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2020 ReportA 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 e h t n i t u o t e s e r a 3 1 0 2 d n a 4 1 0 2 e n u J 0 3 d e d n e s r a e y e h t r o f d e t i m i L p u o r G m o c i Z f o l e n n o s r e p t n e m e g a n a m y e k e h t d n a s r o t c e r i d e h t o t n o i t a r e n u m e r e h t f o s l i a t e D . s r a e y l a i c n a n i f h t o b r o f d e t s e v % 0 0 1 e r e w e l b a t e h t n i d e t s i l t n e m y a p d e s a b - e r a h s d n a s u n o b d e t a l e r e c n a m r o f r e p l l A . s e l b a t g n w o i l l o f n o i t a r e n u m e r f o s l i a t e D C 18 e c n a m r o f r e P e r a h S n i i d a P s u n o B e e y o p m E l y r a t e n o M m r e T t r o h S l y r a a S h s a C d e t a l e R % l a t o T $ S s n o i t p o s e r a h S n o i t a u n n a r e p u S s t i f e n e B s t i f e n e B $ S $ S $ S $ S $ S h s a C $ S s e e F d n a $ S e c n a m r o f r e P m r e T - t r o h S - n o N r e h t O s t n e m y a P d e s a B - e r a h S t i f e n e B l s t i f e n e B e e y o p m E m r e T t r o h S t s o P t n e m y o p m E l – – – – – – . 7 0 3 . 9 7 3 . 7 0 4 . 3 3 4 . 6 0 4 – 7 7 4 1 4 , 0 2 0 8 3 , 2 7 1 9 3 , 2 1 4 3 3 , 1 8 0 2 5 1 , 0 8 1 6 6 6 , 3 7 3 6 1 3 , 5 8 2 9 1 2 , , 8 3 8 1 0 2 1 , 2 0 8 7 8 4 , 7 7 7 8 3 4 , 9 9 0 5 4 3 , 1 8 2 8 2 2 , , 9 5 9 9 9 4 1 , , 8 7 8 3 5 8 2 , – – – – – – 9 5 9 3 , 9 5 9 3 , 8 1 9 7 , – 3 5 2 4 , 3 5 2 4 , 3 5 2 4 , 9 5 7 2 1 , 7 7 6 0 2 , – – – – – – – 8 2 3 2 0 1 , 8 2 3 2 0 1 , – – – – – 8 2 3 2 0 1 , – – – – – 5 2 5 5 , 0 0 6 3 1 , 0 0 6 3 1 , 5 2 7 2 3 , 5 2 9 8 , 0 5 9 5 , 0 5 9 5 , 0 0 9 1 1 , 5 2 7 2 3 , 0 5 4 5 6 , – – – – – 0 0 0 4 2 , 0 0 0 2 1 , 0 0 4 4 4 , 0 0 4 0 8 , 0 0 0 0 6 , 0 0 6 1 2 , 0 0 4 4 1 , 0 0 5 5 4 , 0 0 5 1 4 1 , 0 0 9 1 2 2 , – – – – – – – – – – – – – – – – – – – – – 7 2 3 2 0 1 , 0 0 0 0 2 1 , 7 2 3 2 2 2 , – 4 2 6 8 9 1 , 0 0 0 0 9 1 , 0 0 0 0 4 1 , 4 2 6 8 2 5 , 1 5 9 0 5 7 , 7 7 4 1 4 , 0 2 0 8 3 , 2 7 1 9 3 , 2 1 4 3 3 , 1 8 0 2 5 1 , 0 0 0 2 3 4 , 4 1 8 6 6 1 , 6 2 3 7 5 1 , 0 4 1 6 5 7 , 0 0 0 6 1 2 , 4 7 9 6 1 2 , 6 9 4 0 8 1 , 1 8 8 0 7 1 , 1 5 3 4 8 7 , , 2 7 5 2 9 6 1 , s r o t c e r i d e v i t u c e x e - n o n l a t o t - b u S e z S P S l e n n o s r e p t n e m e g a n a m y e k r e h t O s r o t c e r i d e v i t u c e x e l a t o t - b u S s r o t c e r i D e v i t u c e x E n a m r i a h C - m i S L G m i S H K m i S Y K ) 1 ( h o e T H G ) 3 ( g n a T S H ) 4 ( m i S K J ) 2 ( m i S L J l e n n o s r e p t n e m e g a n a m y e k r e h t o l a t o t - b u S l a t o t d n a r G s r o t c e r i D e v i t u c e x e - n o N m i L P Y g n o e L F 4 1 0 2 e m a N d r a l l i M R I i d t L e t P g n i r e e n g n E s e t a i c o s s A n o i t a d n u o F f o r o t c e r i d g n g a n a m e h t i s i h o e T H G d t L e t P m o c i Z f o r o t c e r i d g n g a n a m i t n o i j e h t s i m i S L J i d t L e t P g n i r e e n g n E n o i t a m o t u A c a M - s y S f o r o t c e r i d g n g a n a m e h t i s i m i S K J d t L e t P m o c i Z f o r o t c e r i d g n g a n a m i t n o i j e h t s i g n a T S H ) 1 ( ) 2 ( ) 3 ( ) 4 ( ZICOM GROUP LIMITED Directors’ Report 2014 % e c n a m r o f r e P m r e T - t r o h S - n o N e c n a m r o f r e P e r a h S n i i d a P s u n o B e e y o p m E l y r a t e n o M m r e T t r o h S l y r a a S h s a C d e t a l e R % l a t o T $ S s n o i t p O s e r a h S n o i t a u n n a r e p u S s t i f e n e B s t i f e n e B $ S $ S $ S $ S $ S h s a C $ S s e e F d n a $ S d e s a B - e r a h S t n e m y o p m E l t s o P s t n e m y a P t i f e n e B l s t i f e n e B e e y o p m E m r e T t r o h S r e h t O – – – – – . 4 8 3 . 8 0 4 . 5 7 3 . 8 6 3 . 8 0 4 . 4 2 4 . 7 0 4 8 6 0 6 4 , 9 6 2 2 4 , 6 3 5 3 4 , 7 5 7 6 3 , 8 7 4 8 7 4 8 7 4 1 3 0 3 6 8 6 1 , 5 6 4 1 , 5 7 7 8 4 7 , 3 0 0 4 9 2 , 5 7 8 2 5 3 , , 3 5 6 5 9 3 1 , 9 5 9 5 5 4 , 5 3 3 4 5 3 , 3 7 2 2 3 4 , 5 3 7 7 3 3 , , 2 0 3 0 8 5 1 , , 5 8 5 4 4 1 3 , – 9 2 7 3 , 9 2 7 3 , 8 5 4 7 , – 7 2 3 3 , 7 2 3 3 , 7 2 3 3 , 1 8 9 9 , 4 0 9 8 1 , – – – – – – – – – – – – – – – – – – – – 5 2 5 5 , 0 0 6 3 1 , 0 0 6 3 1 , 5 2 7 2 3 , 5 7 7 8 , 0 0 7 1 1 , 5 7 7 8 , 0 0 9 5 , 0 5 1 5 3 , 5 7 8 7 6 , – – – – – 0 0 0 4 2 , 0 0 0 2 1 , 0 0 4 4 4 , 0 0 4 0 8 , 0 0 0 0 6 , 0 0 0 8 1 , 0 0 6 1 2 , 0 0 4 4 1 , 0 0 0 4 1 1 , 0 0 4 4 9 1 , – – – – – – – – – – – – – – – – – – – – 0 5 2 7 8 2 , 0 0 0 0 2 1 , 0 0 5 2 3 1 , 0 5 7 9 3 5 , 7 5 8 7 6 1 , 0 0 5 4 4 1 , 0 6 3 3 8 1 , 0 2 5 7 3 1 , 7 3 2 3 3 6 , 0 9 5 5 4 , 1 9 7 1 4 , 8 5 0 3 4 , 6 2 7 6 3 , 5 6 1 7 6 1 , 0 0 0 2 3 4 , 4 7 6 4 4 1 , 6 4 6 8 5 1 , 0 2 3 5 3 7 , 0 0 0 6 1 2 , 5 3 1 0 8 1 , 1 1 2 5 1 2 , 8 8 5 6 7 1 , 4 3 9 7 8 7 , , 7 8 9 2 7 1 1 , , 9 1 4 0 9 6 1 , s r o t c e r i d e v i t u c e x e - n o n l a t o t - b u S l e n n o s r e p t n e m e g a n a m y e k r e h t O ) m i S H K o t e t a n r e t l a ( m i S Y K s r o t c e r i d e v i t u c e x e l a t o t - b u S s r o t c e r i D e v i t u c e x E n a m r i a h C - m i S L G m i S H K s r o t c e r i D e v i t u c e x e - n o N d r a l l i M R I e z S P S m i L P Y g n o e L F ) 1 ( h o e T H G ) 2 ( m i S K J ) 3 ( m i S L J ) 4 ( g n a T S H 3 1 0 2 e m a N l e n n o s r e p t n e m e g a n a m y e k r e h t o l a t o t - b u S l a t o t d n a r G i d t L e t P g n i r e e n g n E s e t a i c o s s A n o i t a d n u o F f o r o t c e r i d g n g a n a m e h t i s i h o e T H G i d t L e t P g n i r e e n g n E n o i t a m o t u A c a M - s y S f o r o t c e r i d g n g a n a m e h t i s i m i S K J d t L e t P m o c i Z f o r o t c e r i d g n g a n a m i t n o i j e h t s i g n a T S H d t L e t P m o c i Z f o r o t c e r i d g n g a n a m i t n o i j e h t s i m i S L J ) 1 ( ) 2 ( ) 3 ( ) 4 ( 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) ) 6 2 3 ( 8 0 2 7 , 8 1 6 4 8 , – 9 7 2 0 7 4 1 , ) 6 2 3 ( 9 2 9 6 , 8 4 1 3 8 , – 9 2 9 6 , 5 5 9 5 4 , 2 8 8 6 , 9 7 2 3 0 6 6 , 9 2 9 6 , 7 1 1 1 5 3 3 7 1 – 3 4 7 3 ) 5 9 8 ( ) 7 9 ( ) 2 4 7 2 ( , ) 5 1 5 ( 5 1 9 3 , 7 8 4 8 8 , 9 3 ) 0 9 ( 0 1 1 0 0 4 3 , – – – ) 9 8 4 2 ( , – – – – 5 5 7 3 – ) 7 9 ( ) 8 2 7 ( – ) 6 6 1 ( 6 1 0 1 , 7 1 1 1 5 3 3 7 1 – – ) 2 1 ( ) 7 6 1 ( – ) 2 4 7 2 ( , ) 5 1 5 ( 1 8 0 4 , 1 7 4 7 8 , – – – 6 3 1 ) 2 1 ( ) 7 6 1 ( – – ) 2 4 7 2 ( , – 1 8 0 4 , 9 9 0 0 5 , ) 6 6 1 ( 6 6 5 3 , 1 8 0 4 , – – – – 3 – 1 1 9 3 ) 0 9 ( 0 1 1 – ) 3 ( ) 1 1 ( – – – 6 2 ) 3 ( ) 1 1 ( ) 9 8 4 2 ( , ) 9 8 4 2 ( , – – – 1 4 7 – ) 2 7 ( 3 7 1 ) 6 3 1 ( – – – – – – – – 6 0 7 – ) 1 2 ( ) 6 2 ( 0 1 1 – – – – ) 1 3 6 ( ) 6 2 3 ( ) 6 2 3 ( – – – – – – – – – – ) 7 5 9 ( ) 5 1 5 ( ) 5 1 5 ( – – – – – – – – – – 2 7 4 5 1 – – – – – – – – – – – 1 2 6 2 2 – – – – – – l a t o T y t i u q e - 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e r a h s m o r f r e f s n a r t e h t d r o c e r o t d e s u s i s n o i t p o e r a h s f o e s i c r e x e – l a t i p a c e r a h S ) a ( ) b ( m o r f g n i c n e m m o c d o i r e p g n i t s e v e h t r e v o d e d r o c e r l s e e y o p m e m o r f d e v i e c e r s e c i v r e s f o e u a v l l e v i t a u m u c e h t f o p u e d a m s i e v r e s e r s t n e m y a p d e s a b - e r a h s e h T ) c ( . s n o i t p o e r a h s e h t f o e s i c r e x e r o y r i p x e e h t y b d e c u d e r s i d n a s n o i t p o e r a h s d e l t t e s - y t i u q e f o e t a d t n a r g e h t 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 l l 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: l l l l l l l 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 8 4 2 , 5 7 1 6 3 , ) 8 0 3 ( 6 0 4 4 , 0 3 5 9 1 , ) 2 9 3 ( ) 8 2 5 ( ) 4 2 2 ( ) 4 5 ( – ) 2 1 1 ( 8 1 3 2 2 , ) 5 2 1 ( 7 7 4 4 , ) 6 7 ( ) 8 1 2 ( ) 6 1 ( – ) 9 1 ( ) 9 2 ( 2 4 1 ) 2 2 1 ( 5 7 0 1 , – – – – – ) 4 ( ) 4 2 ( 7 8 1 6 6 0 1 , – – – – ) 5 1 ( 3 7 2 6 2 3 1 , – – – – 1 – – – – – 4 1 – 5 7 2 5 8 5 1 , ) 1 8 2 ( 8 7 4 3 , ) 0 7 2 ( ) 8 2 5 ( 0 8 1 3 1 , – ) 1 ( ) 4 5 ( ) 2 1 1 ( 2 1 4 5 1 , ) 6 6 ( 5 2 5 3 , ) 2 5 ( ) 8 1 2 ( ) 6 1 ( ) 4 1 ( ) 9 1 ( 1 4 3 6 2 , 5 2 2 1 , 4 7 8 1 , 2 5 5 8 1 , ) 6 2 ( 0 1 4 ) 9 3 1 ( 5 8 3 1 , – – – – – ) 0 1 ( 7 1 3 ) 1 4 ( 0 3 6 1 , – – – – ) 5 1 ( 4 3 2 0 7 0 2 , – – – – – 2 7 ) 2 ( 4 2 1 1 6 3 2 , – – – 5 – ) 3 1 4 ( 9 7 5 3 , ) 2 8 2 ( ) 2 1 3 2 ( , 5 7 3 4 3 , – ) 4 3 1 ( ) 2 7 ( ) 5 4 2 ( ) 2 6 ( ) 0 9 1 ( 8 3 2 4 , ) 6 5 2 2 ( , 6 9 4 4 3 , ) 3 2 ( – ) 8 2 ( 2 – – – – – – – 8 9 ) 5 ( 0 0 1 – – – – – – 5 9 – – – – – – – – – – – – – – – – – – 0 9 7 4 , 5 3 4 0 1 , 1 9 1 1 – – ) 0 0 3 ( – – – ) 3 5 2 ( 2 9 5 4 , – – – – ) 5 ( – 1 – – – – – – – – – – – – – ) 4 ( 6 3 4 0 1 , – – – 2 4 0 1 2 2 , – – – ) 8 4 4 ( ) 9 9 ( 4 0 8 1 , – – – – – – 4 3 3 4 , 2 3 4 0 1 , 5 0 7 1 , 4 3 8 6 1 3 4 2 – – ) 4 2 2 ( – – – 9 6 8 ) 2 5 ( 2 2 2 – – – – – – – – – – – 1 0 7 2 5 1 1 3 , – – – – – ) 3 ( 8 6 2 6 8 3 3 , 9 3 0 1 , 1 5 6 3 , – – – – – – – – – – – – – – – – – – 4 8 7 0 3 , 1 0 1 3 3 , 1 7 6 4 6 5 4 1 6 6 7 7 3 2 6 7 1 , 4 8 0 9 1 , 5 9 0 0 1 5 9 2 3 , 3 2 7 3 , 1 8 7 6 , 0 5 0 7 , 5 0 7 1 , 4 0 8 1 , e l a s r o f d l e h s t e s s a o t n o i t a c i f i s s a l c e R s t e s s a e l b g n a t n i i o t n o i t a c i f i s s a l c e R y r o t n e v n i o t n o i t a c i f i s s a l c e R n o i t a c i f i s s a l c e R f f o e t i r W t n e m n g i l a e r y c n e r r u C s n o i t i d d A s l a s o p s i D y r o t n e v n i o t n o i t a c i f i s s a l c e R t n e m n g i l a e r y c n e r r u C s n o i t i d d A s l a s o p s i D . 3 1 0 2 6 0 3 t A . . 2 1 0 2 7 1 t A . s t e s s a e l b g n a t n i i o t n o i t a c i f i s s a l c e R n o i t a c i f i s s a l c e R f f o e t i r W . 4 1 0 2 6 0 3 t A . t n e m r i a p m i d n a n o i t a i c e r p e d d e t a l u m u c c A e l a s r o f d l e h s t e s s a o t n o i t a c i f i s s a l c e R s t e s s a e l b g n a t n i i o t n o i t a c i f i s s a l c e R y r o t n e v n i o t n o i t a c i f i s s a l c e R n o i t a c i f i s s a l c e R f f o e t i r W t n e m n g i l a e r y c n e r r u C 3 1 0 2 r o f e g r a h C s l a s o p s i D . 2 1 0 2 7 1 t A . y r o t n e v n i o t n o i t a c i f i s s a l c e R t n e m n g i l a e r y c n e r r u C 4 1 0 2 r o f e g r a h C s l a s o p s i D . 3 1 0 2 6 0 3 t A . s t e s s a e l b g n a t n i i o t n o i t a c i f i s s a l c e R n o i t a c i f i s s a l c e R f f o e t i r W . 4 1 0 2 6 0 3 t A . e u l a v g n i y r r a c t e N . 4 1 0 2 6 0 3 t A . . 3 1 0 2 6 0 3 t A . r o t o M s e l c i h e v 0 0 0 $ S ’ l d o h e s a e L s t n e m e v o r p m i 0 0 0 $ S ’ d n a t n a l P t n e m p u q e i 0 0 0 $ S ’ i y r e n h c a M r e d n u n o i t a l l a t s n i 0 0 0 $ S ’ s g n d i l i u B 0 0 0 $ S ’ l d o h e s a e L s e i t r e p o r p 0 0 0 $ S ’ l d o h e e r F d n a l 0 0 0 $ S ’ i t n e m p u q e d n a t n a l p , y t r e p o r P . 9 66 d e t a d i l o s n o C t s o 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 a t o T 0 0 0 $ S ’ ) 9 8 2 ( 4 2 3 4 1 0 2 , 2 2 6 4 1 , ) 5 ( 4 3 1 ) 6 1 ( 9 2 3 2 , 0 0 8 6 1 , 3 2 ) 7 2 ( 9 0 1 9 1 , ) 0 2 ( 0 5 8 4 0 7 2 , 4 5 8 8 5 3 , 1 4 3 7 6 1 ) 2 2 ( 7 1 3 4 , – 1 3 4 3 – – ) 5 ( – 0 6 6 8 – – 6 4 1 – – – – – – – – – – 2 9 7 4 1 , 6 4 1 2 1 2 3 1 , 0 6 4 1 8 2 , 8 8 0 3 , 1 2 7 3 , 9 6 2 1 , 0 1 – – – – – – – – – 1 2 7 3 , ) 0 4 ( 0 3 5 – – 4 3 1 3 9 8 1 , ) 4 2 ( 7 2 2 3 2 ) 7 2 ( – – – – – – – – – 0 1 – 7 3 4 2 3 0 5 4 1 , – – – 1 1 8 1 , 6 1 0 2 , – – ) 9 3 2 ( 5 8 4 7 , ) 4 ( 5 4 1 1 , ) 6 ( 4 2 9 – – – – – – – – – – – – 6 4 2 7 , 1 4 1 1 , 8 1 9 y r o t n e v n i m o r f n o i t a c i f i s s a l c e R , y t r e p o r p m o r f n o i t a c i f i s s a l c e R t n e m p u q e & i t n a p l f f o e t i r W t n e m n g i l a e r y c n e r r u C s n o i t i d d A . 2 1 0 2 7 1 t A . . 3 1 0 2 6 0 3 t A . 8 – – – – – – – – – – – , y t r e p o r p m o r f n o i t a c i f i s s a l c e R t n e m p u q e & i t n a p l t n e m n g i l a e r y c n e r r u C s n o i t i d d A f f o e t i r W 1 2 7 3 , 2 9 0 2 , 0 1 7 2 8 3 , 4 5 2 7 , 1 4 1 1 , 8 1 9 . 4 1 0 2 6 0 3 t A . – 9 5 3 4 7 2 – – 3 3 6 4 7 2 – – 7 0 9 ) 0 2 ( 4 4 5 5 2 3 1 4 5 3 0 9 0 8 3 6 1 ) 2 2 ( 8 7 2 1 , 4 1 8 0 9 9 – – – – – – – – – – 0 1 0 1 – – 7 3 – – 7 3 6 3 – – 3 7 – – – – – – – – – – 4 5 7 3 , 4 5 2 7 , 4 7 7 1 , 6 4 2 7 , – 5 7 9 6 6 1 – 1 4 1 1 , – – – – 1 4 1 1 , – – – 8 4 6 2 8 – 4 7 8 – 4 4 – – 8 1 9 – 4 4 , y t r e p o r p m o r f n o i t a c i f i s s a l c e R t n e m p u q e & i t n a p l t n e m n g i l a e r y c n e r r u C n o i t a s i t r o m A , y t r e p o r p m o r f n o i t a c i f i s s a l c e R t n e m p u q e & i t n a p l t n e m n g i l a e r y c n e r r u C n o i t a s i t r o m A f f o e t i r W . 4 1 0 2 6 0 3 t A . : e u l a v g n i y r r a c t e N 4 1 0 2 e n u J 0 3 t A 3 1 0 2 e n u J 0 3 t A . 3 1 0 2 6 0 3 t A . . 2 1 0 2 7 1 t A . : n o i t a s i t r o m a d e t a u m u c c A l d e t n e t a P l y g o o n h c e t d e t n e t a p n U l y g o o n h c e t 0 0 0 $ S ’ 0 0 0 $ S ’ r e t u p m o C e r a w t f o s 0 0 0 $ S ’ b u C l t n e m p o l e v e D i p h s r e b m e m e r u t i d n e p x e l l i w d o o G d e p o l e v e D l y g o o n h c e t 0 0 0 $ S ’ 0 0 0 $ S ’ 0 0 0 $ S ’ 0 0 0 $ S ’ r e m o t s u C t s i l 0 0 0 $ S ’ s t e s s a e l b g n a t n i I . 0 1 68 p u o r G t s o 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 This page has been intentionally left blank. 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 Z I C O M G R O U P L I M I T E D A N N U A L R E P O R T 2 0 1 4 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.
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