortgage of leasehold properties
Mortgage of freehold land and buildings
Consolidated
2014
S$’000
2,999
5,000
7,999
2013
S$’000
3,125
5,527
8,652
67
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) l
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68
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C
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars)
10.
Intangible assets (cont’d)
Average remaining Amortisation period
(years) – 2014
Average remaining Amortisation period
(years) – 2013
Impairment tests for goodwill
Customer
list
Developed
technology
Computer
software
Unpatented
technology
Patented
technology
–
1
–
–
4
5
10.4
11.4
10
10
In accordance with AASB 3, the carrying value of the Group’s goodwill on acquisition as at 30 June 2014 was
assessed for impairment.
Group
Carrying value of capitalised goodwill
based on cash generating units
Sys-Mac Automation Engineering Pte Ltd
Zicom Group Limited
Orion Systems Integration Pte Ltd (“Orion”)
Biobot Surgical Pte Ltd (“BBS”)
Basis on
which
recoverable
values are
determined
As at
30.6.2014
As at
30.6.2013
S$’000
S$’000
Growth rate
per annum
2014
%
2013
%
Discount
rate per
annum
2014 2013
%
%
2,974
2,299
664
1,316
7,253
2,974 Value-in-use
2,291 Value-in-use
664 Value-in-use
1,316 Value-in-use
7,245
8% - 15% 8% - 20% 16% 16%
5% - 10% 5% - 10% 18% 18%
10% - 20% 17% 16%
15% - 30% 19% 19%
-
-
Goodwill is allocated for impairment testing purposes to the individual entity which is also the cash generating
unit (“CGU”).
The recoverable amount of each CGU is determined based on value-in-use calculations using cash flow projections
based on financial budgets approved by management covering a one to five year period. Budgeted revenue and
gross margin in the financial budgets are based on past performance and its expectation of market development.
Both Orion and BBS are start-up companies engaged in disruptive technologies and it is in the inherent nature
of such green field investments to experience protracted gestation in the process of gaining full adoption by
customers. Terminal growth rate of 1% were used for the above cash generating units with the exception of Orion
for which 0% was used.
The calculations of value in use for the CGUs are most sensitive to the following assumptions:
Budgeted gross margins – Gross margins are based on average values achieved in the three years preceding the
start of the budget period or if unavailable, based on management assessment of the markets. These are increased
over the budget period for anticipated efficiency improvements.
Growth rates – These are used to extrapolate cash flow projections beyond the period covered by the most recent
budgets and are based on management’s assessment of the markets and do not exceed the long-term average
growth rate for the industries relevant to the CGUs. Most recent budgets for Orion and BBS covered a period of 5
years, hence, no growth rate was used for extrapolation.
69
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 10.
Intangible assets (cont’d)
Pre-tax discount rates – Discount rate reflect the current market assessment of the risk specific to the CGUs.
In determining appropriate discount rates for each unit, regard has been given to the weighted average cost of
capital of the entity as a whole and the yield on a 15 year government bond at the beginning of the budgeted year.
Sensitivity to changes in assumption
Management believe that no reasonably possible change in any of the above key assumptions would cause the
carrying values of these CGUs to materially exceed their recoverable amounts.
No impairment loss was required for the financial years ended 30 June 2014 and 2013 for goodwill as their
recoverable values were in excess of their carrying values.
11.
Investment in subsidiaries
Investment in controlled entities, at cost
Less: Impairment loss
Parent Entity
2014
S$’000
54,544
(5,334)
49,210
2013
S$’000
54,544
(5,921)
48,623
The consolidated financial statements include the financial statements of Zicom Group Limited and the
subsidiaries listed in the following table.
The interest in each controlled entity has been adjusted to assessed recoverable amounts on the basis of their
underlying assets.
Country of
incorporation/
formation
Carrying value of
Parent Entity
Investment
2014
S$’000
2013
S$’000
Percentage
of equity held by the
Group
2014
%
2013
%
Australia
Singapore
5,035
44,175
4,448
44,175
100
100
100
100
Name of Company
Held by the Company:
Cesco Australia Limited
Zicom Holdings Pte Ltd
Controlled entities held by subsidiary
companies:
Cesco Equipment Pty Ltd
Zicom Pte Ltd
Zicom Equipment Pte Ltd
Foundation Associates Engineering Pte Ltd
Sys-Mac Automation Engineering Pte Ltd
MTA-Sysmac Automation Pte Ltd
Australia
Singapore
Singapore
Singapore
Singapore
Singapore
–
–
–
–
–
–
–
–
–
–
–
–
100
100
100
100
100
61
100
100
100
100
100
61
70
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 11.
Investment in subsidiaries (cont’d)
Name of Company
Country of
incorporation/
formation
Carrying value of
Parent Entity
Investment
2014
S$’000
2013
S$’000
Percentage
of equity held by the
Group
2014
%
2013
%
Controlled entities held by subsidiary
companies: (cont’d)
SAEdge Vision Solutions Pte Ltd
Integrated Automation Systems Pte Ltd
iPtec Pte Ltd
Orion Systems Integration Pte Ltd
Biobot Surgical Pte Ltd
PT Sys-Mac Indonesia
Zicom Cesco Engineering Co. Ltd
Zicom Cesco Thai Co. Ltd
Zicom Thai Hydraulics Co. Ltd
FA Geotech Equipment Sdn Bhd
Cesco Kemajuan Sdn Bhd
Hangzhou Cesco Machinery Co Ltd
Entity subject to class order relief
Singapore
Singapore
Singapore
Singapore
Singapore
Indonesia
Thailand
Thailand
Thailand
Malaysia
Malaysia
China
–
–
–
–
–
–
–
–
–
–
–
–
49,210
–
–
–
–
–
–
–
–
–
–
–
–
48,623
95
100
100
84
92
100
100
100
100
100
100
100
100
100
–
84
92
100
100
100
100
100
100
100
Pursuant to the Class Order 98/1418, relief has been granted to Cesco Australia Limited (“CAL”) and Cesco
Equipment Pty Ltd (“CEPL”) from the Corporations Act 2001 requirements for the preparation, audit and lodgement
of their financial reports.
As a condition for the Class Order, a deed of Cross Guarantee was executed between Zicom Group Limited (“ZGL”)
and CAL on 15 May 2008. The effect of the deed is that ZGL has guaranteed to pay any deficiency in the event
of winding up of CAL or if CAL does not meet its obligations under the terms of overdraft, loans, leases or other
liabilities subject to the guarantee.
CAL has also given a similar guarantee in the event that ZGL is wound up or if it does not meet its obligations
under the terms of overdraft, loans and leases or other liabilities subject to the guarantee.
On 9 May 2013, CEPL executed a Deed of Assumption with ZGL so that CEPL is joined to the Deed of Cross
Guarantee and assumes liability under and be bound by the Deed of Cross Guarantee as if CEPL was a Group Entity
when the deed of Cross Guarantee was executed.
71
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 11.
Investment in subsidiaries (cont’d)
The consolidated Income Statement and Balance Sheet of the entities that are members of the Closed Group are
as follows:
Consolidated Income Statement
Closed Group
Profit from continuing activities before taxation
Income tax expense
Net profit for the year
Accumulated losses at the beginning
Expiry of employee share options
Dividends paid
Accumulated losses at the end
2014
S$’000
2,311
–
2,311
(24,436)
25
(2,489)
(24,589)
Consolidated Balance Sheet
Closed Group
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Current assets
Cash and bank balances
Inventories
Trade and other receivables
Current liabilities
Payables
Interest-bearing liabilities
Provisions
NET CURRENT ASSETS
Non-current liabilities
Interest-bearing liabilities
Provisions
2014
S$’000
1,164
519
44,175
45,858
1,620
3,979
5,982
11,581
7,766
1,084
347
9,197
2,384
–
124
124
2013
S$’000
2,707
–
2,707
(24,537)
136
(2,742)
(24,436)
2013
S$’000
1,644
593
44,175
46,412
1,776
3,239
5,662
10,677
6,969
1,434
240
8,643
2,034
10
220
230
NET ASSETS
48,118
48,216
Equity attributable to equity holders of the Parent
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
71,601
1,106
(24,589)
48,118
71,631
1,021
(24,436)
48,216
72
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 12.
Investment in an associate
The Group has 46.49% (2013: 46.49%) equity interest in Curiox Biosystems Pte Ltd (“Curiox”), a company
incorporated in Singapore, which is principally involved in research and development on life sciences and
manufacturing of pharmaceutical and biological products for drug discovery and diagnostics.
(a) Movements in carrying amount of the Group’s investment in an associate
At beginning of year
Additional investment
Share of losses after income tax
Unrealised profits
At end of year
(b)
Summarised financial information
2014
S$’000
2,578
–
(739)
(35)
1,804
2013
S$’000
2,768
453
(613)
(30)
2,578
The following table illustrates summarised financial information relating to the Group’s associate:
Current assets
Non-current assets
Current liabilities
Net (liabilities)/assets
Fair value adjustments arising from acquisition
Proportion of Group’s investment
Share of net assets
Goodwill
Unrealised profits
Other equity transactions
Carrying amount of the Group’s investment in associate
Results :
Revenue
Cost of goods sold
Other income
Operating expenses
Loss before tax
Income tax expense
Fair value adjustments arising from acquisition
Net loss for the year
Group’s share of losses for the year
2014
S$’000
1,141
559
1,700
(3,038)
(1,338)
264
(1,074)
46.49%
(499)
2,399
(81)
(15)
1,804
527
(92)
435
350
(2,313)
(1,528)
(1)
(1,529)
(60)
(1,589)
(739)
2013
S$’000
1,257
537
1,794
(1,666)
128
325
453
46.49%
211
2,399
(46)
14
2,578
500
(105)
395
171
(1,842)
(1,276)
–
(1,276)
(60)
(1,336)
(613)
73
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars)
13.
Inventories
Raw materials/trading stocks, at cost or net realisable value
Work-in-progress, at cost
Finished goods, at cost or net realisable value
Stocks-in-transit, at cost
Total inventories at lower of cost and net realisable value
Consolidated
2014
S$’000
14,103
9,561
3,276
818
27,758
2013
S$’000
13,349
6,722
1,243
515
21,829
Inventories recognised as cost of sales for the year ended 30 June 2014 totalled S$60,543,000 (2013: S$61,851,000)
for the Group.
14.
Current Assets - Receivables
Consolidated
Trade receivables (a)
Allowance for impairment loss (b)
Advance payments to suppliers
Amount due from customers for contract work (note 15)
Deposits
Related party receivables (c):
- Associate
- trade
- non-trade
- convertible loan stocks
- loans
- Other related parties (trade)
Other receivables
2014
S$’000
24,316
(163)
24,153
1,817
10,075
155
622
282
460
500
45
952
39,061
2013
S$’000
23,827
(317)
23,510
1,006
8,743
158
155
109
–
–
125
1,026
34,832
(a)
Please refer to note 21(d) for the ageing analysis of trade receivables past due but not impaired.
(b)
Allowance for impairment loss
Trade and other receivables are non-interest bearing and are generally due when invoiced or on 30 to
60 days term. An allowance for impairment loss is recognised when there is objective evidence that an
individual receivable is impaired.
74
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 14.
Current Assets - Receivables (cont’d)
(b)
Allowance for impairment loss (cont’d)
The group has trade and other receivables that are impaired at the balance sheet date and the movements
of the allowance accounts used to record the impairment are as follows:
Consolidated
Individually impaired
Trade receivables
2014
S$’000
2013
S$’000
Non-trade receivables
2013
2014
S$’000
S$’000
Nominal amounts
Less: allowance for impairment
Movements in allowance accounts:
As at 1 July
Charge for the year
Written off
Write back
Currency realignment
As at 30 June
163
(163)
–
317
5
(158)
–
(1)
163
317
(317)
–
374
1
(55)
(1)
(2)
317
26
(26)
–
26
–
–
–
–
26
26
(26)
–
26
–
–
–
–
26
(c)
For related party receivables, please refer to note 23 for terms and conditions.
(d)
Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair
value.
15.
Gross amount due from/(to) customers for contract work
Contract costs incurred to date
Recognised profits to date
Progress billings and advances
Amount due from customers for contract work, net
Gross amount due from customers for contract work (note 14)
Gross amount due to customers for contract work (note 16)
Consolidated
2014
S$’000
17,790
6,993
24,783
(18,564)
6,219
10,075
(3,856)
6,219
2013
S$’000
14,994
4,712
19,706
(13,410)
6,296
8,743
(2,447)
6,296
Advances received included in gross amount due to customers for
contract work
5,470
–
Revenue recognised on projects is disclosed in note 5.
75
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 16.
Current Liabilities - Payables
Trade, other payables and accruals (a)
Amount due to customers for contract work (note 15)
Owing to related parties (b)
- trade
- non-trade
Consolidated
2014
S$’000
26,608
3,856
187
50
30,701
2013
S$’000
18,221
2,447
26
53
20,747
(a)
All amounts are non-interest bearing and are normally settled on 30 to 90-day terms.
(b)
Related parties
For related parties’ payable, please refer to note 23 for terms and conditions.
(c)
Due to the short-term nature of these payables, the carrying value is assumed to approximate its fair value.
17.
Interest-Bearing Liabilities
Consolidated
2014
S$’000
526
5,802
591
–
1,734
1,651
1,801
12,105
620
1,153
985
2,758
2013
S$’000
153
2,817
611
239
1,311
2,380
1,948
9,459
1,236
2,504
1,407
5,147
Current
Bank overdraft (a)
Bills payable (b)
Factory loan (c)
Machinery loan (d)
Invoice finance facility (e)
Term loan (f)
Lease liabilities (note 25)
Non-Current
Factory loan (c)
Term loan (f)
Lease liabilities (note 25)
76
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 17.
Interest-Bearing Liabilities (cont’d)
Details of the secured borrowings are as follows:
(a)
Bank overdraft amounting to S$462,000 (2013: S$nil) which bears interest at 6.00% to 6.50% per annum is
secured by corporate guarantee from Zicom Holdings Pte Ltd (“ZHPL”).
(b)
(c)
Bank overdraft of S$55,000 (2013: S$nil) which bears interest at 7.90% per annum is secured by a corporate
guarantee from Zicom Cesco Engineering Co. Ltd.
The remaining bank overdraft amounting of S$9,000 (2013: S$153,000) which bears interest at 7.90% per
annum is secured by a mortgage of the subsidiary company’s freehold land and buildings at 700/895 Moo
2, Amata Nakorn Industrial Estate, Chonburi, Thailand and a corporate guarantee from ZHPL.
Bill payable amounting to S$5,802,000 (2013: S$2,817,000) with an average maturity of 3 - 4 months (2013:
2.5 - 4 months) bears interest at 1.58% to 2.50% (2013: 2.17% to 2.34%) per annum. All bill payables are
secured by a corporate guarantee given by ZHPL.
Factory loans amounting to S$790,000 (2013: S$1,031,000) which is made up of current and long-term
portions of S$240,000 (2013: S$240,000) and S$550,000 (2013: S$791,000) respectively is repayable over
the remaining 38 monthly instalments at fixed interest rate of 1.75% (2013: 1.75%) per annum. It is secured
by a legal mortgage on ZHPL’s leasehold property at No. 9 Tuas Avenue 9 Singapore 639198 and a corporate
guarantee from the Company.
The remaining factory loan amounting to S$421,000 (2013: S$816,000) which is made up of current
and non-current portions of S$351,000 (2013: S$371,000) and S$70,000 (2013: S$445,000) respectively
is repayable over the remaining 14 monthly instalments at a floating interest rate of 3.9% (2013: 4.13%)
per annum. It is secured by a legal mortgage of the subsidiary company’s freehold land and buildings at
700/895 Moo 2, Amata Nakorn Industrial Estate, Chonburi, Thailand and a corporate guarantee from ZHPL.
(d)
All machinery loans were fully repaid in the current financial year. As at 30 June 2013, machinery loan
amounting to S$156,000 bore interest at 4.13% per annum and was secured by a legal mortgage on the
subsidiary company’s freehold land and buildings at 700/895 Moo 2, Amata Nakorn Industrial Estate,
Chonburi, Thailand and a corporate guarantee from ZHPL.
The remaining machinery loan of S$83,000 which was outstanding as at 30 June 2013 bore interest at a
fixed rate of 8.62% per annum and was secured by a fixed and floating charge over all the assets of Cesco
Australia Limited (“CAL”).
(e)
Invoice finance facility amounting to S$1,073,000 (2013: S$1,311,000) which bears floating interest rate at
5.62% to 5.86% (2013: 5.88% to 6.64%) is secured by a fixed and floating charge over all the assets of CAL.
The remaining invoice finance facility amounting to S$661,000 (2013: S$nil) which is secured by a corporate
guarantee given by ZHPL bears fixed interest rates until expiry, ranging from 2.21% to 2.41% per annum, at
which point interest rate resets.
77
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 17.
Interest-Bearing Liabilities (cont’d)
(f)
Term loans amounting to S$1,612,000 (2013: S$2,067,000) comprising current and long-term portions of
S$459,000 (2013: S$455,000) and S$1,153,000 (2013: 1,612,000) respectively which bears interest at fixed
rates of 1.75% per annum is payable over 5 years and is secured by a corporate guarantee given by ZHPL.
Short term loan with a tenure of 3 months amounting to S$300,000 (2013: S$nil) bears interest at fixed
rate of 2.35% per annum is secured by a corporate guarantee given by ZHPL.
The remaining term loan due within the next 12 months amounting to S$892,000 (2013: S$2,335,000
made up of current portion: S$1,443,000; non-current portion: S$892,000) bears interest at floating rates of
2.53% (2013: 2.38%) per annum and is secured by a corporate guarantee given by ZHPL.
Term loan amounting to S$482,000 outstanding as at 30 June 2013 which bore interest at 5.50% per
annum and secured by a legal mortgage on the subsidiary company’s freehold land and buildings at
700/895 Moo 2, Amata Nakorn Industrial Estate, Chonburi, Thailand and a corporate guarantee from ZHPL
was fully repaid in the current financial year.
(g)
Financing facilities available
As at 30 June 2014, the Group had available S$117,000,000 (2013: S$138,200,000) of undrawn committed
borrowing facilities and all bank covenants were complied with.
18.
Provisions
Current
Product warranties
Employee benefits
Reinstatement costs
Non-Current
Employee benefits
Reinstatement costs
Movements in provision for warranties:
At beginning of year
Additional provision
Written back
Utilised
Currency realignment
At end of year
Warranty expense written-off directly to profit or loss (note 5)
78
Consolidated
2014
S$’000
679
233
54
966
247
143
390
2013
S$’000
927
211
–
1,138
246
197
443
Consolidated
2014
S$’000
2013
S$’000
927
413
(391)
(270)
–
679
8
1,061
862
(815)
(183)
2
927
55
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 18.
Provisions (cont’d)
Movements in provision for employee benefits
At beginning of year
Additional provision
Utilised
Currency realignment
At end of year
Movements in provision for reinstatement costs:
At beginning of year
Additional provision
Currency realignment
At end of year
Consolidated
2014
S$’000
2013
S$’000
457
55
(29)
(3)
480
388
105
–
(36)
457
Consolidated
2014
S$’000
2013
S$’000
197
–
–
197
183
20
(6)
197
In accordance with the lease agreement, the Group must reinstate certain subsidiaries’ leased premises in
Singapore and Australia to its original condition at the end of the lease term.
In the previous financial year, an additional provision of S$20,000 was raised in respect of the Group’s obligation to
remove leasehold improvements from the leased premises in Singapore and is included in the carrying amount of
leasehold improvements. None was raised during the current financial year.
Because of the long-term nature of liability, the greatest uncertainty in estimating the provision is the costs that
will ultimately be incurred. The provision has been calculated using a pre-tax discount rate of 6%.
19.
Contributed equity
(a)
Share Capital
Parent Entity
Consolidated
2014
2013
No. of shares (Thousands)
2014
S$’000
2013
S$’000
Ordinary fully paid shares
214,547
214,752
37,593
37,623
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All
ordinary shares carry one vote per share without restriction.
79
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 19.
Contributed equity (cont’d)
(b) Movements in ordinary share capital
At 1 July 2012
Issue of shares under Zicom Employee Share and Option Plan (i)
Issue of shares in lieu of cash performance bonus (ii)
At 30 June 2013
Issue of shares under Zicom Employee Share and Option Plan (i)
Minimum holding share buy-back (iii)
At 30 June 2014
Company
Number of
ordinary shares
(Thousands)
212,452
517
1,783
214,752
195
(400)
214,547
Group
S$’000
37,083
189
351
37,623
60
(90)
37,593
(i)
Issue of shares under Zicom Employee Share and Option Plan (“ZESOP”)
On 8 October 2012, 24 October 2012 and 4 March 2013, the Company issued and allotted a total
of 517,000 ordinary shares, fully paid at A$0.18 per share, under the ZESOP. Such shares ranked pari
passu with the existing ordinary shares of the Company.
On 1 October 2013, the Company issued and allotted 155,000 and 40,000 ordinary shares, fully paid
at A$0.17 and A$0.18 per share respectively, under the ZESOP. Such shares ranked pari passu with the
existing ordinary shares of the Company.
(ii)
Issue of shares in lieu of cash performance bonus
On 21 November 2012, the board approved the issue and allotment of 430,000 shares to executives,
fully paid at A$0.155 per share, as part payment of their performance bonus for the year ended
30 June 2012. Such shares ranked pari passu with the existing ordinary shares of the Company.
Pursuant to the shareholders’ meeting on 13 November 2012, 888,000, 195,000 and 270,000 shares
were allotted to Messrs Giok Lak Sim, Kok Hwee Sim and Kok Yew Sim respectively, fully paid at
A$0.155 per share as part payment of their performance bonus for the year ended 30 June 2012.
Such shares ranked pari passu with the existing ordinary shares of the Company.
(iii) Minimum holding share buy-back
ZGL completed a share buy-back exercise for holders of unmarketable parcels. A total of 400,000
ordinary shares were bought back by the Company at A$0.192 per share and cancelled.
80
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 20.
Cash and cash equivalents
Cash at bank and in hand
Short-term fixed deposits
For the purpose of cash flow statements, cash and cash equivalents
comprise the following as at 30 June:
Cash and short-term deposits
Bank overdrafts
Consolidated
2014
S$’000
18,895
3,433
22,328
22,328
(526)
21,802
2013
S$’000
19,956
1,399
21,355
21,355
(153)
21,202
Cash at bank balance amounting to S$2,660,000 as at 30 June 2014 (2013: S$2,312,000) earned interest at
floating rate based on daily bank deposit rates ranging of 0.24% to 3.33% (2013: 1.29% to 2.73%) per annum. The
remaining cash at bank balances are non-interest bearing.
Short-term deposits are made for varying periods of one day to 3 months depending on the immediate cash
requirements of the Group, and earn interests at the respective short-term rates.
21.
Financial instruments
(a)
Financial risk management objectives and policies
The Group and the Company is exposed to financial risks arising from its operations and the use of financial
instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency
risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks.
The Group enters into derivative transactions, principally foreign currency forward contracts and foreign
currency options, purpose is to manage currency risk arising from the Group’s operations and sources of
finance. The Group does not apply hedge accounting for such derivatives.
The following sections provide details regarding the Group’s exposure to the above-mentioned financial
risks and the objectives, policies and processes for the management of these risks.
(b)
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of the Group’s financial instruments will
fluctuate because of changes in market interest rates.
The Group’s exposure to interest rate risk arises primarily from loans and borrowings which have floating
interest rates. The Group’s policy with respect to controlling this risk is linked to a regular review of the
total debt position and assessment of the impact of adverse changes in interest rates applicable to new
and existing debt facilities. Consideration is given to potential renewal of existing positions, alternative
financing, alternative hedging positions and mix of fixed and variable interest rates.
81
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 21.
Financial instruments (cont’d)
(b)
Interest rate risk (cont’d)
At the balance sheet date, the Group had the following mix of financial assets and liabilities exposed to
variable interest rate risk:
Financial assets
Cash and bank balances
Financial liabilities
Bank overdraft
Invoice finance facility
Factory loans
Machinery loans
Term loan
Consolidated
2014
S$’000
2013
S$’000
2,660
2,312
526
1,073
421
–
892
2,912
153
1,311
816
156
2,335
4,771
Sensitivity analysis of interest rate risk
As at 30 June 2013, if interest rates had increased/decreased by 25 basis point with all other variables held
constant, post-tax profits for the consolidated entity for the financial year would be (S$1,000)/S$1,000
(2013: (S$10,000)/S$9,000) lower/higher, as a result of the higher/lower interest rates. Accordingly, the
Group’s equity as at year-end will be (S$1,000)/S$1,000 (2013: (S$10,000)/S$9,000) lower/higher.
(c)
Foreign currency risk
Foreign currency risk occurs as a result of the Group’s transactions that are not denominated in their
respective functional currencies. These transactions arise from the Group’s ordinary course of business. The
Group transacts business in various currencies and as a result, is largely exposed to movements in exchange
rates of United States dollars, Sterling pounds, Euros and Australian dollars.
The Group manages its foreign exchange exposure by a policy of matching, as far as possible, receipts and
payments in each individual currency. The Group also uses foreign currency forward contracts and foreign
currency options to hedge a portion of its future foreign exchange exposure. The Group uses these currency
contracts purely as a hedging tool and does not take positions in currencies with a view to make speculative
gains from currency movements.
The following sensitivity analysis is based on the foreign exchange risk exposure in existence at the balance
sheet date. As at 30 June, if exchange rates had moved, as illustrated in the table below, with all other
variables held constant, post tax profit and equity would have been affected as follows:
82
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 21.
Financial instruments (cont’d)
(c)
Foreign currency risk (cont’d)
Consolidated
USD
- strengthened 3% (2013: 3%)
- weakened 3% (2013: 2%)
EUROS
- strengthened 5% (2013: 4%)
- weakened 5% (2013:3%)
AUD
- strengthened 3% (2013: 3%)
- weakened 3% (2013: 7%)
GBP
- strengthened 3% (2013: 5%)
- weakened 3% (2013: 3%)
(d)
Credit risk
Post tax profit
Higher/(lower)
2014
S$’000
2013
S$’000
168
(168)
8
(8)
47
(47)
(5)
5
300
(200)
(5)
4
67
(157)
(4)
3
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty
default on its obligations. The Group’s exposure to credit risk arises primarily from trade and other
receivables.
The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased
credit risk exposure. The Group trades only with recognised and creditworthy third parties. Credit risk is
monitored through careful selection of customers and their balances are monitored on an ongoing basis
with the result that the Group’s exposure of bad debts has not been significant.
Credit risk concentration profile
The Group determines concentration of credit risk by monitoring the country profile of its trade receivables
on an on-going basis. The credit risk concentration profile of the Group’s trade receivables at the balance
sheet date is as follows:
83
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 21.
Financial instruments (cont’d)
(d)
Credit risk (cont’d)
Austria
Australia
Bangladesh
Hong Kong
Indonesia
Malaysia
New Zealand
People’s Republic of China
Singapore
Thailand
United States of America
Vietnam
Others
2014
2013
S$’000
% of total
S$’000
% of total
98
3,378
3,014
188
81
3,913
304
2,089
9,543
738
726
–
81
24,153
0.4%
14.0%
12.5%
0.8%
0.3%
16.2%
1.3%
8.6%
39.5%
3.1%
3.0%
–
0.3%
100%
201
3,290
1,381
160
134
5,593
–
3,159
5,954
2,250
1,290
58
40
23,510
0.8%
14.0%
5.9%
0.7%
0.6%
23.8%
–
13.4%
25.3%
9.6%
5.5%
0.2%
0.2%
100%
At the balance sheet date, approximately 68.5% (2013: 63.3%) of the Group’s trade receivables were due
from 16 (2013: 18) major customers.
Financial assets that are neither past due nor impaired
Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good
payment record with the Group. Cash and short term deposits are placed with reputable banks.
Included in trade receivables as at 30 June 2014, S$2,522,000 (2013: S$103,000) are arranged to be settled
via letters of credit issued by reputable banks in countries where the customers are based.
Financial assets that are past due but not impaired
As at 30 June 2014, the ageing analysis of trade receivables is as follows:
Consolidated
2014
S$’000
4,612
1,712
1,322
164
2,833
10,643
2013
S$’000
6,723
4,258
992
260
2,711
14,944
Less than 30 days
30 to 60 days
61 to 90 days
91 to 120 days
More than 120 days
Financial assets that are impaired
Please refer to note 14 for details.
84
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 21.
Financial instruments (cont’d)
(e)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to
shortage of funds. The Group’s exposure to liquidity risk arises primarily from mismatches of the maturities
of financial assets and liabilities.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use
of stand-by credit facilities.
The following table summarises the maturity profile of the Group’s financial assets and liabilities at the
balance sheet date based on contractual undiscounted payments. The expected timing of actual cash flows
from these financial instruments may differ.
6 months
or less
S$’000
7 to 12
months
S$’000
After 1 year
but not more
than 5 years
S$’000
5 to 10
years
S$’000
Consolidated
2014
Financial assets:
Trade receivables
Other receivables
Investment securities
Loan receivable
Cash and bank balances
Total undiscounted financial assets
Financial liabilities:
Trade payables
Other payables
Unrealised loss on derivatives
Loans and borrowings
Total undiscounted financial liabilities
Total net undiscounted financial
24,225
670
–
500
22,328
47,723
9,777
6,350
173
10,965
27,265
–
93
–
531
–
624
–
1,078
–
1,353
2,431
–
–
1
471
–
472
–
389
–
2,884
3,273
assets/(liabilities)
20,458
(1,807)
(2,801)
Consolidated
2013
Financial assets:
Trade receivables
Other receivables
Investment securities
Loan receivable
Cash and bank balances
Total undiscounted financial assets
Financial liabilities:
Trade payables
Other payables
Unrealised loss on derivatives
Loans and borrowings
Total undiscounted financial liabilities
Total net undiscounted financial
23,790
471
–
–
21,355
45,616
8,138
6,216
2,411
7,821
24,586
–
295
–
–
–
295
–
1,283
–
1,883
3,166
–
–
1
1,031
–
1,032
–
443
–
5,370
5,813
assets/(liabilities)
21,030
(2,871)
(4,781)
Total
S$’000
24,225
763
1
1,502
22,328
48,819
9,777
7,817
173
15,202
32,969
15,850
23,790
766
1
1,031
21,355
46,943
8,138
7,942
2,411
15,074
33,565
13,378
85
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 21.
Financial instruments (cont’d)
(f)
Derivative financial instruments
(i)
Fair value of financial instruments that are carried at fair value
Quoted prices
in active
markets for
identical
instruments
(Level 1)
S$’000
Significant
other
observable
inputs
(Level 2)
S$’000
Significant
unobservable
inputs
(Level 3)
S$’000
Total
S$’000
1
1
–
–
1
1
–
–
–
–
173
173
–
–
2,411
2,411
–
–
–
–
–
–
–
–
1
1
173
173
1
1
2,411
2,411
Group
2014
Financial assets:
Available-for-sale
At 30 June 2014
Financial liabilities:
Derivatives – foreign currency options
At 30 June 2014
2013
Financial assets:
Available-for-sale
At 30 June 2013
Financial liabilities:
Derivatives – foreign currency options
At 30 June 2013
Fair value of available-for-sale financial assets is derived from quoted market prices in active markets.
The Group enters into derivative financial instruments such as foreign currency options with
financial institutions to hedge its foreign currency risks. Such derivative financial instruments are
initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently re-measured at fair value. Any gains or losses arising from changes in fair value of
derivatives are taken directly to profit or loss.
The fair value of these foreign currency options are derived from mark to market valuations using the
Monte Carlo valuation model which incorporates various inputs such as foreign exchange spot and
forward rates, volatility, tenure, time value and forward rates curves of the underlying commodity.
The Group’s own non-performance risk as at 30 June 2014 was assessed to be insignificant.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities
when the fair value is negative.
There were no transfers between level 1 and level 2 during the financial years 2014 and 2013.
86
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 21.
Financial instruments (cont’d)
(f)
Derivative financial instruments (cont’d)
(i)
Fair value of financial instruments that are carried at fair value (cont’d)
Reconciliation of Level 3 fair value movements
Opening balance
Total gains or losses
in other comprehensive income
in profit or loss
Reclassified to investment in subsidiary
Ending balance
2014
S$’000
2013
S$’000
–
–
–
–
–
300
–
–
(300)
–
(ii)
Fair value of financial instruments by classes that are not carried at fair value and whose carrying
amounts are reasonable approximation of fair value
Management has determined that the carrying amounts of cash and short-term deposits, current
trade and other receivables, current trade and other payables, current interest-bearing liabilities
reasonably approximate their fair values because they are mostly short-term in nature and repriced
frequently.
(iii)
Fair value of financial instruments by classes that are not carried at fair value and whose carrying
amounts are not reasonable approximation of fair value
The fair values of non-current finance lease liability and bank loans, which are not carried at fair
value in the balance sheet, is presented in the following table. The fair value is estimated using
discounted cash flow analysis using discount rate that reflects the issuer’s borrowing rate at the end
of the reporting period. The Group’s own non-performance risk as at 30 June 2014 was assessed to
be insignificant.
Carrying Amount
Fair Value
2014
S$’000
2013
S$’000
2014
S$’000
2013
S$’000
Financial liabilities:
Obligations under finance leases
Bank loans
985
1,773
1,407
3,740
955
1,600
1,356
3,405
87
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 22.
Capital Management
The Group’s primary objective when managing capital structure is to maintain an efficient mix of debt and equity
in order to achieve a low cost of capital while taking into account the desirability of retaining financial flexibility to
pursue business opportunities and adequate access to liquidity to mitigate the effect of unforeseen events on cash
flows.
Management regularly reviews the company’s capital structure and make adjustments to reflect economic
conditions, business strategies and future commitments. Management may adjust the dividend payments to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.
Management monitors capital through the gearing ratio (net debt / total capital). The Group defines net debts as
interest-bearing liabilities less cash and cash equivalents. Capital includes equity attributable to the equity holders
of the Parent and reserves. The Group’s policy is to keep its gearing ratio at less than 50%.
The gearing ratios as at 30 June 2014 and 30 June 2013 were 0% as cash and cash equivalents exceeded interest-
bearing liabilities.
23.
Related party disclosures
Parties are considered to be related if one party has the ability to control the other party or exercise significant
influence over the other party in making financial and operating decisions.
In addition to the related party information disclosed elsewhere in the financial statements, the following are
transactions with related parties at mutually agreed terms and amounts:
(a)
Sale and purchase of goods and services
Minority shareholder of a subsidiary company
- Sales
- Purchases
Associates
- Sales
- Interest income
- Rental & utilities income
- Secretarial fees
Other related parties
- Sales
- Commission paid
Consolidated
2014
S$’000
2013
S$’000
167
312
464
84
134
24
268
–
261
241
161
34
145
24
27
35
88
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 23.
Related party disclosures (cont’d)
(b)
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made at arm’s length basis at normal market prices and on
normal commercial terms.
Convertible loan stocks from Curiox Biosystems Pte Ltd (“Curiox”) amounting to $919,000 (2013:
S$919,000) earns interest at 5% per annum. These will be either repaid or redeemed by Curiox equally on
2 maturity dates, 31 December 2014 and 31 December 2015. Zicom Holdings Pte Ltd holds the right to
convert these into preference shares in Curiox on these 2 maturity dates.
As at 30 June 2014, $500,000 (2013: $nil) was extended to Curiox as an interest-bearing loan at 5% per
annum.
Outstanding non-trade balances as at year-end with other related parties are unsecured, interest-free
and have no fixed terms of repayment. For information regarding outstanding balance on related party
receivables and payables at year-end, please refer to notes 14 and 16.
(c)
Compensation of key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
Total compensation
24.
Share-based payment plans
(a)
Recognised share-based payment expenses
Consolidated
2014
S$
2,665,423
65,450
123,005
2,853,878
2013
S$
3,057,806
67,875
18,904
3,144,585
The expense recognised for employee services received during the year for equity-settled share-based
payment transactions amounted to S$110,000 (2013: S$173,000). There have been no cancellations or
modifications to the plan during the years 2014 and 2013.
(b)
Description of the share-based payment plan.
Zicom Employee Share and Option Plan (“ZESOP”)
Share options are granted to employees as an incentive to retain experience and attract talent. Under the
ZESOP, the exercise price of the options approximates the market price of the shares on the grant dates.
Employees must remain in service for a period of 1 to 3 years.
Should an employee leave the company or resign from his office, any vested options not exercised prior to
that date will be lost except for exceptional circumstances such as death or physical or mental incapacity.
The contractual life of each option granted is 3-5 years. There are no cash-settlement alternatives.
89
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 24.
Share-based payment plans (cont’d)
(c)
Outstanding number of options granted under ZESOP
2014
(Thousands)
2013
(Thousands)
Outstanding at beginning of the year
Granted during the year
Forfeited during the year
Expired during the year
Exercised during the year
Outstanding at end of year
7,035
–
(170)
(275)
(195)
6,395
The outstanding balance as at 30 June 2014 and 30 June 2013 is represented by:
No. of options (Thousands)
2013
2014
100
–
175
–
163
135
162
135
1,685
1,650
1,710
1,675
215
215
215
215
1,225
1,040
1,225
1,170
80
80
80
80
7,035
6,395
Exercise price
(Australian Cents)
28
28
28
28
18
18
18
18
17
17
17
17
Exercisable
on or after
28/8/2010
28/8/2011
1/5/2012
1/5/2013
1/10/2011
1/10/2012
15/11/2011
15/11/2012
1/9/2013
1/9/2014
15/11/2013
15/11/2014
6,375
2,610
(155)
(1,278)
(517)
7,035
Expiry Date
27/8/2013
27/8/2013
30/4/2015
30/4/2015
30/9/2015
30/9/2015
14/11/2015
14/11/2015
31/8/2015
31/8/2015
14/11/2015
14/11/2015
(d) Weighted average fair value
The weighted average fair value of options granted in the previous financial year was A$0.09. No options
were granted in the current financial year.
(e)
The weighted average share price during the period of exercise is A$0.22 (2013: A$0.22).
(f)
Option pricing model
The fair value of the equity-settled share options granted under the ZESOP is estimated as at the date of
grant using a Trinomial model taking into account the terms and conditions upon which the options were
granted. The following table lists the inputs to the model used for the share options granted in the previous
financial year. No share options were granted in the current financial year.
Inputs
Exercise price (A$):
Stock price at grant date (A$):
Maximum option life in years:
Volatility:
Risk free interest rate
2013
0.17
0.21
3
65.5%
3.5%
90
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 24.
Share-based payment plans (cont’d)
(f)
Option pricing model (cont’d)
The effects of early exercise have been incorporated into the calculations by defining the conditions under
which employees are expected to exercise their options after vesting in terms of the stock price reaching a
specified multiple of the exercise price, which is not necessary indicative of exercise patterns that may occur
in the future.
25.
Commitments
(a)
Commitments
As at year-end, the Group has the following commitments:
(i)
Issued letters of credit amounting to S$1,094,000 (2013: S$6,435,000).
(ii)
Issued letters of guarantee amounting to S$12,358,000 (2013: S$6,350,000).
(iii)
(iv)
The Group has entered into foreign exchange buy contracts amounting to S$375,000 (2013:
S$30,939,000).
The Group has entered into foreign exchange sell contracts amounting to S$1,996,000 (2013:
S$20,269,000).
(b)
Operating lease commitments
The Group has entered into commercial leases for the use of leasehold properties and office equipment as
lessee. These leases have an average of 3 to 30 years. There are no restrictions placed upon the Group by
entering into these leases.
Future minimum lease payments for the leases are as follows:
Within 1 year
Within 2 - 5 years
More than 5 years
Consolidated
2014
S$’000
2,373
2,349
5,639
10,361
2013
S$’000
2,299
3,430
5,426
11,155
The amount of operating lease payments recognised as an expense in the year ended 30 June 2014 is
S$2,425,000 (2013: S$2,470,000).
91
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 25.
Commitments (cont’d)
(c)
Finance lease commitments
The Group has finance leases for certain items of plant and equipment and motor vehicles. Future
minimum lease payment under finance leases together with present value of the net minimum lease
payments are as follows:
Consolidated
Minimum
payments
2014
S$’000
Present value
of payments
2014
S$’000
Minimum
payments
2013
S$’000
Present value
of payments
2013
S$’000
Due within one year
After one year but not more than five years
Total minimum lease payments
Less: amounts representing finance charges
1,892
1,034
2,926
(140)
2,786
1,801
985
2,786
–
2,786
2,047
1,482
3,529
(174)
3,355
1,948
1,407
3,355
–
3,355
(d)
Capital commitments
The Group has no capital commitment as at 30 June 2014 and 30 June 2013.
26.
Auditors’ remuneration
During the year, the following fees were paid/ payable for services provided by auditors:
Amounts received or due and receivable by Ernst & Young(Australia)
- Audit or review of financial statements
Consolidated
2014
S$
2013
S$
138,255
145,953
Amounts received or due and receivable by Ernst & Young (Singapore)
- Audit or review of financial statements
217,000
208,000
Amounts received or due and receivable by other audit firms
- Audit or review of financial statements
- Taxation services
24,886
9,259
389,400
24,487
13,614
392,054
92
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) 27.
Parent entity disclosures
(a)
The individual financial statements of the parent entity shows the following aggregate amounts:
Balance sheet of the parent entity at year end
Non-current assets
Current assets
Total assets
Current liabilities
Total liabilities
Net Assets
Total equity of the parent entity comprising:
Share capital
Share capital-exercise of share options
Capital reserve
Foreign currency translation reserve
Share based payments reserve
Accumulated losses
Results of parent entity
Profit for the year
Other comprehensive income
Total comprehensive income
(b)
Guarantees
2014
S$’000
49,210
2,573
51,783
70
70
2013
S$’000
48,623
2,869
51,492
50
50
51,713
51,442
71,354
247
688
(200)
732
(21,108)
51,713
2,714
–
2,714
71,405
226
688
(199)
681
(21,359)
51,442
2,669
–
2,669
(i)
(ii)
The parent entity has issued letters of guarantee amounting to S$9,620,000 (2013: S$9,600,000) to
secure trade facilities and factory loans to controlled entities.
The parent entity has entered into a Deed of Cross Guarantee and the subsidiaries subject to the
deed is disclosed in note 11.
(c)
Contingent liabilities
The parent entity has no contingent liabilities and commitments as at 30 June 2014 and 30 June 2013.
93
ANNUAL REPORT 2014Notes to the Consolidated Financial Statements(In Singapore dollars) 28.
Subsequent events
(a)
Incorporation of Zicom MedTacc Private Limited
On 10 August 2014, Zicom Holdings Pte Ltd incorporated a wholly-owned investment holding subsidiary,
Zicom MedTacc Private Limited (“MedTacc”), with a paid up capital of $100,000.
On 25 September 2014, MedTacc was appointed a Medtech Accelerator by SPRING Singapore (SPRING), a
government agency responsible for enterprise development, where SPRING will co-invest with MedTacc on
growth phase medtech start-ups over the next 4 years on 1:1 basis. Both MedTacc and SPRING shall commit
S$15,000,000 each making a total investment pool of S$30,000,000. SPRING will grant options to MedTacc
to acquire their investments at nominal compound rates per year in the event that the investment prove
commercially viable and value may be unlocked.
(b)
Declaration of final dividend
On 27 August 2014, the directors declared a final unfranked dividend of 0.45 Australian cents per share for
the financial year ended 30 June 2014. This amount has not been recognised as a liability as at 30 June
2014 but will be accounted for in the next financial year.
94
ZICOM GROUP LIMITEDNotes to the Consolidated Financial Statements(In Singapore dollars) Directors’ Declaration
In accordance with a resolution of the directors of Zicom Group Limited, I state that:
In the opinion of the directors:
(a)
the financial statements and notes of the consolidated entity are in accordance with the Corporations Act
2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity’s balance sheet as at 30 June 2014 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and Corporations Regulations 2001;
(b)
(c)
(d)
(e)
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in note 2.2.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
this declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2014.
as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in Note 11 will be able to meet any obligations or liabilities to which they are or may
become subject, by virtue of the Deed of Cross Guarantee.
On behalf of the Board
GL Sim
Chairman/Managing Director
29 September 2014
95
95
ANNUAL REPORT 2014
ANNUAL REPORT 2014 Independent Auditor’s Report
to the members of Zicom Group Limited
Report on the financial report
We have audited the accompanying financial report of Zicom Group Limited, which comprises the consolidated balance
sheet as at 30 June 2014, the consolidated statement of comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary
of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated
entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial
year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls
as the directors determine are necessary to enable the preparation of the financial report that is free from material
misstatement, whether due to fraud or error. In Note 2.2, the directors also state, in accordance with Accounting Standard
AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial
Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have
given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the
directors’ report.
96
ZICOM GROUP LIMITED Independent Auditor’s Report
to the members of Zicom Group Limited
Opinion
In our opinion:
a.
the financial report of Zicom Group Limited is in accordance with the Corporations Act 2001, including:
i
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its
performance for the year ended on that date; and
ii
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.2.
Report on the remuneration report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2014. The directors
of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based
on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Zicom Group Limited for the year ended 30 June 2014, complies with section
300A of the Corporations Act 2001.
Ernst & Young
Ric Roach
Partner
Brisbane
29 September 2014
97
ANNUAL REPORT 2014A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young111 Eagle StreetBrisbane QLD 4000 AustraliaGPO Box 7878 Brisbane QLD 4001Tel: +61 7 3011 3333Fax: +61 7 3011 3100ey.com/auAuditor’s Independence Declaration to the Directors of Zicom GroupLimitedIn relation to our audit of the financial report of Zicom Group Limited for the financial year ended 30June 2014, to the best of my knowledge and belief, there have been no contraventions of the auditorindependence requirements of theCorporations Act 2001 or any applicable code of professionalconduct.Ernst & YoungRic RoachPartner29 September 2014A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young111 Eagle StreetBrisbane QLD 4000 AustraliaGPO Box 7878 Brisbane QLD 4001Tel: +61 7 3011 3333Fax: +61 7 3011 3100ey.com/auAuditor’s Independence Declaration to the Directors of Zicom GroupLimitedIn relation to our audit of the financial report of Zicom Group Limited for the financial year ended 30June 2014, to the best of my knowledge and belief, there have been no contraventions of the auditorindependence requirements of theCorporations Act 2001 or any applicable code of professionalconduct.Ernst & YoungRic RoachPartner29 September 2014 Information on Shareholdings
As at 26 September 2014
Distribution of Equity Securities
a)
Analysis of numbers of equity security holders by size of holding:-
1
1,001
5,001
10,001
100,001
–
–
–
–
1,000
5,000
10,000
100,000
and over
Ordinary Shares
Number of Holders
9,314
980,110
2,984,190
22,399,403
188,174,446
214,547,463
56
263
334
633
152
1,438
b)
There were 94 holders of less than a marketable parcel of ordinary shares.
Twenty Largest Equity Security Holders
The names of the twenty largest equity security holders are listed below:
Name
SNS HOLDINGS PTE LTD
JUAT KOON SIM
CITICORP NOMINEES PTY LIMITED
GIOK LAK SIM
VENTRADE (ASIA) PTE LTD
JUAT LIM SIM
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
EE GEK GOH
BNP PARIBAS NOMS (NZ) LTD
HUNG SEAH TANG
SIONG TECK NG
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MAKRAM HANNA & RITA HANNA
ALAN BLACKBURN & ASSOCIATES PTY LTD
FIRST CHARNOCK SUPERANNUATION PTY LTD
JUAT KHIANG SIM
DEBUSCEY PTY LTD
KOK HWEE SIM
KOK YEW SIM
ANTHONY SARACENI & CARMEL SARACENI
Substantial Shareholders
Number of
Ordinary Shares Held
Percentage of
Issued Shares
66,548,603
17,040,920
15,238,497
10,925,765
8,478,344
6,207,767
3,757,126
2,791,017
2,716,871
2,460,199
2,410,665
2,232,150
2,232,138
2,000,000
1,890,000
1,789,525
1,355,615
1,208,180
1,070,253
1,015,000
31.02%
7.94%
7.10%
5.09%
3.95%
2.89%
1.75%
1.30%
1.27%
1.15%
1.12%
1.04%
1.04%
0.93%
0.88%
0.83%
0.63%
0.56%
0.50%
0.47%
Substantial shareholders in the company (holding not less than 5% of the issued capital), as disclosed in substantial
shareholder notices given to the company, are set out below:
Name
GIOK LAK SIM & HIS ASSOCIATES
JUAT KOON SIM & HIS ASSOCIATES
CITICORP NOMINEES PTY LIMITED
Voting Rights
Number of
Ordinary Shares Held
Percentage of
Issued Shares
77,474,368
19,831,937
15,238,497
36.11%
9.24%
7.10%
On a show of hands, every member present in person or by proxy shall have one vote and, upon a poll, each share shall have
one vote.
98
ZICOM GROUP LIMITED
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99
ANNUAL REPORT 2014 This page has been intentionally left blank.
100
ZICOM GROUP LIMITED Corporate Directory
BOARD OF DIRECTORS
Giok Lak Sim
(Chairman and Managing Director)
Kok Hwee Sim
(Executive Director)
Kok Yew Sim
(Executive Director)
Yian Poh Lim
Frank Leong Yee Yew
Ian Robert Millard
Shaw Pao Sze
JOINT COMPANY SECRETARIES
Jenny Lim Bee Chun
Surendra Kumar
REGISTERED OFFICE
38 Goodman Place
Murarrie QLD 4172
Australia
Telephone : +61 7 3908 6088
Facsimile
: +61 7 3390 6898
Website
: www.zicomgroup.com
SHARE REGISTRY
Link Market Services Limited
Level 15
324 Queen Street
Brisbane, QLD 4000
Australia
Facsimile
: +61 2 9287 0309
Contents
AUDITORS
Ernst & Young
111 Eagle Street
Brisbane QLD 4000
Australia
SOLICITORS
Thomson Geer
Level 16, Waterfront Place
1 Eagle Street
Brisbane QLD 4000
Australia
BANKERS
Australia
Westpac Banking Corporation
Singapore
United Overseas Bank Limited
Malayan Banking Berhad
Oversea-Chinese Banking Corporation Limited
DBS Bank Limited
Westpac Banking Corporation
Australia & New Zealand Banking Group Limited
Thailand
United Overseas Bank (Thai) Public Company Limited
Siam Commercial Bank
China
Industrial and Commercial Bank of China Limited
China Merchants Bank
01 Chairman’s Message
33 Consolidated Statement of Changes in Equity
02 Directors and Company Secretaries
34 Consolidated Statement of Cash Flows
05 Corporate Chart
06 Key Management
07 Directors’ Report
23 Auditor’s Independence Declaration
36 Notes to the Consolidated Financial Statements
95 Directors’ Declaration
96
Independent Auditor’s Report
98
Information on Shareholdings
24 Corporate Governance Statement
Inside back cover
Corporate Directory
31 Consolidated Statement of Comprehensive Income
back cover
Notice of General Meeting
32 Consolidated Balance Sheet
Zicom Group Limited
38 Goodman Place, Murarrie QLD 4172 Australia
Telephone: +61 7 3908 6088
Facsimile: +61 7 3390 6898
www.zicomgroup.com
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Notice of General Meeting
The General Meeting of Zicom Group Limited will be held at the
The Colmslie Hotel
Corner of Wynnum and Junction Roads
Morningside 4170, Queensland
Australia
Time: 10.00am (Brisbane time)
Date: Monday, 3 November 2014
A formal Notice of Meeting is enclosed.