BEATING NEW PATHS
ANNUAL REPORT 2018
“The only limit to our realization of tomorrow
will be our doubts of today.”
– Franklin D. Roosevelt
For personal use only Contents
Chairman’s Message
Board of Directors
Company Secretaries
Corporate Chart
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
03
05
06
07
22
23
31
32
33
34
36
101
102
108
Inside back cover
Inside back cover
BEATING NEW PATHS
ZICOM GROUP LIMITED
Annual Report 2018
For personal use only CHAIRMAN’S MESSAGE
Chairman’s Message
“The only limit to our
realization of tomorrow will
be our doubts of today.”
– Franklin D. Roosevelt
Dear Shareholders,
The Group has been confronted with unprecedented challenges.
The Group’s once biggest revenue earner, the marine offshore
sector, has encountered serious adverse factors impacting the
industry directly leading to surplus capacity and uncertainties.
The main cause is geopolitical. It may take another 2-3
years before demand resurges. Although the Group’s other
revenue streams in construction and precision engineering
are recovering in strength these are unable to cover the slack
in the marine offshore sector. Gestation costs that include
commercial development of the medtech investments are
expected to compound the impact against Group’s results for
another 1-2 years.
Restructuring
The Board has decided that a structural approach is required to
strengthen focus and achieve cost cutting without undermining
strength. One of the major considerations is the commercial
development and gestation costs of its medtech investments
which annually amount to more than S$4.0m. This will increase
in the next 1-2 years to drive scalability and profi tability.
The Group has initially intended to cluster the medtech portfolio
companies together to go for an initial public listing (IPO). Zicom
Innovations Group Private Limited (ZIPL) had been formed for
this purpose and was to hold all the investments in the cluster.
After several interactions with potential strategic investors, it
has been decided that direct investments into each portfolio
company would generate better valuations. The value of the
IPO would have been based on the sum-of-parts. We have
therefore focused on new external investments directly into the
portfolio companies. This strategic step will validate valuations
of the Group’s investments. The Group has therefore decided
to defer the IPO of the medtech companies as a cluster. Most of
the portfolio companies have been held under Zicom MedTacc
Private Limited (ZMT), a medtech incubator. ZMT would have
become another portfolio company under ZIPL to focus on
incubation as a business activity. As the IPO of the medtech
cluster has been deferred, it has not been found necessary
to place the medtech portfolio companies under ZIPL but to
remain in ZMT.
Demerger
The Group has reviewed the new realities in seeking the best
paths to maximise value. In continuing to hold the medtech
investments in the Group will necessitate the Group to continue
being impacted by the gestation and commercial development
costs of more than S$4m a year for at least the next 1-2 years.
Continuous funding will also be required. The Group’s business
direction will become increasingly diffi cult to differentiate due
to the growing difference in the nature of the businesses. The
Group’s medtech investments are mainly disruptive innovations
which require a dynamic contemporary human resource
structure to be maintained. Its human resource reward
schemes are inevitably different making forging uniform group
policy impractical.
To enhance shareholder value, the Group has decided to
demerge the medtech investments from our core businesses
made up of marine offshore oil and gas, construction equipment
and precision engineering. Zicom MedTacc Private Limited has
changed its name to ZIG Ventures Private Limited (ZIGV) as a
holding company of the various medtech portfolio companies.
The entire share capital of ZIGV will be distributed in specie to
all the existing shareholders of the Company in the same ratio
as their shareholdings in ZGL. After the demerger the Group
and ZIGV will operate as two independent entities with the
same shareholders in both entities. They will be positioned to
pursue more focused directions independently.
Zicom Group Limited (“ZGL”) will continue to be listed on
ASX. ZIGV will, in the immediate future, be an unlisted public
company registered in Singapore. Post demerger your Board
ZICOM GROUP LIMITED
Annual Report 2018
1
For personal use only Chairman’s Message
expects the ZGL’s shares to retain a net book value of A$0.23
per share. The Board therefore believes that the present market
price of A$0.082 per share, which is below net book value, is
not expected to be reduced any further.
Impending Board Changes
Board changes will be carried out. I will step down as the
Group MD on 31 December 2018 and will remain an executive
Chairman for the next 3 years, at the end of which the position
will be reviewed. I will focus on strategic directions, mentoring
and managing succession at all levels. At my request my pay
has been frozen for 11 years since 2007. From January 2019,
I will further reduce my pay by 30%. I will concurrently chair the
board of ZIGV as a non-executive chairman.
Mr Kok Yew Sim, at present a Group’s executive director, will
take over as the Group MD and will be designated as Group
CEO. Kok Yew who is currently an executive director in ZIGV
will remain as a non-executive director. Mr Kok Hwee Sim who
is a Group’s executive director and currently CEO of ZIGV will
remain a non-executive director of the Group. Kok Hwee will be
fully responsible to raise new capital for ZIGV to drive growth
and expansion as its Group CEO. Ms Jenny Lim, the Group’s
FC, will be appointed an executive director of the Group. Jenny
will remain a non-executive director of ZIGV.
Prospects
The Group has always adopted a judicious fi nancial policy
with a low gearing ratio. The Group embraces changes.
These attributes will be maintained. Several setbacks
notwithstanding, the Group continues to steadfastly maintain
its course and, where necessary, make changes to its path
to stay relevant and to achieve its long-term objectives. The
Board is confi dent that given the changes made, the Group’s
recovery can be expedited.
Appreciation
It has been challenging times. Board members, Group’s
management and employees have risen to the unprecedented
challenges facing the Group. On this occasion I would also like
to thank all of them and our shareholders for their continuing
support. We look forward to enhance shareholders value with
the restructuring and initiatives undertaken.
A profi le of each of the above directors is given in the Annual
Report.
G L Sim
Chairman
The Group will concurrently be carrying out Board renewal.
The intention is to eventually average down the Board’s age
from 65 to below 60 and that of independent directors from
75 to 65. This takes cognizance of the needs of the prevailing
disruptive technological age which the Group embraces. The
Group believes that experiences of Board members should be
contemporaneous.
2
ZICOM GROUP LIMITED
Annual Report 2018
ZICOM GROUP LIMITED
Annual Report 2018
For personal use only
Board of Directors
EXECUTIVE DIRECTORS
GIOK LAK SIM, FCPA
Chairman and Group Managing Director,
Age 72
KOK HWEE SIM, BSc, MSc
Executive Director, Age 40
KOK YEW SIM, BSc
Executive Director, Age 38
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, strategic
management as well as international trade.
Member of Strategic Advisory Panel,
Diagnostics 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. His corporate
responsibilities include banking relationships,
treasury management, mergers and
acquisitions, strategic partnerships and fund
raising. As the Chief Executive Offi cer of ZIG
Ventures Private Limited, part of his focus
is to co-invest with Enterprise Singapore, a
Singapore statutory board, into promising
early stage healthcare biomedical and
sciences technologies companies. Kok Hwee
leads a team of healthcare commercialisation
professionals to proactively build and support
capabilities and forge strategic partnerships
with the global healthcare ecosystem. Mr
Sim graduated with a Bachelor’s degree
in Industrial Engineering and Operations
Research from the University of Michigan,
Ann Arbor, USA 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. For many years, as
the Chief Executive Offi cer of Sys-Mac
Automation Engineering Pte Ltd (Sys-Mac),
Mr Kok Yew Sim has been instrumental in
Sys-Mac Group’s growth journey, focusing on
providing customised automation solutions
and building capabilities in Sys-Mac to
support manufacturing for the Group’s
medical technologies companies. He has
also successfully led the Group’s investments
in semiconductor technology to penetrate
the competitive markets. Going forward, he
will focus on innovating the Group’s existing
core businesses and seek mergers and
acquisitions to expand or unlock values for
these businesses. 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 to 31 March 2018)
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 ZIG Ventures 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
CEO of Orion Systems Integration Pte Ltd
Deputy Chairman of iPtec Pte Ltd
Director of Curiox Biosystems Pte Ltd
Director of Emage Vision 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
101,267,137 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 2018
ZICOM GROUP LIMITED
Annual Report 2018
3
For personal use only Board of Directors
INDEPENDENT DIRECTORS
YIAN POH LIM, BSc, MSc
Independent Director, Age 72
FRANK LEONG YEE YEW,
MBA, FCA (ENGLAND &
WALES), FCA (SINGAPORE)
Independent Director, Age 75
IAN ROBERT MILLARD,
FCA, FAICD
Independent Director, Age 79
SHAW PAO SZE
Independent Director, Age 74
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. He is also an
Expert Consultant to Suzhou
Vocational University.
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
Other current directorships
and former directorships in
last 3 years
Chairman and Independent
Director of Casa Holdings
Limited (appointed 4 November
2008)
Lead Independent Director of TTJ
Holdings Limited (appointed 5
July 1996)
Independent Director of TTJ
None
None
Holdings Limited (appointed 11
January 2010)
Special responsibilities
Special responsibilities
Special responsibilities
Special responsibilities
Chairman of Nomination and
Remuneration Committee
Member of Audit Committee
Non-Executive Director of Zicom
Member of Nomination and
Remuneration Committee
Member of Audit Committee
Non-Executive Director of Zicom
Holdings Private Limited
Holdings Private Limited
Chairman of Audit Committee
Non-Executive Director of Cesco
None
Australia Limited
Relevant interests in shares
and options as at date of
signing the Directors’ Report
Relevant interests in shares
and options as at date of
signing the Directors’ Report
Relevant interests in shares
and options as at date of
signing the Directors’ Report
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
4
ZICOM GROUP LIMITED
Annual Report 2018
ZICOM GROUP LIMITED
Annual Report 2018
For personal use only
Company Secretaries
LIM BEE CHUN, JENNY, FCCA
Joint Company Secretary, Age 45
IGOR SUSHKO (NICK),
MBA, FCPA, BBus, BSc
Joint Company Secretary, Age 52
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 ZIG Ventures 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 2018
ZICOM GROUP LIMITED
Annual Report 2018
5
For personal use only Corporate Chart
ZICOM GROUP LIMITED
100%
DEQING CESCO
MACHINERY CO LTD
China
Concrete Mixers
100%
ZICOM THAI HYDRAULICS
CO LTD
Thailand
Hydraulics Systems
100%
FA GEOTECH EQUIPMENT
SDN BHD
Malaysia
Foundation Equipment
100%
ZICOM HOLDINGS
PRIVATE LIMITED
Singapore
Investment Holding
100%
CESCO AUSTRALIA LIMITED
Australia
Concrete Mixers
100%
ZICOM CESCO
ENGINEERING CO LTD
Thailand
Concrete Mixers
100%
FAE CONSTRUCTION PTE LTD
Singapore
Foundation Works &
Marine Construction
100%
ZICOM CESCO THAI CO LTD
Thailand
Dormant
100%
FAEQUIP CORPORATION
Philippines
Foundation Equipment
100%
CESCO EQUIPMENT PTY LTD
Australia
Engineered Products
100%
FOUNDATION ASSOCIATES
ENGINEERING PRIVATE LIMITED
Singapore
Foundation Equipment
100%
FAE THAI CO LTD
Thailand
Foundation Equipment
100%
ZICOM PRIVATE LIMITED
Singapore
Marine Deck Machinery
100%
ZICOM EQUIPMENT
PRIVATE LIMITED
Singapore
Oils & Gas Equipment
100%
SYS-MAC AUTOMATION
ENGINEERING PTE LTD
Singapore
Precision Engineering & Automation
100%
ZICOM INNOVATIONS
GROUP PRIVATE LIMITED
Singapore
Investment Holding
INVESTMENT HOLDING
COMPANY
CONSTRUCTION
EQUIPMENT
OFFSHORE MARINE,
OIL & GAS MACHINERY
PRECISION ENGINEERING
& TECHNOLOGIES
HEALTHCARE BIOMEDICAL
AND SCIENCES
TECHNOLOGIES
100%
ZIG MEDTECH ASIA PTE LTD
Singapore
Medical and Surgical Supplies
100%
ZIG VENTURES PRIVATE LIMITED
Singapore
Medical Technology Accelerator
Investment Holding
95%
BIOBOT SURGICAL PTE LTD
Singapore
Medical Device
ASSOCIATED COMPANIES
Curiox Biosystems Pte Ltd
HistoIndex Pte Ltd
Endofotonics Pte Ltd
BELKIN Laser Ltd
Pellucid Networks Pte Ltd
51%
ZICOM ENERGY SOLUTIONS
PRIVATE LIMITED
Singapore
Dual Fuel Technology
72%
LINK VUE SYSTEMS PTE LTD
Singapore
Industrial Automation
100%
PT SYS-MAC INDONESIA
Indonesia
Precision Engineering
61%
98%
100%
MTA-SYSMAC
AUTOMATION PTE LTD
Singapore
Automation
ORION SYSTEMS
INTEGRATION PTE LTD
Singapore
Semiconductor Equipment
IPTEC PTE LTD
Singapore
Medical Technology
Translation Services
ASSOCIATED COMPANY
Emage Vision Pte Ltd
6
ZICOM GROUP LIMITED
Annual Report 2018
For personal use only Directors’ Report 2018
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 2018.
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, gas metering stations, gas processing
plants, foundation equipment, concrete mixers and precision engineered machinery, rental of foundation equipment, supply
of automation products and solutions, 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
%
-13.8
+135.3
Year ended
30 June 18
S$ million
Year ended
30 June 17
S$ million
81.51
(10.87)
94.52
(4.62)
The Group’s cash balances remain healthy. As at 30 June 2018, the Group’s total cash and bank balances were S$9.74m
as compared with S$18.59m as at 30 June 2017.
Dividends
The Board has decided not to pay any dividend this year.
7
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
Review of Operations
The Group’s consolidated revenue for the full year is S$81.51m as compared with S$94.52m in the previous year, a
decrease of 13.8%. The Group’s full year net consolidated loss after tax attributable to members to 30 June 2018 is
S$10.87m as compared with S$4.62m in the previous year, an increase of 135.3%.
Loss per share for the year is Singapore 5.01 cents compared to Singapore 2.13 cents in the previous year, an increase of
Singapore 2.88 cents.
Net tangible assets per share decreased from Singapore 30.28 cents to 25.31 cents per share.
Return on equity, based on average of the opening and closing equity, for the year was -14.5% as compared to -5.6% in
2017.
The average rates for currency translation for transactions and cash flows are A$1 to S$1.0375 (2017: S$1.0498) for the
year ended 30 June 2018 and balances A$1 to S$1.0076 (2017: S$1.0570) as at 30 June 2018, reflecting a weakening
A$.
The Group’s businesses, in particular the offshore marine and oil and gas segment, for the year just ended, encountered
one of the greatest challenges. Demand for the marine segment dropped significantly by almost 80% and the oil and
gas sector saw projects being delayed. The causes are both economic and geopolitical, the latter being a greater factor.
Regrettably we do not anticipate any significant recovery in the marine sector for 2-3 years although the land-based oil
and gas sector is experiencing signs of recovery as delayed projects are being awarded.
The construction and precision engineering segments had shown improvements but these were not sufficient to cover
the losses caused by the continuing slump in the offshore marine, oil and gas sectors and the scaled up gestation costs
relating to market development of the technology sector.
The Group has for the last 12 months engaged with relevant parties on unlocking values on its technology investments. It
has come to the conclusion that the best way to maximise valuations for the Group is to demerge the medical technology
investments from the core businesses of the Group. We believe that in this way each individual portfolio company can
scale up and unlock its value with new external investments, engage in a trade sale or public listing at its own pace
commensurate with its development and valuation. The technology investments adversely impacted the group with
S$4.0m in gestation costs for the year just ended and it is expected this cost is likely to increase further for the next 2-3
years as marketing development is accelerated.
Your Board has decided that a demerger of the technology businesses will take the form of a capital reduction by pro rata
distribution in specie to all shareholders. We plan to consolidate the medtech businesses into one non-listed public holding
entity whose shares will be distributed. A resolution on this will be put to shareholders for approval in the upcoming AGM.
The demerger will enable management to focus on their respective business, eliminate continuing gestation costs, and
save the Group further funding for such investments. The technology investments will seek alternative mode of funding
independent of the Group.
Future new investments in the Group will be focused on developing lateral growth of existing core businesses. These
include our investments on dual fuel technology for the marine offshore sector, and automation relating to oil and gas
and industrial applications that strengthen our capability and catalyse our growth going forward. In line with this strategy,
the Group has, subsequent to year end, disposed of its investment in SAEdge Vision Solutions Pte Ltd focused on vision
development with a net gain of S$1.6m. This investment was made to advance lateral growth on the precision engineering
segment but has been found to take too long to gain traction and to achieve scalability on its own.
Prospects for the coming year will remain very challenging. Your Board is confident that the restructuring will help to
improve on the Group’s results and enhance shareholder value.
8
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
Segmental Revenue
The following is an analysis of the segmental revenue:-
Segmental Revenue
Offshore Marine, Oil & Gas Machinery
Construction Equipment
Precision Engineering & Technologies
Industrial & Mobile Hydraulics
Offshore Marine, Oil & Gas Machinery
Change
%
- 77.1
+ 33.4
+ 2.5
+ 8.4
Year ended
30 June 18
S$ million
Year ended
30 June 17
S$ million
7.21
41.41
30.95
2.19
31.54
31.05
30.19
2.02
Demand for offshore marine, oil and gas machinery decreased by 77.1% in the full year as compared with the previous
year. Global geopolitical factors and potential trade wars have increased uncertainties compounding a situation caused
by excess production capacity. The depressed sentiments are expected to last at least another 2-3 years even though oil
prices have somewhat strengthened. As a result, the Group is looking seriously into cost cutting and diverting resources
for alternative revenue stream.
We are, however, hopeful that the land-based oil and gas sector is showing signs of improvements as deferred projects
are being awarded. The Group has just secured 2 projects involving gas regulating and metering stations amounting to
S$15m and are confident more projects can be secured within this coming financial year.
Construction Equipment
The construction sector in Singapore, the main market for our foundation equipment, had been flat. However, our foray
into regional markets such as Malaysia, the Philippines and Thailand are showing positive results that helped bring this
sector to profitability.
Demand for concrete mixers in Australia and Thailand had been stronger increasing their contributions to the Group. We
expect that the increase in infrastructure developments in Australia and Thailand will continue to support our businesses to
achieve profitability in these countries.
Precision Engineering & Technologies
Demand for the precision engineering and technologies sector increased by 2.5% in the full year as compared with the
previous year. The semiconductor market has remained strong and this has helped to maintain repeat orders for our
semiconductor equipment. Demand for industrial automation had also resurged and we are hopeful that the momentum
will be maintained in the coming year.
During the year, this segment has also restructured itself to increase its focus on medical equipment which is less volatile.
The precision engineering segment had been an outsourcing contractor for various established medical equipment
manufacturers from Europe and USA prior to our investments in medical technologies. Our investments in medical
technologies has contributed to its capability in this area that now includes engineering for such products raising its value
chain. Its manufacturing capability is now FDA approved. The Group will continue to collaborate with the various medtech
portfolio companies on an arms’ length basis as is already a practice within the Group.
9
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
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 18
S$ million
As at 30 June 17
S$ million
10.92
9.50
8.85
69.55
22.73
9.74
80.47
32.23
18.59
The Group’s gearing ratio is 13.46% (2017: 0%). Gearing ratio has been arrived at by dividing our interest-bearing liabilities
less cash and cash equivalents over total capital.
Return per Share
The Group’s earnings and net tangible assets per share are as follows:-
Classification
Earnings per share
Decrease
Singapore Cents
2018
Singapore Cents
2017
Singapore Cents
2.88
(5.01)
(2.13)
The weighted average shares used to compute basic earnings per share are 217,140,780 for this year and the previous
year.
Classification
Decrease
Singapore Cents
As at 30 June 18
Singapore Cents
As at 30 June 17
Singapore Cents
Net tangible assets per share
4.97
25.31
30.28
Net tangible assets per share has decreased due to the Group’s operational loss for the year.
Capital Expenditure
For the year ending 30 June 2019, the Group does not plan to invest in any capital equipment.
10
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
Confirmed Orders
We have a total of S$37.8m (30 June 2017: S$21.3m) outstanding confirmed orders in hand on 30 June 2018. A
breakdown of these outstanding confirmed orders is as follows:-
Offshore Marine, Oil & Gas Machinery
Construction Equipment
Precision Engineering & Technologies
Industrial & Mobile Hydraulics
Total
S$ m
15.6
9.0
12.9
0.3
37.8
These outstanding orders are scheduled for delivery in the financial year 2019. Prospects for ongoing orders, save for the
offshore marine, are strengthening.
Prospects
The global economic environment being impacted by unprecedented geopolitical factors compounded by the ongoing
trade war between the world’s two largest economies has deteriorated amidst great uncertainties. The road ahead has
become more challenging. Post demerger, while the Group continues to focus on vertical expansion, it will concurrently
consider, where necessary, investments on technology and products to catalyse the expansion of the Group’s businesses
laterally.
Subsequent Events after the Balance Sheet Date
Investment in Endofotonics Pte Ltd
On 28 August 2018, 1,058,201 ordinary shares were allotted to Zicom MedTacc Private Limited for a cash consideration
of S$222,000 pursuant to the subscription of a non-renounceable rights issue by Endofotonics Pte Ltd (“Endofotonics”).
As a result of this allotment, the Group’s interest in Endofotonics increased to 24.39%.
Demerger of technology businesses
On 29 August 2018, the Board resolved to approve, subject to final approval by shareholders, for the purposes of
Section 256B of the Corporations Act 2001, that the Company shall demerge Zicom MedTacc Private Limited from the
Group, in a form of capital reduction by distributing all the issued ordinary shares in Zicom MedTacc Private Limited to the
Company’s shareholders on a pro rata basis.
Disposal of SAEdge Vision Solutions Pte Ltd
On 31 August 2018, Sys-Mac Automation Engineering Pte Ltd (“Sys-Mac”) completed the disposal of its 96% equity
interest in SAEdge Vision Solutions Pte Ltd (“SAEdge”) to Emage Vision Pte Ltd (“EV”) for a consideration of S$3,473,000,
satisfied by the allotment of 43,336 EV voting shares to Sys-Mac, representing an equity interest of 14.88% in EV.
Zicom MedTacc Private Limited changed its name
On 7 September 2018, Zicom MedTacc Private Limited changed its name to ZIG Ventures Private Limited.
11
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
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.
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:
Meetings of Committees
Giok Lak Sim
Kok Hwee Sim
Kok Yew Sim
Yian Poh Lim
Frank Leong Yee Yew
Ian R Millard
Shaw Pao Sze
Full meetings of directors
Audit
A
4
4
2
4
4
4
4
B
4
4
4
4
4
4
4
A
–
–
–
3
3
3
–
B
–
–
–
3
3
3
–
A = Number of meetings attended
Nomination &
Remuneration
B
A
1
1
–
–
–
–
1
1
1
1
–
–
–
–
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$8,415 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 Frank Leong Yee Yew and Kok Hwee Sim retire by rotation and being eligible, offer themselves for re-election.
12
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
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 2018.
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.
13
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
Remuneration report (Audited)
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
Company. 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 2018 Annual General Meeting.
The Board recommends that total directors’ fees for Non-Executive Directors for the financial year ending 30 June
2019 be fixed at a maximum sum of A$150,000 (S$148,000) 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.
14
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
Remuneration report (Audited)
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 pre-tax consolidated profits of ZHPL 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.
Pursuant to Mr Sim’s service agreement with ZHPL, he 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 consolidated profits,
Mr Sim will be paid a bonus not exceeding 5% of CAL’s consolidated profits. For the financial year just ended, CAL
has achieved its profit target. However, given the current challenging business environment, Mr Sim has decided to
offset his CAL bonus entitlement of A$75,477 against the remuneration paid to him by ZHPL during the year and
will therefore waive payment of such an incentive from ZHPL.
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.
15
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
Remuneration report (Audited)
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 shareholder 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 2,610,000 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
2018
(4.83)
–
9.6
25.12
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
Average rate for EPS
1.0375
1.0498
1.0106
1.0864
1.1521
Closing rate for NTA per share
1.0076
1.0570
1.0026
1.0323
1.1739
16
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
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G
ZICOM GROUP LIMITED Annual Report 2018For personal use only
Directors’ Report 2018
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(
ZICOM GROUP LIMITED Annual Report 2018For personal use only
Directors’ Report 2018
Remuneration report (Audited)
Details of share options to key management personnel
Options granted to, vested, exercised or expired during the years 2018 and 2017 as well as their outstanding options held
as at year end are shown in the tables below.
30 June 2018
Balance at
1 July 2017 Granted
Options
exercised Expired
Balance at
30 June
2018
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
–
–
–
–
–
–
–
–
–
–
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
–
–
–
–
–
–
–
–
–
–
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.
19
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 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
–
300,000
300,000
–
–
–
–
200,000
200,000
1,000,000
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
Remuneration report (Audited)
Shareholdings of key management personnel as at 30 June 2018 and 30 June 2017 are as follows:
30 June 2018
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 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
Balance as at
1 July 2017
Granted as
remuneration
Options
exercised
Purchases
Balance as at
30 June 2018
94,753,137
1,538,180
1,350,253
488,000
624,364
592,250
–
6,687,767
2,111,339
108,145,290
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,514,000
–
–
–
–
–
–
101,267,137
1,538,180
1,350,253
488,000
624,364
592,250
–
–
–
6,514,000
6,687,767
2,111,339
114,659,290
Balance as at
1 July 2016
Granted as
remuneration
Options
exercised
Purchases
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
There were no other transactions and balances with key management personnel and their related parties during the year.
20
ZICOM GROUP LIMITED Annual Report 2018For personal use only Directors’ Report 2018
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$
148,363
19,764
168,127
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/Group Managing Director
28 September 2018
21
ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 2018, I declare to the best of my
knowledge and belief, there have been:
a)
b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
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
28 September 2018
22
ZICOM GROUP LIMITED Annual Report 2018For personal use only 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.
Company Secretaries
The Joint Company Secretaries are directly accountable to the Board through the Chairman.
23
ZICOM GROUP LIMITED Annual Report 2018For personal use only Corporate Governance Statement
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 20% 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
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 12 of the Directors’ Report.
24
ZICOM GROUP LIMITED Annual Report 2018For personal use only Corporate Governance Statement
Board Skills Matrix
The Board seeks to ensure as a minimum the Board’s skills matrix includes:
(a)
(b)
Each Director must be capable of making a valuable contribution to the effective operations of the Company and
Board’s deliberations and processes;
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.
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.
25
ZICOM GROUP LIMITED Annual Report 2018For personal use only Corporate Governance Statement
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 the Group 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
23 years
11 years
4 years
Independent
Mr Ian R Millard
12 years
Mr Y P Lim
12 years
Mr Frank Leong
12 years
Mr S P Sze
8 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.
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.
26
ZICOM GROUP LIMITED Annual Report 2018For personal use only Corporate Governance Statement
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.
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.
27
ZICOM GROUP LIMITED Annual Report 2018For personal use only Corporate Governance Statement
•
•
•
•
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 12 of the Directors’ Report.
To ensure the integrity of the Company’s financial reports, the Group 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.
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.
•
28
ZICOM GROUP LIMITED Annual Report 2018For personal use only Corporate Governance Statement
•
•
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.
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 12 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.
29
ZICOM GROUP LIMITED Annual Report 2018For personal use only Corporate Governance Statement
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.
A maximum amount of remuneration for Non-Executive Directors is fixed by shareholders in general meeting and can be
varied in the same manner. In determining the allocation, the Board must take into account of 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.
30
ZICOM GROUP LIMITED Annual Report 2018For personal use only Consolidated Statement of Comprehensive Income
for the year ended 30 June 2018
(In Singapore dollars)
Revenue
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
Loss 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 (loss)/income for the year, 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
2018
S$’000
2017
S$’000
5
5
5
12
6
78,994
92,628
2,512
81,506
(40,156)
(32,742)
(5,208)
(2,599)
(10,523)
(424)
(1,273)
(11,419)
277
(11,142)
2
(208)
(206)
1,892
94,520
(45,571)
(28,601)
(5,356)
(2,484)
(17,119)
(421)
(724)
(5,756)
1,003
(4,753)
(19)
915
896
(11,348)
(3,857)
(10,873)
(269)
(4,620)
(133)
(11,142)
(4,753)
(11,079)
(269)
(3,724)
(133)
(11,348)
(3,857)
7
7
(5.01)
(5.01)
(2.13)
(2.13)
31
ZICOM GROUP LIMITED Annual Report 2018For personal use only Consolidated Balance Sheet
as at 30 June 2018
(In Singapore dollars)
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Convertible loans to an associate
Investments in associates
Current assets
Cash and bank balances
Inventories
Trade and other receivables
Gross amount due from customers for contract work
Prepayments
Tax recoverable
TOTAL ASSETS
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Gross amount due to customers for contract work
Interest-bearing liabilities
Provisions
Provision for taxation
NET CURRENT ASSETS
Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions
TOTAL LIABILITIES
NET ASSETS
Equity attributable to equity holders of the Parent
Share capital
Reserves
Retained earnings
Non-controlling interests
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
32
Note
2018
S$’000
2017
S$’000
9
10
6
12
12
20
13
14
15
16
15
17
18
17
6
18
19
21,301
14,602
3,054
1,131
8,798
48,886
9,739
28,007
21,802
4,227
398
–
64,173
22,969
14,725
2,767
602
9,448
50,511
18,591
23,145
19,195
3,305
409
32
64,677
113,059
115,188
19,122
1,844
18,407
1,882
192
41,447
19,991
19
9,935
2,281
219
32,445
22,726
32,232
664
983
414
2,061
652
1,224
398
2,274
43,508
34,719
69,551
80,469
38,314
(1,562)
32,581
69,333
218
38,314
(1,501)
43,444
80,257
212
69,551
80,469
113,059
115,188
ZICOM GROUP LIMITED Annual Report 2018For personal use only Consolidated Statement of Changes in Equity
for the year ended 30 June 2018
(In Singapore dollars)
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33
ZICOM GROUP LIMITED Annual Report 2018For personal use only
Consolidated Statement of Cash Flows
for the year ended 30 June 2018
(In Singapore dollars)
Cash flows from operating activities:
Operating loss before taxation
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Bad debts written off
Allowance for doubtful debts, net
Allowance for inventory obsolescence, net
Inventories written off
Finance costs
Interest income
Property, plant and equipment written off
Intangible assets written off
Gain on disposal of property, plant and equipment
Forfeiture of customer deposit
Trade and other payables written back
Provisions made, net
Share-based payments
Share of results of associates
Unrealised exchange differences
Operating (loss)/profit before reinvestment in working capital
Increase in stocks and work-in-progress
Decrease in projects-in-progress
Increase in debtors
(Decrease)/increase in creditors
Cash (used in)/generated from operations
Interest received
Interest paid
Income taxes paid
Note
2018
S$’000
2017
S$’000
(11,419)
(5,756)
9
10
5
5
5
5
5
5
5
5
5
5
18
3,984
1,224
–
403
322
186
424
(94)
47
72
(57)
–
(72)
167
155
1,273
(177)
(3,562)
(3,837)
903
(2,859)
(1,140)
(10,495)
62
(428)
(278)
4,300
1,056
5
412
307
62
421
(62)
7
–
(71)
(95)
(37)
1,423
43
724
573
3,312
(835)
5,869
(3,712)
3,969
8,603
45
(402)
(407)
Net cash (used in)/generated from operating activities
(11,139)
7,839
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of available-for-sale asset
Purchase of computer software
Increase in development expenditure
Increase in patented technology
Investments in associates
Subscription of convertible loan in an associate
Acquisition of subsidiaries
9(b)
9(c)
10
10
12(b)
11(b)
(3,278)
61
–
(17)
(854)
(53)
(676)
(497)
(145)
(1,777)
94
1
(68)
(974)
(56)
(3,339)
(600)
–
Net cash used in investing activities
(5,459)
(6,719)
34
ZICOM GROUP LIMITED Annual Report 2018For personal use only Consolidated Statement of Cash Flows
for the year ended 30 June 2018
(In Singapore dollars)
Cash flows from financing activities:
Proceeds from bank borrowings
Repayments of bank borrowings
Loans from a related party
Dividends paid on ordinary shares
Repayment of hire purchase creditors
Note
2018
S$’000
2017
S$’000
17(e)
8
11,495
(5,063)
1,352
–
(430)
2,800
(4,033)
–
(809)
(819)
Net cash generated from/(used in) financing activities
7,354
(2,861)
Net decrease in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(9,244)
(39)
18,239
(1,741)
(1)
19,981
8,956
18,239
20
20
35
ZICOM GROUP LIMITED Annual Report 2018For personal use only 1.
Corporate information
This financial report of Zicom Group Limited (the “Company” or “Parent Entity”) and its subsidiaries (collectively, the
“Group” or “consolidated entity”) for the year ended 30 June 2018 was authorised for issue in accordance with a
resolution of the Directors on 28 September 2018.
Zicom Group Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly
traded on the Australian Securities Exchange. The Company is also the ultimate parent.
The nature of the operations and principal activities of the Group are described in the Directors’ report.
2.
Summary of significant accounting policies
2.1 Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with
the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board (“AASB”). The financial statements have
been prepared on a going concern basis and items are measured on a historical cost basis except for
derivative financial instruments which have been measured at their fair values.
The financial report is presented in Singapore dollars and all values are rounded to the nearest thousand
dollars (S$’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 2017. 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. In respect of AASB 15 in particular, the review of revenue contracts to date have not
identified any material adjustments in respect of material revenue generating business segments. For
AASB 9, all indications are that on a consolidated basis the impact will be immaterial. AASB 16 is likely
to result in the recognition of right of use assets, however the assessment is ongoing.
•
•
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)
36
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.2
Statement of compliance (cont’d)
(ii)
Accounting Standards and Interpretations issued but not effective (cont’d)
•
•
•
AASB 16 Leases (Effective for annual periods on or after 1 July 2019)
Interpretation 22 Foreign Currency Transactions and Advance Consideration
Interpretation 23 Uncertainty over Income Tax Treatments
2.3
Principles of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries
as at 30 June 2018. 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 Entity. 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.
37
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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.
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.
38
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.5 Operating segments (cont’d)
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.
(c)
Consolidated financial statements
On consolidation, the results and balance sheets 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.
39
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.6
Foreign currency (cont’d)
(c)
Consolidated financial statements (cont’d)
The exchange differences arising on the translation are recognised in other comprehensive income.
On disposal of a foreign operation, the component of other comprehensive income relating to that
particular foreign operation is recognised in profit or loss.
2.7
Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. The cost of an item of property,
plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably. Such
cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-
term construction projects if the recognition criteria are met. When significant parts of property, plant and
equipment are required to be replaced at intervals, the Group 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.
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.
40
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.8
Intangible assets
Intangible assets acquired separately are measured initially at cost. The cost of an intangible asset acquired
in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
Internally generated intangible 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
3 – 10 years
10 – 20 years
12 – 16 years
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.
41
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.9
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the
asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to
sell and its value in use and is determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of assets. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset.
In determining fair value less cost to sell, recent market transactions are taken into account, if available.
If no such transaction can be identified, an appropriate valuation model is used. These calculations are
corroborated by valuation multiples, quoted share prices for publicly traded companies or other available
fair value indicators. Where the carrying amount of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. Impairment losses are recognised in
profit or loss.
The Group bases its impairment calculation on detailed budgets 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 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.
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’s investments in associates are accounted for 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 share of results of associate in the period in
which the investment is acquired.
42
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.10 Associates (cont’d)
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 its 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 there 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 share of
results of associates.
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.
43
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.11 Financial Instrument – Initial recognition and subsequent measurement (cont’d)
(i)
Financial assets (cont’d)
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
(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 (negative net changes in fair value) or interest income (positive net
changes in fair value) 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 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 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 2018 and 2017.
44
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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
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.
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 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 had 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.
45
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 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.
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.
46
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.11 Financial Instrument – Initial recognition and subsequent measurement (cont’d)
(iii)
Financial liabilities (cont’d)
Subsequent measurement (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
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.
47
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 outcome of the construction contract cannot be measured reliably (principally during the early
stages of a contract), both contract revenue and expenses are not recognised until the 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.
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.
48
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.16 Fair value measurement (cont’d)
The fair value of an asset or a 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.
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 is provided. Initial
recognition is based on historical experience. The initial estimate of warranty-related costs is reviewed
annually and revised, if necessary.
49
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.17 Provisions (cont’d)
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 government or 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.
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 costs.
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.
50
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.20 Leases (cont’d)
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.
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 charge or credit to profit or loss for a
period represents the movement in cumulative expense recognised as at beginning and end of that
period and is recognised in employee costs.
No expense is recognised for options that do not ultimately vest. The share-based payments reserve
is transferred to retained earnings upon expiry or forfeiture of the share options after its vesting date.
When the options are exercised, the share-based payments reserve is transferred to share capital as
new shares are issued.
51
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.21 Employee benefits (cont’d)
(b)
Employee share option plan (cont’d)
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 modification 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.
(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.
52
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2.
Summary of significant accounting policies (cont’d)
2.22 Revenue recognition (cont’d)
Interest income
Interest income is recognised using the effective interest method.
Dividends
Dividend income is recognised when the Group’s right to receive payment is established.
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.
53
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 relating to items recognised outside profit or loss is recognised outside profit or loss.
Deferred tax items are recognised in correlation to the underlying transaction either in other
comprehensive income or directly in equity and deferred tax arising from a business combination is
adjusted against goodwill on acquisition.
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 purchase of assets or services is not
recoverable from the taxation authority, in which case the goods and services tax is recognised
as part of the cost of acquisition of the asset or as part of the expense item, as applicable; and
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.
54
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 2018, the Group holds 72.28% (2017: 73.02%) 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 power and 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 2018, the Group holds 10.88% (2017: 10.88%), 16.66% (2017: 16.66%) and 11.51%
(2017: 8.23%) 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 that are 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.
55
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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. As these calculations are based on assumptions involving
unobservable inputs, they are categorised within Level 3 of the fair value hierarchy. 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 performance of the
assets 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 CGU 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 CGUs 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.
(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.
56
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 3.
Significant accounting judgements, estimates and assumptions (cont’d)
(b)
Key sources of estimation uncertainty (cont’d)
(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 2018, the carrying amount of capitalised
development expenditure was S$5,209,000 (2017: S$5,113,000).
(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 2018
were S$192,000 (2017: S$219,000) and S$983,000 (2017: S$1,224,000) respectively. The Group
also had deferred tax assets of S$3,054,000 (2017: S$2,767,000) as at 30 June 2018.
4.
Segment information
Business segments
Identification of reportable segments
The Group has identified its operating segments based on internal reports that are reviewed and used by the chief
operating decision maker and the executive management team in assessing performance and in determining the
allocation of resources. The operating segments are identified based on products and services as follows:
•
•
•
•
Offshore Marine, Oil & Gas Machinery – manufacture and supply of deck machinery, gas metering stations,
gas processing plants and related equipment, parts and services.
Construction Equipment – manufacture and supply of concrete mixers and foundation equipment, including
equipment rental, parts and related services.
Precision Engineering & Technologies – manufacture and supply of precision and automation equipment and
products, medtech equipment and products, medtech translation and engineering services.
Industrial & Mobile Hydraulics – supply of hydraulic drive systems, parts and services.
Intersegment sales
Intersegment sales are recognised based on internally set transfer price at arm’s length basis.
57
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 4.
Segment information (cont’d)
Business segments (cont’d)
Unallocated revenue and expenses
Unallocated revenue comprises mainly non-segmental revenue. Unallocated expenses comprise mainly non-
segmental expenses such as head office expenses.
The following tables present information regarding operating segments for the years ended 30 June 2018 and
2017.
Offshore
marine, oil &
gas machinery
S$’000
Construction
equipment
S$’000
Precision
engineering &
technologies
S$’000
Industrial
& mobile
hydraulics Consolidated
S$’000
S$’000
Year ended 30 June 2018
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
58
6,472
629
108
7,209
41,349
60
4
41,413
29,288
1,659
–
30,947
1,885
–
301
2,186
(5,431)
2,223
(5,789)
516
(1,273)
12
341
394
447
3,464
6
2,993
574
366
965
1,555
418
–
–
11
22
78,994
2,348
413
81,755
(413)
70
94
81,506
(8,481)
70
(1,405)
(1,273)
(11,089)
(424)
94
(11,419)
277
(11,142)
3,842
1,312
5,154
4,953
1,461
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 4.
Segment information (cont’d)
Business segments (cont’d)
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
Offshore
marine, oil &
gas machinery
S$’000
Construction
equipment
S$’000
Precision
engineering &
technologies
S$’000
Industrial
& mobile
hydraulics Consolidated
S$’000
S$’000
31,362
173
–
31,535
30,965
82
1
31,048
28,717
1,468
4
30,189
1,584
–
436
2,020
492
(1,154)
(3,011)
347
(724)
228
–
422
972
2,125
2
3,344
458
478
1,108
1,318
864
–
–
17
64
92,628
1,723
441
94,792
(441)
107
62
94,520
(3,326)
107
(1,454)
(724)
(5,397)
(421)
62
(5,756)
1,003
(4,753)
2,831
1,110
3,941
5,101
2,358
59
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 2
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Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only
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i
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only
5.
Revenue, income and expenses
(i)
Revenue
Sale of goods
Rendering of services
Rental income
Revenue recognised on projects
(ii)
Other operating income
Interest income
Forfeiture of customer deposit
Gain on disposal of property, plant and equipment
Trade and other payables written back
Sale of machinery previously written off
Recovery of liquidated damages paid
Services rendered
Government grants
Other revenue
(iii)
Other operating expenses
Included in other operating expenses are the following:
Allowance for inventory obsolescence, net
Allowance for doubtful debts, net
Bad debts written off
Foreign exchange loss/(gain)
Provision for product warranties made, net
Property, plant and equipment written off
Warranty expense charged directly to profit or loss
Inventories written off
Intangible assets written off
Sales commission
Sea freight
Travelling expenses
Utility charges
62
Consolidated
2018
S$’000
54,193
4,849
3,303
16,649
78,994
2017
S$’000
53,926
4,491
2,794
31,417
92,628
Consolidated
2018
S$’000
2017
S$’000
94
–
57
72
24
615
857
761
32
2,512
62
95
71
37
–
–
487
1,122
18
1,892
Consolidated
2018
S$’000
2017
S$’000
322
403
–
350
103
47
3
186
72
805
1,017
960
766
307
412
5
(236)
1,365
7
4
62
–
6,501
879
1,177
772
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 6.
Taxation
Current income tax
- Current income tax charge
- Loss transferred under Group Relief Scheme
- Adjustments in respect of previous years
Deferred income tax
- Relating to the origination and reversal of temporary differences
- Adjustments in respect of previous years
Tax benefit
Consolidated
2018
S$’000
2017
S$’000
329
–
(46)
(10)
(550)
(277)
508
(396)
(14)
(917)
(184)
(1,003)
A reconciliation between the tax benefit and the product of accounting loss of the Group multiplied by the
applicable tax rate for the year ended 30 June is as follows:
Loss before taxation
Tax at the domestic rates applicable to profits in the countries where the Group
operates
Release of deferred tax liability on intangible assets
Non-deductible expenses
Non-taxable income
Partial tax exemption
Deferred tax assets not recognised
Utilisation of previously unrecognised tax losses
Adjustments in respect of previous years
Enhanced tax credits
Others
Tax benefit
Consolidated
2018
S$’000
2017
S$’000
(11,419)
(5,756)
(1,423)
(47)
154
(127)
(36)
2,559
(433)
(596)
(331)
3
(277)
(673)
(47)
174
(123)
(37)
751
(262)
(198)
(588)
–
(1,003)
The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.
63
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 6.
Taxation (cont’d)
Deferred taxation as at 30 June relates to the following:
Consolidated
balance sheet
Consolidated statement of
comprehensive income
2018
S$’000
2017
S$’000
2018
S$’000
2017
S$’000
Deferred tax assets
Differences in depreciation
Intangible assets
Provisions
Unutilised tax losses
Unutilised capital allowances
Deferred tax liabilities
Differences in depreciation
Intangible assets
Unutilised capital allowances
Unutilised tax losses
Unutilised donations
(28)
(1,027)
464
3,104
541
3,054
(988)
(292)
275
5
17
(983)
(95)
(1,022)
710
2,662
512
2,767
(1,138)
(339)
184
56
13
(1,224)
The directors estimate that the potential future income tax benefit at 30 June in
respect of revenue tax losses of certain subsidiaries not brought to account is
The benefit will only be obtained if –
(67)
5
246
(467)
(29)
(157)
(47)
(91)
51
(4)
(560)
(34)
34
(370)
40
(45)
(734)
(46)
63
4
(13)
(1,101)
Consolidated
2018
S$’000
2017
S$’000
7,991
6,324
(a)
(b)
these subsidiaries derive future assessable income of a nature and of an amount sufficient to enable the
benefit to be realised;
these subsidiaries continue to be in the same trade and there is no substantial change in their shareholdings;
and
(c)
there are no changes in tax legislation that adversely affect these subsidiaries’ ability to realise the benefit.
Tax Consolidation Legislation
Zicom Group Limited and its wholly-owned Australian subsidiaries have not elected to form a tax consolidated
group.
64
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 7.
Earnings per share
Basic earnings per share is calculated by dividing the Group’s net profit or loss attributable to equity holders of the
Parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the Group’s net profit or loss attributable to equity holders of
the Parent by the adjusted weighted average number of ordinary shares which takes into account the effects of all
dilutive potential ordinary shares comprising share options granted to employees.
(a)
Earnings used in calculating basic and diluted earnings per share
Net loss attributable to equity holders of the Parent
Consolidated
2018
S$’000
2017
S$’000
(10,873)
(4,620)
No. of shares (Thousands)
(b) Weighted average number of ordinary shares for basic and diluted
earnings per share
217,141
217,141
(c)
Earnings per share
Basic
Diluted
Singapore cents
(5.01)
(5.01)
(2.13)
(2.13)
There were 2,610,000 (2017: 2,680,000) share options excluded from the calculation of diluted earnings per share
that could potentially dilute basic earnings per share in the future because they are antidilutive for the current period
presented.
There have been no transactions involving ordinary or potential ordinary shares which occurred between the
reporting date and the date of completion of these financial statements.
8.
Dividends
Declared and paid during the financial year:
- Final unfranked dividend for 2017: nil
- Interim unfranked dividend for 2018: nil
- Final unfranked dividend for 2016: 0.20 Australian cents per share
- Interim unfranked dividend for 2017: 0.15 Australian cents per share
Proposed but not recognised as a liability as at 30 June:
- Final unfranked dividend for 2018: nil (2017: nil)
Consolidated
2018
S$’000
2017
S$’000
–
–
–
–
–
–
–
–
459
350
809
–
65
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only l
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66
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only
9.
Property, plant and equipment (cont’d)
(a)
The net book value of property, plant and equipment held under hire purchase are as follows:
Motor vehicles
Plant and equipment
Consolidated
2018
S$’000
2017
S$’000
301
796
1,097
408
1,414
1,822
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$3,854,000
(2017: S$2,990,000) of which S$40,000 (2017: S$651,000) were acquired by means of hire purchase
financing and S$354,000 (2017: S$43,000) was acquired by means of loan financing. Cash payments
of S$3,278,000 (2017: S$1,777,000) were made to purchase property, plant and equipment. Included in
additions is an amount of S$182,000 (2017: S$519,000) 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$4,000 (2017: S$23,000). Sales proceeds amounting to S$61,000 (2017: S$94,000) 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$47,000 (2017: S$7,000).
(e)
The net book value of property, plant and equipment pledged as security are as follows:
Leasehold buildings
Freehold land and buildings
Plant and equipment
Motor vehicles
Please refer to note 17 for details.
Consolidated
2018
S$’000
2017
S$’000
5,715
4,412
354
93
10,574
2,623
4,576
–
110
7,309
67
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only l
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68
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only
10.
Intangible assets (cont’d)
Average remaining amortisation period (years) – 2018
Average remaining amortisation period (years) – 2017
Assets by business segment:
Development
expenditure
Unpatented
technology
4.9
5.2
6.4
7.4
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
2,883
358
–
3,241
Precision
engineering
&
technologies
1,187
12,212
8,798
22,197
Construction
equipment
15,244
1,987
–
17,231
Industrial
& mobile
hydraulics Unallocated
2
10
–
12
1,985
35
–
2,020
Total
21,301
14,602
8,798
44,701
Offshore Marine, Oil and Gas Machinery
The assets in this segment relate predominantly to Zicom Private Limited and Zicom Equipment Private Limited.
The most significant asset in this segment relates to a leasehold building amounting to S$2.5m, carried at historical
cost less accumulated depreciation, which has been supported by market valuation that confirmed no indicator of
impairment. The oil and gas segment continues to generate positive cash flows with a pipeline of contracts and
margin on product sales and projects further supporting no impairment trigger.
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 impairment assessment is performed.
Industrial and Mobile Hydraulics
As noted above, there are no material assets in this segment.
69
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 valuation performed on this building in the current financial year has
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 2018. 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”)
Zicom Energy Solutions Private Limited
As at
30.6.2018
S$’000
As at
30.6.2017
S$’000
Basis on
which
recoverable
values are
determined
Pre-tax
discount
rate per
annum
2018
2017
2,975
1,973
664
1,316
282
7,210
2,975
2,070
664
1,316
–
7,025
Value in use
Value in use
Value in use
Value in use
–
14% 15%
14% 14%
19% 24%
18% 17%
–
–
In accordance with AASB 136, the carrying value of the Group’s goodwill on acquisition as at 30 June 2018 was
assessed for impairment.
The businesses in the PET segment are in different phases of development with some of the businesses close to
or just starting 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 5 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 CGUs with the exception of Orion for which 0% was used.
70
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 0% and 100%.
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 is in its early stage of commercialisation of its product. 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 is in its second 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 0% and 100%.
71
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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’s DA-Cell Plate
and Washing Station has just entered the commercialisation stage. 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 100%.
Interests in the rest of the associates as disclosed in note 12 were mostly acquired in the last financial year and all
of these associates are in the research and development phase of their products. As such, their current carrying
values, in the absence of an impairment trigger, were considered representative of their fair values.
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
Pre-tax 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.
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.
72
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 10.
Intangible assets (cont’d)
Impairment tests for goodwill and associates (cont’d)
Market share assumptions – For businesses that are in the early stages of 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 that 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 be reduced
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 stages of product development (research and development) and some
of them close to commercialisation with some having started its journey of commercialisation. For the businesses
that have started commercialisation, in particular Orion, 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 2018 and
2017 for goodwill as their recoverable values were in excess of their carrying values.
11.
Investments in subsidiaries
Investments in controlled entities, at cost
Less: Impairment loss
Parent Entity
2018
S$’000
2017
S$’000
54,544
(2,322)
52,222
54,544
(3,573)
50,971
73
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 11.
Investments in subsidiaries (cont’d)
The consolidated financial statements include the financial statements of Zicom Group Limited and the subsidiaries
listed in the following table.
The carrying amount in each controlled entity has been adjusted to assess recoverable amounts on the basis of
their underlying assets.
Name of Company
Held by the Company:
Cesco Australia Limited
Zicom Holdings Private Limited
Country of
incorporation/
formation
Carrying value
of Parent Entity
investment
Percentage
of equity held by the
Group
2018
S$’000
Australia
Singapore
8,047
44,175
2017
S$’000
6,796
44,175
2018
%
100
100
2017
%
100
100
Controlled entities held through subsidiary
companies:
Cesco Equipment Pty Ltd
Zicom Private Limited
Zicom Energy Solutions Private Limited (b)
Zicom Equipment Private Limited
Link Vue Systems Pte Ltd (a)
Foundation Associates Engineering Private
Limited
FAE Construction Pte Ltd
FAEQUIP Corporation
FAE Thai Co. Ltd (c)
Sys-Mac Automation Engineering Pte Ltd
MTA-Sysmac Automation Pte Ltd
SAEdge Vision Solutions Pte Ltd
iPtec Pte Ltd
Orion Systems Integration Pte Ltd
Biobot Surgical Pte Ltd
Zicom MedTacc Private Limited
Zicom Innovations Group Private Limited (d)
ZIG Medtech Asia Pte Ltd (e)
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
Australia
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Philippines
Thailand
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Indonesia
Thailand
Thailand
Thailand
Malaysia
China
(a)
Link Vue Systems Pte Ltd (“Link Vue”)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
52,222
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50,971
100
100
51
100
72
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
–
100
61
96
100
98
95
100
–
–
100
100
100
100
100
100
On 26 September 2017, the Group 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.
74
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 11.
Investments in subsidiaries (cont’d)
(b)
Zicom Energy Solutions Private Limited (“ZES”)
On 27 October 2017, the Group acquired 51% equity interest in Zicom Energy Solutions Private Limited, a
dual fuel technology company, for a cash consideration of S$510,000.
The net identifiable assets and liabilities arising from the acquisitions of Link Vue and ZES based on
provisional values were:
Assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and bank balances
Liabilities
Trade and other payables
Total identifiable net assets
Non-controlling interests measured at its proportionate share of net
identifiable assets
Intangible assets arising from acquisition
Effects of acquisition on cash flows
Total consideration
Cash and bank balances of subsidiary company acquired
Net cash outflow on acquisition
(c)
FAE Thai Co. Ltd (“FAE Thai”)
Link Vue
S$’000
ZES
S$’000
–
89
157
102
348
(148)
200
(56)
45
189
189
(102)
87
3
–
1
452
456
(9)
447
(219)
282
510
510
(452)
58
On 11 October 2017, FAE Thai Co. Ltd was incorporated in Thailand by Foundation Associates Engineering
Private Limited, both wholly-owned subsidiaries, with a paid-up capital of THB2,500,000 (S$104,000). FAE
Thai is principally engaged in trading and rental of foundation equipment and the provision of construction
services.
(d)
Zicom Innovations Group Private Limited
On 27 October 2017, Zicom Innovations Group Private Limited was incorporated by Zicom Holdings Private
Limited, both wholly-owned subsidiaries, with a paid-up capital of S$1.
(e)
ZIG Medtech Asia Pte Ltd (“ZMA”)
On 22 February 2018, ZIG Medtech Asia Pte Ltd was incorporated by Zicom Innovations Group Private
Limited, both wholly-owned subsidiaries, with a paid-up capital of S$2. ZMA is principally engaged in the
distribution of medical and surgical supplies.
75
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 11.
Investments in subsidiaries (cont’d)
Entity subject to class order relief
Pursuant to the ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, relief has been granted
to Cesco Australia Limited (“CAL”) and Cesco Equipment Pty Ltd (“CEPL”) from the Corporations Act 2001
requirements for the preparation, audit and lodgement of their financial reports.
As a condition for the relief, a Deed of Cross Guarantee was executed between Zicom Group Limited (“ZGL”)
and CAL on 15 May 2008. The effect of the Deed is that ZGL has guaranteed to pay any deficiency in the event
of winding up of CAL or if CAL does not meet its obligations under the terms of overdraft, loans, leases or other
liabilities subject to the guarantee.
CAL has also given a similar guarantee in the event that ZGL is wound up or if it does not meet its obligations
under the terms of overdraft, loans and leases or other liabilities subject to the guarantee.
On 9 May 2013, CEPL executed a Deed of Assumption with ZGL so that CEPL is joined to the Deed of Cross
Guarantee and assumes liability under and be bound by the Deed of Cross Guarantee as if CEPL was a Group
Entity when the Deed of Cross Guarantee was executed.
The consolidated Income Statement and Balance Sheet of the entities that are members of the Closed Group are
as follows:
Consolidated Income Statement
Profit from continuing activities before taxation
Income tax benefit
Net profit for the year
Accumulated losses at the beginning of year
Forfeiture of employee share options
Dividends paid
Accumulated losses at the end of year
Closed Group
2018
S$’000
2017
S$’000
1,065
311
1,376
(23,209)
4
–
(21,829)
1,248
–
1,248
(23,651)
3
(809)
(23,209)
76
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 11.
Investments in subsidiaries (cont’d)
Consolidated Balance Sheet
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments in subsidiaries
Current assets
Cash and bank balances
Inventories
Trade and other receivables
Prepayments
Current liabilities
Payables
Interest-bearing liabilities
Provisions
NET CURRENT ASSETS
Non-current liabilities
Interest-bearing liabilities
Provisions
NET ASSETS
Equity attributable to equity holders of the Parent
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
Closed Group
2018
S$’000
2017
S$’000
1,286
358
302
44,175
46,121
1,163
4,499
4,647
19
10,328
4,749
206
470
5,425
456
377
–
44,175
45,008
1,772
3,229
3,549
15
8,565
3,492
39
467
3,998
4,903
4,567
421
112
533
61
115
176
50,491
49,399
72,322
(2)
(21,829)
72,322
286
(23,209)
50,491
49,399
77
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 12.
Investments in associates
(a)
Investment details
Held through subsidiaries
Curiox Biosystems Pte Ltd
HistoIndex Pte Ltd
Endofotonics Pte Ltd
BELKIN Laser Ltd
Pellucid Networks Pte Ltd
Principal place of business
Singapore
Singapore
Singapore
Israel
Singapore
(b) Movements in carrying amount of the Group’s investments in associates
Curiox Biosystems Pte Ltd (“Curiox”)
Shareholdings held: 72.28% (2017: 73.02%)
At beginning of year
Additional investment
Share of loss after income tax
Share of other comprehensive income
Unrealised profits
At end of year
Consolidated
2018
S$’000
2017
S$’000
5,107
871
706
1,196
918
8,798
5,266
1,301
907
1,374
600
9,448
Consolidated
2018
S$’000
2017
S$’000
5,266
276
(393)
2
(44)
5,107
5,295
323
(301)
(19)
(32)
5,266
On 8 September 2017, 138,000 preference shares were allotted to Zicom Holdings Private Limited (“ZHPL”)
for a cash consideration of S$276,000 pursuant to the remaining tranche of the non-renounceable rights
issue. Due to allotment for excess rights applications to some shareholders, the Group’s interest in Curiox
decreased to 72.75%.
On 1 February 2018, 22,000 preference shares were issued to directors of Curiox as part payment of
directors’ fees and 5,500 ordinary shares were issued under the Curiox Employee Share and Option Plan. As
a result of this allotment, the Group’s interest in Curiox decreased to 72.28%.
Although ZHPL holds the majority of voting rights in Curiox, it does not have the power and practical ability
to direct the relevant activities of Curiox unilaterally and hence, Curiox remains an associate of the Group as
at 30 June 2018.
78
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 12.
Investments in associates (cont’d)
(b) Movements in carrying amount of the Group’s investments in associates (cont’d)
HistoIndex Pte Ltd (“HistoIndex”)
Shareholdings held: 10.88% (2017: 10.88%)
At beginning of year
Share of loss after income tax
Unrealised profits
At end of year
Consolidated
2018
S$’000
2017
S$’000
1,301
(419)
(11)
871
1,591
(288)
(2)
1,301
HistoIndex entered into a convertible loan agreement on 6 June 2018 with Zicom MedTacc Private Limited
(“ZMT”) and various investors, collectively the “Lenders”, to which the Lenders have granted convertible
loans aggregating S$1,000,000 to HistoIndex. The convertible loans earns interest at 5% per annum and
may be converted into ordinary shares at a discounted price upon the occurrence of pre-defined events or
repaid upon maturity on 5 June 2021.
Although the Group holds less than 20% of equity interest, the Group has the ability to exercise significant
influence through its shareholdings and participation on HistoIndex Board of Directors.
Endofotonics Pte Ltd (“Endofotonics”)
Shareholdings held: 21.89% (2017: 21.89%)
At beginning of year
Investment during the year
Share of loss after income tax
At end of year
Consolidated
2018
S$’000
2017
S$’000
907
–
(201)
706
–
1,000
(93)
907
Under the terms of the investment, ZMT can acquire additional shares through options and achieving certain
milestones. The changes in fair value of the options was assessed as being not significant as at 30 June
2018.
BELKIN Laser Ltd (“BELKIN”)
Shareholdings held: 16.66% (2017: 16.66%)
At beginning of year
Investment during the year
Share of loss after income tax
At end of year
Consolidated
2018
S$’000
2017
S$’000
1,374
–
(178)
1,196
–
1,416
(42)
1,374
Although the Group holds less than 20% of equity interest, the Group has the ability to exercise significant
influence through its shareholdings and participation on BELKIN Board of Directors.
79
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 12.
Investments in associates (cont’d)
(b) Movements in carrying amount of the Group’s investments in associates (cont’d)
Pellucid Networks Pte Ltd (“Pellucid”)
Shareholdings held: 11.51% (2017: 8.23%)
At beginning of year
Investment during the year
Share of loss after income tax
At end of year
Consolidated
2018
S$’000
2017
S$’000
600
400
(82)
918
–
600
–
600
Although the Group holds less than 20% of equity interest, the Group has the ability to exercise significant
influence through its shareholdings and participation on Pellucid Board of Directors.
(c)
Summarised financial information
The following table illustrates summarised financial information relating to the Group’s material investment in
associate:
Current assets
Non-current assets
Current liabilities
Net assets
Add: Fair value adjustments arising from acquisition
Proportion of Group’s investment
Share of net assets
Goodwill
Less: Unrealised profits
Less: Other equity transactions
Group’s carrying amount of investment in associate
Curiox
2018
S$’000
2017
S$’000
1,960
1,155
3,115
(856)
2,259
271
2,530
72.28%
1,829
3,428
(147)
(3)
5,107
2,198
623
2,821
(556)
2,265
328
2,593
73.02%
1,893
3,478
(103)
(2)
5,266
80
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only
12.
Investments in associates (cont’d)
(c)
Summarised financial information (cont’d)
Results:
Revenue
Cost of goods sold
Other income
Operating expenses
Loss before tax
Income tax expense
Add: Fair value adjustments arising from acquisition
Net loss for the year
Other comprehensive income
Total comprehensive income
Group’s share of loss for the year
Group’s share of other comprehensive income
13.
Inventories
Raw materials/trading stocks (at cost or net realisable value)
Work-in-progress (at cost)
Finished goods (at cost)
Stocks-in-transit (at cost)
Total inventories at lower of cost and net realisable value
Curiox
2018
S$’000
2017
S$’000
2,213
(526)
1,687
123
(2,287)
(477)
(4)
(481)
(60)
(541)
2
(539)
(393)
2
1,955
(267)
1,688
272
(2,309)
(349)
(2)
(351)
(60)
(411)
(26)
(437)
(301)
(19)
Consolidated
2018
S$’000
18,902
6,191
2,097
817
28,007
2017
S$’000
15,437
4,792
2,171
745
23,145
Inventories recognised as cost of sales for the year ended 30 June 2018 totalled S$50,335,000 (2017:
S$54,780,000) for the Group.
81
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only
14. Current assets - receivables
Trade receivables (a)
Allowance for impairment loss (b)
Advance payments to suppliers
Deposits
Related party receivables (c):
- Associates
- trade
- non-trade
- Other related parties
- trade
- non-trade
Other receivables
Consolidated
2018
S$’000
2017
S$’000
19,461
(1,087)
18,374
1,363
100
361
158
142
–
1,304
21,802
15,502
(680)
14,822
2,416
86
278
233
61
3
1,296
19,195
(a)
Please refer to note 21(d) for the ageing analysis of trade receivables past due but not impaired.
(b)
Trade and other receivables are non-interest bearing and are generally due when invoiced or on 30 to
60 days’ terms. An allowance for impairment loss is recognised when there is objective evidence that an
individual receivable is impaired.
The Group has trade receivables that were impaired at the balance sheet date and the movements in the
provision for impairment are as follows:
Consolidated
Individually impaired
Trade receivables
2017
2018
S$’000
S$’000
1,087
(1,087)
–
680
7
423
–
(20)
(3)
1,087
680
(680)
–
309
–
519
(44)
(107)
3
680
Nominal amounts
Less: allowance for impairment
Movements in allowance accounts:
As at 1 July
Acquisition of subsidiary company
Charge for the year
Written off
Unused amounts reversed
Currency realignment
As at 30 June
(c)
For related party receivables, please refer to note 23 for terms and conditions.
82
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 15. Gross amount due from/(to) customers for contract work
Contract costs incurred to date
Recognised profits (less recognised losses) to date
Progress billings
Amount due from customers for contract work, net
Gross amount due from customers for contract work
Gross amount due to customers for contract work
Consolidated
2018
S$’000
2017
S$’000
6,249
1,023
7,272
(4,889)
2,383
4,227
(1,844)
2,383
4,005
2,369
6,374
(3,088)
3,286
3,305
(19)
3,286
Advances received included in gross amount due to customers for contract work
217
–
Revenue recognised on projects is disclosed in note 5.
16. Current liabilities - payables
Trade payables and accruals (a)
Advance received from customers
Related party payables (b)
- Associates
- trade
- Other related parties
- trade
- non-trade
Other payables
Unrealised loss on derivatives
Consolidated
2018
S$’000
17,879
997
2017
S$’000
16,095
3,528
–
21
18
17
211
–
19,122
9
9
265
64
19,991
(a)
All amounts are non-interest bearing and are normally settled on 30 to 90 days’ terms.
(b)
For related parties’ payables, please refer to note 23 for terms and conditions.
83
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 17.
Interest-bearing liabilities
Current
Bank overdrafts (a)
Bills payable (b)
Factory loans (c)
Term loans (d)
Loans from a related party (e)
Lease liabilities (note 25)
Non-current
Term loans (d)
Lease liabilities (note 25)
Consolidated
2018
S$’000
2017
S$’000
783
4,469
–
11,409
1,352
394
18,407
421
243
664
352
4,164
42
4,941
–
436
9,935
61
591
652
Details of the secured borrowings are as follows:
(a)
Bank overdraft amounting to S$305,000 (2017: S$352,000) which bears interest at floating rates ranging
from 6.00% to 6.25% (2017: 6.03% to 6.28%) per annum is secured by corporate guarantee from Zicom
Holdings Private Limited (“ZHPL”).
Bank overdraft of S$306,000 (2017: S$nil) which bears interest at floating rate of approximately 7.70% per
annum is secured by a corporate guarantee from Zicom Cesco Engineering Co Ltd.
Bank overdraft of S$125,000 (2017: S$nil) which bears interest at floating rate of approximately 7.70% per
annum 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.
The remaining bank overdraft of S$47,000 (2017: S$nil) which bears interest at fixed rate of 7.87% per
annum is secured by a corporate guarantee from the Company.
(b)
Bills payable amounting to S$1,419,000 (2017: S$3,976,000) with an average maturity of 2 - 5 months
(2017: 1 - 4 months) bear fixed interest rates until expiry, ranging from 1.78% to 4.70% (2017: 2.40% to
3.55%) per annum, at which point interest rate resets and are secured by a corporate guarantee given by
ZHPL.
Bills payable amounting to S$3,050,000 (2017: S$nil) with a maturity of 4 months bear fixed interest rates
until expiry, ranging from 3.39% to 3.40% per annum, at which point interest rate resets and are secured by
a second legal mortgage on ZHPL’s leasehold building at No. 29 Tuas Avenue 3 Singapore 639420 and a
corporate guarantee from ZHPL.
The remaining bills payable outstanding as at 30 June 2017 of S$188,000 with a maturity of 2 months bore
fixed interest rate of 3.69% per annum until expiry and was secured by a corporate guarantee from Zicom
Cesco Engineering Co. Ltd.
(c)
Factory loan outstanding as at 30 June 2017 amounting to S$42,000 which bore interest at floating
rates ranging from 2.90% to 3.05% per annum was fully repaid during the year. It was secured by a
legal mortgage on ZHPL’s leasehold building at No. 9 Tuas Avenue 9 Singapore 639198 and a corporate
guarantee from the Company.
84
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 17.
Interest-bearing liabilities (cont’d)
(d)
Term loans amounting to S$145,000 (2017: S$100,000) comprising of current and long-term portions of
S$54,000 (2017: S$39,000) and S$91,000 (2017: S$61,000) respectively which are secured by a fixed
charge over the purchased motor vehicles and equipment are payable over 3 to 5 years (2017: 3 to 4 years)
and bear interest at fixed rates of 4.12% to 5.40% (2017: 4.12% to 4.39%) per annum.
Term loan amounting to S$435,000 (2017: S$nil) comprising of current and long-term portions of S$105,000
and S$330,000 respectively is repayable over 4 years and bear interest at fixed rate of 5.51% per annum. It
is secured by a fixed charge over the purchased equipment and a corporate guarantee from Cesco Australia
Limited.
Term loan outstanding as at 30 June 2017 amounting to S$833,000 which bore interest at floating rates
ranging from 2.85% to 3.10% per annum and secured by a corporate guarantee given by ZHPL was fully
repaid during the year.
Term loan outstanding as at 30 June 2017 amounting to S$1,069,000 which bore interest at floating rate
of approximately 3.65% per annum and secured by a legal mortgage on the subsidiary company’s freehold
land and buildings at 700/895 Moo 2, Amata Nakorn Industrial Estate, Chonburi, Thailand and a corporate
guarantee from ZHPL was fully repaid during the year.
The remaining term loan outstanding as at 30 June 2017 amounting to S$200,000 which bore interest
at floating rates ranging from 2.90% to 3.05% per annum and secured by a legal mortgage on ZHPL’s
leasehold building at No. 9 Tuas Avenue 9 Singapore 639198 and a corporate guarantee from the Company
was fully repaid during the year.
Short term loans with tenures of 1 – 3 months (2017: 3 – 6 months) amounting to S$2,300,000 (2017:
S$2,800,000) bear interest at fixed rates ranging from 3.39% to 3.57% (2017: 2.77% to 3.24%) per annum
and is secured by a corporate guarantee given by ZHPL.
A revolving credit line of S$5,000,000 (2017: S$nil) for a term of 10 years was offered to ZHPL where
drawdown can be made in tranches for a tenure of 1, 2 or 3 months and thereafter, rollover as required. This
facility which is secured by a legal mortgage on ZHPL’s leasehold building at No. 9 Tuas Avenue 9 Singapore
639198 and corporate guarantees from the Company and Zicom Private Limited shall be reduced by an
annual reduction of S$500,000 commencing on 28 August 2018. As at 30 June 2018, S$5,000,000 has
been drawn down with tenures of 1 month bearing interest at fixed rates until expiry, ranging from 2.75% to
3.00% per annum, at which point, interest rate resets.
Short term loan of S$3,000,000 (2017: S$nil) with a term of 5 years was granted to Zicom Private Limited
where drawdown can be made in tranches for a tenure of 1, 3 or 6 months and thereafter, rollover as
required. This facility which is subject to a monthly reduction of S$50,000 commencing on 16 June 2018 is
secured by a legal mortgage on ZHPL’s leasehold building at No. 5 Tuas Avenue 1 Singapore 639490 and a
corporate guarantee from ZHPL. As at 30 June 2018, S$2,950,000 is outstanding with tenures of 1 and 3
months bearing interest at fixed rates until expiry, ranging from 2.66% to 2.73% per annum, at which point,
interest rate resets.
The remaining short term loan with a tenure of 3 months amounting to S$1,000,000 (2017: S$nil) which is
secured by a first legal mortgage on ZHPL’s leasehold building at No. 29 Tuas Avenue 3 Singapore 639420
bears interest at fixed rate at 2.89% per annum until expiry, at which point, interest rate resets.
85
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 17.
Interest-bearing liabilities (cont’d)
(e)
Loans from a related party amounting to S$1,352,000 (2017: S$nil) which bear interest at fixed rate of 5%
per annum have a maturity of 3 months which may be extended if required.
(f)
Financing facilities available
As at 30 June 2018, the Group had available S$103,000,000 (2017: S$99,000,000) of undrawn committed
borrowing facilities and all bank covenants were complied with.
18. Provisions
Current
Product warranties
Employee benefits
Non-current
Employee benefits
Reinstatement costs
Movements in provision for warranties:
At beginning of year
Additional provision
Unused amounts reversed
Utilised
Currency realignment
At end of year
Consolidated
2018
S$’000
2017
S$’000
1,494
388
1,882
260
154
414
1,918
612
(509)
(513)
(14)
1,494
1,918
363
2,281
242
156
398
720
1,536
(171)
(166)
(1)
1,918
Warranty expense charged directly to profit or loss (note 5)
3
4
Movements in provision for employee benefits:
At beginning of year
Additional provision
Unused amounts reversed
Utilised
Currency realignment
At end of year
Movements in provision for reinstatement costs:
At beginning of year
Currency realignment
At end of year
86
605
77
(13)
(2)
(19)
648
156
(2)
154
534
91
(33)
(16)
29
605
154
2
156
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 18. Provisions (cont’d)
Provision for expected warranty claims is recognised on hydraulic deck machineries, gas processing plants, flip chip
bonders and robotic systems supplied. Assumptions used to calculate these provisions were based on a certain
percentage of sale values and past experience of the level of repairs and returns based on the two-year warranty
period.
In accordance with the lease agreements, the Group must reinstate certain subsidiaries’ leased premises in
Singapore and Australia to its original condition at the end of the lease term.
Because of the long-term nature of liability, the greatest uncertainty in estimating the provision is the costs that will
ultimately be incurred.
19.
Share capital
Parent Entity
Consolidated
2018
2017
No. of shares (Thousands)
2018
S$’000
2017
S$’000
Ordinary fully paid shares
217,141
217,141
38,314
38,314
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary
shares carry one vote per share without restriction.
There were no movements in share capital for both financial years.
20. Cash and cash equivalents
Cash at bank and in hand
Short-term fixed deposits
Consolidated
2018
S$’000
2017
S$’000
9,465
274
9,739
18,591
–
18,591
For the purpose of statement of the consolidated cash flows, cash and cash equivalents comprise the following as
at 30 June:
Cash and short-term deposits
Bank overdrafts
9,739
(783)
8,956
18,591
(352)
18,239
Cash at bank balance amounting to S$522,000 as at 30 June 2018 (2017: S$234,000) earned interest at floating
rate based on daily bank deposit rates ranging from 0.30% to 3.08% (2017: 0.30% to 2.16%) 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.
Included in short-term fixed deposits are amounts of S$84,000 (2017: S$nil) pledged for facilities.
87
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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
2018
S$’000
2017
S$’000
522
736
–
–
736
234
352
42
2,102
2,496
Sensitivity analysis of interest rate risk
As at 30 June 2018, 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$1,000 (2017: S$5,000)
higher/lower, as a result of the higher/lower interest rates. Accordingly, the Group’s equity as at year-end will
be (S$1,000)/S$1,000 (2017: (S$5,000)/S$5,000) lower/higher.
88
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 21.
Financial instruments (cont’d)
(c)
Foreign currency risk
Foreign currency risk occurs as a result of the Group’s transactions that are not denominated in their
respective functional currencies. These transactions arise from the Group’s ordinary course of business.
The Group transacts business in various currencies and as a result, is largely exposed to movements in
exchange rates of United States dollar, Euro, Bangladeshi Taka and Australian dollar.
The Group manages its foreign exchange exposure by a policy of matching, as far as possible, receipts and
payments in each individual currency. The Group also uses foreign currency forward contracts to hedge
a portion of its future foreign exchange exposure purely as a hedging tool and does not take positions in
currencies with a view to make speculative gains from currency movements.
The following sensitivity analysis is based on the foreign exchange risk exposure in existence at the balance
sheet date. As at 30 June, if exchange rates had moved, as illustrated in the table below, with all other
variables held constant, post-tax results and equity would have been affected as follows:
Consolidated
USD
- strengthened 1% (2017: 1%)
- weakened 2% (2017: 2%)
EURO
- strengthened 2% (2017: 4%)
- weakened 1% (2017: 2%)
AUD
- strengthened 2% (2017: 3%)
- weakened 2% (2017: 3%)
BDT
- strengthened 2% (2017: 2%)
- weakened 2% (2017: 2%)
(d)
Credit risk
2018
S$’000
2017
S$’000
40
(79)
3
(1)
8
(8)
–
–
42
(83)
24
(12)
30
(30)
(3)
3
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default
on its obligations. The Group’s exposure to credit risk arises primarily from trade and other receivables.
The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased
credit risk exposure. The Group trades only with recognised and creditworthy third parties. Credit risk is
monitored through careful selection of customers and their balances are monitored on an ongoing basis with
the result that the Group’s exposure to bad debts has not been significant.
89
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 21.
Financial instruments (cont’d)
(d)
Credit risk (cont’d)
Credit risk concentration profile
The Group determines concentration of credit risk by monitoring the country profile of its trade receivables
on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the balance
sheet date is as follows:
Austria
Australia
Bangladesh
France
Hong Kong
Indonesia
Italy
Malaysia
New Zealand
People’s Republic of China
Philippines
Singapore
Taiwan
Thailand
United States of America
Vietnam
Others
Consolidated
2018
2017
S$’000
% of total
S$’000
% of total
137
3,758
1,979
56
178
120
120
966
100
229
88
4,848
4,207
1,085
99
300
104
18,374
0.7
20.5
10.8
0.3
1.0
0.7
0.7
5.3
0.5
1.2
0.5
26.4
22.9
5.9
0.5
1.6
0.5
100
137
3,038
473
126
24
395
88
1,575
10
609
130
4,289
3,522
250
106
-
50
14,822
0.9
20.5
3.2
0.8
0.2
2.7
0.6
10.6
0.1
4.1
0.9
28.9
23.8
1.7
0.7
-
0.3
100
At the balance sheet date, approximately 56.9% (2017: 48.7%) of the Group’s trade receivables were due
from 9 (2017: 5) major customers.
90
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 21.
Financial instruments (cont’d)
(d)
Credit risk (cont’d)
Financial assets that are not impaired
Trade and other receivables that are not impaired are with creditworthy debtors with good payment records.
Cash and short term deposits are placed with reputable banks.
As at 30 June 2018, the ageing analysis of trade receivables that are past due but not impaired is as follows:
Less than 30 days
30 to 60 days
61 to 90 days
91 to 120 days
More than 120 days
Consolidated
2018
S$’000
2017
S$’000
5,748
602
780
374
2,331
9,835
2,393
868
254
131
1,206
4,852
As at 30 June 2018, trade receivables amounting to S$1,766,000 (2017: S$645,000) were arranged to be
settled via letters of credit issued by reputable banks in countries where the customers were based.
Financial assets that are impaired
Please refer to note 14 for details.
(e)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage
of funds. The Group’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial
assets and liabilities.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of
stand-by credit facilities.
91
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 21.
Financial instruments (cont’d)
(e)
Liquidity risk (cont’d)
The following table summarises the maturity profile of the Group’s financial assets and liabilities at the
balance sheet date based on contractual undiscounted payments. The expected timing of actual cash flows
from these financial instruments may differ.
Consolidated
2018
Financial assets:
Trade receivables
Other receivables
Loan receivable
Cash and bank balances
Total undiscounted financial assets
Financial liabilities:
Trade payables
Other payables
Loans and borrowings
Total undiscounted financial liabilities
Total net undiscounted financial assets/
(liabilities)
2017
Financial assets:
Trade receivables
Other receivables
Loan receivable
Cash and bank balances
Total undiscounted financial assets
Financial liabilities:
Trade payables
Other payables
Unrealised loss on derivatives
Loans and borrowings
Total undiscounted financial liabilities
Total net undiscounted financial assets
1 year
or less
S$’000
After 1 year
but not more
than 5 years
S$’000
5 to
10 years
S$’000
Total
S$’000
18,055
1,478
–
9,739
29,272
10,986
5,267
18,560
34,813
(5,541)
14,677
1,521
–
18,591
34,789
7,291
6,629
64
10,057
24,041
10,748
–
–
1,270
–
1,270
–
–
715
715
555
–
–
690
–
690
–
–
–
688
688
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,055
1,478
1,270
9,739
30,542
10,986
5,267
19,275
35,528
(4,986)
14,677
1,521
690
18,591
35,479
7,291
6,629
64
10,745
24,729
10,750
92
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only
21.
Financial instruments (cont’d)
(f)
Fair values
(i)
Fair value of financial instruments that are carried at fair value
As at 30 June 2018, the Group had no financial instruments measured at fair value.
As at 30 June 2017, the Group had the following financial liabilities measured at fair value:
Quoted prices in
active markets for
identical instruments
(Level 1)
S$’000
Significant other
observable
inputs
(Level 2)
S$’000
Significant
unobservable
inputs
(Level 3)
S$’000
Total
S$’000
Consolidated
Financial liabilities:
Derivatives – foreign currency
forward contracts
–
64
–
64
The fair value of foreign currency forward contracts are derived from mark-to-market valuations using
theoretical valuation model which incorporates various inputs such as foreign exchange spot and
forward rates, volatility, tenure, time value and forward rates curves of the underlying commodity.
There were no transfers between level 1 and level 2 fair value measurements during the financial years
2018 and 2017.
(ii)
Fair value of financial instruments by classes that are not carried at fair value and whose carrying
amounts are reasonable approximation of fair value
Management has determined that the carrying amounts of cash and short-term deposits, current
trade and other receivables, current trade and other payables, current interest-bearing liabilities
reasonably approximate their fair values because they are mostly short-term in nature and repriced
frequently.
93
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 21.
Financial instruments (cont’d)
(f)
Fair values (cont’d)
(iii)
Fair value of financial instruments by classes that are not carried at fair value and whose carrying
amounts are not reasonable approximation of fair value
The fair values of non-current finance lease liabilities and bank loans bearing interest at fixed rates,
which are not carried at fair value in the balance sheet, are presented in the following table. The fair
value is estimated using discounted cash flow analysis using discount rate that reflects the issuer’s
borrowing rate at the end of the reporting period. The Group’s own non-performance risk as at
30 June 2018 was assessed to be insignificant.
Consolidated
Carrying Amount
2017
2018
S$’000
S$’000
Fair Value
2018
S$’000
2017
S$’000
421
243
61
591
359
230
56
567
Financial liabilities:
Bank loans
Obligations under finance leases
22. Capital Management
The Group’s primary objective when managing capital structure is to maintain an efficient mix of debt and equity
in order to achieve a low cost of capital while taking into account the desirability of retaining financial flexibility to
pursue business opportunities and adequate access to liquidity to mitigate the effect of unforeseen events on cash
flows.
The Group regularly reviews the Company’s capital structure and make adjustments to reflect economic conditions,
business strategies and future commitments. The Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets or increase borrowings. No changes were made in
the objectives, policies and processes during the years ended 30 June 2018 and 30 June 2017.
Management monitors capital through the gearing ratio (net debt / total capital). The Group defines net debts as
interest-bearing liabilities less cash and cash equivalents. Capital includes equity attributable to the equity holders of
the Parent and reserves. The Group’s policy is to keep its gearing ratio at less than 50%.
94
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 22. Capital Management (cont’d)
The gearing ratios as at 30 June 2018 and 30 June 2017 were as follows:
Interest-bearing liabilities (note 17)
Less: bank overdrafts (note 17)
Less: cash and cash equivalents (note 20)
Net debt
Equity attributable to holders of the Parent
Gearing ratio
23. Related party disclosures
Consolidated
2018
S$’000
2017
S$’000
19,071
(783)
18,288
(8,956)
9,332
10,587
(352)
10,235
(18,239)
(8,004)
69,333
80,257
13.46%
–
In addition to the related party information disclosed elsewhere in the financial statements, the following are
transactions with related parties at mutually agreed terms and amounts:
(a)
Sale and purchase of goods and services
Minority shareholder of a subsidiary company
- Sales
- Purchases
Associates
- Sales
- Purchases
- Interest income
- Rental & utilities income
- Services rendered
Other related parties
- Sales
- Services rendered
Consolidated
2018
S$’000
2017
S$’000
1,200
28
638
–
33
173
683
28
–
276
33
933
62
21
115
365
–
6
95
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 23. Related party disclosures (cont’d)
(b)
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made at arm’s length basis at normal market prices and on
normal commercial terms.
Outstanding non-trade balances as at year-end with related parties are unsecured, interest-free and have no
fixed terms of repayment. For information regarding outstanding balances on related party receivables and
payables at year-end, please refer to notes 14 and 16.
(c) Compensation of key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
Total compensation
24.
Share-based payment plans
(a)
Recognised share-based payment expenses
Consolidated
2018
S$
2017
S$
1,407,101
45,060
–
1,452,161
1,442,745
44,010
17,892
1,504,647
The expense recognised for employee services received during the year for equity-settled share-based
payment transactions amounted to S$155,000 (2017: S$43,000).
There have been no cancellations or modifications to the plan during the years 2018 and 2017.
(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.
96
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 24.
Share-based payment plans (cont’d)
(c)
Movements during the year
Outstanding at beginning of year
Forfeited during the year
Outstanding at end of year
Exercisable at end of year
2018
2017
No. of options (Thousands)
2,680
(70)
2,610
2,750
(70)
2,680
2,610
2,680
The outstanding balance of share options as at 30 June 2018 and 30 June 2017 is represented by:
No. of options (Thousands)
2018
2017
Exercise price
(Australian Cents)
Exercisable
on or after
2,010
600
2,610
2,080
600
2,680
20.5
18.0
1/11/2016
1/12/2016
Expiry Date
31/10/2019
30/11/2020
25. Commitments
(a)
Commitments
As at year-end, the Group has issued letters of guarantee amounting to S$10,724,000 (2017:
S$11,606,000).
(b)
Operating lease commitments
The Group has entered into commercial leases for the use of leasehold properties and office equipment as
lessee. These leases have an average of 2 to 30 years. There are no restrictions placed upon the Group by
entering into these leases.
Future minimum lease payments for the leases are as follows:
Within 1 year
Within 2 - 5 years
More than 5 years
Consolidated
2018
S$’000
2017
S$’000
2,136
4,744
4,344
11,224
2,147
5,078
4,577
11,802
The amount of operating lease payments recognised as an expense in the year ended 30 June 2018 is
S$2,509,000 (2017: S$2,382,000).
97
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 25. Commitments (cont’d)
(c)
Finance lease commitments
The Group has finance leases for various items of plant and equipment. Future minimum lease payments
under finance leases together with present value of the net minimum lease payments are as follows:
Minimum
payments
2018
S$’000
Present value
of payments
2018
S$’000
Minimum
payments
2017
S$’000
Present value
of payments
2017
S$’000
408
260
668
(31)
637
394
243
637
–
637
455
625
1,080
(53)
1,027
436
591
1,027
–
1,027
Consolidated
Due within one year
After one year but not more than five years
Total minimum lease payments
Less: amounts representing finance charges
(d)
Capital commitments
As at 30 June 2018, the Group has committed to subscribe to the non-renounceable rights issue by
Endofotonics Pte Ltd for a cash consideration of S$222,000 (note 28).
26. Auditors’ remuneration
During the year, the following fees were paid/payable for services provided by auditors:
Amounts received or due and receivable by Ernst & Young (Australia) for:
- Audit and review of financial statements
- Taxation services
Consolidated
2018
S$
2017
S$
148,363
19,764
136,474
12,388
Amounts received or due and receivable by Ernst & Young (Singapore) for:
- Audit and review of financial statements
255,000
243,000
Amounts received or due and receivable by other audit firms for:
- Audit and review of financial statements
- Taxation services
- Other non-audit services
25,741
4,464
–
453,332
24,307
4,450
2,000
422,619
98
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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
2018
S$’000
2017
S$’000
52,222
2,089
54,311
198
198
50,971
2,066
53,037
55
55
54,113
52,982
71,850
472
688
(423)
153
(18,627)
54,113
1,224
–
1,224
71,850
472
688
(338)
165
(19,855)
52,982
1,081
–
1,081
(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$5,047,000 (2017: S$242,000) 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 2018 and 30 June 2017.
99
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 28.
Subsequent events
(a)
Investment in Endofotonics Pte Ltd
On 28 August 2018, 1,058,201 ordinary shares were allotted to Zicom MedTacc Private Limited for a cash
consideration of S$222,000 pursuant to the subscription of a non-renounceable rights issue by Endofotonics
Pte Ltd (“Endofotonics”). As a result of this allotment, the Group’s interest in Endofotonics increased to
24.39%.
(b)
Demerger of technology businesses
On 29 August 2018, the Board resolved to approve, subject to final approval by shareholders, for the
purposes of Section 256B of the Corporations Act 2001, that the Company shall demerge Zicom MedTacc
Private Limited from the Group, in a form of capital reduction by distributing all the issued ordinary shares in
Zicom MedTacc Private Limited to the Company’s shareholders on a pro rata basis.
(c)
Disposal of SAEdge Vision Solutions Pte Ltd
On 31 August 2018, Sys-Mac Automation Engineering Pte Ltd (“Sys-Mac”) completed the disposal
of its 96% equity interest in SAEdge Vision Solutions Pte Ltd (“SAEdge”) to Emage Vision Pte Ltd (“EV”)
for a consideration of S$3,473,000, satisfied by the allotment of 43,336 EV voting shares to Sys-Mac,
representing an equity interest of 14.88% in EV.
(d)
On 7 September 2018, Zicom MedTacc Private Limited changed its name to ZIG Ventures Private Limited.
100
Notes to the Consolidated Financial Statements (In Singapore dollars)ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 2018 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 2018 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)
(e)
the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note
2.2.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
this declaration has been made after receiving the declarations required to be made to the Directors in accordance
with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2018.
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/Group Managing Director
28 September 2018
101
ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 2018, 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 2018 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.
102
ZICOM GROUP LIMITED Annual Report 2018For personal use only 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
The Directors’ assessment of the recoverability
of the Group’s intangible assets of S$14.6 million,
inclusive of goodwill of S$7.2 million, property, plant
and equipment of S$21.3 million and investments
in associates of S$8.8 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 finite life intangible, property, plant
and equipment and investments in associates are
assessed for indicators of impairment. In respect of
goodwill, impairment testing was performed by the
Group as disclosed in Note 10.
The Group addressed the recoverability of
investments in associates by way of an impairment
model which valued the individual investments
where an indicator of impairment was identified.
Due to the range of judgments and assumptions
used in the impairment models (such as 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
(39% of total assets), this was considered to be a
Key Audit Matter.
As disclosed in Note 10 of 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.
Our audit procedures included the following:
• We assessed the CGU to which the goodwill was
allocated and, the assumptions and methodologies used
by the Group in the value-in-use impairment models.
• 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 finite
life asset in the context of the expected future period of
economic consumption.
• We assessed
flow
forecast
the Directors’ cash
assumptions supporting their recoverability assessments,
being forecast 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.
103
ZICOM GROUP LIMITED Annual Report 2018For personal use only Independent Auditor’s Report
to the Members of Zicom Group Limited
2. Accounting for 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
Private Limited, holds 72.28% (PY 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 2018 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.
104
ZICOM GROUP LIMITED Annual Report 2018For personal use only 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.
105
ZICOM GROUP LIMITED Annual Report 2018For personal use only 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.
106
ZICOM GROUP LIMITED Annual Report 2018For personal use only 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 13 to 20 of the Directors’ Report for the year ended 30 June
2018.
In our opinion, the Remuneration Report of Zicom Group Limited for the year ended 30 June 2018, 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
28 September 2018
107
ZICOM GROUP LIMITED Annual Report 2018For personal use only Information on Shareholdings
As at 27 September 2018
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
6,993
625,075
1,969,823
12,611,929
201,926,960
217,140,780
59
172
219
359
106
915
b)
There were 258 holders of less than a marketable parcel of ordinary shares.
Twenty Largest Equity Security Holders
The names of the twenty largest equity security holders are listed below:
Name
SNS HOLDINGS PTE LTD
JUAT KOON SIM
GIOK LAK SIM
VENTRADE (ASIA) PTE LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JUAT LIM SIM
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS (NZ) LTD
MR MAKRAM HANNA & MRS RITA HANNA
J P MORGAN NOMINEES AUSTRALIA LIMITED
EE GEK GOH
SIONG TECK NG
HUNG SEAH TANG
JUAT KHIANG SIM
FIRST CHARNOCK SUPERANNUATION PTY LTD
KOK HWEE SIM
DEBUSCEY PTY LTD
KOK YEW SIM
MR CHUAN GAO
BNP PARIBAS NOMINEES PTY LTD
Substantial Shareholders
Number of Ordinary
Shares Held
Percentage of
Issued Shares
87,514,360
11,778,172
13,752,777
8,478,344
7,527,184
6,487,767
5,631,230
4,703,153
4,428,975
2,815,634
2,791,017
2,410,665
2,100,839
2,069,525
1,890,000
1,488,180
1,355,615
1,350,253
1,338,820
1,227,018
40.30%
5.42%
6.34%
3.90%
3.47%
2.99%
2.59%
2.17%
2.04%
1.30%
1.29%
1.11%
0.97%
0.95%
0.87%
0.69%
0.62%
0.62%
0.62%
0.57%
Substantial shareholders in the company (holding not less than 5% of the issued capital), as disclosed in substantial
shareholder notices given to the company, are set out below:
Name
GIOK LAK SIM & HIS ASSOCIATES
JUAT KOON SIM & HIS ASSOCIATES
Voting Rights
Number of
Ordinary Shares Held
Percentage of
Issued Shares
101,267,137
14,569,189
46.64%
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.
108
ZICOM GROUP LIMITED Annual Report 2018For personal use only Corporate Directory
Board of Directors
Giok Lak Sim
(Chairman and Managing Director)
Kok Hwee Sim
(Executive Director)
Kok Yew Sim
(Executive Director)
Yian Poh Lim
Frank Leong Yee Yew
Ian Robert Millard
Shaw Pao Sze
Joint Company Secretaries
Jenny Lim Bee Chun
Igor Sushko
Registered Office
38 Goodman Place
Murarrie QLD 4172
Australia
Telephone
: +61 7 3908 6088
Facsimile
: +61 7 3390 6898
Website
: www.zicomgroup.com
Share Registry
Link Market Services Limited
Level 21
10 Eagle Street
Brisbane, QLD 4000
Australia
Facsimile
: +61 2 9287 0309
Auditors
Ernst & Young
111 Eagle Street
Brisbane, QLD 4000
Australia
Solicitors
Thomson Geer
Level 16, Waterfront Place
1 Eagle Street
Brisbane, QLD 4000
Australia
Bankers
Australia
Westpac Banking Corporation
Singapore
United Overseas Bank Limited
Malayan Banking Berhad
Oversea-Chinese Banking Corporation Limited
DBS Bank Ltd
Westpac Banking Corporation
Thailand
United Overseas Bank (Thai) Public Company Limited
The Siam Commercial Bank Public Company Limited
China
Industrial and Commercial Bank of China Limited
China Construction Bank Corporation
Philippines
BDO Unibank, Inc.
Notice of Annual General Meeting
The Annual General Meeting of Zicom Group Limited will be held at the
The Colmslie Hotel
Corner of Wynnum and Junction Roads
Morningside, Queensland 4170
Australia
Time: 10.00am (Brisbane time)
Date: Thursday, 15 November 2018
A formal Notice of Meeting is enclosed.
6
ZICOM GROUP LIMITED
Annual Report 2018
For personal use only I
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A
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P
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2
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1
8
38 Goodman Place, Murarrie QLD 4172 Australia
Telephone: +61 7 3908 6088
Facsimile: +61 7 3390 6898
www.zicomgroup.com
For personal use only