ABN 62 009 816 871 • ASX Code : ZGL
A CHANGING
LANDSCAPE
ANNUAL REPORT 2017
“What we think, we become”... Buddha
IN PURSUIT OF
GLOBAL OUTREACH
CONTENTS
Chairman’s Message
Board of Directors
Company Secretaries
Corporate Chart
Key Management
Directors’ Report
Auditor’s Independence Declaration
Corporate Governance Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Information on Shareholdings
Corporate Directory
Notice of Annual General Meeting
01
02
04
05
06
07
23
24
33
34
35
36
38
107
108
114
Inside back cover
Inside back cover
CHAIRMAN’S MESSAGE
A CHANGING
LANDSCAPE
Dear Shareholders,
The global economy is a changing landscape driven
by a new wave of disruptive technologies and digital
innovations. A new economy has emerged. Although
businesses of the old economy remain a mainstay of the
global economy, sectors’ relevance and sustainability
will very much be dependent on how they embrace
the new wave.
As part of its transformation, our Group has invested in
disruptive technologies aligning with the new wave.
Gestation of these investments has inevitably taken
a toll on our short term performance compounded
by concurrent slacks in its core businesses arising from
excess production capacity.
The challenges to the global economy and hence the
Group’s businesses are unprecedented. The Group’s
investments in disruptive technologies from its reserves
without any borrowings, are emerging from gestation. A
few are being commercialised. The world is our market
for these products. We have, in the last 2 years, opened
new markets in the USA, Europe, Australia, India and
China. This has set us to expand our global outreach.
We embrace continuous innovations. We recently
acquired an automation company specialised in
industrial controls and system engineering. The synergy
achieved will enable the Group to scale up to higher
end automation with potentials to build up capabilities
in the space of Internet of things, aligning ourselves
with Industrial 4.0 Revolution, a pervading force that
enables smart cities, smart factories and smart homes.
Our offshore marine sector has acquired a dual fuel
technology company. This technology will
focus
strongly on the offshore and marine sector enabling us
to foray into the clean energy space as mandated by
rules set by the International Maritime Organisation in
2008 that will come into full force in January 2020. All
new and old vessels are required to achieve sulphur
emission to below 0.5% (mass by mass) from the
current 3.5%. Complementing our existing offshore
marine business, this enables horizontal expansion and
expands our value chain to the industry.
It is gratifying that our transformation has begun to
see results which are gaining traction. Our business
landscape is changing. We are confident that these
decisions have put the Group in a sustainable footing
to stay relevant with the changing global economic
landscape.
Our investments in technology are ripe to unlock their
value. A subsidiary, Zicom Innovations Pte Ltd, has
been formed to place all our technology investments
together with our precision engineering subsidiary under
one cluster in preparation of an Initial Public Offer. A pre-
IPO funding is being sought to scale up the businesses in
this sector. We target for the IPO to take place over the
next 12-18 months.
Barring unforeseen circumstances, your Board is hopeful
that the Group’s directions will pay dividends in the near
future.
I take this opportunity to thank all our management and
employees for embracing the Group’s new directions
and for working cohesively to achieve our objectives
and the Board for their support and guidance for all
these initiatives. I wish to thank our shareholders for their
forbearance and support.
G L Sim
Chairman
ZICOM GROUP LIMITED Annual Report 2017
1
BOARD OF DIRECTORS
EXECUTIVE DIRECTORS
GIOK LAK SIM, FCPA
Chairman and Group Managing Director,
Age 71
KOK HWEE SIM, BSc, MSc
Executive Director, Age 39
KOK YEW SIM, BSc
Executive Director, Age 37
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.
Chairman of Grant Appeal Advisory
Panel, SPRING Singapore
Chairman of Growth Policy Advisory
Committee, SPRING Singapore
Member of Strategic Advisory Panel,
Diagnostic Development Hub,
A*Star ETPL
Member of Incubation Advisory Board,
Singapore National Eye Centre
Member, Board of Governors, UOB-SMU
Asian Enterprise Institute
Singapore Ernst & Young Entrepreneur of
the Year (Industrial Products), 2008
Mr Kok Hwee Sim was appointed to
the Board on 21 November 2007. As
Executive Director of the Group, he
focuses on developing capabilities
and infrastructure to support the
expansion of the Group’s investments
in the technology cluster. Mr Sim is
also the Chief Executive Officer of
Zicom MedTacc Private Limited, a
medical technology accelerator and
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. He
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 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. He is also
the Deputy Chairman of iPtec Pte Ltd,
the medtech translation subsidiary,
and a Director of Zicom MedTacc
Private Limited, a medical technology
accelerator and investment company.
He 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
(appointed on 1 April 2014)
None
None
Special responsibilities
Special responsibilities
Special responsibilities
Member of Nomination and
Remuneration Committee
Executive Chairman of all subsidiaries
Chairman of Curiox Biosystems Pte Ltd
Chairman of HistoIndex Pte Ltd
Director of BELKIN Laser Ltd
Chairman of Endofotonics Pte Ltd
Director of Pellucid Networks Pte Ltd
CEO of Biobot Surgical Pte Ltd
CEO of Zicom MedTacc Private Limited
Director of Curiox Biosystems Pte Ltd
Director of HistoIndex Pte Ltd
Director of BELKIN Laser Ltd
Director of Endofotonics Pte Ltd
Director of Pellucid Networks Pte Ltd
CEO of Sys-Mac Automation Engineering
Pte Ltd and its subsidiaries
Deputy Chairman of iPtec Pte Ltd
Director of Curiox Biosystems 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
Relevant interests in shares and options
as at date of signing the Directors’ Report
94,753,137 ordinary shares
1,538,180 ordinary shares and 300,000
options
1,350,253 ordinary shares and 300,000
options
2
ZICOM GROUP LIMITED Annual Report 2017
BOARD OF DIRECTORS
INDEPENDENT DIRECTORS
YIAN POH LIM, BSc, MSc
Independent Director, Age 71
FRANK LEONG YEE YEW,
MBA, FCA (ENGLAND &
WALES), FCA (SINGAPORE)
Independent Director, Age 74
IAN ROBERT MILLARD,
FCA, FAICD
Independent Director, Age 78
SHAW PAO SZE
Independent Director, Age 73
Experience and expertise
Experience and expertise
Experience and expertise
Experience and expertise
Appointed to the Board on
24 July 2006. Mr Yian Poh
Lim has more than 20 years
of extensive experience in
the banking and fi nance
industry. In 1993, he set
up Yian Poh Associates, a
fi nancial consultancy and
investment fi rm. Since 2000,
Mr Lim has been an Honorary
Commercial Advisor to The
Administrative Committee
of Jiaxing Economic
Development Zone, China
and was recently appointed
as the Expert Consultant
of Suzhou Vocational
University. 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)
Lead Independent Director
of TTJ Holdings Limited
(appointed 5 July 1996)
Appointed to the Board
on 24 July 2006. Extensive
experience in auditing,
fi nancial management
and corporate secretarial
work, having practised as
a partner in an audit fi rm
and worked as a company
secretary, fi nance manager
and fi nancial controller
in a leading property
development company and
involved in acquisitions and
major developments. Mr
Leong is also the Honorary
Treasurer of The Children’s
Charities Association of
Singapore.
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
fi rms in Queensland and
a Fellow of the Australian
Institute of Company
Directors.
Appointed to the Board on
19 February 2010. Mr Shaw
Pao Sze holds a Master
Foreign-Going Certifi cate
of Competency and has
extensive experiences
in maritime industry from
managing liner and ship
chartering services, corporate
planning in one of the
world’s largest shipping lines
and consultancy services
for transport engineering,
maritime and logistics
planning for infrastructure
projects.
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
Independent Director of TTJ
None
Holdings Limited (appointed
11 January 2010)
Synergy Metals Ltd (Australia)
(appointed 15 October
2010)
Special responsibilities
Special responsibilities
Special responsibilities
Special responsibilities
Chairman of Nomination and
Remuneration Committee
Member of Audit Committee
Non-Executive Director of
Zicom Holdings Private
Limited
Member of Nomination and
Remuneration Committee
Member of Audit Committee
Non-Executive Director of
Zicom Holdings Private
Limited
Chairman of Audit
Committee
Non-Executive Director of
Cesco Australia Limited
None
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
Relevant interests in shares
and options as at date of
signing the Directors’ Report
488,000 ordinary shares
624,364 ordinary shares
592,250 ordinary shares
NIL
ZICOM GROUP LIMITED Annual Report 2017
3
COMPANY SECRETARIES
LIM BEE CHUN, JENNY, FCCA
Joint Company Secretary, Age 44
IGOR SUSHKO (NICK),
MBA, FCPA, BBus, BSc
Joint Company Secretary, Age 51
Experience and expertise
Experience and expertise
Ms Jenny Lim has been the Group’s
Financial Controller since 2005. She is a
Fellow of the Association of Chartered
Certifi ed Accountants from the United
Kingdom since 1998. Ms Lim has over 10
years of audit and tax experience in an
international public accounting fi rm prior
to joining the Group.
Mr Sushko joined the Group in April
2017 as the Finance Manager of Cesco
Australia Limited. He holds a Master’s
degree in Business Administration and
has been a Fellow of Certifi ed Practising
Accountants, Australia since 2015.
Mr Sushko has more than 20 years of
experience in fi nancial management,
treasury and international trade in both
publicly and privately-owned businesses.
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 Zicom Private Limited
Director of Zicom MedTacc Private
Limited
Company Secretary of Zicom Holdings
Private Limited
Joint Company Secretary of Curiox
Biosystems Pte Ltd
Company Secretary of Cesco Australia
Limited and Cesco Equipment Pty
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
944,563 ordinary shares and 200,000
options
NIL
4
ZICOM GROUP LIMITED Annual Report 2017
CORPORATE CHART
ZICOM GROUP LIMITED
100%
ZICOM HOLDINGS
PRIVATE LIMITED
Singapore
Investment Holding
100%
DEQING CESCO
MACHINERY CO LTD
China
Concrete Mixers
100%
ZICOM THAI HYDRAULICS
CO LTD
Thailand
Hydraulics Systems
100%
CESCO AUSTRALIA LIMITED
Australia
Concrete Mixers
100%
ZICOM CESCO ENGINEERING
CO LTD
Thailand
Concrete Mixers
100%
FA GEOTECH EQUIPMENT
SDN BHD
Malaysia
Foundation Equipment
100%
CESCO EQUIPMENT PTY LTD
Australia
Engineered Products
100%
ZICOM CESCO THAI CO LTD
Thailand
Dormant
100%
FAE CONSTRUCTION PTE LTD
Singapore
Foundation Works &
Marine Construction
100%
FOUNDATION ASSOCIATES
ENGINEERING PRIVATE LIMITED
Singapore
Foundation Equipment
100%
FAEQUIP CORPORATION
Philippines
Foundation Equipment
100%
ZICOM PRIVATE LIMITED
Singapore
Marine Deck Machinery
100%
ZICOM EQUIPMENT
PRIVATE LIMITED
Singapore
Oils & Gas Equipment
51%
ZICOM ENERGY SOLUTIONS
PRIVATE LIMITED
Singapore
Dual Fuel Technology
72%
LINK VUE SYSTEMS PTE LTD
Singapore
Industrial Automation
100%
SYS-MAC AUTOMATION
ENGINEERING PTE LTD
Singapore
Precision Engineering & Automation
100%
PT SYS-MAC INDONESIA
Indonesia
Precision Engineering
INVESTMENT HOLDING
COMPANY
CONSTRUCTION
EQUIPMENT
OFFSHORE MARINE,
OIL & GAS MACHINERY
PRECISION ENGINEERING &
TECHNOLOGIES
95%
BIOBOT SURGICAL PTE LTD
Singapore
Medical Device
100%
ZICOM MEDTACC PRIVATE LIMITED
Singapore
Medical Technology Accelerator
Investment Holding
ASSOCIATED COMPANY
Curiox Biosystems Pte Ltd
61%
MTA-SYSMAC AUTOMATION
PTE LTD
Singapore
Automation
96%
SAEDGE VISION SOLUTIONS
PTE LTD
Singapore
Vision System Solutions Provider
98%
ORION SYSTEMS INTEGRATION
PTE LTD
Singapore
Semiconductor Equipment
100%
IPTEC PTE LTD
Singapore
Medical Technology
Translation Services
ASSOCIATED COMPANIES
HistoIndex Pte Ltd
Endofotonics Pte Ltd
BELKIN Laser Ltd
Pellucid Networks Pte Ltd
ZICOM GROUP LIMITED Annual Report 2017
5
KEY MANAGEMENT
SINGAPORE
ZICOM PRIVATE LIMITED
JOINT MANAGING DIRECTORS
Juat Lim Sim
Hung Seah Tang
EXECUTIVE DIRECTORS
Juat Khiang Sim
Hong Jun Zhang
Jenny Lim Bee Chun
ZICOM EQUIPMENT PRIVATE LIMITED
MANAGING DIRECTOR
Rashed Choudhury
FOUNDATION ASSOCIATES ENGINEERING PRIVATE LIMITED
MANAGING DIRECTOR
Peck Hua Ng
EXECUTIVE DIRECTOR
Teck Meng Liew
FAE CONSTRUCTION PTE LTD
EXECUTIVE DIRECTORS
Peck Hua Ng
Teck Meng Liew
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
Kok Yew Sim
BIOBOT SURGICAL PTE LTD
EXECUTIVE DIRECTORS
Kok Hwee Sim - CEO
Kok Yew Sim
IPTEC PTE LTD
EXECUTIVE DIRECTORS
Kok Hwee Sim
Kok Yew Sim
ZICOM MEDTACC PRIVATE LIMITED
EXECUTIVE DIRECTORS
Kok Hwee Sim - CEO
Kok Yew Sim
Peter Cheng Tim Kum
Thong Yuen Poon
LINK VUE SYSTEMS PTE LTD
MANAGING DIRECTOR
Gandhi Vidyut Sooryakant
6
ZICOM GROUP LIMITED Annual Report 2017
ZICOM ENERGY SOLUTIONS PRIVATE LIMITED
MANAGING DIRECTOR
Boon Khian Teo
EXECUTIVE DIRECTOR
Paul Sayan
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
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
Tony Low Boon Koon
CHINA
DEQING CESCO MACHINERY CO LTD
MANAGING DIRECTOR
Chin Ming Tan
PHILIPPINES
FAEQUIP CORPORATION
EXECUTIVE DIRECTORS
Teck Meng Liew - CEO
Peck Hua Ng
DIRECTORS’ REPORT 2017
Your directors present their report on Zicom Group Limited (the “Company”) and its subsidiaries (collectively,
the “Group” or “consolidated entity”) for the year ended 30 June 2017.
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)
(Independent)
(Independent)
(Independent)
(Independent)
Details of Directors’ qualifications, experience, other current directorship and responsibilities are included in
the “Board of Directors” section within the annual report.
Principal Activities
The Group’s principal activities comprise the manufacturing of deck machinery, offshore structures, gas
metering stations, gas processing plants, foundation equipment, concrete mixers and precision engineered
machinery, rental of foundation equipment, supply of medtech equipment and products, medtech
translation services 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
Total revenue
Net loss after tax attributable to equity holders of the Parent
Change
%
-18.3
+121.1
Year ended
30 June 17
S$ million
Year ended
30 June 16
S$ million
94.52
(4.62)
115.66
(2.09)
The Group’s cash balances remain healthy. As at 30 June 2017, the Group’s total cash and bank balances
were S$18.59m as compared with S$20.56m as at 30 June 2016.
Dividends
In view of the Group’s performance, it has decided not to pay any final dividend this year. In prior year,
a final dividend of 0.20 Australian cents per share was paid. The Group has decided to conserve cash this
year to accelerate its current industrial transformation. We are hopeful to be able to resume our dividend
payment in the next financial year.
ZICOM GROUP LIMITED Annual Report 2017
7
DIRECTORS’ REPORT 2017
Review of Operations
The Group’s consolidated revenue for the full year is S$94.52m as compared with S$115.66m in the previous
year, a decrease of 18.3%. The Group’s full year net consolidated loss after tax attributable to members to
30 June 2017 is S$4.62m as compared with S$2.09m in the previous year, an increase of 121.1%.
Loss per share for the year is Singapore 2.13 cents compared to Singapore 0.96 cents in the previous year, an
increase of Singapore 1.17 cents.
Net tangible assets per share decreased from Singapore 32.45 cents to 30.28 cents per share.
Return on equity, based on average of the opening and closing equity, for the year was -5.6% as compared
to -2.4% in 2016.
The average rates for currency translation for transactions and cash flows are A$1 to S$1.0498 (2016:
S$1.0106) for the year ended 30 June 2017 and balances A$1 to S$1.0570 (2016: S$1.0026) as at 30 June 2017,
reflecting a strengthened A$.
The world’s economic landscape is undergoing a significant change. Rapid digital disruptions are being
compounded by new geo-political developments in transforming economic and business environment in
an unprecedented way. The results for the full year have not escaped the impact of these changes as well
as the consolidating effect of over-supply. As a result, price pressures across board had impacted on profit
margins during the year, notwithstanding general overheads had been reduced.
The main segments that were severely affected were the offshore marine, oil and gas sector, the
construction sector as well as the precision engineering sector, our existing core businesses. Gestation costs
of our technology investments incurred on product development have greatly scaled down. The current
costs are mainly incurred for global market development to accelerate commercialisation. However such
costs have also impacted the results.
The offshore marine sector is expected to continue to be in a slump. During the year we focused to
successfully complete 3 turnkey projects and at the same strengthened our capabilities for increased gas
projects in the pipeline. We expect these projects to be awarded in this coming financial year. As a result
we expect to improve on this sector’s consolidated results. The construction sector had been subdued but
signs of improvements have emerged. The precision engineering sector suffered from an overhang of prior
years’ slack in demand. The situation has been improving and demand for its services now resurged. A few
of our technology investments have begun to generate revenue and are expected to break-even within the
coming financial year, defining their growth phase.
The Group has entered into an inflection point of its restructuring phase. Several years ago, in recognition
of the rapid digital and technological disruption to the world’s economy it embarked on an industry
transformation of its businesses. The Group aims on industries for the future.
The Group’s first diversification was technologies on semiconductor and medical equipment. It has also
begun to look into clean energy and waste control technologies. These are focused on high end niche
areas and in industries for the future. At the same time, established core businesses will be strengthened with
innovations to stay relevant.
8
ZICOM GROUP LIMITED Annual Report 2017
DIRECTORS’ REPORT 2017
We have begun to restructure and realign our business units so as to enable management to refocus. As a
first step, the precision engineering and technology cluster will be grouped for a spin-off in an Initial Public
Offer. Work on this has commenced and announcements will be made at appropriate intervals to keep
shareholders informed.
Segmental Revenue
The following is an analysis of the segmental revenue:-
Segmental Revenue
Offshore Marine, Oil & Gas Machinery
Construction Equipment
Precision Engineering & Technologies
Industrial & Mobile Hydraulics
Offshore Marine, Oil & Gas Machinery
Change
%
- 46.8
- 24.8
+ 132.1
- 12.9
Year ended
30 June 17
S$ million
Year ended
30 June 16
S$ million
31.54
31.05
30.19
2.02
59.26
41.27
13.01
2.32
Demand for offshore marine, oil and gas machinery decreased by 46.8% in the full year as compared with
the previous year. The geo-political factors affecting the offshore oil market have become increasingly more
uncertain and volatile. There is a surplus fleet of vessels of all denominations world-wide. Production capacity
is in excess. As a result global capital expenditure has been severely curtailed. The situation is expected to
last at least 2-3 years longer, before it can hit bottom.
We are hopeful that demand for land-based gas processing activities remains strong particularly in the
market in which we operate. The demand is generated by the country’s infrastructural needs. We are
hopeful that projects will be materialised in the coming year.
Barring no unforeseen factors, this sector is expected to perform better in the coming year.
Construction Equipment
The construction sector in Singapore, the main market for our foundation equipment had been weak due to
surplus equipment from completion of several infrastructure projects and scaled down housing construction.
Revenue from sales and rental of construction equipment decreased by 24.8% in the full year as compared
with the previous year.
Demand for sales and rental of foundation equipment from regional markets in Malaysia, Thailand, Indonesia
and the Philippines has however increased. More marketing focus is now being placed on these countries.
Demand for construction equipment including concrete mixers in Australia and Thailand were stronger but
margins were impacted by competition and currency fluctuations. We expect with increase in infrastructure
developments, demand will remain strong.
ZICOM GROUP LIMITED Annual Report 2017
9
DIRECTORS’ REPORT 2017
Precision Engineering & Technologies
Precision Engineering
Demand for the precision engineering sector increased by 132.1% in the full year as compared with the
previous year. The semiconductor market has been recovering but the industrial automation market was
somewhat affected by the global uncertainty, thus depressing the overall margin. We are hopeful that
demand for industrial automation projects which has, in recent months resurged, will maintain their
momentum over the next 2 years. Coupled with newly created demand in semiconductor equipment and
sales of our medical technology equipment, the results for this sector are expected to strengthen in the
coming year.
Semiconductor Technology
Our technology has been fully validated by a world’s leading semiconductor chip assembly factory.
Following the breakthrough, we have been engaged by several customers to evaluate our machine with
a view of adoption. At this stage we are hopeful that more orders would materialise during the coming
year and our market base will broaden and strengthen. Our product has been well proven to meet the
current industry’s demand for compact high power computing chips that require very stringent accuracy
and miniaturisation. We have proven to stay ahead of the curve over other more established competitors.
Medtech Technology
Our Group’s medtech investments on surgical robots, liver fibrosis imaging machines, drug development
instrumentation and ophthalmology have begun to generate revenue. We are hopeful that these
investments can break-even in the next 12 months and embark on their exponential growth. These
technologies together with our precision engineering sector are being grouped for a potential spin-off, the
process of which has commenced.
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. There has not been any significant variation in this segment.
Financial Position
The Group’s financial position remains strong:-
Classification
Net assets
Net working capital
Cash in hand and at bank
Gearing Ratio
Decrease
S$ million
As at 30 June 17
S$ million
As at 30 June 16
S$ million
4.62
9.11
1.97
80.47
32.23
18.59
85.09
41.34
20.56
The Group’s gearing ratio is 0% at the same ratio as for the year ended 30 June 2016 as cash and cash
equivalents exceeded interest-bearing liabilities. Gearing ratio has been arrived at by dividing our interest-
bearing liabilities less cash and cash equivalents over total capital.
10
ZICOM GROUP LIMITED Annual Report 2017
DIRECTORS’ REPORT 2017
Return per Share
The Group’s earnings and net tangible assets per share are as follows:-
Classification
Earnings per share
Decrease
Singapore Cents
2017
Singapore Cents
2016
Singapore Cents
1.17
(2.13)
(0.96)
The weighted average shares used to compute basic earnings per share are 217,140,780 for this year and
216,702,764 shares for the previous year.
Classification
Decrease
Singapore Cents
As at 30 June 17
Singapore Cents
As at 30 June 16
Singapore Cents
Net tangible assets per share
2.17
30.28
32.45
Net tangible assets per share has decreased due to the Group’s operational loss for the year offset by the
translation gain arising from the appreciation of functional currencies of certain foreign operations.
Capital Expenditure
For the year ending 30 June 2018, the Group does not plan to invest in any capital equipment.
Confirmed Orders
We have a total of S$21.3m (30 June 2016: S$48.4m) outstanding confirmed orders in hand on 30 June 2017.
A breakdown of these outstanding confirmed orders is as follows:-
Offshore Marine, Oil & Gas Machinery
Construction Equipment
Precision Engineering & Technologies
Industrial & Mobile Hydraulics
Total
S$ m
3.2
6.9
11.0
0.2
21.3
These outstanding orders are scheduled for delivery in the financial year 2018. Prospects for ongoing orders
are strengthening.
Prospects
The global economic environment continues to be challenging and has become increasingly uncertain,
being compounded by unprecedented geo-political factors. Notwithstanding that, global recovery is
somewhat evident although it is segmental and not across board. It is the Group’s policy to take a long term
view of the global economic directions, and pursue its directions regardless of transient economic or political
factors. It has, and will continue to focus on technology and products for the future industry. After several
years of transformation the Group is confident that it is travelling in the right direction.
The Group’s financial position remains strong with virtually no gearing. We are confident to maintain this
position such that we can continue to take advantage of opportunities to complete our industrial
transformation road map to be sustainable.
ZICOM GROUP LIMITED Annual Report 2017
11
DIRECTORS’ REPORT 2017
Subsequent Events after the Balance Sheet Date
Investment in Pellucid Networks Pte Ltd
On 8 August 2017, Zicom MedTacc Private Limited injected S$400,000 into Pellucid Networks Pte Ltd
(“Pellucid”) and increased its equity interest in Pellucid to 11.51%.
Investment in Curiox Biosystems Pte Ltd
On 8 September 2017, 138,000 preference shares were allotted to Zicom Holdings Private Limited for a cash
consideration of S$276,000 pursuant to the remaining tranche of the non-renounceable rights issue. As a
result of this allotment, the Group’s interest in Curiox decreased to 72.75%.
Investment in Link Vue Systems Pte Ltd
On 26 September 2017, Zicom Equipment Private Limited, a wholly-owned subsidiary, has acquired 71.87%
equity interest in Link Vue Systems Pte Ltd, an automation company specialised in industrial controls and
system engineering, for a cash consideration of S$189,000.
Investment in Zicom Energy Solutions Private Limited
On 21 September 2017, Zicom Private Limited, a wholly-owned subsidiary, entered into an investment
agreement to acquire 51% equity interest in Zicom Energy Solutions Private Limited, a dual fuel technology
company, for a cash consideration of S$510,000, payable in 2 equal tranches. Completion for the
first tranche is targeted to be in October 2017 with the second tranche due within 90 days from the first
completion date.
Litigation
On 30 August 2017, Luminex Corporation which is based in the United States (“Luminex”) has filed an Original
Complaint against Curiox Biosystems Inc (“Curiox”), a subsidiary of Curiox Biosystems Pte Ltd which in turn is
an associate of Zicom Holdings Private Limited, in the United States District Court, Western District of Texas
(Austin Division).
Luminex is seeking, amongst others, orders enjoining Curiox from “falsely or misleadingly advertising or
promoting Curiox’s products” and making “false and misleading statements about the performance of
Luminex’s systems” and to seek damages.
Curiox has retained attorneys in the Boston, USA law firm of Morgan, Lewis & Bockius LLP as legal counsel.
Curiox denies all of Luminex’s claims and will vigorously defend itself against Luminex’s allegations. Curiox will
also consider potential counterclaims it may have against Luminex.
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.
12
ZICOM GROUP LIMITED Annual Report 2017
DIRECTORS’ REPORT 2017
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:
Full meetings of directors
Audit
Nomination &
Remuneration
Meetings of Committees
A
4
4
3
4
4
3
4
B
4
4
4
4
4
4
4
A
-
-
-
3
3
3
-
B
-
-
-
3
3
3
-
A
1
-
-
1
1
-
-
B
1
-
-
1
1
-
-
Giok Lak Sim
Kok Hwee Sim
Kok Yew Sim
Yian Poh Lim
Frank Leong Yee Yew
Ian R Millard
Shaw Pao Sze
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$8,714 to insure against liabilities of the
directors and officers of the reporting entity.
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 Australia,
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 end of the financial year.
Retirement, election and continuation in office of directors
Messrs Shaw Pao Sze and Kok Yew Sim retire by rotation and being eligible, offer themselves 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 remuneration report as at 30 June 2017.
ZICOM GROUP LIMITED Annual Report 2017
13
DIRECTORS’ REPORT 2017
Remuneration report (Audited)
This remuneration report outlines the remuneration arrangements of 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 Parent. 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
(Chairman and Managing Director)
(Executive Director)
(Executive Director)
(Independent Director)
(Independent Director)
(Independent Director)
(Independent Director)
(ii)
Senior Executives
J L Sim
H S Tang
(Joint Managing Director of Zicom Private Limited and Director of Zicom Holdings
Private Limited)
(Joint Managing Director of Zicom Private Limited and Director of Zicom Holdings
Private Limited)
There were no changes to KMP after the reporting date and before the date the financial report was
authorised for issue.
The remuneration report is set out under the following main headings:
A
B
C
A
Principles used to determine the nature and amount of remuneration
Service Agreements
Details of remuneration
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.
14
ZICOM GROUP LIMITED Annual Report 2017
DIRECTORS’ REPORT 2017
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 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 2017 Annual General Meeting.
The Board recommends that total directors’ fees for Non-Executive Directors for the financial year
ending 30 June 2018 be fixed at a maximum sum of A$150,000 (S$159,000) at the same level as the
previous year.
Executive directors and senior executives
All remuneration paid to executive directors and senior executives comprises the following
components:
Base pay and benefits;
Short term incentives;
Other remuneration such as superannuation; and
Participation in the Zicom Employee Share and Option Plan.
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).
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 S$500,000 or 15% of total shareholders’ funds outstanding at the end of the previous financial
year.
ZICOM GROUP LIMITED Annual Report 2017
15
DIRECTORS’ REPORT 2017
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 2016. 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 as at the end of that financial year. 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
2016 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 minimum performance
bonus of 5% but not exceeding 10% of the pre-tax consolidated profits of ZHPL upon achieving agreed
minimum profit targets, being the only criterion for his entitlement. Mr Sim is entitled to convert part
of his performance bonus up to 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 financial year
just ended, Mr Sim was not entitled to any bonus as the minimum profit target was not achieved.
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.
These senior executives are also entitled to convert part of their performance bonus up to 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
exercised the option to convert part of their performance bonus into ZGL shares.
16
ZICOM GROUP LIMITED Annual Report 2017
DIRECTORS’ REPORT 2017
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 first allocated to each group company based on its profit
contribution to the Group for the past 3 years adjusted by factors such as potential contribution to the
Group and past conversion rates. 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.
No share options were granted or exercised during the current financial year.
There were 2,680,000 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)
Dividends per share (Australian cents)
Closing share price (Australian cents)
Net tangible assets per share (Australian cents)
Exchange rates used for currency translation
2017
(2.03)
0.15
12.00
28.65
2016
(0.95)
0.45
17.00
32.37
2015
1.04
0.70
20.50
33.37
2014
1.65
0.90
22.00
29.64
2013
2.56
1.00
23.00
29.96
Average rate for EPS
Closing rate for NTA per share
1.0498
1.0570
1.0106
1.0026
1.0864
1.0323
1.1521
1.1739
1.2664
1.1699
ZICOM GROUP LIMITED Annual Report 2017
17
DIRECTORS’ REPORT 2017
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ZICOM GROUP LIMITED Annual Report 2017
19
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DIRECTORS’ REPORT 2017
Details of share options to key management personnel
Options granted to, vested, exercised or expired during the years 2017 and 2016 as well as their outstanding
options held as at year end are shown in the tables below.
30 June 2017
Balance at
1 July 2016 Granted
Options
exercised Expired
Balance at
30 June
2017
Value of
options
granted
S$
Value of
options
expired
S$
Exercisable
Not
Exercisable
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
300,000
300,000
–
–
–
–
200,000
200,000
1,000,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
300,000
300,000
–
–
–
–
200,000
200,000
1,000,000
–
–
–
–
–
–
–
–
–
–
Directors
G L Sim
K H Sim
K Y Sim
Y P Lim
F Leong
I R Millard
S P Sze
Executives
J L Sim
H S Tang
–
300,000
300,000
–
–
–
–
200,000
200,000
1,000,000
30 June 2016
Balance at
1 July 2015 Granted
Options
exercised Expired
Balance at
30 June
2016
Value of
options
granted
S$
Value of
options
expired
S$
Exercisable
Not
Exercisable
–
280,000
280,000
–
–
–
30,000
–
300,000
300,000
–
–
–
–
–
(280,000)
(280,000)
–
–
–
–
–
–
–
–
–
–
(30,000)
–
300,000
300,000
–
–
–
–
–
7,650
7,650
–
–
–
–
–
–
–
–
–
–
3,538
200,000
480,000
1,270,000
–
–
600,000
–
(100,000)
(660,000)
200,000
–
(180,000)
200,000
(210,000) 1,000,000
–
–
15,300
–
19,108
22,646
–
–
–
–
–
–
–
–
–
–
–
300,000
300,000
–
–
–
–
200,000
200,000
1,000,000
Directors
G L Sim
K H Sim
K Y Sim
Y P Lim
F Leong
I R Millard
S P Sze
Executives
J L Sim
H S Tang
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 Annual Report 2017
DIRECTORS’ REPORT 2017
The terms and conditions of the options granted to key management personnel during the financial year
ended 30 June 2016 were as follows:
Grant date
Fair value per option at grant date
Exercise price
First Exercise date
Last Exercise date
2016
1/12/2015
A$0.04
A$0.18
1/12/2016
30/11/2020
Shareholdings of key management personnel as at 30 June 2017 and 30 June 2016 are as follows:
30 June 2017
Directors
G L Sim
K H Sim
K Y Sim
Y P Lim
F Leong
I R Millard
S P Sze
Executives
J L Sim
H S Tang
30 June 2016
Directors
G L Sim
K H Sim
K Y Sim
Y P Lim
F Leong
I R Millard
S P Sze
Executives
J L Sim
H S Tang
Balance as at
1 July 2016
Granted as
remuneration
Options
exercised
Net change
other
Balance as at
30 June 2017
89,345,442
1,538,180
1,350,253
488,000
624,364
592,250
–
6,687,767
2,111,339
102,737,595
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,407,695
–
–
–
–
–
–
94,753,137
1,538,180
1,350,253
488,000
624,364
592,250
–
–
–
5,407,695
6,687,767
2,111,339
108,145,290
Balance as at
1 July 2015
Granted as
remuneration
Options
exercised
Net change
other
Balance as at
30 June 2016
80,758,915
1,258,180
1,070,253
488,000
624,364
592,250
–
6,687,767
2,470,699
93,950,428
–
–
–
–
–
–
–
–
280,000
280,000
–
–
–
–
8,586,527
–
–
–
–
–
–
89,345,442
1,538,180
1,350,253
488,000
624,364
592,250
–
–
–
–
–
100,000
660,000
–
(459,360)
8,127,167
6,687,767
2,111,339
102,737,595
There were no other transactions and balances with key management personnel and their related parties
during the year.
ZICOM GROUP LIMITED Annual Report 2017
21
DIRECTORS’ REPORT 2017
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.
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.
Non-Audit Services
Tax compliance services was provided by the entity’s auditor, Ernst & Young Australia. The directors are
satisfied that the provision of non-audit services is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001. The nature and scope of non-audit services provided did
not compromise auditor’s independence.
Ernst & Young Australia received or due to receive the following amounts for the provision of services:
Assurance related
Tax compliance services
Rounding of Amounts
S$
136,474
12,388
148,862
The Company is an entity to which the ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191 applies and accordingly, the amounts contained 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 2017
22
ZICOM GROUP LIMITED Annual Report 2017
AUDITOR’S INDEPENDENCE DECLARATION
to the Directors of Zicom Group Limited
As lead auditor for the audit of Zicom Group Limited for the financial year ended 30 June 2017, I declare to
the best of my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Zicom Group Limited and the entities it controlled during the financial year.
Ernst & Young
Tom du Preez
Partner
29 September 2017
ZICOM GROUP LIMITED Annual Report 2017
23
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.
A description of the Company’s practices in complying with the principles is set out below.
Principle 1: Laying Solid Foundations for Management and Oversight
Role of Board and management
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 and strategic objectives. It monitors performance and
achievement of these 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, available resources,
major capital expenditure, capital raising, acquisition and divestment of Company’s assets;
maintains liaison with the Company’s auditor; and
reports to shareholders.
Candidates for election or re-election as a Director
The Company is guided by the Board for the selection, nomination and appointment of Directors. As part
of this process the Board ascertains the qualifications and experience that a potential candidate possesses.
Background checks, as appropriate, are carried out before a person is appointed by the Board. In addition,
the Board will continue to provide shareholders with all material information in its possession relevant to any
decision to elect or re-elect a Director by inclusion in the Notice of Meeting.
Written agreements with Directors
The Executive Chairman, Executive Directors and Senior Executives have letters of appointments or service
contracts describing their terms of office, duties, rights and responsibilities.
The other Directors 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.
24
ZICOM GROUP LIMITED Annual Report 2017
CORPORATE GOVERNANCE STATEMENT
Company Secretaries
The Joint Company Secretaries are directly accountable to the Board through the Chairman.
Diversity Policy
The Company does not have a written diversity policy but 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 22% of the Company’s workforce is made up
of female employees.
Performance Review
The Chairman is responsible for evaluating the performance of its senior executives, committees and
individual Directors. The review process is currently informal, generally done through a meeting with the
Chairman of the Board. The performance 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.
The review process as disclosed above was undertaken in the current reporting period.
Principle 2: Structure the Board to Add Value
Composition of Board
The names of the Directors of the Company in office at the date of this annual report are set out in the
Directors’ report on page 7.
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.
The composition of the Board has been 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.
Nomination and Remuneration Committee
A combined Nomination and Remuneration Committee has been established comprising the following
members:
Mr Y P Lim (Chairman)
Mr G L Sim
Mr Frank Leong
ZICOM GROUP LIMITED Annual Report 2017
25
CORPORATE GOVERNANCE STATEMENT
The Committee is responsible for the selection, nomination and appointment of Directors, monitoring the skills
and expertise of current Board members, consider succession planning issues, assessing the independence
of Non-Executive Directors and identifying the likely order of retirement by rotation of Directors. In addition,
the committee formulates the remuneration policies for the Board Members and Managing Director of the
Group.
For details on the number of meetings of the Nomination and Remuneration Committee held during the year
and the attendees at those meetings, please refer to page 13 of the Directors’ Report.
Board Skills Matrix
The Board seeks to ensure as a minimum the Board’s skills matrix includes:
(a)
Each Director must be capable of making a valuable contribution to the effective operations of the
Company and Board's deliberations and processes;
(b) Directors must collectively have the necessary skills, knowledge and experience to understand the
risks of the Company and to ensure that the Company is managed in an appropriate way taking into
account these risks; and
(c) All Directors must be able to read and understand fundamental financial statements.
The Board believes that it has adequate representation of the necessary skills and requirements noted
above.
Independence
Majority of the Company’s Board of Directors are 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;
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;
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; and
has not been a director of the entity for such a period that his or her independence may have
been compromised.
26
ZICOM GROUP LIMITED Annual Report 2017
CORPORATE GOVERNANCE STATEMENT
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 20% shareholding if a private company or 2% if a listed company.
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.
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 Private Limited (“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 G L Sim
is, and was not independent.
As such, the Chairperson and Managing Director positions are held by the same non-independent director.
The Board recognises the importance of having an independent chair, however, other selection criterion,
in particular business acumen and industry experience, are also fundamentally important. The Board has
chosen a director who has significant diversified and broad-based experience in the business who will lead
the Company in the best interests of the shareholders.
Length of Service
The term in office held by each Director in office at the date of this report is as follows:
Executive
Mr G L Sim
Mr K H Sim
Mr K Y Sim
22 years
10 years
3 years
Independent
Mr Ian R Millard
11 years
Mr Y P Lim
11 years
Mr Frank Leong
11 years
Mr S P Sze
7 years
The Company’s Constitution specifies that at each annual general meeting, 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.
ZICOM GROUP LIMITED Annual Report 2017
27
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.
Induction and Professional Development
The Company does not consider it necessary to have a formal program for inducting new directors
and professional development for directors. However, whenever appropriate, the Company provides
opportunities to develop and maintain their skills and knowledge to perform their roles as directors
effectively.
Principle 3: Act Ethically and Responsibly
Code of Conduct
The Board expects all Directors, officers, employees and consultants to the Company to observe high
standards of honesty, integrity, fairness and business ethics. 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 and to act in accordance with the Corporations Act 2001 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.
Share Trading Policy
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:
The period between 1 January and the release of the Company’s Half Year results to the Stock
Exchange
The period between 1 July and the release of the Company’s Full Year results to the Stock Exchange
The twenty-four hours following an announcement of price sensitive information on the Stock
Exchange
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’s shares. The undertaking of any trading in shares must be notified to the
Company Secretary who makes disclosure to the ASX.
28
ZICOM GROUP LIMITED Annual Report 2017
CORPORATE GOVERNANCE STATEMENT
Principal 4: Safeguard Integrity in Corporate Reporting
Audit Committee
The Audit Committee comprises only independent members:
Mr Ian R Millard (Chairman)
Mr Frank Leong
Mr Y P Lim
The Audit Committee operates in accordance with a charter. The main responsibilities of the Audit
Committee are to:
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.
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.
Recommend the appointment or removal of the external auditor and the rotation of the audit
engagement partner.
Recommend the remuneration of the external auditor, and review the terms of their engagement, the
scope and quality of their audit and assess their performance.
Consider the independence and competence of the external auditor on an ongoing basis.
Report on matters relevant to the committee’s role and responsibilities.
Non-committee members, including members of the management team and the external auditor, may
attend meetings of the Committee by invitation of the Committee Chair.
The Committee has rights of access to management and external auditor without management present
and rights to seek explanations and additional information from both management and auditor.
For details on the number of meetings of the Audit Committee held during the year and the attendees at
those meetings, please refer to page 13 of the Directors’ Report.
To ensure the integrity of the Company’s financial reports, the Managing Director and the Group Financial
Controller are required to provide written assurance to the Board that, in their opinion, the financial records
of the Company for the relevant financial year have been properly maintained in accordance with the
Corporations Act 2001, the financial statements and the notes for the financial year comply with accounting
standards and present a true and fair view of the financial position and performance of the entity.
The Company’s external auditor is requested to attend the Company’s Annual General Meeting to answer
any questions from shareholders.
ZICOM GROUP LIMITED Annual Report 2017
29
CORPORATE GOVERNANCE STATEMENT
Principal 5: Make Timely and Balanced Disclosure
The Board recognises that the Company as a publicly-listed entity has an obligation to make timely and
balanced disclosure in accordance with the requirements of the Australian Securities Exchange Listing
Rules and the Corporations Act 2001. The Board is committed to keep the market reasonably informed
of information which may have a material effect on the price or value of the Company’s securities in a
balanced and understandable way.
The Executive Chairman is responsible for monitoring information which could be price sensitive, liaising
with the Company Secretaries to make an initial assessment and forwarding to the Board for confirmation
of disclosure of such information. If not all Directors are immediately available, the Company Secretary is
authorised to lodge such information upon receiving the majority of Directors’ approval in order not to delay
in giving this information to ASX.
Principal 6: Respect the Rights of Shareholders
The Company aims to communicate all important information relating to the Company to its shareholders.
Additionally, the Company recognises potential investors and other interested stakeholders may wish to
obtain information about the Company from time to time.
To achieve this, the Company communicates information regularly to shareholders and other stakeholders
through the following:
Annual General Meeting (“AGM”): the Company encourages full participation of shareholders at the
AGM and for those shareholders who are unable to attend in person, they are able to lodge proxies.
The external auditor will attend the AGM and is available to answer any questions from shareholders
about the conduct of the audit and the preparation and content of the auditor’s report.
Annual Report: the Company Annual Report will be available on its website and contains important
information about the Company’s activities and results for the previous financial year.
ASX Announcements: all ASX announcements, including annual and half year financial reports are
posted on the Company’s website as soon as these have been released by ASX.
Investor relations: the Company provides an online email inquiry service to assist shareholders with any
queries.
All shareholders are given the options to receive communications from, and send communications to, the
share registry electronically.
Principle 7: Recognise and Manage Risk
Given the size of the Company, the Board has not established a risk committee nor does it have an internal
audit function. Rather the Board is responsible for the Company’s risk management. The responsibility and
control of risk management rests with the senior management of the respective subsidiaries chaired by the
Executive Chairman.
30
ZICOM GROUP LIMITED Annual Report 2017
CORPORATE GOVERNANCE STATEMENT
The Board is conscious of the need to continually maintain systems of risk management and controls 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, investment, 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.
The Company does not consider that it has any material exposure to economic, environmental and social
sustainability risks.
In accordance with Section 295A of the Corporations Act 2001, 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 for the financial year just ended is founded on a
sound system of risk management and internal control which implements the policies adopted by the
Board; and
The Company’s risk management and internal control system is operating efficiently and effectively in
all material respects to manage the Company’s key business risks.
The Board acknowledges that such internal control assurance is 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,
the use of testing on a sample basis, the inherent limitations in internal controls and because much of the
evidence available is persuasive rather than conclusive 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 combined Nomination and Remuneration Committee has been established by the
Board comprising the Executive Chairman and two independent directors.
For details on the number of meetings of the Nomination and Remuneration Committee held during the year
and the attendees at those meetings, please refer to page 13 of the Directors’ Report.
Details of the remuneration for Directors and Key Management Personnel can be found in the Directors’
Report within the Annual Report.
The Managing Director and Executive Directors receive performance based remuneration. The Managing
Director has renewed his service agreement with the Group for a term of another 5 years from 1 July
2016. The Non-Executive Directors do not receive any performance based remuneration and do not have
contracts with the Company that give them any form of specific tenure. One-third of the Directors except
the Managing Director 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.
ZICOM GROUP LIMITED Annual Report 2017
31
CORPORATE GOVERNANCE STATEMENT
A maximum amount of remuneration for Non-Executive Directors is fixed by shareholders in general meetings
and can be varied in the same manner. In determining the allocation, the Board must take into account the
time demands on the Directors together with the responsibilities undertaken by them.
The Directors with the exception of Mr G L Sim were granted options. The first grant of options 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 sensible and balanced which aligns the interests of shareholders and all Directors.
Transactions which limit the economic risk of participating in unvested elements under equity-based
remuneration schemes are not allowed.
32
ZICOM GROUP LIMITED Annual Report 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2017
(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
Loss before taxation
Tax benefit/(expense)
Loss for the year from continuing operations after taxation
Other comprehensive income:
Items that may be subsequently reclassified to profit and loss
Share of other comprehensive income of associates, net of tax
Foreign currency translation on consolidation
Other comprehensive income/(loss) for the period, net of tax
Total comprehensive loss
Loss attributable to:
Equity holders of the Parent
Non-controlling interests
Loss for the year
Total comprehensive loss attributable to:
Equity holders of the Parent
Non-controlling interests
Total comprehensive loss
Earnings per share (cents)
Basic loss per share
Diluted loss per share
Note
2017
S$’000
2016
S$’000
5
5
5
12
6
92,628
113,897
1,892
1,761
(45,571)
(28,601)
(5,356)
(2,484)
(17,119)
(421)
(724)
(5,756)
1,003
(4,753)
(67,941)
(28,564)
(5,604)
(2,398)
(11,999)
(467)
(382)
(1,697)
(878)
(2,575)
(19)
915
896
10
(855)
(845)
(3,857)
(3,420)
(4,620)
(133)
(2,086)
(489)
(4,753)
(2,575)
(3,724)
(133)
(2,931)
(489)
(3,857)
(3,420)
7
7
(2.13)
(2.13)
(0.96)
(0.96)
ZICOM GROUP LIMITED Annual Report 2017
33
CONSOLIDATED BALANCE SHEET
as at 30 June 2017
(In Singapore dollars)
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Convertible loan to an associate
Investments in associates
Others
Current assets
Cash and bank balances
Inventories
Trade and other receivables
Gross amount due from customers for contract work
Prepayments
Tax recoverable
TOTAL ASSETS
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Gross amount due to customers for contract work
Interest-bearing liabilities
Provisions
Provision for taxation
NET CURRENT ASSETS
Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions
TOTAL LIABILITIES
NET ASSETS
Equity attributable to equity holders of the Parent
Share capital
Reserves
Retained earnings
Non-controlling interests
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
34
ZICOM GROUP LIMITED Annual Report 2017
Note
2017
S$’000
2016
S$’000
9
10
6
12
12
20
13
14
15
16
15
17
18
17
6
18
19
22,969
14,725
2,767
602
9,448
–
50,511
18,591
23,145
19,195
3,305
409
32
64,677
24,728
14,632
2,378
–
6,886
1
48,625
20,557
22,427
15,512
11,735
786
17
71,034
115,188
119,659
19,991
19
9,935
2,281
219
32,445
32,232
652
1,224
398
2,274
34,719
80,469
38,314
(1,501)
43,444
80,257
212
80,469
18,176
2,580
7,352
1,069
513
29,690
41,344
2,584
1,954
339
4,877
34,567
85,092
38,314
(2,437)
49,146
85,023
69
85,092
115,188
119,659
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2017
(In Singapore dollars)
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ZICOM GROUP LIMITED Annual Report 2017
35
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2017
(In Singapore dollars)
Cash flows from operating activities:
Operating loss before taxation
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Bad debts written off
Allowance for doubtful debts, net
Allowance for inventory obsolescence, net
Inventories written off
Finance costs
Interest income
Property, plant and equipment written off
Intangible assets written off
Gain on disposal of property, plant and equipment, net
Forfeiture of customer deposit
Trade and other payables written back
Provisions made/(written back), net
Share-based payments
Share of results of associates
Unrealised exchange differences
Operating profit before reinvestment in working capital
(Increase)/decrease in stocks and work-in-progress
Decrease/(increase) in projects-in-progress
(Increase)/decrease in debtors
Increase/(decrease) in creditors
Cash generated from operations
Interest received
Interest paid
Income taxes paid
Note
2017
S$’000
2016
S$’000
(5,756)
(1,697)
9
10
5
5
5
5
5
5
5
5
5
5
18
4,300
1,056
5
412
307
62
421
(62)
7
–
(71)
(95)
(37)
1,423
43
724
573
3,312
(835)
5,869
(3,712)
3,969
8,603
45
(402)
(407)
4,536
1,068
130
160
224
7
467
(81)
36
22
(46)
(45)
(6)
(177)
83
382
(422)
4,641
4,397
(9,216)
9,468
(3,360)
5,930
81
(480)
(102)
Net cash generated from operating activities
7,839
5,429
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of available-for-sale asset
Purchase of computer software
Increase in development expenditure
Increase in patented technology
Investments in associates
Subscription of convertible loan in an associate
9(b)
9(c)
10
10
12(b)
(1,777)
94
1
(68)
(974)
(56)
(3,339)
(600)
(794)
115
–
(39)
(506)
(41)
(1,765)
–
Net cash used in investing activities
(6,719)
(3,030)
36
ZICOM GROUP LIMITED Annual Report 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2017
(In Singapore dollars)
Cash flows from financing activities:
Repayment of bank borrowings
Dividends paid on ordinary shares
Proceeds from issue of shares by subsidiary company to
non-controlling interests
Proceeds from exercise of employee share options
Repayment of hire purchase creditors
Net cash used in financing activities
Net decrease in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
2017
S$’000
2016
S$’000
8
20
20
(1,233)
(809)
–
–
(819)
(3,434)
(1,336)
43
287
(1,693)
(2,861)
(6,133)
(1,741)
(1)
19,981
(3,734)
(155)
23,870
18,239
19,981
ZICOM GROUP LIMITED Annual Report 2017
37
1.
Corporate information
This financial report of Zicom Group Limited (the “Company” or “Parent Entity”) and its subsidiaries
(collectively, the “Group” or “consolidated entity”) for the year ended 30 June 2017 was authorised for
issue in accordance with a resolution of the Directors on 29 September 2017.
Zicom Group Limited is a for profit company limited by shares incorporated in Australia whose shares
are publicly traded on the Australian Securities Exchange. The Company is also the ultimate parent.
The nature of the operations and principal activities of the Group are described in the Directors’ report.
2.
Summary of significant accounting policies
2.1
Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in
accordance with the requirements of the Corporations Act 2001, Australian Accounting
Standards and other authoritative pronouncements of the Australian Accounting Standards
Board (“AASB”). The financial report has also been prepared on a historical cost basis except for
derivative financial instruments which have been measured at their fair values.
The financial report is presented in Singapore dollars and all values are rounded to the nearest
thousand dollars (S$’000) unless otherwise stated.
2.2
Statement of compliance
The financial report also complies with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board.
(i)
Changes in accounting policies and disclosures
The Group applied for the first time certain standards and amendments, which are
effective for annual periods beginning on or after 1 July 2016. The Group has not early
adopted any other standard, interpretation or amendment that has been issued but is not
yet effective.
The adoption of these standards and interpretations did not have any effect on the
financial performance or position of the Group.
(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. The directors expect the adoption of these new
and amended standards and interpretations will have no material impact on the financial
statements in the period of initial application except for the standards disclosed below for
which the directors have yet to finalise their assessment of the impact.
AASB 9 Financial Instruments (Effective for annual periods on or after 1 July 2018)
AASB 15 Revenue from Contracts with Customers (Effective for annual periods on or
after 1 July 2018)
AASB 16 Leases (Effective for annual periods on or after 1 July 2019)
38
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.3
Principles of consolidation
The consolidated financial statements comprise the financial statements of the Company and its
subsidiaries as at 30 June 2017. The financial statements of the subsidiaries used in the preparation
of the consolidated financial statements are prepared for the same reporting date as the
Parent. 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. Specifically, the Group controls an investee if and only if the Group has:
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.
Generally, there is a presumption that a majority of voting rights results in control. To support this
presumption and 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:
The contractual arrangement(s) with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group’s voting rights and potential voting rights.
The Group reassesses 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 loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated financial statements
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.
In the Parent Entity’s separate financial statements, investments in subsidiaries are accounted for
at cost less impairment losses.
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 derecognises the
related assets (including goodwill), liabilities, non-controlling interest and other components of
equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is
recognised at fair value.
ZICOM GROUP LIMITED Annual Report 2017
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.4
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. Identifiable assets
acquired and liabilities assumed in a business combination are measured initially at fair values
at the date of acquisition. 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 assesses 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 in the
acquiree is remeasured to fair value at the acquisition date and any resulting gain or loss is
recognised in profit or loss.
Any excess of the sum of the fair value of the consideration transferred in the business
combination, the amount of non-controlling interest in the acquiree (if any), and the fair value
of the Group’s previously held equity interest in the acquiree (if any), over the net fair value
of the acquiree’s identifiable assets and liabilities is recorded as goodwill. In instances where
the latter amount exceeds the former, the Group reassesses 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 reassessment 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 is 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 has been allocated to 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. 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.
40
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
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.
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. Capital expenditure consists of additions
of property, plant and equipment and intangible assets.
2.6
Foreign currency
(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)
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their
respective functional currency spot rates ruling at the transaction dates. Monetary assets
and liabilities denominated in foreign currencies are retranslated at the rate of exchange
ruling at the reporting date. Non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange rates at the dates of the
initial transactions. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value is determined.
Differences arising on the settlement or translation of monetary items are recognised in
profit or loss.
ZICOM GROUP LIMITED Annual Report 2017
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.6
Foreign currency (cont’d)
(c) Consolidated financial statements
On consolidation, the results and balance sheet of foreign operations are translated into
Singapore dollars using the following procedures:
Assets and liabilities are translated at the closing rate prevailing at the reporting
date; and
Income and expenses are translated at average exchange rate for the year, which
approximates the exchange rates at the dates of the transactions.
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 depreciates them separately based on their specific useful lives. 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 buildings
Buildings
Machinery
Office furniture and equipment
Leasehold improvements
Motor vehicles
Computers
over remaining period of the lease expiring years 2036 to 2042
20 years
10 years
3 - 5 years
5 years
5 years
1 year
Machinery under installation or construction are not depreciated as these assets are not yet
available for use.
42
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.7
Property, plant and equipment (cont’d)
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 derecognised upon disposal or when no future
economic benefits are expected from its use. Any gain or loss on derecognition of the asset is
included in profit or loss in the year the asset is derecognised.
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 assets with the exception
of development expenditure and computer software costs are not capitalised and the related
expenditure is recognised in profit or 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 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 amortisation method are reviewed at least at each financial year-end.
Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for by changing the amortisation period or
method, as appropriate, and are treated as changes in accounting estimates and adjusted on
a prospective basis.
Intangible assets with indefinite useful lives or not yet available for use are not amortised, 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
Developed technology
Development expenditure
Patented technology
Unpatented technology
5 years
8 years
7 years
5 – 10 years
10 – 20 years
12 – 14 years
ZICOM GROUP LIMITED Annual Report 2017
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.8
Intangible assets (cont’d)
Research and development costs
Research costs are expensed as incurred. Development expenditure on an individual project
is recognised as an intangible asset 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 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. During the period of development, the asset is
tested for impairment annually.
Club membership
Club membership was acquired separately and is not amortised as it has an indefinite life.
Gains or losses from derecognition 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.
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 which are prepared separately
for each of the Group’s cash-generating units to which the individual assets are allocated. These
budgets generally cover a period of one to five years. For longer periods, a long-term growth
rate is calculated and applied to project future cash flows after the period covered by the
budgets.
44
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.9
Impairment of non-financial assets (cont’d)
An assessment is made at each reporting date as to whether there is any indication that
previously recognised impairment losses 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 through its power to
participate in the financial and operating policy decisions of the investee but does not have
control or joint control over those policies.
The Group account for its investments in associates using the equity method from the date it
becomes an associate.
On acquisition of the investment, any excess of the cost of investment over the Group’s share
of the net fair value of the investee’s identifiable assets and liabilities is accounted as goodwill
and is included in the carrying amount of the investment. Such goodwill is neither amortised nor
tested for impairment. Any excess of the Group’s share of the net fair value of the investee’s
identifiable assets and liabilities over the cost of investment is included as income in the
determination of the Group’s share of results of associate in the period in which the investment is
acquired.
Under the equity method, investment in associate is carried in the balance sheet at cost plus
post-acquisition changes in the Group’s share of net assets of the associate. The profit or loss
reflects the Group’s share of 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.
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.
After application of the equity method, the Group determines whether it is necessary to
recognise an additional impairment loss on its investment in 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 such evidence, the Group calculates the amount of impairment
as the difference between the recoverable amount of the associate and its carrying value and
recognises the amount in profit or loss included in the Group’s share of results of associates.
ZICOM GROUP LIMITED Annual Report 2017
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.10 Associates (cont’d)
The financial statements of the associates are prepared for the same reporting period as the
Group. Where necessary, adjustments are made to bring the accounting policies in line with
those of the Group.
Upon loss of significant influence over the associate, the Group measures the retained interest
at fair value. Any difference between the aggregate of fair value of the retained interest and
proceeds from disposal and the carrying amount of the investment at the date the equity
method was discontinued 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 regulation 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:
Financial assets at fair value through profit or loss
Loan and receivables
Held-to-maturity investments
Available-for-sale financial assets
46
ZICOM GROUP LIMITED Annual Report 2017
NOTES 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 (cont’d)
(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 or 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 carried at fair value with net
changes in fair value presented as finance costs or interest 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 investments
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 the investment to maturity. After initial measurement,
held-to-maturity investments are measured at amortised cost using the effective
interest rate method, less impairment. Gains and losses are recognised in profit
or loss when the held-to-maturity investments are derecognised or impaired, and
through the amortisation process. The Group did not have any held-to-maturity
investments during the years ended 30 June 2017 and 2016.
(d) Available-for-sale (AFS) financial assets
AFS financial assets include equity investments 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 or loss. Debt securities in this category are
those that are intended to be held for an indefinite period of time and that may be
sold in response to needs for liquidity or changes in market conditions.
ZICOM GROUP LIMITED Annual Report 2017
47
NOTES 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 (cont’d)
(d) Available-for-sale (AFS) financial assets (cont’d)
After initial measurement, AFS financial assets are subsequently measured at fair
value with unrealised gains or losses recognised in other comprehensive income
and credited to the AFS reserve until the investment is derecognised, at which time
the cumulative gain or loss is recognised in other operating income, or when the
investment is determined to be impaired, the cumulative loss is reclassified from
the AFS reserve to profit or loss. Interest earned while holding AFS financial assets is
reported as interest income using the effective interest rate method.
Investments in equity instruments whose fair value cannot be reliably measured are
measured at cost less impairment loss.
Derecognition
A financial asset is derecognised where the contractual right to receive cash flows from
the asset has expired. On derecognition of a financial asset in its entirety, the difference
between the carrying amount and the sum of the consideration received and other
cumulative gain or loss that has been recognised in other comprehensive income is
recognised in profit or loss.
(ii)
Impairment of financial assets
The Group assesses, at each reporting date, whether there is objective evidence that a
financial asset or a group of financial assets is impaired. An impairment exists 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 debtor or a group of debtors is experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the probability
that they will enter into 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.
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 assets 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.
48
ZICOM GROUP LIMITED Annual Report 2017
NOTES 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)
The carrying amount of the asset is reduced through the use of an allowance account
and the loss is recognised in profit or loss. When the asset becomes uncollectable, the
carrying amount of the impaired financial asset is reduced directly or if the amount was
previously charged to the allowance account, the amounts charged to the allowance
account are written off against the carrying value of the financial asset.
If, in a subsequent year, the amount of the estimated impairment loss increases or
decreases 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 liabilities 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:
(a)
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 or loss.
Financial liabilities are classified as held for trading if they are incurred for the
purpose of 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 at fair value
through profit or loss.
ZICOM GROUP LIMITED Annual Report 2017
49
NOTES 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)
(b)
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 derecognised as well as through the amortisation process.
Derecognition
A financial liability is derecognised 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 a derecognition 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 Derivative financial instruments
The Group uses derivative financial instruments such as foreign currency forward contracts 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
remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive
and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value of derivatives are taken directly to profit or
loss.
2.13 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.
50
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.14
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; and
Finished goods and work-in-progress: costs of direct materials and labour and a proportion
of manufacturing overheads based on normal operating capacity. These costs are
assigned on a first-in first-out basis.
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.
2.15 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 reporting 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.
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 costs. 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.
ZICOM GROUP LIMITED Annual Report 2017
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.16 Fair value measurement
The Group measures financial instruments, such as derivatives, at fair value at each 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 accessible 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 or 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:
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 at fair value on a
recurring basis, the Group determines whether transfers have occurred between levels in the
hierarchy by reassessing 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.
52
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.17 Provisions
General
Provisions are recognised when the Group has a present obligation (legal or constructive) as a
result of a past event, 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 reporting 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, when 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.
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 reporting 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 and corporate bond rates with terms to maturity and currencies that match,
as closely as possible, the estimated future cash outflows.
2.18 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 periods that the related
costs, for 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.
2.19 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. Capitalisation of borrowing costs commences when
the activities to prepare the asset for its intended use or sale are in progress and the expenditure
and borrowing costs are incurred. Borrowing costs are capitalised until the asset is substantially
completed for its intended use or sale. 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.
ZICOM GROUP LIMITED Annual Report 2017
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.20 Leases
The determination of whether an arrangement is, or contains a lease is based on the substance
of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if
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 or assets, even if that asset is or those assets are
not explicitly specified in the arrangement.
Group as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that
transfers substantially all the risks and rewards incidental to ownership to the Group is classified
as a finance lease. An operating lease is a lease other than a finance lease.
Finance leases 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 as finance cost.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the
asset and 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 rewards of ownership of the
leased asset is accounted for in accordance with the Group’s policy for sale of goods as set out
in note 2.22. Costs incurred in connection with negotiating and arranging the finance lease are
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 and arranging an
operating lease are added to the carrying amount of the leased asset and recognised over the
lease term on the same basis as rental income. The accounting policy for rental income is set
out in note 2.22.
54
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.21 Employee benefits
(a) Defined contribution plans
The Group makes contributions to national pension schemes as defined by the laws of the
countries in which it has operations.
For its Australian subsidiaries, contributions are made to employee accumulation
superannuation funds. For the Group’s companies in Singapore, contributions are made
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 expense in
the year in which the related service is performed.
(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 of grant using an appropriate valuation model.
This cost is recognised in profit or loss, with a corresponding increase in the share-based
payments reserve, over the period in which service conditions are fulfilled (“vesting
period”). The cumulative expense 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 expense 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.
Where the terms of an equity-settled transaction award are modified, the minimum
expense recognised is the expense as if the terms had not been modified, if the original
terms of the award are met. An additional expense is recognised for any modifications
that increases the total fair value of the share-based payment transaction, or is otherwise
beneficial to the employee as measured at the date of modification.
Where the employee share option plan is cancelled, it is treated as if it vested on the date
of cancellation, and any expense that otherwise would have been recognised for services
received over the remaining vesting period is recognised immediately. However, if a new
award is substituted for the cancelled award, and designated as a replacement award
on the date it was granted, the cancelled and new awards are treated as if there was a
modification of the original award, as described in the previous paragraph.
ZICOM GROUP LIMITED Annual Report 2017
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.21 Employee benefits (cont’d)
(c)
Employee leave entitlement
Employee entitlements to annual leave are recognised as a liability when they are
accrued to the employees. The undiscounted liability for leave expected to be settled
within 12 months from the reporting date is recognised for services rendered by the
employees up to the end of the reporting period.
2.22 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
received. Revenue is measured at the fair value of the consideration received or receivable,
net of returns and allowances, trade discounts and volume rebates, 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, associated costs or the possible return of goods.
Rendering of services
Revenue from services rendered are recognised upon performance of services and the delivery
to customers.
Revenue recognised on projects
Revenue on projects are recognised using the percentage of completion method. The stage
of completion is determined by reference to the costs incurred to date as a percentage of
total estimated costs for each project. Losses, if any, are immediately recognised when their
existence is foreseen.
Interest income
Interest income is recognised using the effective interest rate.
Dividends
Dividend income is recognised when the Group’s right to receive payment is established.
56
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.22 Revenue recognition (cont’d)
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 for services rendered is recognised on an accrual basis.
2.23 Taxation
(a) Current income 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 reporting 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 income 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 tax is provided using the liability method on temporary differences at the end
of the reporting period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable 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 arrangements, 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.
ZICOM GROUP LIMITED Annual Report 2017
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.23 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 arrangements, 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 reporting 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 reporting 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 reporting 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 services tax
Revenues, expenses and assets are recognised net of the amount of goods and services
tax except:
-
-
When the goods and services tax incurred on a sale or purchase of assets or
services is not payable to or recoverable from the taxation authority, in which case
the goods and services tax is recognised as part of the revenue or the expense item
or part of the cost of acquisition of the asset, as applicable; and
When receivables and payables 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 in the balance sheet.
58
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 2.
Summary of significant accounting policies (cont’d)
2.24 Share capital and share issuance expenses
Ordinary shares are classified as share capital in equity. Incremental costs directly attributable to
the issuance of new shares are deducted against share capital.
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 the accompanying disclosures. Uncertainty about these assumptions and
estimates could result in outcomes that require a material adjustment to the carrying amounts of
assets or liabilities affected in future periods.
(a)
Judgements made in applying accounting policies
(i) Determination of control and significant influence over investees
As at 30 June 2017, the Group holds 73.02% (2016: 72.62%) equity interest in Curiox
Biosystems Pte Ltd (“Curiox”). Although the Group holds the majority of voting rights in
Curiox, it has been assessed that the Group does not have the practical ability to direct
the relevant activities of Curiox unilaterally but has significant influence over its financial
and operating policy decisions. Hence, the investment in Curiox is treated as an associate
as opposed to being a subsidiary company.
As at 30 June 2017, the Group holds 10.88% (2016: 10.88%), 16.66% (2016: nil) and 8.23%
(2016: nil) equity interests in HistoIndex Pte Ltd, BELKIN Laser Ltd and Pellucid Networks
Pte Ltd respectively. The Group considers these investees as associates as the Group
has the ability to exercise significant influence through both its shareholdings and active
participation on the respective Boards of Directors.
(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. The Group
based its assumptions and estimates on parameters available when the financial statements
were prepared. Existing circumstances and assumptions about future developments, however,
may change due to market changes or circumstances arising beyond the control of the Group.
Such changes are reflected in the assumptions when they occur.
(i)
Impairment of non-financial assets and investments in associates
The Group assesses whether there are any indicators of impairment for all non-financial
assets and investments in associates at each reporting date. Impairment exists when the
carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount
which is the higher of its fair value less costs of disposal and its value in use.
Goodwill and other intangibles with indefinite lives are tested for impairment annually and
at other times when such indicators exist. Other non-financial assets and investments in
associates are tested for impairment when there are indicators that the carrying amounts
may not be recoverable.
ZICOM GROUP LIMITED Annual Report 2017
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 3.
Significant accounting judgements, estimates and assumptions (cont’d)
(b)
Key sources of estimation uncertainty (cont’d)
(i)
Impairment of non-financial assets and investments in associates (cont’d)
The fair value less costs of disposal calculation is based on available data from binding
sales transactions conducted at arm’s length for similar assets or observable market
prices less incremental costs for disposing of the assets (where applicable). The value in
use calculations are based on a Discounted Cash Flow (DCF) model. The cash flows are
derived from budgets for the next five years and do not include restructuring activities that
the Group is not yet committed to or significant future investments that will enhance the
asset’s performance of the CGU being tested.
When value in use calculations are undertaken to determine the recoverable amount,
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. The recoverable amounts are sensitive to the discount rates
used in the DCF model, future cash inflows including the timing of such cash inflows and
the growth rates used for both the initial five year cash flow period and long term growth
rates. For some CGUs, management also considers the ability to commercialise based on
the stage of development of the CGU’s product and services. Whilst these decisions are
based on outcomes from research and development to date, it also involves a significant
level of judgement. These estimates are most relevant to goodwill and other intangible
assets recognised by the Group. These estimates are also relevant where the carrying
value of investments in associates are considered.
The key assumptions used to determine the recoverable amounts for the different cash
generating units are disclosed in note 10 to the financial statements.
(ii)
Impairment of loans and receivables
The Group assesses at the end of each reporting period 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. The Group also takes into account if there have been significant changes in
the technological, market, economic or legal environment in which the debtor operates
in.
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 receivables at the reporting
date is disclosed in note 21 to the financial statements.
60
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 3.
Significant accounting judgements, estimates and assumptions (cont’d)
(b)
Key sources of estimation uncertainty (cont’d)
(iii) Construction contracts
The Group recognises contract revenue by reference to the stage of completion of the
contract activity at the reporting date, when the outcome of a construction contract can
be estimated reliably. The stage of completion is determined by reference to the costs
incurred to date for work performed as a percentage of total estimated contract costs.
Significant assumptions are required to estimate the total contract costs which will affect
the stage of completion. In making these estimates, management has relied 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.
(iv) Development expenditure
The Group capitalises development expenditure in accordance with its accounting policy
as set out in note 2.8. Initial capitalisation of costs is based on management’s judgement
that technological and economic feasibility is confirmed. In determining the amount to
be capitalised, management makes assumptions regarding the expected future cash
generation of the project, discount rates to be applied and the expected period of
benefits. As at 30 June 2017, the carrying amount of capitalised development expenditure
was S$5,113,000 (2016: S$4,754,000).
(v)
Taxes
The Group has exposure to income taxes in numerous jurisdictions. Significant judgement
is involved in determining the provision for income taxes. The Group recognises liabilities
for expected tax issues based on estimates of whether additional taxes will be due.
The Group recognises deferred tax assets for all unused tax losses to the extent that it is
probable that taxable profit will be available against which the losses can be utilised.
Significant judgement is required to determine the amount of deferred tax assets that
can be recognised, based on the likely timing and level of future taxable profits. Where
the final tax outcome 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 amounts of the Group’s current tax payables and deferred tax liabilities
at 30 June 2017 were S$219,000 (2016: S$513,000) and S$1,224,000 (2016: S$1,954,000)
respectively. The Group also had deferred tax assets of S$2,767,000 (2016: S$2,378,000) as
at 30 June 2017.
ZICOM GROUP LIMITED Annual Report 2017
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 4.
Segment information
Business segments
Identification of reportable segments
The Group has identified its operating segments based on internal reports that are reviewed and
used by the chief operating decision maker and the executive management team in assessing
performance and in determining the allocation of resources. The operating segments are identified
based on products and services as follows:
Offshore Marine, Oil & Gas Machinery – manufacture and supply of deck machinery, gas
metering stations, gas processing plants, offshore structures for underwater robots and related
equipment, parts and services.
Construction Equipment – manufacture and supply of concrete mixers and foundation
equipment, including equipment rental, parts and related services.
Precision Engineering & Technologies – manufacture and supply of precision and automation
equipment, medtech equipment and products, medtech translation and engineering services.
Industrial & Mobile Hydraulics – supply of hydraulic drive systems, parts and services.
Intersegment sales
Intersegment sales are recognised based on internally set transfer price at arm’s length basis.
Unallocated revenue and expenses
Unallocated revenue comprises mainly non-segmental revenue. Unallocated expenses comprise
mainly non-segmental expenses such as head office expenses.
62
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 4.
Segment information (cont’d)
Business segments (cont’d)
The following tables present information regarding operating segments for the years ended 30 June
2017 and 2016.
Offshore
marine, oil &
gas machinery
S$’000
Construction
equipment
S$’000
Precision
engineering &
technologies
S$’000
Industrial &
mobile
hydraulics Consolidated
S$’000
S$’000
Year ended 30 June 2017
Revenue
Sales to external customers
Other revenue
Intersegment sales
Total segment revenue
Intersegment elimination
Unallocated revenue
Interest income
Total consolidated revenue
Results
Segment results
Unallocated revenue
Unallocated expenses
Share of results of associates
Loss before tax and finance costs
Finance costs
Interest income
Loss before taxation
Tax benefit
Net loss after taxation
Other segment information
Capital expenditure
- property, plant and equipment
- intangible assets
Depreciation and amortisation
Other non-cash expenses
31,362
173
–
31,535
30,965
82
1
31,048
28,717
1,468
4
30,189
1,584
–
436
2,020
492
(1,154)
(3,011)
347
(724)
228
–
422
972
2,125
2
3,344
458
478
1,108
1,318
864
–
–
17
64
92,628
1,723
441
94,792
(441)
107
62
94,520
(3,326)
107
(1,454)
(724)
(5,397)
(421)
62
(5,756)
1,003
(4,753)
2,831
1,110
3,941
5,101
2,358
ZICOM GROUP LIMITED Annual Report 2017
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 4.
Segment information (cont’d)
Business segments (cont’d)
Year ended 30 June 2016
Revenue
Sales to external customers
Other revenue
Intersegment sales
Total segment revenue
Intersegment elimination
Unallocated revenue
Interest income
Total consolidated revenue
Results
Segment results
Unallocated revenue
Unallocated expenses
Share of results of associates
Loss before tax and finance costs
Finance costs
Interest income
Loss before taxation
Tax expense
Net loss after taxation
Other segment information
Capital expenditure
- property, plant and equipment
- intangible assets
Offshore
marine, oil &
gas machinery
S$’000
Construction
equipment
S$’000
Precision
engineering &
technologies
S$’000
Industrial &
mobile
hydraulics Consolidated
S$’000
S$’000
59,210
48
–
59,258
41,202
66
3
41,271
11,623
1,387
–
13,010
1,862
1
452
2,315
7,450
494
(7,723)
420
(382)
113,897
1,502
455
115,854
(455)
178
81
115,658
641
178
(1,748)
(382)
(1,311)
(467)
81
(1,697)
(878)
(2,575)
1,682
583
2,265
5,363
627
–
–
17
48
23
33
1,168
2
491
548
Depreciation and amortisation
Other non-cash expenses/
442
3,496
1,408
(income)
(100)
528
151
64
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) t
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ZICOM GROUP LIMITED Annual Report 2017
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars)
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ZICOM GROUP LIMITED Annual Report 2017
)
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66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars)
5.
Revenue, income and expenses
(i)
Revenue
Sale of goods
Rendering of services
Rental income
Revenue recognised on projects
(ii) Other operating income
Interest income
Forfeiture of customer deposit
Gain on disposal of property, plant and equipment
Services rendered
Government grants
Trade and other payables written back
Other revenue
(iii) Other operating expenses
Included in other operating expenses are the following:
Allowance for inventory obsolescence, net
Allowance for doubtful debts, net
Bad debts written off
Foreign exchange (gain)/loss
Provision for product warranties made/(written back), net
Property, plant and equipment written off
Warranty expense charged directly to profit or loss
Inventories written off
Intangible assets written off
Loss on disposal of property, plant and equipment
Consolidated
2017
S$’000
53,926
4,491
2,794
31,417
92,628
2016
S$’000
50,200
4,275
2,921
56,501
113,897
Consolidated
2017
S$’000
2016
S$’000
62
95
71
487
1,122
37
18
1,892
81
45
56
118
1,433
6
22
1,761
Consolidated
2017
S$’000
2016
S$’000
307
412
5
(236)
1,365
7
4
62
–
–
224
160
130
359
(240)
36
–
7
22
10
ZICOM GROUP LIMITED Annual Report 2017
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 6.
Taxation
Current income tax
- Current income tax charge
- Loss transferred under Group Relief Scheme
- Adjustments in respect of previous years
Deferred income tax
- Relating to the origination and reversal of temporary differences
- Adjustments in respect of previous years
Tax (benefit)/expense
Consolidated
2017
S$’000
2016
S$’000
508
(396)
(14)
(917)
(184)
(1,003)
268
(207)
371
475
(29)
878
A reconciliation between the tax expense and the product of accounting loss of the Group multiplied
by the applicable tax rate for the year ended 30 June is as follows:
Loss before taxation
Tax at the domestic rates applicable to profits in the countries where
the Group operates
Release of deferred tax liability on intangible assets
Non-deductible expenses
Non-taxable income
Partial tax exemption
Deferred tax assets not recognised
Utilisation of previously unrecognised tax losses
Adjustments in respect of previous years
Enhanced tax credits
Others
Tax (benefit)/expense
Consolidated
2017
S$’000
2016
S$’000
(5,756)
(1,697)
(673)
(47)
174
(123)
(37)
751
(262)
(198)
(588)
–
(1,003)
(118)
(47)
206
(363)
(46)
1,807
(285)
342
(630)
12
878
The above reconciliation is prepared by aggregating separate reconciliations for each national
jurisdiction.
68
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 6.
Taxation (cont’d)
Deferred taxation as at 30 June relates to the following:
Deferred tax liabilities
Differences in depreciation
Intangible assets
Unutilised capital allowances
Unutilised tax losses
Unutilised donations
Deferred tax assets
Unutilised tax losses
Unutilised capital allowances
Provisions
Differences in depreciation
Intangible assets
Consolidated
balance sheet
Consolidated statement of
comprehensive income
2017
S$’000
2016
S$’000
2017
S$’000
2016
S$’000
(1,138)
(339)
184
56
13
(1,224)
2,662
512
710
(95)
(1,022)
2,767
(1,876)
(385)
247
60
–
(1,954)
2,688
467
340
(129)
(988)
2,378
(734)
(46)
63
4
(13)
40
(45)
(370)
(34)
34
(1,101)
(353)
(47)
52
(60)
–
790
83
108
(104)
(23)
446
The directors estimate that the potential future income tax benefit at
30 June in respect of revenue tax losses of certain subsidiaries not
brought to account is
The benefit will only be obtained if –
Consolidated
2017
S$’000
2016
S$’000
6,324
5,639
(a)
(b)
(c)
these subsidiaries derive future assessable income of a nature and of an amount sufficient to
enable the benefit to be realised;
these subsidiaries continue to be in the same trade and there is no substantial change in their
shareholdings; and
there are no changes in tax legislation that adversely affect these subsidiaries’ ability to realise
the benefit.
Tax Consolidation Legislation
Zicom Group Limited and its wholly-owned Australian subsidiaries have not elected to form a tax
consolidated group.
ZICOM GROUP LIMITED Annual Report 2017
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 7.
Earnings per share
Basic earnings per share is calculated by dividing the Group’s net profit or loss attributable to equity
holders of the Parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the Group’s net profit or loss attributable to equity
holders of the Parent by the adjusted weighted average number of ordinary shares which takes
into account the effects of all dilutive potential ordinary shares comprising share options granted to
employees.
Consolidated
2017
S$’000
2016
S$’000
(a)
Earnings used in calculating basic and diluted earnings per share
Net loss attributable to equity holders of the Parent
(4,620)
(2,086)
No. of shares (Thousands)
(b) Weighted average number of ordinary shares for basic and
diluted earnings per share
217,141
216,703
(c)
Earnings per share
Basic
Diluted
Singapore cents
(2.13)
(2.13)
(0.96)
(0.96)
There were 2,680,000 (2016: 2,750,000) share options excluded from the calculation of diluted earnings
per share that could potentially dilute basic earnings per share in the future because they are
antidilutive for the current period presented.
There have been no transactions involving ordinary or potential ordinary shares which occurred
between the reporting date and the date of completion of these financial statements.
8.
Dividends
Declared and paid during the financial year:
- Final unfranked dividend for 2016: 0.20 Australian cents per share
- Interim unfranked dividend for 2017: 0.15 Australian cents per share
- Final unfranked dividend for 2015: 0.35 Australian cents per share
- Interim unfranked dividend for 2016: 0.25 Australian cents per share
Consolidated
2017
S$’000
2016
S$’000
459
350
–
–
809
–
–
774
562
1,336
Proposed but not recognised as a liability as at 30 June:
- Final unfranked dividend for 2017: nil (2016: 0.20 Australian cents
per share)
–
442
70
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) l
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ZICOM GROUP LIMITED Annual Report 2017
71
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9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars)
9.
Property, plant and equipment (cont’d)
(a)
The net book value of property, plant and equipment held under hire purchase are as follows:
Motor vehicles
Plant and equipment
Consolidated
2017
S$’000
408
1,414
1,822
2016
S$’000
282
2,145
2,427
Leased assets are pledged as security for the related finance lease liabilities (note 17).
(b) During the year, the Group acquired property, plant and equipment with an aggregate cost of
S$2,990,000 (2016: S$1,831,000) of which S$651,000 (2016: S$766,000) were acquired by means of
hire purchase financing and S$43,000 (2016: S$78,000) was acquired by means of loan financing.
Cash payments of S$1,777,000 (2016: S$794,000) were made to purchase property, plant and
equipment. Included in additions is an amount of S$519,000 (2016: S$193,000) which was
previously included in stock but was converted and capitalised as fixed assets during the current
financial year.
(c) During the financial year, the Group disposed of property, plant and equipment with an
aggregate net book value of S$23,000 (2016: S$69,000). Sales proceeds amounting to S$94,000
(2016: S$115,000) 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$7,000 (2016: S$36,000).
(e)
The net book value of property, plant and equipment pledged as security are as follows:
Leasehold buildings
Freehold land and buildings
Motor vehicles
Please refer to note 17 for details.
Consolidated
2017
S$’000
2016
S$’000
2,623
4,576
110
7,309
2,748
4,555
75
7,378
72
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) l
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N
ZICOM GROUP LIMITED Annual Report 2017
73
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1
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars)
10.
Intangible assets (cont’d)
Average remaining amortisation period (years) – 2017
Average remaining amortisation period (years) – 2016
Assets by business segment:
Development
expenditure
Unpatented
technology
5.2
6.2
7.4
8.4
Assets and investments in associates by business segment are summarised as follows:
Property plant and equipment
Intangible assets
Investments in associates
Offshore
marine,
oil & gas
machinery
3,211
115
–
3,326
Precision
engineering
&
technologies
1,290
12,406
9,448
23,144
Construction
equipment
16,267
2,120
–
18,387
Offshore Marine, Oil and Gas Machinery
Industrial &
mobile
hydraulics Unallocated Total
22,969
14,725
9,448
47,142
2,193
69
–
2,262
8
15
–
23
The assets in this segment relate predominantly to Zicom Private Limited and Zicom Equipment Private
Limited. This segment continues to generate positive cash flows with a pipeline of contracts and
margin on product sales and projects effectively supporting no indicators of impairment.
Construction Equipment
The assets in this segment relate predominantly to Foundation Associates Engineering Private Limited,
Cesco Australia Limited and Zicom Cesco Engineering Co. Ltd. This segment manufactures and supply
concrete mixers and foundation equipment including equipment rental continues to generate positive
cash flows. Due to the goodwill that arose at acquisition of Cesco Australia Limited, an impairment
analysis is performed annually (refer below for discussion on Zicom Group Limited).
Precision Engineering and Technologies
Companies included in this segment are Sys-Mac Automation Engineering Pte Ltd, Orion Systems
Integration Pte Ltd, Biobot Surgical Pte Ltd (entities discussed below) and investments in associates
(refer to note 12 and below). Due to the goodwill that arose at acquisition of these entities, an annual
assessment is performed.
Industrial and Mobile Hydraulics
As noted above, there are no material assets in this segment.
74
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 10.
Intangible assets (cont’d)
Unallocated
The most significant asset in this segment represents leasehold building which is carried at historical
cost adjusted for accumulated depreciation. Market valuations performed on significant buildings in
the current financial year have confirmed that there are no impairment indicators.
Impairment tests for goodwill and associates
The Group did not have any intangible assets with indefinite useful life as at 30 June 2017. Goodwill
acquired through business combinations, are allocated to the individual entity which is also the cash
generating unit (CGU). These entities fall within the Precision Engineering and Technologies (PET) and
Construction Equipment (CE) segments of the Group as outlined above.
Consolidated
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
Pre-tax
discount
rate per
annum
2017
2016
As at
30.6.2017
S$’000
As at
30.6.2016
S$’000
2,975
2,070
664
1,316
7,025
2,975
1,964
664
1,316
6,919
Value in use
Value in use
Value in use
Value in use
15%
14%
24%
17%
22%
12%
28%
16%
In accordance with AASB 136, the carrying value of the Group’s goodwill on acquisition as at 30 June
2017 was assessed for impairment.
In addition to this, the Group has continued to invest in businesses in the PET segment. The businesses
in the PET segment are in different phases of development with some of the businesses close to
commercialisation and others still firmly in the product development phase. For all businesses in the PET
segment there were no triggers associated with technical feasibility including ability to sell, complete
or use the projects, nor any indicators linked to the generation of probable future economic benefits
from the projects.
The recoverable amount of each CGU is determined based on value in use calculations using cash
flow projections from financial budgets approved by management covering a five year period.
Budgeted revenue and gross margin in the financial budgets are based on past performance and
its expectation of market development. Long term growth rate of 1% was used for the above cash
generating units with the exception of Orion for which 0% was used.
ZICOM GROUP LIMITED Annual Report 2017
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 10.
Intangible assets (cont’d)
Impairment tests for goodwill and associates (cont’d)
Zicom Group Limited
Goodwill in this CGU relates mainly to Cesco Australia Limited that operates in the construction
industry in the manufacturing of cement mixers. The recoverable amount of the CGU has been
determined based on value in use calculation using cash flow projections from financial budgets
that was approved by management covering a 5 year period. The cash flows beyond 5 years were
extrapolated using a long term growth rate of 1% based on market information consistent for the
industry it operates in. The cash flows for the first 5 years included growth of between 5% and 8%.
Sys-Mac Automation Engineering Pte Ltd (“Sys-Mac”)
Sys-Mac is involved in contract manufacturing and system integration which includes machining works,
design and build of customised automation equipment and systems. The recoverable amount of
the CGU has been determined based on value in use calculation using cash flow projections from
financial budgets that was approved by management covering a 5 year period. The cash flows
beyond 5 years were extrapolated using a long term growth rate of 1% based on market information
consistent for the industry it operates in. The cash flows for the first 5 years included growth of between
15% and 25%.
Biobot Surgical Pte Ltd (“BBS”)
BBS is a medical technology CGU and its main product is the iSR’obotTM Mona Lisa, an intelligent
robotic prostate biopsy device. BBS will be moving into commercialisation of its product in the next 12
months. The recoverable amount of the CGU has been determined based on value in use calculation
using cash flow projections from financial budgets that was approved by management covering a 5
year period. The projected cash flows reflect initial outflows through early stage commercialisation and
then ramp up based on market share assumptions through the increased demand for its products,
consumables and services. The cash flows beyond 5 years were extrapolated using a long term growth
rate of 1% based on market information consistent for the industry it operates in. The cash flows for the
first 5 years included growth of between 0% and 60%.
Orion Systems Integration Pte Ltd (“Orion”)
Orion provides equipment with high performance flip chip applications to companies involved in
back-end semiconductor production. Its signature product is Phoenix Quadpro, a high speed, fine
pitch flip chip bonder. Orion completed its first year of commercial production. The recoverable
amount of the CGU has been determined based on value in use calculation using cash flow
projections from financial budgets that was approved by management covering a 5 year period. The
projected cash flows reflect early ramp up in 2019 based on market share assumptions through the
increased demand for its products. The cash flows do not extend beyond 5 years as this is considered
to be the expected product life cycle. The cash flows for the first 5 years included growth of between
-20% (in the last year) and 5%.
76
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 10.
Intangible assets (cont’d)
Impairment tests for goodwill and associates (cont’d)
Associates
Curiox Biosystems Pte Ltd (“Curiox”)
Curiox is a bioinstrumentation company which is accounted for as an associate as disclosed in note
12. It is involved in the development and commercialisation of innovative assay platforms based on
its expertise in surface chemistry and engineering. It has introduced a series of DropArray Microplates.
Curiox will be moving into commercialisation of its DA-Cell Plate and Washing Station in the next 12
months. The recoverable amount of Curiox has been determined based on value in use calculation
using cash flow projections from financial budgets that was approved by management covering a 5
year period. The projected cash flows reflect initial outflows through early stage commercialisation and
then ramp up based on market share assumptions through the increased demand for its products,
consumables and services. The cash flows beyond 5 years were extrapolated using a long term growth
rate of 1% based on market information consistent for the industry it operates in. The cash flows for the
first 5 years included growth of between 0% and 60%.
Interests in the rest of the associates as disclosed in note 12 were recently acquired as such their
current carrying values, in the absence of an impairment trigger, were considered representative
of fair value. These associates are predominantly in the research and development phase of their
products.
Key assumptions used in value in use calculations and sensitivity to changes in assumptions:
The calculations of value in use (VIU) for the CGUs are most sensitive to the following assumptions:
-
-
-
-
-
Gross margins
Discount rates
Market share assumptions
Growth rate estimates
Timing of cash flows
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.
Decreased demand can lead to a decline in gross margin. A decrease in gross margin of 10%
would not result in an impairment adjustment. Decreases greater than 10% may result in impairment
adjustments. This applies to all CGUs where VIU assessment was required to be performed.
ZICOM GROUP LIMITED Annual Report 2017
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 10.
Intangible assets (cont’d)
Impairment tests for goodwill and associates (cont’d)
Pre-tax discount rates – Discount rate reflect the current market assessment of the risk specific to the
CGUs, taking into consideration the time value of money and individual risks of the underlying assets
that have not been incorporated in the cash flow estimates. 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 10-15 year government bond at the beginning of the budgeted year. CGU’s
specific risk is incorporated in the discount rate by applying individual beta factors. The beta factors
are evaluated annually based on publicly available market data. A rise in the pre-tax discount rate by
5% or above may result in impairment adjustments for all CGUs.
Market share assumptions – For businesses that are about to commence commercialisation such as
Biobot and Curiox, cash flows in the first 5 years included in the budget are determined with reference
to industry data which effectively drives the growth profile for these businesses over the initial 5 year
period. These assumptions are important as management assesses how the CGU’s position relative to
its competitors may change over the forecast period. Management is expecting its businesses to be
taking market share as the CGUs will be selling new technology. An annual decrease in excess of 25%
in forecast revenues based on market information may result in an impairment adjustment.
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. Management
acknowledges the speed of technological change and the possibility of new entrants can have a
significant impact on growth rates. Growth rates can also impact on the margins achieved by the
CGUs as discussed above. Should the long term growth rate reduce by 1%, there is still no impairment
required.
Timing of cash flows – As indicated above, a number of the CGUs in the PET segment are in
different stages of development with some businesses in early stage development (research and
development) and some of them close to commercialisation with some having started its journey of
commercialisation. For the businesses that are close to commercialisation, in particular Biobot and
Curiox, a 3 year delay in cash flows will not result in impairment. A delay of greater than 3 years will
result in impairment. The rest of the businesses in the PET segment are predominantly in the research
and development phase of their respective products. There are currently no indicators that these
products will not continue to the commercialisation phase.
Summary of sensitivity to changes in assumptions
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.
For all of the above CGUs and for Curiox, the calculated value in use were in excess of the carrying
amounts of the assets and as such, there were no impairment adjustment required for the financial
years ended 30 June 2017 and 2016 for goodwill as their recoverable values were in excess of their
carrying values.
78
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 11.
Investments in subsidiaries
Investments in controlled entities, at cost
Less: Impairment loss
Parent Entity
2017
S$’000
54,544
(3,573)
50,971
2016
S$’000
54,544
(3,947)
50,597
The consolidated financial statements include the financial statements of Zicom Group Limited and
the subsidiaries listed in the following table.
The interest in each controlled entity has been adjusted to assess recoverable amounts on the basis of
their underlying assets.
Name of Company
Held by the Company:
Cesco Australia Limited
Zicom Holdings Private Limited
Controlled entities held through
subsidiary companies:
Cesco Equipment Pty Ltd
Zicom Private Limited
Zicom Equipment Private Limited
Foundation Associates Engineering
Private Limited
FAE Construction Pte Ltd
FAEQUIP Corporation (a)
Sys-Mac Automation Engineering Pte Ltd
MTA-Sysmac Automation Pte Ltd
SAEdge Vision Solutions Pte Ltd
iPtec Pte Ltd
Orion Systems Integration Pte Ltd (b)
Biobot Surgical Pte Ltd
Zicom MedTacc Private Limited
PT Sys-Mac Indonesia
Zicom Cesco Engineering Co. Ltd
Zicom Cesco Thai Co. Ltd
Zicom Thai Hydraulics Co. Ltd
FA Geotech Equipment Sdn Bhd
Deqing Cesco Machinery Co. Ltd
Country of
incorporation/
formation
Carrying value
of Parent Entity
investment
Percentage of equity
held by the Group
2017
S$’000
2016
S$’000
2017
%
2016
%
Australia
Singapore
6,796
44,175
6,422
44,175
100
100
Australia
Singapore
Singapore
Singapore
Singapore
Philippines
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Indonesia
Thailand
Thailand
Thailand
Malaysia
China
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50,971
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50,597
100
100
100
100
100
100
100
61
96
100
98
95
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
61
96
100
84
95
100
100
100
100
100
100
100
ZICOM GROUP LIMITED Annual Report 2017
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 11.
Investments in subsidiaries (cont’d)
(a)
FAEQUIP Corporation (“FAEQUIP”)
On 21 September 2016, FAEQUIP Corporation was incorporated in the Philippines by Foundation
Associates Engineering Private Limited, a wholly-owned subsidiary of Zicom Holdings Private
Limited (“ZHPL”), with a paid up capital of PHP9,500,000 (S$278,000). FAEQUIP is principally
engaged in trading and rental of foundation equipment and the provision of construction
services.
(b) Orion Systems Integration Pte Ltd (“Orion”)
On 30 June 2017, ZHPL increased its investment in Orion by way of capitalisation of an amount
of S$5,063,000 owed by Orion to ZHPL, increasing the Group’s interest in Orion from 84.00% to
98.18%. The difference between the amount by which the non-controlling interest was adjusted
and the fair value of consideration paid of S$276,000 has been recognised directly in equity.
Entity subject to class order relief
Pursuant to the Class Order 98/1418, relief has been granted to Cesco Australia Limited (“CAL”) and
Cesco Equipment Pty Ltd (“CEPL”) from the Corporations Act 2001 requirements for the preparation,
audit and lodgement of their financial reports.
As a condition for the Class Order, a Deed of Cross Guarantee was executed between Zicom Group
Limited (“ZGL”) and CAL on 15 May 2008. The effect of the Deed is that ZGL has guaranteed to pay
any deficiency in the event of winding up of CAL or if CAL does not meet its obligations under the
terms of overdraft, loans, leases or other liabilities subject to the guarantee.
CAL has also given a similar guarantee in the event that ZGL is wound up or if it does not meet its
obligations under the terms of overdraft, loans and leases or other liabilities subject to the guarantee.
On 9 May 2013, CEPL executed a Deed of Assumption with ZGL so that CEPL is joined to the Deed
of Cross Guarantee and assumes liability under and be bound by the Deed of Cross Guarantee as if
CEPL was a Group Entity when the Deed of Cross Guarantee was executed.
The consolidated Income Statement and Balance Sheet of the entities that are members of the
Closed Group are as follows:
Consolidated Income Statement
Closed Group
Profit from continuing activities before taxation
Income tax expense
Net profit for the year
Accumulated losses at the beginning of year
Forfeiture/expiry of employee share options
Dividends paid
Accumulated losses at the end of year
80
ZICOM GROUP LIMITED Annual Report 2017
2017
S$’000
1,248
–
1,248
(23,651)
3
(809)
(23,209)
2016
S$’000
1,663
–
1,663
(24,352)
374
(1,336)
(23,651)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 11.
Investments in subsidiaries (cont’d)
Consolidated Balance Sheet
Closed Group
Non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Current assets
Cash and bank balances
Inventories
Trade and other receivables
Prepayments
Current liabilities
Payables
Interest-bearing liabilities
Provisions
NET CURRENT ASSETS
Non-current liabilities
Interest-bearing liabilities
Provisions
2017
S$’000
456
377
44,175
45,008
1,772
3,229
3,549
15
8,565
3,492
39
467
3,998
4,567
61
115
176
2016
S$’000
243
357
44,175
44,775
1,538
3,153
3,314
11
8,016
3,503
21
440
3,964
4,052
60
86
146
NET ASSETS
49,399
48,681
Equity attributable to equity holders of the Parent
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
72,322
286
(23,209)
72,322
10
(23,651)
49,399
48,681
ZICOM GROUP LIMITED Annual Report 2017
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 12.
Investments in associates
(a)
Investment details
Held through subsidiaries
Curiox Biosystems Pte Ltd
HistoIndex Pte Ltd
Endofotonics Pte Ltd
BELKIN Laser Ltd
Pellucid Networks Pte Ltd
Principal place of business
Singapore
Singapore
Singapore
Israel
Singapore
Consolidated
2017
S$’000
2016
S$’000
5,266
1,301
907
1,374
600
9,448
5,295
1,591
–
–
–
6,886
(b) Movements in carrying amount of the Group’s investments in associates
Curiox Biosystems Pte Ltd (“Curiox”)
Shareholdings held: 73.02% (2016: 72.62%)
At beginning of year
Additional investment
Share of loss after income tax
Share of other comprehensive income
Unrealised profits
At end of year
Consolidated
2017
S$’000
2016
S$’000
5,295
323
(301)
(19)
(32)
5,266
4,515
1,108
(339)
8
3
5,295
Zicom Holdings Private Limited (“ZHPL”) has subscribed for a total of 299,000 rights shares
in Curiox pursuant to a non-renounceable rights issue, such entitlement to be taken up in
two tranches. On 16 June 2017, 161,000 preference shares were allotted to ZHPL for a cash
consideration of S$323,000, thereby increasing the Group’s interest in Curiox to 73.02%. Payment
for the remaining tranche amounting to S$276,000 will be due on 1 September 2017. Upon
completion of this rights issue, the Group’s equity interest in Curiox will become 72.75%.
Although ZHPL holds the majority of voting rights in Curiox, it does not have the power and
practical ability to direct the relevant activities of Curiox unilaterally and hence, Curiox remains
an associate of the Group as at 30 June 2017.
82
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 12.
Investments in associates (cont’d)
(b) Movements in carrying amount of the Group’s investments in associates (cont’d)
HistoIndex Pte Ltd (“HistoIndex”)
Shareholdings held: 10.88% (2016: 10.88%)
At beginning of year
Additional investment
Share of loss after income tax
Share of other comprehensive income
Unrealised profits
At end of year
Consolidated
2017
S$’000
2016
S$’000
1,591
–
(288)
–
(2)
1,301
500
1,139
(43)
2
(7)
1,591
HistoIndex entered into a convertible loan agreement dated 1 June 2017 with Zicom MedTacc
Private Limited (“ZMT”) and various investors, collectively the “Lenders”, to which the Lenders
have granted convertible loans aggregating S$1,800,000 to HistoIndex. The convertible loans
earn interest at 5% per annum and may be converted into ordinary shares at a discounted price
upon the occurrence of pre-defined events or repaid upon maturity on 31 May 2020.
Although the Group holds less than 20% of equity interest, the Group has the ability to exercise
significant influence through both its shareholdings and the Chairman’s active participation on
HistoIndex Board of Directors.
Endofotonics Pte Ltd (“Endofotonics”)
Shareholdings held: 21.89% (2016: nil%)
At beginning of year
Initial investment
Share of loss after income tax
At end of year
Consolidated
2017
S$’000
2016
S$’000
–
1,000
(93)
907
–
–
–
–
On 25 November 2016, ZMT acquired 21.89% equity interest in Endofotonics Pte Ltd for a cash
consideration of S$1,000,000. Under the terms of the investment, ZMT can acquire additional
shares through options and achieving certain milestones. The changes in fair value of the
options was assessed as being not significant as at 30 June 2017.
ZICOM GROUP LIMITED Annual Report 2017
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 12.
Investments in associates (cont’d)
(b) Movements in carrying amount of the Group’s investments in associates (cont’d)
BELKIN Laser Ltd (“BELKIN”)
Shareholdings held: 16.66% (2016: nil%)
At beginning of year
Initial investment
Share of loss after income tax
At end of year
Consolidated
2017
S$’000
2016
S$’000
–
1,416
(42)
1,374
–
–
–
–
On 2 February 2017, ZMT acquired 11.04% equity interest in BELKIN Laser Ltd, a medical device
company based in Israel, for a cash consideration of US$471,000. On 27 June 2017, ZMT injected
an additional US$539,000, increasing the Group’s interest in BELKIN to 16.66%.
Although the Group holds less than 20% of equity interest, the Group has the ability to exercise
significant influence through its shareholdings and participation on BELKIN Board of Directors.
Pellucid Networks Pte Ltd (“Pellucid”)
Shareholdings held: 8.23% (2016: nil%)
As part of the Accelerator Funding Scheme, Spring Singapore (“SPRING”) co-invested with ZMT in
Pellucid Networks Pte Ltd on 1:1 basis and grant call options to ZMT to acquire their investments
at nominal annual compounding interest. As at 30 June 2017, ZMT has invested S$600,000 cash
for an equity interest of 8.23% with the remaining S$400,000 injected subsequent to year end.
Upon completion, both SPRING and ZMT will each hold 11.51% equity interest in Pellucid.
Although the Group holds less than 20% of equity interest, the Group has the ability to exercise
significant influence through its shareholdings and participation on Pellucid Board of Directors.
84
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 12.
Investments in associates (cont’d)
(c)
Summarised financial information
The following table illustrates summarised financial information relating to the Group’s material
investment in associate:
Current assets
Non-current assets
Current liabilities
Net assets
Add: Fair value adjustments arising from acquisition
Proportion of Group’s investment
Share of net assets
Goodwill
Less: Unrealised profits
Less: Other equity transactions
Group’s carrying amount of investment in associate
Results:
Revenue
Cost of goods sold
Other income
Operating expenses
Loss before tax
Income tax expense
Add: Fair value adjustments arising from acquisition
Net loss for the year
Other comprehensive income
Total comprehensive income
Group’s share of loss for the year
Group’s share of other comprehensive income
Curiox
2017
S$’000
2016
S$’000
2,198
623
2,821
(556)
2,265
328
2,593
73.02%
1,893
3,478
(103)
(2)
5,266
1,955
(267)
1,688
272
(2,309)
(349)
(2)
(351)
(60)
(411)
(26)
(437)
(301)
(19)
2,012
423
2,435
(393)
2,042
385
2,427
72.62%
1,762
3,676
(71)
(72)
5,295
1,852
(246)
1,606
280
(2,296)
(410)
(2)
(412)
(30)
(442)
9
(433)
(339)
8
ZICOM GROUP LIMITED Annual Report 2017
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars)
13.
Inventories
Raw materials/trading stocks (at cost or net realisable value)
Work-in-progress (at cost)
Finished goods (at cost)
Stocks-in-transit (at cost)
Total inventories at lower of cost and net realisable value
Consolidated
2017
S$’000
15,437
4,792
2,171
745
23,145
2016
S$’000
15,504
4,371
1,762
790
22,427
Inventories recognised as cost of sales for the year ended 30 June 2017 totalled S$54,780,000 (2016:
S$75,886,000) for the Group.
14. Current assets - receivables
Trade receivables (a)
Allowance for impairment loss (b)
Advance payments to suppliers
Deposits
Related party receivables (c):
- Associates
- trade
- non-trade
- Other related parties
- trade
- non-trade
Other receivables
Consolidated
2017
S$’000
15,502
(680)
14,822
2,416
86
278
233
61
3
1,296
19,195
2016
S$’000
12,824
(309)
12,515
1,360
90
74
32
4
–
1,437
15,512
(a)
Please refer to note 21(d) for the ageing analysis of trade receivables past due but not impaired.
86
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 14. Current assets - receivables (cont’d)
(b)
Trade and other receivables are non-interest bearing and are generally due when invoiced or
on 30 to 60 days’ terms. An allowance for impairment loss is recognised when there is objective
evidence that an individual receivable is impaired.
The Group has trade and other receivables that were impaired at the balance sheet date and
the movements in the provision for impairment are as follows:
Consolidated
Individually impaired
Trade receivables
2017
S$’000
2016
S$’000
Non-trade receivables
2016
2017
S$’000
S$’000
Nominal amounts
Less: allowance for impairment
Movements in allowance
accounts:
As at 1 July
Charge for the year
Written off
Unused amounts reversed
Currency realignment
As at 30 June
680
(680)
–
309
519
(44)
(107)
3
680
309
(309)
–
215
200
(66)
(40)
–
309
–
–
–
–
–
–
–
–
–
–
–
–
26
–
(26)
–
–
–
(c)
For related party receivables, please refer to note 23 for terms and conditions.
15. Gross amount due from/(to) customers for contract work
Contract costs incurred to date
Recognised profits to date
Progress billings
Amount due from customers for contract work, net
Gross amount due from customers for contract work
Gross amount due to customers for contract work
Revenue recognised on projects is disclosed in note 5.
Consolidated
2017
S$’000
4,005
2,369
6,374
(3,088)
3,286
3,305
(19)
3,286
2016
S$’000
42,451
12,976
55,427
(46,272)
9,155
11,735
(2,580)
9,155
ZICOM GROUP LIMITED Annual Report 2017
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 16. Current liabilities - payables
Trade payables and accruals (a)
Advance received from customers
Related party payables (b)
- Associates
- trade
- Other related parties
- trade
- non-trade
Other payables
Unrealised loss on derivatives
Consolidated
2017
S$’000
16,095
3,528
2016
S$’000
16,670
1,174
21
–
9
9
265
64
19,991
1
52
279
–
18,176
(a) All amounts are non-interest bearing and are normally settled on 30 to 90 days’ terms.
(b)
For related parties’ payables, please refer to note 23 for terms and conditions.
Consolidated
2017
S$’000
2016
S$’000
352
4,164
42
4,941
436
9,935
–
61
591
652
576
1,930
255
3,830
761
7,352
42
2,108
434
2,584
17.
Interest-bearing liabilities
Current
Bank overdrafts (a)
Bills payable (b)
Factory loans (c)
Term loans (d)
Lease liabilities (note 25)
Non-current
Factory loans (c)
Term loans (d)
Lease liabilities (note 25)
88
ZICOM GROUP LIMITED Annual Report 2017
NOTES 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$352,000 (2016: S$221,000) which bears interest at floating
rates ranging from 6.03% to 6.28% (2016: 6.00% to 6.50%) per annum is secured by corporate
guarantee from Zicom Holdings Private Limited (“ZHPL”).
Included in the remaining overdrafts of S$355,000 outstanding as at 30 June 2016, S$217,000
was secured by a corporate guarantee from Zicom Cesco Engineering Co. Ltd while S$138,000
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. These overdrafts bore interest at floating rates of approximately 7.80% per annum.
(b)
Bills payable amounting to S$3,976,000 (2016: S$1,930,000) with an average maturity of 1 - 4
months (2016: 1 - 5 months) bear fixed interest rates until expiry, ranging from 2.40% to 3.55%
(2016: 2.04% to 3.80%) per annum, at which point interest rate resets and are secured by a
corporate guarantee given by ZHPL.
(c)
(d)
The remaining bills payable of S$188,000 with a maturity of 2 months bears fixed interest rate
of 3.69% per annum until expiry and is secured by a corporate guarantee from Zicom Cesco
Engineering Co. Ltd.
Factory loan amounting to S$42,000 (2016: S$297,000 comprising current and long-term portions
of S$255,000 and S$42,000 respectively) is repayable over 2 (2016: 14) remaining monthly
instalments and bear interest at floating rates ranging from 2.90% to 3.05% (2016: 2.95%) per
annum. It is secured by a legal mortgage on ZHPL’s leasehold building at No. 9 Tuas Avenue 9
Singapore 639198 and a corporate guarantee from Zicom Group Limited.
Term loan amounting to S$833,000 (2016: S$1,833,000 comprising current and long-term portions
of S$1,000,000 and S$833,000 respectively) which bears interest at floating rates ranging from
2.85% to 3.10% (2016: 2.70% to 3.20%) per annum is payable over 3 years and is secured by a
corporate guarantee given by ZHPL.
Term loan amounting to S$1,069,000 (2016: S$2,043,000 comprising current and long-
term portions of S$1,029,000 and S$1,014,000 respectively) bears interest at floating rate of
approximately 3.65% (2016: 3.75%) per annum and is payable over 3 years. It is 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.
Term loan amounting to S$200,000 (2016: S$680,000 comprising current and long-term portions of
S$480,000 and S$200,000 respectively) which bears interest at floating rates ranging from 2.90%
to 3.05% (2016: 2.95%) per annum is payable over 5 years and is secured by a legal mortgage
on ZHPL’s leasehold building at No. 9 Tuas Avenue 9 Singapore 639198 and a corporate
guarantee from Zicom Group Limited.
The remaining term loans amounting to S$100,000 (2016: S$82,000) comprising of current and
long-term portions of S$39,000 (2016: S$21,000) and S$61,000 (2016: S$61,000) respectively which
are secured by a fixed charge over 2 motor vehicles are payable over 3 to 4 years (2016: 4
years) and bear interest at fixed rates of 4.12% to 4.39% (2016: 4.12%) per annum.
Short term loans with tenures of 3 – 6 months (2016: 3 – 6 months) amounting to S$2,800,000
(2016: S$1,300,000) bear interest at fixed rates ranging from 2.77% to 3.24% (2016: 2.80% to 2.99%)
per annum and is secured by a corporate guarantee given by ZHPL.
ZICOM GROUP LIMITED Annual Report 2017
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 17.
Interest-bearing liabilities (cont’d)
(e)
Financing facilities available
As at 30 June 2017, the Group had available S$99,000,000 (2016: S$116,000,000) of undrawn
committed borrowing facilities and all bank covenants were complied with.
18.
Provisions
Current
Product warranties
Employee benefits
Reinstatement costs
Non-current
Employee benefits
Reinstatement costs
Movements in provision for warranties:
At beginning of year
Additional provision
Unused amounts reversed
Utilised
Currency realignment
At end of year
Consolidated
2017
S$’000
2016
S$’000
1,918
363
–
2,281
242
156
398
720
1,536
(171)
(166)
(1)
1,918
720
303
46
1,069
231
108
339
1,167
291
(531)
(210)
3
720
Warranty expense charged directly to profit or loss (note 5)
4
–
Movements in provision for employee benefits:
At beginning of year
Additional provision
Unused amounts reversed
Utilised
Currency realignment
At end of year
534
91
(33)
(16)
29
605
489
64
(1)
(2)
(16)
534
90
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 18.
Provisions (cont’d)
Movements in provision for reinstatement costs:
At beginning of year
Currency realignment
At end of year
Consolidated
2017
S$’000
2016
S$’000
154
2
156
156
(2)
154
A provision is recognised for expected warranty claims on hydraulic deck machineries, gas processing
plants and flip chip bonders supplied. Assumptions used to calculate these provisions were based on
a certain percentage of sale values and past experience of the level of repairs and returns based on
the two-year warranty period.
In accordance with the lease agreements, the Group must reinstate certain subsidiaries’ leased
premises in Singapore and Australia to its original condition at the end of the lease term. Because of
the long-term nature of liability, the greatest uncertainty in estimating the provision is the costs that will
ultimately be incurred.
19.
Share capital
(a) Share Capital
Parent Entity
Consolidated
2017
2016
No. of shares (Thousands)
2017
S$’000
2016
S$’000
Ordinary fully paid shares
217,141
217,141
38,314
38,314
The holders of ordinary shares are entitled to receive dividends as and when declared by the
Company. All ordinary shares carry one vote per share without restriction.
ZICOM GROUP LIMITED Annual Report 2017
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 19.
Share capital (cont’d)
(b) Movements in ordinary share capital
At 1 July 2015
Issue of shares under Zicom Employee Share and Option Plan
(“ZESOP”)
At 30 June 2016 and 30 June 2017
Company
Number of
ordinary
shares
(Thousands)
Consolidated
S$’000
215,522
37,862
1,619
217,141
452
38,314
During the last financial year, the Company issued and allotted a total of 1,190,000 and 429,000
ordinary shares fully paid at A$0.18 and A$0.17 per share respectively, under the ZESOP. Such
shares ranked pari passu with the existing ordinary shares of the Company.
There were no movements during the current financial year.
20. Cash and cash equivalents
Cash at bank and in hand
Short-term fixed deposits
Consolidated
2017
S$’000
18,591
–
18,591
2016
S$’000
20,438
119
20,557
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise the
following as at 30 June:
Cash and short-term deposits
Bank overdrafts
18,591
(352)
18,239
20,557
(576)
19,981
Cash at bank balance amounting to S$234,000 as at 30 June 2017 (2016: S$336,000) earned interest at
floating rate based on daily bank deposit rates ranging from 0.30% to 2.16% (2016: 0.38% to 2.17%) per
annum.
Short-term deposits are made for varying periods of 1 day to 3 months depending on the immediate
cash requirements of the Group and earn interest at the respective short-term rates.
92
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 21.
Financial instruments
(a)
Financial risk management objectives and policies
The Group and the Company are 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, 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 or 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. 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 overdrafts
Factory loan
Term loans
Consolidated
2017
S$’000
2016
S$’000
234
336
352
42
2,102
2,496
576
297
4,556
5,429
Sensitivity analysis of interest rate risk
As at 30 June 2017, if interest rates had increased/decreased by 25 basis point with all other
variables held constant, post-tax loss for the consolidated entity for the financial year would be
S$5,000 (2016: S$11,000) higher/lower, as a result of the higher/lower interest rates. Accordingly,
the Group’s equity as at year-end will be (S$5,000)/S$5,000 (2016: (S$11,000)/S$11,000) lower/
higher.
ZICOM GROUP LIMITED Annual Report 2017
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 21.
Financial instruments (cont’d)
(c)
Foreign currency risk
Foreign currency risk occurs as a result of the Group’s transactions that are not denominated in
their respective functional currencies. These transactions arise from the Group’s ordinary course
of business. The Group transacts business in various currencies and as a result, is largely exposed
to movements in exchange rates of United States dollar, Sterling pound, Euro, Bangladeshi Taka
and Australian dollar.
The Group manages its foreign exchange exposure by a policy of matching, as far as possible,
receipts and payments in each individual currency. The Group also uses foreign currency
forward contracts to hedge a portion of its future foreign exchange exposure purely as a
hedging tool and does not take positions in currencies with a view to make speculative gains
from currency movements.
The following sensitivity analysis is based on the foreign exchange risk exposure in existence
at the balance sheet date. As at 30 June, if exchange rates had moved, as illustrated in the
table below, with all other variables held constant, post-tax results and equity would have been
affected as follows:
Consolidated
USD
- strengthened 1% (2016: 5%)
- weakened 2% (2016: 2%)
EURO
- strengthened 4% (2016: 3%)
- weakened 2% (2016: 3%)
AUD
- strengthened 3% (2016: 3%)
- weakened 3% (2016: 3%)
GBP
- strengthened 2% (2016: 5%)
- weakened 2% (2016: 5%)
BDT
- strengthened 2% (2016: 2%)
- weakened 2% (2016: 2%)
2017
S$’000
2016
S$’000
42
(83)
24
(12)
30
(30)
(1)
1
(3)
3
–
–
(12)
12
14
(14)
(8)
8
10
(10)
94
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 21.
Financial instruments (cont’d)
(d) Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a
counterparty default on its obligations. The Group’s exposure to credit risk arises primarily from
trade and other receivables.
The Group’s objective is to seek continual revenue growth while minimising losses incurred due
to increased credit risk exposure. The Group trades only with recognised and creditworthy third
parties. Credit risk is monitored through careful selection of customers and their balances are
monitored on an ongoing basis with the result that the Group’s exposure to bad debts has not
been significant.
Credit risk concentration profile
The Group determines concentration of credit risk by monitoring the country profile of its trade
receivables on an on-going basis. The credit risk concentration profile of the Group’s trade
receivables at the balance sheet date is as follows:
Austria
Australia
Bangladesh
France
Hong Kong
Indonesia
Malaysia
People’s Republic of China
Philippines
Singapore
Taiwan
Thailand
United States of America
Others
Consolidated
2017
2016
S$’000
% of total
S$’000
% of total
137
3,038
473
126
24
395
1,575
609
130
4,289
3,522
250
106
148
14,822
0.9
20.5
3.2
0.8
0.2
2.7
10.6
4.1
0.9
28.9
23.8
1.7
0.7
1.0
100
169
2,774
959
–
157
38
1,580
65
–
5,922
–
680
127
44
12,515
1.3
22.2
7.7
–
1.3
0.3
12.6
0.5
–
47.3
–
5.4
1.0
0.4
100
At the balance sheet date, approximately 48.7% (2016: 39.9%) of the Group’s trade receivables
were due from 5 (2016: 5) major customers.
ZICOM GROUP LIMITED Annual Report 2017
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 21.
Financial instruments (cont’d)
(d) Credit risk (cont’d)
Financial assets that are not impaired
Trade and other receivables that are not impaired are with creditworthy debtors with good
payment records. Cash and short term deposits are placed with reputable banks.
As at 30 June 2017, the ageing analysis of trade receivables that are past due but not impaired
is as follows:
Less than 30 days
30 to 60 days
61 to 90 days
91 to 120 days
More than 120 days
Consolidated
2017
S$’000
2016
S$’000
2,393
868
254
131
1,206
4,852
1,894
955
228
145
3,445
6,667
As at 30 June 2017, trade receivables amounting to S$645,000 (2016: S$758,000) were arranged
to be settled via letters of credit issued by reputable banks in countries where the customers
were based.
Financial assets that are impaired
Please refer to note 14 for details.
(e)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due
to shortage of funds. The Group’s exposure to liquidity risk arises primarily from mismatches of the
maturities of financial assets and liabilities.
The Group’s objective is to maintain a balance between continuity of funding and flexibility
through the use of stand-by credit facilities.
96
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 21.
Financial instruments (cont’d)
(e)
Liquidity risk (cont’d)
The following table summarises the maturity profile of the Group’s financial assets and liabilities
at the balance sheet date based on contractual undiscounted payments. The expected timing
of actual cash flows from these financial instruments may differ.
6 months
or less
S$’000
7 to 12
months
S$’000
After 1 year
but not
more than
5 years
S$’000
5 to 10
years
S$’000
Total
S$’000
Consolidated
2017
Financial assets:
Trade receivables
Other receivables
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
14,677
1,282
–
18,591
34,550
7,291
6,523
64
8,967
22,845
–
239
–
–
239
–
106
–
1,090
1,196
assets/(liabilities)
11,705
(957)
2016
Financial assets:
Trade receivables
Other receivables
Investment securities
Cash and bank balances
Total undiscounted financial assets
Financial liabilities:
Trade payables
Other payables
Loans and borrowings
Total undiscounted financial liabilities
Total net undiscounted financial
12,109
1,278
–
20,557
33,944
9,299
6,040
5,746
21,085
–
143
–
–
143
–
43
1,796
1,839
–
–
690
–
690
–
–
–
688
688
2
–
–
1
–
1
–
–
2,639
2,639
assets/(liabilities)
12,859
(1,696)
(2,638)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,677
1,521
690
18,591
35,479
7,291
6,629
64
10,745
24,729
10,750
12,109
1,421
1
20,557
34,088
9,299
6,083
10,181
25,563
8,525
ZICOM GROUP LIMITED Annual Report 2017
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 21.
Financial instruments (cont’d)
(f)
Fair values
(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
64
64
–
–
–
–
–
–
64
64
1
1
Consolidated
2017
Financial liabilities:
Derivatives – foreign currency
forward contracts
At 30 June 2017
2016
Financial assets:
Available-for-sale
At 30 June 2016
Fair value of available-for-sale financial assets is derived from quoted market prices in
active markets.
The fair value of foreign currency forward contracts are derived from mark-to-market
valuations using theoretical 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.
There were no transfers between level 1 and level 2 fair value measurements during the
financial years 2017 and 2016.
(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.
98
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 21.
Financial instruments (cont’d)
(f)
Fair values (cont’d)
(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 liabilities and bank loans bearing interest at
fixed rates, which are not carried at fair value in the balance sheet, are 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 2017 was assessed to be insignificant.
Financial liabilities:
Obligations under finance leases
Bank loans
Consolidated
Carrying Amount
Fair Value
2017
S$’000
591
61
2016
S$’000
434
61
2017
S$’000
567
56
2016
S$’000
419
54
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.
The Group regularly reviews the Company’s capital structure and make adjustments to reflect
economic conditions, business strategies and future commitments. The Group may adjust the amount
of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets or
increase borrowings. No changes were made in the objectives, policies and processes during the
years ended 30 June 2017 and 30 June 2016.
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 2017 and 30 June 2016 were 0% as cash and cash equivalents
exceeded interest-bearing liabilities.
ZICOM GROUP LIMITED Annual Report 2017
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 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
- Purchases
- Interest income
- Rental & utilities income
- Services rendered
Other related parties
- Interest income
- Services rendered
Consolidated
2017
S$’000
2016
S$’000
276
33
933
62
21
115
365
–
6
222
32
509
–
31
78
32
1
–
(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.
Outstanding non-trade balances as at year-end with related parties are unsecured, interest-
free and have no fixed terms of repayment. For information regarding outstanding balances on
related party receivables and payables at year-end, please refer to notes 14 and 16.
(c) Compensation of key management personnel
Consolidated
2017
S$
2016
S$
1,442,745
44,010
17,892
1,504,647
1,455,999
46,909
27,590
1,530,498
Short-term employee benefits
Post-employment benefits
Share-based payments
Total compensation
100
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 24.
Share-based payment plans
(a)
Recognised share-based payment expenses
The expense recognised for employee services received during the year for equity-settled share-
based payment transactions amounted to S$43,000 (2016: S$83,000).
There have been no cancellations or modifications to the plan during the years 2017 and 2016.
(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,
physical or mental incapacity.
The contractual life of each option granted is 3 to 5 years. There are no cash-settlement
alternatives.
(c) Movements during the year
Outstanding at beginning of year
Granted during the year
Forfeited during the year
Expired during the year
Exercised during the year
Outstanding at end of year
Exercisable at end of year
2017
2016
No. of options (Thousands)
2,750
–
(70)
–
–
2,680
2,680
7,440
600
(20)
(3,651)
(1,619)
2,750
–
The outstanding balance of share options as at 30 June 2017 and 30 June 2016 is represented
by:
No. of options (Thousands)
2017
2016
Exercise price
(Australian Cents)
Exercisable
on or after
2,080
600
2,680
2,150
600
2,750
20.5
18.0
1/11/2016
1/12/2016
Expiry Date
31/10/2019
30/11/2020
ZICOM GROUP LIMITED Annual Report 2017
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 24.
Share-based payment plans (cont’d)
(d)
The weighted average fair value of options granted in the previous financial year was A$0.04.
(e)
The weighted average share price during the period of exercise in the previous financial year
was A$0.18.
(f) Option pricing model
The fair value of the equity-settled share options granted under the ZESOP is estimated as at the
date of grant using a Trinomial model taking into account the terms and conditions upon which
the options were granted. The following table lists the inputs to the model used:
Inputs
Exercise price (A$):
Stock price at grant date (A$):
Maximum option life in years:
Volatility:
Risk free interest rate:
2016
0.180
0.170
5
34.94%
2.00%
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 necessarily
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 guarantee amounting to S$11,606,000 (2016: S$13,990,000).
(ii)
Entered into foreign exchange sell contracts amounting to S$1,179,000 (2016: S$120,000).
102
ZICOM GROUP LIMITED Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 25. Commitments (cont’d)
(b) Operating lease commitments
The Group has entered into commercial leases for the use of leasehold properties and office
equipment as lessee. These leases have an average of 2 to 30 years. There are no restrictions
placed upon the Group by entering into these leases.
Future minimum lease payments for the leases are as follows:
Within 1 year
Within 2 - 5 years
More than 5 years
Consolidated
2017
S$’000
2,147
5,078
4,577
11,802
2016
S$’000
2,148
4,203
5,575
11,926
The amount of operating lease payments recognised as an expense in the year ended 30 June
2017 is S$2,382,000 (2016: S$2,297,000).
(c)
Finance lease commitments
The Group has finance leases for various plant and equipment. Future minimum lease payments
under finance leases together with present value of the net minimum lease payments are as
follows:
Consolidated
Due within one year
After one year but not more than
five years
Total minimum lease payments
Less: amounts representing
finance charges
Minimum
payments
2017
S$’000
Present value
of payments
2017
S$’000
Minimum
payments
2016
S$’000
Present value
of payments
2016
S$’000
455
625
1,080
(53)
1,027
436
591
1,027
–
1,027
792
455
1,247
(52)
1,195
761
434
1,195
–
1,195
ZICOM GROUP LIMITED Annual Report 2017
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 25. Commitments (cont’d)
(d) Capital commitments
As at 30 June 2017, the Group had the following capital commitments:
(i)
(ii)
Payment for the second tranche of the subscription of rights shares in Curiox Biosystems
Pte Ltd amounting to S$276,000 due on 1 September 2017 (note 12b); and
Additional injection of capital into Pellucid Networks Pte Ltd amounting to S$400,000 (note
12b).
The Group had no capital commitment as at 30 June 2016.
26. Auditors’ remuneration
During the year, the following fees were paid/payable for services provided by auditors:
Amounts received or due and receivable by Ernst & Young (Australia)
for:
- Audit and review of financial statements
- Taxation services
Consolidated
2017
S$
2016
S$
136,474
12,388
127,336
–
Amounts received or due and receivable by Ernst & Young (Singapore)
for:
- Audit and review of financial statements
243,000
230,000
Amounts received or due and receivable by other audit firms for:
- Audit and review of financial statements
- Taxation services
- Other non-audit services
24,307
4,450
2,000
422,619
23,502
7,552
2,229
390,619
104
ZICOM GROUP LIMITED Annual Report 2017
NOTES 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
Non-current assets
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Equity
Share capital (i)
Share capital - exercise of share options
Capital reserve
Foreign currency translation reserve
Share-based payments reserve
Accumulated losses
Results
Profit for the year
Other comprehensive income
Total comprehensive income
2017
S$’000
50,971
2,066
53,037
55
55
2016
S$’000
50,597
2,024
52,621
49
49
52,982
52,572
71,850
472
688
(338)
165
(19,855)
52,982
1,081
–
1,081
71,850
472
688
(437)
129
(20,130)
52,572
1,522
–
1,522
(i)
The share capital of the Parent Entity differs from that of the consolidated entity due to
the reverse takeover which took place in 2006. Accordingly, the Parent Entity which is the
legal parent is accounted for as the acquiree for accounting purposes.
(b) Guarantees
(i)
(ii)
The Parent Entity has issued letters of guarantee amounting to S$242,000 (2016:
S$1,115,000) to secure trade facilities and bank loans for 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 as at 30 June 2017 and 30 June 2016.
ZICOM GROUP LIMITED Annual Report 2017
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(In Singapore dollars) 28.
Subsequent events
(a)
Investment in Pellucid Networks Pte Ltd
On 8 August 2017, Zicom MedTacc Private Limited injected S$400,000 into Pellucid Networks Pte
Ltd (“Pellucid”) and increased its equity interest in Pellucid to 11.51%.
(b)
Investment in Curiox Biosystems Pte Ltd
On 8 September 2017, 138,000 preference shares were allotted to Zicom Holdings Private
Limited for a cash consideration of S$276,000 pursuant to the remaining tranche of the non-
renounceable rights issue. As a result of this allotment, the Group’s interest in Curiox decreased
to 72.75%.
(c)
Investment in Zicom Energy Solutions Private Limited
On 21 September 2017, Zicom Private Limited, a wholly-owned subsidiary, entered into an
investment agreement to acquire 51% equity interest in Zicom Energy Solutions Private Limited,
a dual fuel technology company, for a cash consideration of S$510,000, payable in 2 equal
tranches. Completion for the first tranche is targeted to be in October 2017 with the second
tranche due within 90 days from the first completion date.
(d)
Investment in Link Vue Systems Pte Ltd
On 26 September 2017, Zicom Equipment Private Limited, a wholly-owned subsidiary, has
acquired 71.87% equity interest in Link Vue Systems Pte Ltd, an automation company specialised
in industrial controls and system engineering, for a cash consideration of S$189,000.
(e)
Litigation
On 30 August 2017, Luminex Corporation which is based in the United States (“Luminex”) has
filed an Original Complaint against Curiox Biosystems Inc (“Curiox”), a subsidiary of Curiox
Biosystems Pte Ltd which in turn is an associate of Zicom Holdings Private Limited, in the United
States District Court, Western District of Texas (Austin Division).
Luminex is seeking, amongst others, orders enjoining Curiox from “falsely or misleadingly
advertising or promoting Curiox’s products” and making “false and misleading statements about
the performance of Luminex’s systems” and to seek damages.
Curiox has retained attorneys in the Boston, USA law firm of Morgan, Lewis & Bockius LLP as legal
counsel. Curiox denies all of Luminex’s claims and will vigorously defend itself against Luminex’s
allegations. Curiox will also consider potential counterclaims it may have against Luminex.
106
ZICOM GROUP LIMITED Annual Report 2017
NOTES 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 for the financial year ended 30 June
2017 are 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 2017 and
of its performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and Corporations Regulations 2001;
(b)
(c)
(d)
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
2017.
(e) 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 2017
ZICOM GROUP LIMITED Annual Report 2017
107
INDEPENDENT AUDITOR’S REPORT
to the members of Zicom Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Zicom Group Limited (the Company) and its subsidiaries (collectively
the Group), which comprises the consolidated balance sheet as at 30 June 2017, 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 to the financial statements, including a
summary of significant accounting policies and the Directors’ Declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 and
of its consolidated financial performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements
of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our
audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial report of the current year. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion
on these matters. For each matter below, our description of how our audit addressed the matter is provided
in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of
the financial statements. The results of our audit procedures, including the procedures performed to address
the matters below, provide the basis for our audit opinion on the accompanying financial report.
108
ZICOM GROUP LIMITED Annual Report 2017
INDEPENDENT AUDITOR’S REPORT
to the members of Zicom Group Limited
1. Assessment of the carrying value of the intangible assets, property, plant and equipment and investments
in associates
Refer to Notes 9, 10 and 12 of the financial report
Why significant
How our audit addressed the key audit matter
We focused on this area because the
Directors’ assessment of the recoverability
of the Group’s intangible assets of S$14.7
million, inclusive of goodwill of S$7.0 million,
property, plant and equipment of S$23.0
million and investments in associates of S$9.5
million, involves significant judgments and
assumptions about the progress and future
results of the Cash Generating Units (“CGUs”)
of the Group. An impairment assessment of
goodwill is carried out annually, while definite
life intangible, property, plant and equipment
and investments in associates are assessed
for indicators of impairment. For the current
financial year, in respect of goodwill and
some associates, indicators were identified
and impairment testing was performed by the
Group as disclosed in note 10.
in
range of
judgments and
Due to the
assumptions used
impairment
the
models (i.e. cash flow forecasts, growth
rates, discount rates, timing of cash flows,
market share assumptions and margins)
and assessments, as well as the significant
carrying amount of the property, plant and
equipment, intangible assets and investments
in associates (41% of total assets), this is
considered to be a Key Audit Matter.
As disclosed in the note 10 to the financial
report, the impairment models are sensitive
to growth rate, margin, timing of cash flows
and discount rate which, if not achieved,
could reasonably be expected to give rise to
impairment charges in the future.
In performing our procedures for goodwill, we assessed
the CGU to which the goodwill was allocated, the
assumptions and methodologies used by the Group
in the value-in-use models. The procedures performed
are outlined below.
We evaluated the Group’s assessment for indicators
of impairment. In doing so, we considered the CGUs
business performance and associated results for the
year, market conditions and expected future results.
Where indicators of impairment were identified, we
assessed the Group’s value-in-use models for the CGU,
as outlined below. We also assessed the useful life of
each definite life asset in the context of the expected
future period of economic consumption.
the Directors’
We understood and assessed
assumptions over key business drivers of the cash flow
forecasts supporting their recoverability assessments,
being
forecasted confir med orders, market
performance and expected growth, the level of new
business wins, timing of cash flows and the planned
margin growth capabilities. Where applicable, we
considered the historical reliability of the Group’s cash
flow forecasting process.
We evaluated the key assumptions including the
discount rates and terminal growth rates used
in the impairment assessments. We involved our
valuation specialists to assess the discount rates and
long term growth rates applied in the models. For
some businesses in the precision engineering and
technology segment we also assessed multiples of
comparable companies.
We performed sensitivity analysis around the key
assumptions above to ascertain the extent of
change in those assumptions that either individually
or collectively would be significantly different to the
Directors’ conclusion.
We assessed the adequacy of the related disclosures
in the notes to the financial report.
ZICOM GROUP LIMITED Annual Report 2017
109
INDEPENDENT AUDITOR’S REPORT
to the members of Zicom Group Limited
2. Accounting for the investment in Curiox
Refer to Note 12 of the financial report
Why significant
How our audit addressed the key audit matter
The Group, through its subsidiary Zicom Holding
Pte Limited, holds 73.02% in Curiox Biosystems Pte
Ltd (“Curiox”).
The Group continued to consider Curiox as an
associate entity and applied the equity method of
accounting for its interest in Curiox in accordance
with Australian Accounting Standards. This requires
significant judgment and reassessment for any
changes in the shareholdings and the Articles of
Association of Curiox (“the Articles”).
We evaluated the Group’s assessment of the
treatment for the investment in Curiox. This
included understanding the Articles of Curiox
to assess whether the Group’s rights under the
Articles do not provide control over Curiox.
We assessed the adequacy of the Group’s
disclosure of the nature and risks associated with
Curiox and the summarised financial information
included in the financial report.
Information Other than the Financial Report and Auditor’s Report Thereon
The Directors are responsible for the other information. The other information comprises the information
included in the Company’s 2017 Annual Report other than the financial report and our auditor’s report
thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date of
this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of
this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not express
any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related
assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
110
ZICOM GROUP LIMITED Annual Report 2017
INDEPENDENT AUDITOR’S REPORT
to the members of Zicom Group Limited
Responsibilities of the Directors 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 control as the Directors determine is necessary to enable the preparation of the financial report
that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Group or cease operations, or have no
realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
ZICOM GROUP LIMITED Annual Report 2017
111
INDEPENDENT AUDITOR’S REPORT
to the members of Zicom Group Limited
Auditor’s Responsibilities for the Audit of the Financial Report (cont’d)
•
•
•
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting in
the preparation of the financial report. We also conclude, based on the audit evidence obtained,
whether a material uncertainty exists related to events and conditions that may cast significant doubt
on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in the auditor’s report to the disclosures in the financial report
about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the
financial report. However, future events or conditions may cause an entity to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are responsible
for the direction, supervision and performance of the Group audit. We remain solely responsible for our
audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
112
ZICOM GROUP LIMITED Annual Report 2017
INDEPENDENT AUDITOR’S REPORT
to the members of Zicom Group Limited
Report on Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 21 of the Directors’ Report for the year
ended 30 June 2017.
In our opinion, the Remuneration Report of Zicom Group Limited for the year ended 30 June 2017, complies
with section 300A of the Corporations Act 2001.
Responsibilities
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.
Ernst & Young
Tom du Preez
Partner
Brisbane
29 September 2017
ZICOM GROUP LIMITED Annual Report 2017
113
INFORMATION ON SHAREHOLDINGS
As at 28 September 2017
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
6,600
692,256
2,150,919
14,026,800
200,264,205
217,140,780
55
189
240
402
116
1,002
b)
There were 146 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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JUAT KOON SIM
GIOK LAK SIM
VENTRADE (ASIA) PTE LTD
JUAT LIM SIM
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS (NZ) LTD
MR MAKRAM HANNA & MRS RITA HANNA
EE GEK GOH
SIONG TECK NG
J P MORGAN NOMINEES AUSTRALIA LIMITED
HUNG SEAH TANG
JUAT KHIANG SIM
FIRST CHARNOCK SUPERANNUATION PTY LTD
KOK HWEE SIM
DEBUSCEY PTY LTD
KOK YEW SIM
MR CHUAN GAO
KAILVA PTY LTD
Substantial Shareholders
Number of
Ordinary Shares
Held
Percentage of
Issued Shares
81,000,360
14,669,118
11,778,172
13,752,777
8,478,344
6,487,767
5,796,373
4,822,704
4,086,500
2,791,017
2,410,665
2,295,949
2,100,839
2,069,525
1,890,000
1,488,180
1,355,615
1,350,253
1,338,820
1,200,000
37.30%
6.76%
5.42%
6.34%
3.90%
2.99%
2.67%
2.22%
1.88%
1.29%
1.11%
1.06%
0.97%
0.95%
0.87%
0.69%
0.62%
0.62%
0.62%
0.55%
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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JUAT KOON SIM & HIS ASSOCIATES
Voting Rights
Number of
Ordinary Shares
Held
Percentage of
Issued Shares
94,753,137
14,669,118
14,569,189
43.64%
6.76%
6.71%
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.
114
ZICOM GROUP LIMITED Annual Report 2017
CORPORATE DIRECTORY
BOARD OF DIRECTORS
AUDITORS
Giok Lak Sim
(Chairman and Managing Director)
Ernst & Young
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
Igor Sushko
REGISTERED OFFICE
38 Goodman Place
Murarrie QLD 4172
Australia
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
Telephone
: +61 7 3908 6088
Facsimile
: +61 7 3390 6898
Singapore
United Overseas Bank Limited
Website
: www.zicomgroup.com
Malayan Banking Berhad
SHARE REGISTRY
Link Market Services Limited
Level 15
324 Queen Street
Brisbane, QLD 4000
Australia
Oversea-Chinese Banking Corporation Limited
DBS Bank Ltd
Westpac Banking Corporation
Australia and New Zealand Banking Group Limited
Thailand
United Overseas Bank (Thai) Public Company Limited
Facsimile
: +61 2 9287 0309
The Siam Commercial Bank Public Company Limited
China
Industrial and Commercial Bank of China Limited
China Construction Bank Corporation
NOTICE OF
ANNUAL GENERAL MEETING
ANNUAL GENERAL MEETING
ANNUAL GENERAL MEETING
The Annual General Meeting of Zicom Group Limited will be held at the
The Annual General Meeting of Zicom Group Limited will be held at the
The Annual General Meeting of Zicom Group Limited will be held at the
The Colmslie Hotel
Corner of Wynnum and Junction Roads
Corner of Wynnum and Junction Roads
Corner of Wynnum and Junction Roads
Morningside, Queensland 4170
Australia
Time: 10.00am (Brisbane time)
Date: Wednesday, 15 November 2017
Date: Wednesday, 15 November 2017
A formal Notice of Meeting is enclosed.
A formal Notice of Meeting is enclosed.
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7
38 Goodman Place, Murarrie QLD 4172 Australia
Telephone: +61 7 3908 6088
Facsimile: +61 7 3390 6898
www.zicomgroup.com