31 January 2023

Asia Strategic Holdings Ltd.

("Asia Strategic", the "Group" or the "Company")

Results for the financial year ended 30 September 2022

Asia Strategic Holdings Ltd. (LSE: ASIA), the independent developer and operator of consumer businesses in emerging Asia, is pleased to announce its audited results for the financial year ended 30 September 2022 ("FYE 2022").

Copies of the annual report and accounts for the financial year ended 30 September 2022 will be made available on the Company's website (www.asia-strategic.com).

HIGHLIGHTS

Financial Highlights

All dates for the reporting period refer to the financial year ended 30 September 2022 ("FYE 2022") and the comparative period refers to financial year ended 30 September 2021 ("FYE 2021"), unless otherwise stated.

The year on year ("YOY") growth or decline refers to any change that occurred between FYE 2022 and FYE 2021.

·   Group revenues for FYE 2022 increased 19% vs. FYE 2021 to US$17.9 million, of which 68% (FYE 2021: 62%) derived from Education and 32% (FYE 2021: 38%) derived from Services.

·   The double-digit revenue growth was mainly driven by (i) the sharp turnaround of the Education segment's performance in Myanmar during FYE 2022 of 158% YOY, and (ii) EXERA, which was able to achieve single-digit growth on the back of a strong FYE 2021.

·   Covid-19 cases in Vietnam peaked towards the end of 2021 and subsided in February 2022. This resulted in an uneven recovery within the Group's operations wherein the Education division in Myanmar recovered to pre Covid-19 levels by December 2021 whilst Vietnam student numbers remain depressed, albeit they are now improving. 

·   The Group's adjusted EBITDA loss for FYE 2022 widened to US$1.9 million (FYE2021: US$0.9 million).

·   The Group's net loss for FYE 2022 increased to US$6.0 million (FYE 2021: US$4.8 million, excluding the impairment of an amount due from a related party of US$1.0 million), due to (i) the impact from six months of Covid-19 related closures in late 2021, (ii) the slow recovery of Wall Street English Vietnam, (iii) the strengthening of USD against MMK by ca. 50%, leading to a foreign exchange net loss of US$1.0 million in FYE 2022 (FYE 2021: US$0.8 million gain), and (iv) the increase in marketing expenses of US$0.7 million for the ramp-up of marketing activities subsequent to the relaxation of Covid-19 restrictions in Myanmar and Vietnam.

·   The Group net comprehensive loss for FYE 2022 narrowed to US$6.0 million (FYE 2021: US$6.3 million).

·   As at 30 September 2022, the Group's current and long-term deferred revenue, which represent cash received in advance of performance obligations, amounted to US$8.1 million and US$1.9 million, compared to US$5.3 million and US$0.6 million as at 30 September 2021. Current deferred revenues shall be realised in FYE 2023 while long-term deferred revenues shall be realised in FYE 2024 and FYE 2025, as and when services are rendered to students with reference to the individual terms of the student contracts.

·   As a result of extensive cost control and cash flow management initiatives, financial resources continue to be carefully administered. The Group generated cash inflows from operating activities of ca. US$3.6 million in FYE 2022 vs. cash outflows of US$1.2 million in FYE 2021, excluding the repayment of lease liabilities of US$3.0 million (FYE 2021: US$1.8 million). The Group's overall performance and cash flow generation should further benefit from the expected economic recovery across ASEAN post Covid-19.

·  In November 2021, the Company announced the subscription of convertible notes totalling US$5.7 million. Through a loan re-organisation exercise, the Company's largest corporate shareholder, Macan Pte. Ltd. ("MACAN"), subscribed to a US$3.5 million Zero Coupon Convertible Note, satisfied through a cash consideration of US$1.0 million and the conversion of one of the shareholder's loan facilities amounting to US$2.5 million.

As part of the loan re-organisation exercise, this loan facility agreement was terminated with effect from 31 October 2021. After the loan re-organisation exercise, the Group has a remaining loan facility of up to US$1.5 million with MACAN. During the financial year, the Group has drawn down an additional US$0.3 million, and repaid US$2.1 million. As at the date of this report, the available facility remains at US$1.5 million. 

Management has assessed that there are sufficient mitigating actions within the control of the Group to ensure sufficient liquidity for its working capital requirements for at least the next 12 months from the date of this report, such as (i) undertaking a controlled expansion of its existing and future businesses, (ii) maintaining financial liquidity discipline, and (iii) accessing the unutilised credit facility of US$1.5 million with MACAN. No cash outflow is expected from the convertible notes as conversion into ordinary shares of the Company is mandatory at the earlier of maturity or the qualifying event as disclosed in Note 22 to the financial statements.

·  The diversification of the Group's operations between Vietnam and Myanmar will continue to play an important role in mitigating any further economic risk and single-country exposure to the Group.

Operational Highlights

Education

·   Group revenues from owned and managed Education businesses for FYE 2022 were US$11.9 million and US$0.2 million (FYE 2021: US$8.8 million and US$0.5 million), respectively. The managed business is expected to wind down within FYE 2023, following the completion of services delivered to legacy students.

·   As at 30 September 2022, the Group's current and long-term deferred revenue from education businesses representing cash received in advance of performance were at US$7.9 million and US$1.9 million, compared to US$5.2 million and US$0.6 million as at 30 September 2021.

·   The Group's Education segment is currently operating the Group's owned businesses and servicing legacy students for the managed business of a related party, comprising:

(i)     English language education for children from as young as one-year old through teenagers (Kids&Us), under exclusive licensing agreements entered in FYE 2022 in Vietnam and Myanmar;

(ii)    Adult English language learning (Wall Street English) in Vietnam and Myanmar;

(iii)   Tertiary education (Auston University) in Myanmar; and

(iv)   K-12 international school (Yangon American International School) in Myanmar.

Through these businesses Asia Strategic provides a wide range of education services to students from nursery up to tertiary education. The Wall Street English language learning centres support the training of the Group's employees and provide synergistic value to the Group.

·   As at 30 September 2022, the number of centres and students were as follows:

*    Since October 2022, the number of centres has grown to 19, reflecting the additional openings of 3 Kids&Us centres in Vietnam, 1 Wall Street English centre in Myanmar and 1 Auston satellite campus in Mandalay.

·   In April and August 2022, the Group entered into exclusive franchising agreements with Kids&Us English, S.L.U ("Kids&Us") for the development of English language centres for children under the brand "Kids&Us School of English" in Myanmar and Vietnam, respectively.

Four Kids&Us centres have opened between September and November 2022 in Ho Chi Min City situated at District 3, District 7, Cao Duc Lan and Su Van Hanh, Vietnam, with over 100 students to date.

Two Kids&Us centres are planned to be operational in Myanmar by June 2023. No Kids&Us centres were operational in Myanmar in FYE 2022.

·   It is worth noting the strong increase in the number of students in Myanmar across all divisions and in particular Wall Street English and Auston. Notwithstanding the complex political and security environment, the Wall Street English and Auston businesses appear to have fully recovered and even exceed their pre Covid-19 performance. 

·   A decrease in student enrolment was experienced by WSE Vietnam at the end of FYE 2022 due to (i) the strict Covid-19 restrictions imposed in Vietnam between November 2021 and February 2022, and (ii) closures of two language centres for refurbishment during the pre-Covid-19 period to revitalise the centres in preparation for the commercial recovery post Covid-19.

Services

·   Group revenues from owned and managed Services businesses recorded low single-digit growth reaching US$5.8 million (FYE 2021: US$5.7 million), partially due to the weakening of the Myanmar Kyat against the United States Dollar (functional currency) from an average of 1,514 in FYE 2021 to 1,855 in FYE 2022, which impacted the revenues denominated in Myanmar Kyats. 

·   Through its Services segment, the Group is currently active in (i) owned integrated security services (EXERA), and (ii) managed hospitality services (Ostello Bello).

EXERA

·   The Group provides a range of integrated security, risk management, journey management and cash in transit services under the EXERA brand. Acquired by the Group in May 2018, EXERA operates exclusively in Myanmar through an experienced workforce of ca. 1,600 security officers, as at 30 September 2022, supporting a wide range of international and local clients.

·   Its customer base includes multi-national corporations, large oil and gas companies, established local businesses and governmental bodies and international organisations such as WFP, UNHCR, UNICEF, the Embassy of the Republic of Singapore and the Delegation of the European Union to Myanmar. 

·   EXERA follows international process standards including ISO 9001, OHSAS 18000, and ANSI/ASIS PSC 1, and is the only company in Myanmar accredited to the ISO 18788 Management System for Private Security Operations.

Ostello Bello

·   Ostello Bello, previously operating within the Hospitality Division, comprises boutique hostels with ca. 300 beds and over 70 rooms in three locations across Bagan and Mandalay, the most popular tourist destinations in Myanmar.

·   The performance of Ostello Bello has been severely impacted by the continued Covid-19 related travel restrictions. In FYE 2022, management decided to discontinue its location in Nyaung Shwe from July 2022, thus reducing the number of beds and rooms managed by the Group. Furthermore, in December 2022 management decided to cease operations in one location in Bagan. The closure of these two outlets does not have a material impact on the Group as operations and management fees were already minimal in both FYE 2022 and FYE 2021.

·   To address the continued underperformance of Myanmar's tourism industry and to offset the currently challenging operating environment in Myanmar, the Group remains focused on reducing operating costs and generating operational synergies. It is worth noting that through its boutique hostels, the Group provides livelihood for hundreds of individuals in developing communities such as Bagan and Mandalay. Management takes great pride and acknowledges its role as a responsible long-term investor in these communities.

·   Currently, Ostello Bello Mandalay hosts teachers and security personnel, providing safe accommodation and flexibility to ramp-up headcount in Mandalay to enable expansion of the Group's Education operations.  

Others

·  Asia Strategic continues to develop its business network and expand its pipeline within the Group's existing sectors (e.g. Education and Services) and explore new sectors. The Group is currently focused on building a stronger presence on the ground in Vietnam, whilst seeking new opportunities, partnerships and synergistic acquisitions throughout emerging Asia to diversify the Group's geographical exposure.

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

·  As at 30 September 2022, the Group held an investment in the listed equity security of Myanmar Investments International Limited ("MIL"), a Myanmar-focused investment company listed on the AIM market of the London Stock Exchange with investments in the telecommunications and financial sectors. The Group intends to hold the investment for long-term strategic purposes and capital appreciation and therefore designated this investment as financial assets at fair value through other comprehensive income. The investment is carried at fair value based on the quoted bid market price on the last trading day of the reporting date.

·  As at 30 September 2022, the Group recorded a fair value adjustment loss in the other comprehensive income of US$0.2 million (FYE 2021: loss of US$0.4 million). As at 30 September 2022, based on available information, the unaudited net asset value reported by MIL has decreased by 59% percent to US$10.5 million (30 September 2021: US$25.6 million), equivalent to US$0.28 (FYE 2021: US$0.67) per MIL share.

SIGNIFICANT EVENTS AND TRANSACTIONS

1)  Settlement and Termination of Shareholder's Loans

On 20 October 2021, the Company entered into a loan re-organisation with the Company's largest corporate shareholder, MACAN, as detailed below:

i)       Subscribed US$3.5 million Zero Coupon Convertible Notes of the Company satisfied through cash consideration of US$1.0 million and the conversion of principal shareholder's Loan Facility 2 amounting to US$2.5 million (Note 18); and

ii)      Terminated Loan Facility 2 agreement with the Company with effect from 31 October 2021.

2)  Convertible Notes Programme

      On 1 November 2021, the Company launched a Convertible Notes Programme to raise up to US$10.0 million over a six-month period for working capital and future investments. The convertible note ("CN") holders have an option to subscribe to either (i) a 10% coupon option ("10% Coupon Convertible Note") or (ii) a zero−coupon option ("Zero Coupon Convertible Note").

      The Company's existing shareholders subscribed to CN amounting to US$5.7 million (excluding transaction costs) comprising:

I.     10% Coupon Convertible Notes amounting to US$0.5 million; and

II.    Zero−Coupon Convertible Notes amounting to US$5.2 million including subscription by MACAN as detailed above and in Note 18 to the financial statements.

3)  Adoption of 2022 Employee Share Option Scheme

At the Annual General Meeting, held on 4 March 2022, in order to incentivise existing and new management and employees, the Company's shareholders approved a new share option scheme (the "2022 ESOS"), whereby share options in respect of up to 200,000 ordinary shares in the capital of the Company may be granted to certain individuals at an exercise price of US$11.00 per share with a typical vesting schedule of 40% of the option on the first anniversary of the grant date, 40% of the option on the second anniversary of the grant date and 20% of the option on the third anniversary of the grant date. A total of 135,000 share options have been granted under the 2022 ESOS as of the date of this report.

4)  Exclusive Agreement for Kids&Us School of English in Vietnam and Myanmar

On 25 April 2022 and 15 August 2022, the Group entered into exclusive franchising agreements with Kids&Us English, S.L.U ("Kids&Us") for the development of English language centres for children under the brand "Kids&Us School of English" in Myanmar and Vietnam, respectively, for a period of 10 years.

Kids&Us is a leading provider of English language education for children from as young as one-year old through teenagers. Founded in Manresa, Barcelona, in 2003, Kids&Us has over 157,000 students across more than 500 schools in 9 countries. Kids&Us has developed an innovative and effective pedagogical method:

·   Kids&Us uses a unique teaching method based on the natural process of developing one's mother tongue, a process which takes place in a specific, natural and spontaneous order.

·   The courses are adapted to the students' ages and life experiences.

·   Small groups - a maximum of five in the 'Babies' stage (one and two-year-olds) and eight across the rest of the courses - allow for personalised attention and a high level of student participation and interaction in the classroom.

·   Continuity of the courses allows children to learn from one-year old.

·   Classes are conducted entirely in English, ensuring total linguistic immersion.

·   Students can continue learning English outside of class time:

o The Kids&Us 360º Universe provides an endless range of activities and stimulating opportunities to continue learning at urban day camps, workshops (for cooking, science, theatre), summer camps, etc.

o Products created by Kids&Us include books, boardgames, etc.

o Apps, online homework exercises and electronic devices.

Under the terms of these agreements, the Group paid initial fees of US$216,000 for Myanmar and Vietnam (EUR100,000 for each territory) and has committed to pay (i) ongoing service fees as a percentage of revenues, (ii) cumulative opening fees of EUR150,000 within four years from signing of the Vietnam franchising agreement, and (iii) didactic materials based on consumption, among other fees.

The Group established its first four centres in Ho Chi Minh City between September and November 2022 and is planning to open its first two centres in Yangon by June 2023.

5)  Impact of Coronavirus ("Covid−19") on Vietnam and Myanmar

The number of Covid-19 daily cases in Vietnam has been at a manageable level since February 2022, which in turn enabled the Government to ease Covid-19 restrictions and re-open to vaccinated international tourists in mid-March in line with other ASEAN countries. As at the date of this report, we have no knowledge of further restrictions being planned.

Myanmar has largely recovered from Covid-19, with substantially fewer cases reported, and reopened the country to international travel in a bid to bolster international tourism and engage with the international business communities since 1 April 2022.

In support of the respective countries effort to achieve a higher vaccination rate and ensuring the well-being of its employees, the Group on its own accord executed a Covid-19 vaccination programme for all eligible employees. This enabled management to focus firmly on operational improvements, planned expansion and new business opportunities with sufficient preventive measures from past experiences for future disruptions arising from spikes in Covid-19. 

As at the date of approval of these financial statements, the number of Covid-19 daily cases across ASEAN remains negligible and no further restrictions are planned. The Group continuously monitors these developments and makes appropriate adjustments to the business operations to ensure resilience and sustainability for each of its operating segment.

6)  Impact of the State of Emergency on Myanmar

On 1 February 2021, the Myanmar military announced that it had declared a State of Emergency. In the short aftermath of the military takeover, the Group's businesses were disrupted intermittently due to (i) outages in telecommunication, (ii) imposition of martial law in certain townships, (iii) widespread demonstrations and, subsequently (iv) increased security risks. The political situation is evolving daily, and the outcome and long-term effects remain unclear at this stage.

While the political outlook remains uncertain, economic activity has resumed in the main economic hubs of Yangon and Mandalay. Management continues to monitor several risk factors including:

·   The rise of an insurgence campaign resulting in daily explosions and political assassinations across the country;

·   The retaliation by the military and other armed forces;

·   The disruption of the global and local supply chain, resulting in double digit inflation;

·   The weakening of the banking financial system and limited access to cash; and

·   Exchange rate volatility and capital controls.

In April 2022, through notifications and directives, the Central Bank of Myanmar ("CBM") implemented foreign exchange control measures requiring all foreign currency receipts from 4 April 2022 to be converted to Myanmar Kyat ("Kyat" or "MMK"), restricting conversion of foreign currencies and limiting offshore remittance.

Subsequently, the CBM announced exemptions and the relaxation of certain measures to Myanmar Investment Committee ("MIC") permitted foreign investments, investments in Special Economic Zones, embassies, airlines and certain non-profit organisations. The Group owns and operates the Yangon American International School ("Yangon American"), an approved international school qualified for certain foreign exchange control exemptions.

The development of these regulations remains fluid and subject to abrupt changes. The Group continuously monitors any additional announcements or clarifications from the CBM to manage its currency exposure proactively.

7)  Impact of the war in Ukraine and trade war

Countries within emerging Asia are navigating through the recovery of the prolonged pandemic, however the war initiated by Russia against Ukraine fuelled new economic uncertainties and inflationary pressures globally.

Coupled with the trade war between the United States and China, this has also disrupted global supply chains and reduced the availability of certain goods and materials in the countries in which the Group operates.

As the Group's activities are focused on services rather than manufacturing, disruption to the Group's activities has been limited to date. The Group will continuously undertake measured expansion of its existing and future businesses and maintain financial liquidity discipline.

Subject to the impact of foreign exchange fluctuations, the Group's operations in Vietnam are expected to exceed Myanmar over time, however contribution from both markets remains an important diversification strategy to mitigate the overall Covid-19 and geographical risk exposure of the Group.

The Group has considered the market conditions as at the reporting date, in making estimates and judgements on the recoverability of the assets as at 30 September 2022. The significant estimates and judgements applied are disclosed in Note 3 to the financial statements.

COUNTRY-SPECIFIC UPDATES

The Asian Development Bank ("ADB") expects GDP growth in developing Asia of 4.2% in 2022 and 4.6% in 2023, amid mounting challenges regionally and globally. The downward revisions vs. prior estimates (4.3% and 4.9% respectively) are driven by the increased monetary tightening by central banks led by the US Treasury, the Russian invasion of Ukraine and the strict Covid-19 lockdowns in the People's Republic of China.

Inflation in developing Asia in 2022 is likely to reach 4.4% and 4.2% in 2023. While inflation in the region remains lower than elsewhere, supply disruptions continue to push up food and fuel prices.

Vietnam Updates

·  Vietnam ended 2021 with a 2.6% GDP growth rate, according to the General Statistics Office of Vietnam, weathering one of the harshest Covid-19 lockdowns in the world during the second half of 2021 from June to October. Demonstrating its resilience, Vietnam is also one of the rare economies to post two consecutive years of growth since the start of Covid-19 globally.

·  The ADB forecast gross domestic product growth at 6.5% in 2022 and 6.7% in 2023 reflecting a sharp rebound made possible by Vietnam's high Covid-19 vaccination coverage, quick shift to a more flexible pandemic containment approach/reopening, expanding trade, and the Government's economic recovery and development initiatives.

·  The world is experiencing widespread and persistent inflationary pressures due to the effects of the Russian invasion of Ukraine and increasing interest rates by US Treasury. IMF forecasts global inflation to peak at 9.5% in 2022 before falling to 4.1% in 2022. In general, among the five economies of the ASEAN-5 region, Indonesia and Vietnam are the two countries that are forecasted by the IMF to have a higher inflation rate in 2023 than in 2022. Specifically, the inflation rate in Indonesia will increase sharply from 4.6% in 2022 to 5.5%. Meanwhile, Vietnam's inflation is forecast to increase only slightly, from 3.8% in 2022 to 3.9% in 2023.

·  Vietnam is also expected to benefit from the European Union Vietnam Free Trade Agreement and the Regional Comprehensive Economic Partnership ("RCEP"), agreed by all ten ASEAN countries as well as China, Japan, South Korea, Australia and New Zealand, officially came into force in January 2022. The World Bank forecasts that RCEP could drive GDP to increase by 1.5% for Vietnam.

·  Vietnam continues as the preferred destination of multiple supply chain and manufacturing relocations, due to strong economic fundamentals and a favourable foreign investment environment when compared with neighbouring countries. Vietnam is also the next best alternative to China for global manufacturers to diversify and shelter from the on-going China-US trade war.  

·  In recent years, Vietnam has emerged as a leading hub for manufacturing electronics in Southeast Asia. Relocations by manufacturing companies such as Foxconn, Intel, Foster, Luxshare, and Lego since 2019 highlight this trend. In recent years, Vietnam has emerged as a leading hub for manufacturing of electronics in Southeast Asia. The computer and electronics products gross value has increased from US$67.9 billion in 2015 to US$119.9 billion in 2020 with CAGR of ca. 18%.

·  Vietnam is the 15^th most populous country in the world and is amongst the countries with the highest population density. Vietnam is also experiencing rapid demographic and social change as its population is forecasted to grow from 98 million today to 120 million by 2050. Based on the 2021 Population Census Report by the General Statistics Office of Vietnam, 56% of the population is under 35 years old, with a life expectancy of 76 years, the highest among countries in the region at similar income levels. Vietnam's emerging middle class is approximately 13% of the population and is expected to reach 26% by 2026.

·  Vietnam was rated as a country with moderate English proficiency and ranked 60 globally based on EF English Proficiency Index ("EF EPI").  The EF EPI index was derived from the surveys conducted by EF Education First, a Swedish education company, analysing the results of 2.1 million non-native English speakers who took their EF SET English tests in 2021 across 111 countries and regions. The list, EF English Proficiency Index (EF EPI) 2022, divided countries into different bands from "Very high proficiency" to "Very low proficiency".

Myanmar Updates

·   Since 2020, the compounded effects of the Covid-19 pandemic, the proclaimed State of Emergency and global inflation have reversed the development gains since the democratic reform process started in 2011. The World Bank reported in 2022 that poverty is estimated to have doubled compared to March 2020, with ca. 40 percent of the population is estimated to be living below the national poverty line, undoing a decade of progress in poverty reduction.

·   The World Bank's Myanmar Economic Monitor report in July 2022 projects economic growth of 3.0% in the fiscal year ending September 2022, a single-digit recovery after experiencing a contraction of 18% in fiscal year 2021. The near-term economic outlook remains weak due to the ongoing impact of the military coup. The Russian war against Ukraine has caused additional economic uncertainties and inflationary pressures globally exacerbating the economic issues.

Myanmar's economy has faced a series of external and internal disruptions which have impeded recovery from the large contraction in economic activity last year.

·   In April 2022, through notifications and directives, the Central Bank of Myanmar ("CBM") implemented certain foreign exchange control measures requiring all foreign currency receipts from 4 April 2022 to be converted to Myanmar Kyat, restricting conversion of foreign currencies and limiting offshore remittance. The immediate impact was further weakening of the Kyat and sharp rise in the prices of imported goods, prices of fuel with corresponding increase in transportation cost and other basic items.

·   The World Bank reported a spike in inflation that has disrupted the operations of all businesses. The latest available data indicate that CPI inflation increased to 17.3 percent YOY in March 2022.

·   Whilst Myanmar navigates through the headwinds, certain sectors have stabilised or recovered over the past twelve months driving modest growth. Some firms have reported operating at a higher proportion of their capacity in 2022 than was the case in 2021, particularly in the manufacturing sector, and manufactured exports are recovering.

·   Construction activity and work on several projects have resumed after a long pause last year, and the pipeline of issued permits has grown. A rise in mobility at workplaces, retail outlets, and transport hubs have supported overall activity, although indicators of consumer spending are weak.

·   However, industries reliant on domestic demand are facing challenges from lower household incomes and rising prices of daily necessity, while agricultural production remains constrained by increased input prices, transport disruptions, and ongoing conflict.

·   Any future recovery in domestic activity will likely be contingent on political improvement, the removal of temporary foreign control measures, the reopening of the country to international travel in a bid to bolster international tourism and continued engagement with the international business communities.

·  The economic outlook is uncertain, with a wide range of possible scenarios. Any future recovery in domestic activity will likely be contingent on improvement in the political situation and a rebound in mobility and the restoration of key services, including financial services. The trade and foreign investment outlook will depend on the reactions of international investors and governments.

Enrico Cesenni (OSI), Chief Executive Officer of Asia Strategic, commented:

"I am very pleased to report that over the financial year ended 30 September 2022, Asia Strategic has continued to achieve double-digit growth while strengthening its operations, in a complex social, economic and political environment both locally and internationally.

"As the Covid-19 related restrictions were gradually lifted from November 2021 in Myanmar and February 2022 in Vietnam, the Group has experienced a material rebound in its operating businesses, particularly within consumer facing brands such as Wall Street English and Auston.

"It is worth noting that revenues grew across both Education (+30% YOY) and Services (+2% YOY), notwithstanding the strong currency devaluation in Myanmar, and that the Group continues to benefit from commercial momentum that is driven by pent-up demand and the limited spending options available to customers, particularly in Myanmar."

"In the medium term, global inflation and supply chain shortages will likely result in a reduction of disposable income and hinder discretionary spending, particularly in Myanmar."

"On the other hand, the Group remains focused on sectors that are less correlated with the broader economy, such as Security Services, or that address core needs, such as Education. This allows Asia Strategic to pursue a long-term agenda, confident in our capital structure."

"We would like to take this opportunity to thank shareholders for their continued support and all members of staff across the Group for their hard work and sacrifices through these challenging, uncertain and troubling times."

For more information, please visit www.asia-strategic.com or contact:

CHAIRMAN'S STATEMENT

Mission and Strategy

Asia Strategic's "mission is to grow sustainable businesses in emerging Asia through patient and committed capital" in line with our purpose of "empowering communities in emerging Asia". Our strategy is to identify, seed, acquire and grow tech-enabled consumer businesses in emerging Asia, that address core needs and have the potential to grow into regional and global champions.

Since the Company's inception, our focus has been on building committed and experienced management teams capable of starting and growing businesses, while benefiting from the growth of ASEAN economies. While the Group's Hospitality operations remain severely affected by Myanmar's State of Emergency, the Education and Services businesses have thrived and are generating synergies across the respective products and businesses. We are confident that our growth will continue both organically and through acquisitions.

Focused diversification is and will remain at the core of our strategy as it allows Asia Strategic to stabilise its expected growth, while simultaneously capitalising on the opportunities currently available in emerging Asia. While the Covid-19 global pandemic continued to present significant challenges to the Group during FYE 2022, the transformational acquisition of WSE Vietnam in 2020 was a key strategic milestone for Asia Strategic as it provided geographical diversification and exposure to one of the most attractive and fast-growing markets in ASEAN. Building on our knowledge in the education sector and the Group's transversal capabilities, we have acquired the exclusive franchising rights to Kids&Us School of English in Vietnam and Myanmar and opened our first four centres in Vietnam.

Board's Responsibility

The Board is fully aware of its responsibility to ensure that all our businesses operate in a manner that reflects our corporate and social responsibility to all of our stakeholders. We target sectors that positively contribute to the overall development of the countries in which we operate, enabling jobs and alleviating poverty, and within these sectors we aim to build businesses that embody the best business, environmental, social and governance practices.

The ongoing political upheaval in Myanmar has once again brought to light the importance of responsible business dealings. Before engaging with any customer, the Group conducts extensive diligence checks on the counterpart's activities, ownership and business associates. Group-wide know-your-client ("KYC") and anti-bribery trainings are conducted routinely and for all new employees.

Throughout the Covid-19 pandemic, our team remained on the ground in Myanmar and implemented several initiatives aimed at containing the potential spread while continuing to successfully service our customers across over 200 sites. Furthermore, Asia Strategic's management facilitated the sharing of best practices and medical knowledge between Myanmar's front-line medical personnel and an international task force composed of Italian and American doctors. With the kind support of Pun Hlaing Hospitals, most of our eligible workforce was vaccinated.

The Board and the Group's management actively promote sustainability and diversity as we believe it is a core strategic advantage that will enable the Group to maintain its leading competitive position in the future. Equal opportunities are promoted across the Group and we are proud to report that female representation across our workforce is over 63% (excluding EXERA's security officers). We are also actively looking to increase female representation and overall diversity within the Board of Directors.

Training programmes are being implemented across the Group to foster an environment where talent can emerge and flourish. We are proud to report that the local workforce represents over 96% of Asia Strategic's workforce.

Outlook

In FYE 2022, Asia Strategic remained focused on:

(i)     the recovery of all the Group's operation post Covid-19;

(ii)    the reorganisation of WSE Vietnam;

(iii)   the stabilisation of the Myanmar businesses throughout a serious of exogenous shocks; and

(iv)   the launch of Kids&Us in Vietnam.

In FYE 2023, management shall be concentrated on organically growing the Group's Education and Services businesses regionally, including Kids&Us in both Vietnam and Myanmar, together with complementary acquisitions. The Group will continue to pursue its asset-light strategy while increasing the portfolio of businesses owned and under management.

Words of appreciation

Thanks to the hard work and personal sacrifices of all our employees, the Group's operations have strengthened, leading to a positive operating cash flow for FYE 2022, notwithstanding a highly volatile trading environment.

Asia Strategic's management has gained valuable knowledge and experience as a result of the adversities faced since early 2020 and I can confidently claim that Asia Strategic is building one of the most committed and aligned management teams in emerging Asia.

This will enable us to evaluate and approach investment opportunities with a unique strategic and data-driven angle, leveraging groupwide capabilities and further differentiating Asia Strategic from the other providers of capital and/or technical expertise in those countries.

The Board would like to take this opportunity to thank our shareholders for their continued support and encouragement, and our staff, partners and customers for their relentless commitment, effort and support throughout these unprecedented times.

Richard Greer

Independent Non-Executive Chairman

30 January 2023

OPERATIONAL REVIEW

Education

The Group's objective is to become one of the leading private operators of educational institutions in emerging Asia through the identification of opportunities and expansion in the sector.

Within its Education segment, the Group is currently active in (i) adult English language learning (Wall Street English), (ii) tertiary education (Auston), (iii) K-12 international school (Yangon American), and (iv) English language education for children from as young as one-year old through teenagers (Kids&Us).

The Group generates student revenues from the businesses it owns and operates. The fees paid by students are typically variable depending on the type, duration of the services purchased to the customer and course intake. 

Furthermore, the Group generates revenues through management fees, technical assistance fees and other one-off fees ("Fees to the Group") from the operations it manages. In FYE 2022, such fees were in respect of support services rendered to legacy students of a related party.

Wall Street English Vietnam

Wall Street English Vietnam ("WSE Vietnam") caters to the premium English Language Training market, focusing exclusively on adult learning, and offers its services through a flexible and integrated blended learning solution that can be delivered entirely online.

WSE Vietnam owns and operates seven English language retail centres in Ho Chi Minh City and Binh Duong. The centres operate under 10-year Centre Franchise Agreements with Wall Street English International on terms similar to those in place for WSE Myanmar.

In July 2020, the Group completed the acquisition of WSE Vietnam for a nominal consideration, resulting in a carried-forward goodwill of US$4.7 million as at 30 September 2022.

In FYE 2022, WSE Vietnam generated revenues to the Group of US$7.4 million (FYE 2021: US$7.5 million). It is worth noting that in FYE 2022, WSE Vietnam accounted for approximately 41% of the total Group's revenue for the year, which emphasises the importance of Vietnam as a key growth market for the Group and mitigates the concentration of revenue risk from a single source country.

Management routinely conducts in-depth studies to assess further growth opportunities for WSE Vietnam through opening of new centres within Ho Chi Minh City and other major cities such as Hanoi.

Wall Street English Myanmar

Wall Street English Myanmar ("WSE Myanmar") caters to the premium English Language Training market, focusing exclusively on adult learning, and offers its services through a flexible and integrated blended learning solution that can be delivered entirely online.

WSE Myanmar owns and operates five English language retail centres across Yangon and Mandalay. The fifth centre was only established in October 2022 and did not contribute to FYE 2022.

In FYE 2022, WSE Myanmar generated revenues to the Group of US$3.2 million (FYE 2021: US$0.7 million) and fees to the Group of US$0.2 million (FYE 2021: US$0.5 million) from its Managed businesses. In the next financial year, the Group is expected to generate revenues solely from its Owned business on completion of services to the legacy students.

Management continues to assess further growth opportunities for WSE Myanmar in order to meet the average development targets stated under the area development agreement with Wall Street English International of approximately one new centre per year up to a total of ten centres. Further sub-franchising opportunities in Myanmar will be evaluated in due course.

During the Covid-19 restrictions, Wall Street English quickly adapted to the new environment and launched the Wall Street English online solution and digital classroom. While instrumental during lockdown periods, these solutions are critical to further expand the addressable market through nationwide coverage. Moving forward, Wall Street English shall leverage on the franchisor's teachers to deliver services to students remotely. This enables WSE Myanmar to achieve higher student to teachers ratio, reduce fixed staff costs and improve flexibility for future expansion.

From an operational perspective, we are proud to report that, notwithstanding several lockdowns and restrictions, both WSE Myanmar and WSE Vietnam continue to rank as top countries in the Wall Street English network in terms of student progress. Student satisfaction is key to establishing Wall Street English as the leading premium English language education provider for adults.

Auston

Auston is the result of a strategic collaboration signed in April 2018 between Asia Strategic and the Auston Institute of Management, an operator of private schools in Singapore that prepares students for careers in Engineering, IT Technology and Project Management through higher education learning.

Its first campus opened in Yangon in May 2018 covering over three floors 1,000 sqm and has expanded to Mandalay since October 2022. The initial product portfolio included foundation programmes and diplomas in Infrastructure & Networks, Mechanical Engineering, Engineering Technology and Construction Project Management.

In February 2020, the Company announced a partnership with Liverpool John Moores University ("LJMU") to provide high quality engineering training programmes for young, working professionals in Myanmar. The partnership with LJMU is a significant milestone for Auston in offering students a path towards an engineering degree and providing globally recognised degrees in Myanmar and that by lecturers with, at a minimum, a master's degree or a PhD from a recognised awarding body.

Auston's programmes are often packaged together with WSE Myanmar services to provide students a platform to achieve a high level of English proficiency and ensure they are qualified for leading roles at local and international companies. Auston's campuses are in close proximity of WSE Myanmar's learning centres, which provides added convenience to the students. The WSE Myanmar collaboration complements other education businesses and creates synergies within the Group.

In FYE 2022, Auston recorded accounting revenues of US$0.5 million (FYE 2021: US$0.01 million) and deferred revenues of ca. US$0.7 million (Sept'21: US$0.1 recognised in FYE2022), which will be realised within the next financial year and US$0.3 million in FYE 2023.

As of 31 December 2022, the number of enrolled students at Auston has grown exponentially to over 500 (FYE 2021: ca. 50) and the cumulative contract value increased by US$1.6 million (31 December 2021: US$0.5 million). High cumulative contract value indicates potential unbilled receivables and accounting revenues, which will realise in the near future when courses are delivered to the students over the course period/intake. 

The strong revenue and student growth is predominantly due to students seeking globally recognised diplomas/degrees in Myanmar to further their studies abroad in search of better job opportunities locally and abroad.  

Yangon American

In April 2019, the Group received an investment permit from the MIC to own and operate its first international school, Yangon American International School ("Yangon American"). The permit is granted under the 2016 Investment Law, following the issue of MIC Notification No. 7 of 2018 for carrying out investment activities in education services and private international schools.

Yangon American, which commenced operations in August 2019, with planned capacity of up to 400 students, is positioned as a leading K-12 school. The school is centrally located and only 4 km from Asia Strategic's educational hub of WSE Myanmar and Auston in Junction Square. It has 17 classrooms spread over 2,000 sqm, plus a multi-use playground of more than 1,000 sqm.

Yangon American operates classes from nursery through fifth grade, serving students from the age of 2 to 11 with revenues for Asia Strategic being generated from student fees, admission fees and ancillary services.

Despite the Covid-19 temporary closures and State of Emergency, Yangon American maintained student enrolment of over 50 students for Academic Year 2021/2022 with a mixture of foreign and local student support.

In July 2021, Yangon American was fully accredited to offer the International Baccalaureate Primary Years Programme ("IB PYP") and is able to leverage the accreditation to secure more students and compete with other international schools. Yangon American's application to receive the Western Association of Schools and Colleges ("WASC") certification is in progress.

For FYE 2022, Yangon American generated revenues of US$0.8 million (FYE 2021: US$0.6 million). Yangon American is still in a development phase building its academic credentials and student enrolment towards capacity.

Kids&Us Vietnam and Myanmar

On 25 April 2022 and 15 August 2022, the Group entered into exclusive franchising agreements with Kids&Us English, S.L.U ("Kids&Us") for the development of English language centres for children under the brand "Kids&Us School of English" in Myanmar and Vietnam, respectively, for a period of 10 years.

Kids&Us is a leading provider of English language education for children from as young as one-year old through teenagers. Founded in Manresa, Barcelona, in 2003, Kids&Us has over 157,000 students across 500 schools in 9 countries. Kids&Us has developed an innovative and effective pedagogical method:

·   Kids&Us uses a unique teaching method based on the natural process of developing one's mother tongue, a process which takes place in a specific, natural and spontaneous order.

·   The courses are adapted to the students' ages and life experiences.

·   Small groups - a maximum of five in the 'Babies' stage (one and two-year-olds) and eight across the rest of the courses - allow for personalised attention and a high level of student participation and interaction in the classroom.

·   Continuity of the courses allows children to learn from one-year old.

·   Classes are conducted entirely in English, ensuring total linguistic immersion.

·   Students can continue learning English outside of class time:

o The Kids&Us 360º Universe provides an endless range of activities and stimulating opportunities to continue learning.

o Products created by Kids&Us include books, boardgames, etc.

o Apps, online homework exercises and electronic devices.

The Group established its first four centres in Ho Chi Minh City between September and November 2022 and is planning to open its first two centres in Yangon by June 2023. No revenues were recorded in FYE 2022.

Services

The Group's objective is to become one of the leading risk management partners for companies and organisations operating across emerging Asia.

EXERA was founded in 2012 and was acquired by the Group in May 2018 for US$2.2 million, resulting in goodwill of US$1.4 million. EXERA provides risk management, consulting, integrated security, manned guarding, secure logistics and cash in transit services to a wide range of international and local clients across Myanmar. EXERA is seeking to grow organically and through synergistic acquisition of other security related businesses within emerging Asia to build its capacity and ability to service customers in key growth sectors.

As the business is fully owned, the Group generates revenues through the provision of security services to its clients. Typical contracts have a term of 1-3 years with predictable monthly revenues, particularly for core manned guarding services.

Risk management services are also provided either on a consulting or yearly subscription. EXERA publishes Security Information Reports ("SIRs") that support the security-related decision making of its customers. The circulation of SIRs has sustained demand because of Covid-19 and the riskier operating environment in Myanmar.

For FYE 2022, EXERA's revenues growth slowed to low single-digit yielding US$5.8 million (FYE 2021: US$5.7 million), partly balancing the 44% YOY growth in FYE 2021.

Protection of Assets and People

As of 30 September 2022, EXERA had an experienced workforce of over 1,600 (Sept'21: ca. 1,700) security officers and provides a range of integrated security, guarding, protective services, journey management, training, and nationwide risk consulting, to a wide range of international and local clients across ca. 200 sites (Sept'21: 170 sites).

EXERA's customer base includes internationally recognised and high credit worthy customers such as multi-national corporations, large oil and gas companies, established local businesses, governmental bodies and international organisations and embassies. EXERA's services are essential to the continued presence of these organisations in Myanmar throughout the current political and economic instability.

EXERA's Security Officers are highly trained in accordance with the guidelines from the British Security Industry Association. Furthermore, EXERA strives to achieve excellence in its systems and processes and has been awarded ISO 9001, OHSAS 18000 and ASNSI/ASIS PSC 1 accreditations. EXERA is also the only company in Myanmar accredited to "ISO 18788 Management System for Private Security Companies". These accreditations are the hallmark of a company intent on delivering high quality services for the benefit of our customers.

Secured Logistics and Cash in Transit 

EXERA provides a number of customers with English speaking security-trained drivers and vehicles on a long-term contract basis. Our services include emergency management and crisis intervention designed to help our clients in the event of a serious accident, medical emergency or natural disaster.

EXERA was one of the very first international providers of cash in transit ("CIT") services in Myanmar. EXERA's CIT services are fully insured from pick-up to drop-off and are executed by a highly trained team including an operations manager and Cash Escort Officers.

Our CIT operations are continuously monitored by EXERA's 24/7 command centre. This combination of international standards with local expertise and knowledge makes our team perfectly tailored to conduct CIT operations in Myanmar. The team's training and knowledge spans all elements of CIT services, including equipment and vehicle use, standard operating procedures and fail-safe systems designed to prevent theft and thwart any attempted robberies.

EXERA is in regular discussion and continuously seeking partnership with a number of financial institutions to evaluate transformational outsourcing opportunities in relation to cash management and movement services.

Facilities Management and Other Services

EXERA's strategy is to develop new services that differentiate it from its competitors, build barriers to entry and provide a wider range of support services to existing and new customers. As part of this strategy, EXERA is developing a comprehensive facilities management capability. EXERA is now providing Facility Management services to the Yangon American International School, selected embassies and businesses within the wider Asia Strategic Group.

Managed Hospitality business

Ostello Bello, a managed business previously operating separately within the Hospitality segment, comprises boutique hostels with ca. 300 beds and 70 rooms in three locations across Bagan and Mandalay, the most popular tourist destinations in Myanmar.

The performance of Ostello Bello has been severely impacted by the continued Covid-19 related travel restrictions in place between 2020 and 2022. The Group has discontinued its location in Nyaung Shwe from July 2022, thus reducing the number of beds and rooms managed by the Group. Furthermore, in December 2022, management decided to cease operations in one location in Bagan. The closure of these two outlets does not have a material impact on the Group as operations were already minimal in both FYE 2021 and FYE 2022.

To address the continued under performance of Myanmar's tourism industry and to offset the currently challenging operating environment in Myanmar, the Group's remains focused on reducing operating costs and generating operational synergies. It is worth noting that through its boutique hostels the Group provides livelihood for hundreds of individuals in developing communities such as Bagan. Management takes great pride and acknowledges its role as a responsible long-term investor in these communities.

SUSTAINABILITY AND DIVERSITY

Operating internationally, the Group remains cognisant of evolving operational standards and their implications for the sustainability of our business in the respective countries. The Group ensures systems and processes are localised and integrated into every aspect of the businesses focusing on Quality Services and Safety, Occupational Health and Safety, Talent Development & Retention and Human Rights and Labour Practices.

The Group has identified a range of focus areas that are closely aligned to the Sustainable Development Goals ("SDGs") of the 2020 Agenda for Sustainable Development and the Ten Principles of the UN Global Compact ("UNGC").

Asia Strategic embraces and supports the following SDGs within its operations:

SDG 1 - No Poverty

The businesses managed and owned by the Group provide ca. 2,200 jobs to local employees in Vietnam and Myanmar.

All employees are paid at least the statutory minimum wage, provided cost of living allowances to weather through global inflation and benefit from fair working conditions and shift patterns.

Throughout its presence across over 200 sites, the Group supports local businesses, job creation and entrepreneurship.

SDG 4 - Quality Education

Through its Education segment, the Group ensures inclusive and equitable education and promotes lifelong learning opportunities for all. All education businesses adopted remote learning technologies, access to foreign teachers and access to academic advancement opportunities at affordable prices for ca. 7,500 students.

Graduated Wall Street English and Auston students are equipped with globally recognised certificates/diplomas/degrees in Myanmar to further their studies abroad in search of better job opportunities locally and abroad.  Several scholarships were also offered across both Wall Street English and Auston and the Group successfully assisted graduated Auston students to secure internships positions.

SDG 5 - Gender Equality

Direct and indirect Full Time Employees ("FTEs") marginally increased to 2,310 (30 September 2021: 2,284), notwithstanding a slight decrease in the Services segment.

As of 30 September 2022, 96% of the total workforce (30 September 2021: 96%) are local employees in the countries where the Group operates. Approximately 63% (30 September 2021: 71%) of the Group's workforce are female (excluding EXERA's security officers). While female participation is lower in Asia Strategics' Services segment, 65% of the new hires are female (excluding EXERA's security officers) thanks to management's targeted hiring initiatives. At this stage we are not aware of any gap between the pay of male and female employees.

SDG 8 - Decent Work and Economic Growth

The Group ensures fair working conditions and standards for all its employees across over 200 sites. The Group follows the principles of the UK Modern Anti-Slavery Act 2015 and prohibits child labour across all of its business operations and projects, and there were no cases of child labour reported since the founding of the Group.

In support of the respective countries effort to achieve a higher vaccination rate and ensuring the well-being of our employees, the Group at its own accord initiated the Covid-19 vaccination programme for all eligible employees. As at the date of this report, 83% of our total workforce are fully vaccinated (91% when EXERA's security officers located outside Yangon are excluded).

Several Covid-19 prevention initiatives have also been implemented for the protection of our staff, students and customers including, among others frequent disinfection, adequate PPE, risk assessments, Covid-19 helpline. Furthermore, support is provided to the immediate family members of any deceased employee.

Despite being rich in resources and strong in agriculture, Myanmar wasn't spared by the effects of global inflation on food prices and fuel. Beginning October 2022, the Group provided cost of living allowances to selected group of employees to cope with the effects of inflation.

FINANCIAL REVIEW

The Group revenues from the owned and managed businesses grew by 19% to US$17.9 million (FYE 2021: US$15.0 million), despite (i) the political headwinds in Myanmar, (ii) the effects of global inflation, (iii) the Covid-19 restrictions in the first half of FYE 2022, and (iv) the currency devaluation in Myanmar.    

All Education businesses recorded a strong rebound in revenue, except for WSE Vietnam which remained flat due to Covid-19 related closures in late 2021. It is worth highlighting the strong performance of the Education businesses in Myanmar as students increasingly seek access to global opportunities and quality products.

The Services segment recorded only a moderate growth due to the contraction of the economy in Myanmar and the impact of the FX devaluation on the MMK-denominated revenue. It is worth noting that FYE 2022 revenues remained substantially higher than FYE 2020, at US$5.8 million and US$3.9 million respectively.

RESULTS OF OPERATIONS

The 19% YOY increase in Group revenues to US$17.9 million (FYE 2021: US$15.0 million) reflects the impact of (i) a strong recovery in Myanmar's education businesses (+158% YOY), (ii) EXERA's moderate growth (+2% YOY), following stronger growth in the prior years, and (iii) the muted performance of Vietnam's education business (-1% YOY) impacted by Covid-19 related closures in late 2021.

*    Key performance of the Group is measured, among others, based on (i) earnings before interest, income tax, depreciation and amortisation ("Adjusted EBITDA"), and (ii) Adjusted EBITDA less amortisation of right-of-use assets and interest on lease liabilities ("Adjusted EBITDA after impact of ROUs").

Group gross profit for year was US$8.0 million (FYE 2021: US$4.5 million), a marked increase in both absolute (+77% YOY) and relative terms (45% in FYE 2022 vs 30% in FYE 2021). The notable improvement in gross profit margin was attributable to (i) higher rate of renewal / new student contracts secured for across all Education businesses leading to the recovery of Myanmar's revenues, (ii) the shift to a more profitable product mix, and (iii) further cost efficiencies across all segments. 

Revenue growth (+19% YOY) and improvement in gross profit margin (+77% YOY) was partially offset by the increase in administrative and other operating expenses (+24% YOY excluding depreciation and amortisation), (i) foreign exchange loss, linked to the adverse foreign exchange movements due to the weakening of the Myanmar Kyat against the United States Dollar (functional currency) from an average 1,514 in FYE 2021 to 1,855 in FYE 2022, which resulted in a net loss of US$1.0 million (FYE 2021: gain of US$0.8 million), (ii) ramp-up of marketing activities coupled with higher cost due to the strengthening of USD (e.g. Facebook/Google), and (iii) higher employee benefit expenses (e.g. additional headcount for expansion, extensive vaccination campaigns, insurance and bonus).

Direct and indirect Full Time Employees ("FTEs") increased to ca. 2,310 (Sep'21: 2,280). The additional headcount was mainly due to the new Vietnam Kids&Us business segment and the ramping up of Education operations across Vietnam and Myanmar.

LIQUIDITY AND CAPITAL RESOURCES

As at 30 September 2022, the Group's cash and cash equivalents amounted to US$2.0 million, compared to US$2.2 million as at 30 September 2021.

The Group recorded positive cash flows generated from operating activities of US$3.6 million, compared to cash outflows from operating activities of US$1.2 million FYE 2021. This is mainly due increase in contract liabilities of US$4.1 million (FYE 2021: US$0.6 million) arising from higher renewals/new student contracts secured and collections from WSE Myanmar and Auston, whereby courses are paid in advance of services being delivered over the duration of the respective courses.     

If repayment of leases liabilities were considered, the Group would record a manageable adjusted cash inflow from operating activities of US$0.7 million (includes US$0.2 million prepayment of a lease).

In FYE 2022, the Group incurred capital expenditures of US$1.7 million (FYE 2021: US$0.2 million) mainly on leasehold improvements for the (i) relocation and space optimisation of three English language centres in Vietnam, (ii) the opening of four new Kids&Us Centres in Vietnam, and (iii) a new Wall Street English centre in Yangon (Terminal M) and (iv) the expansion of the Auston campus in Myanmar. Such investments are planned expansion to capitalise on the reopening from Covid-19 restrictions and is expected to further enhance the Group's commercial success post Covid-19 and set it apart from its competitors.

On 25 April 2022 and 15 August 2022, the Group entered into exclusive franchising agreements with Kids&Us English, S.L.U ("Kids&Us") for the development of English language centres for children under the brand "Kids&Us School of English" in Myanmar and Vietnam, respectively for a period of 10 years. Under the terms of these agreements, the Group paid initial fees of US$0.2 million for Myanmar and Vietnam.

The Group's Convertible Note Programme launched in November 2021 successfully generated cash subscriptions amounting to US$3.2 million (excluding transaction costs), which were utilised for working capital and partial repayment of the shareholder's loan and interests. As part of the Group's loan re-organisation with MACAN, the Group repaid cash of US$2.1 million as part cash settlement of the Loan Facility 1 and full settlement of the Loan Facility 2 which terminated with effect from 31 October 2021 (FYE 2021: drawdown of US$2.3 million, net of repayments).   

Increase in repayment of lease liabilities by US$1.1 million is mainly due to (i) prepayment of annual lease for Yangon American for calendar year 2023, (ii) new leases relating to marketing billboards for Auston/Wall Street English/Kids&Us, and (iii) lease of Exera's new corporate office.

Cash and cash equivalents ended at US$2.0 million on 30 September 2022 (Sept'21: US$2.2 million), close to the previous year despite large loan repayments and capital expenditures for enhancement and expansion of education centres/campuses. As at the date of this report, as part of risk management, cash balances are predominantly located in Singapore to mitigate country and credit risk exposures.

DIVIDENDS

The Board of Directors does not recommend payment of dividends for the financial year ended 30 September 2022 as the Group needs to conserve cash for working capital and future expansion.

WORKING CAPITAL

The Board of Directors has carried out a detailed review of the cash flow forecast of the Group of at least 24 months from the financial year ended 30 September 2022. The cash flow forecast has been prepared with consideration of timing, extent of future recovery from Covid−19 and Myanmar's State of Emergency and other available information of the future at the end of the reporting period.

Given the uncertainty of these events, the Group conducted extensive stress−testing on the various possible impacts on the financial performance and cash flows of the Group and the length of time it will take for operational activities to recover from these effects according to business segments and countries the Group operates.

Appropriate adjustments were made to the estimates and judgements applied on the future prospects and timing of future recovery with consideration of several other factors such as the general macroeconomic environment and initiatives within the control of the Group.

The Directors have evaluated that there are sufficient mitigating actions within their control, such as a significant reduction of operational activities of non−profitable business segments and a reduction of discretionary expenditures to manage operational cost. Other key considerations in the assessment, amongst others, include:

a)     Access to a credit facility of US$1.5 million from Loan Facility 1 with MACAN expiring in 30 June 2024 as disclosed in Note 18 of the financial statements, for working capital purposes and provides flexibility for fulfilment of future expansion plan;

b)     The MACAN shareholder's loan Facility 1 is due to expire in June 2024 at which date the forecasts anticipate that the Group will have sufficient cash reserves to repay the outstanding amount. MACAN has confirmed that it would not seek repayment of the facility unless the Group has sufficient cash flows available;

c)      Undertaking by MACAN, the Company's largest shareholder, not to demand repayment for the loan (Note 18) within the next 12 months from the date of approval of the financial statements for the financial year ended 30 September 2022;

d)     Positive working capital as student fees in the Education business segments are generally collected 1 to 12 months (FYE 2021: same) and more than 12 months for certain students who prepaid in advance of performance with reference to the individual terms of the student contracts. Refer to Note 4 of the financial statements for further details;

e)     Limited variance of the actual cash flow and forecasted cash flow of the Group for the period subsequent to the year end up to the date of these financial statements;

f)      Higher operational flexibility and lower fixed costs by utilising franchisor's teachers chargeable based on actual usage with no minimum volume requirements; and

g)     No future cash outflows arising from the mandatory conversion of the convertible notes (Note 22) as these CN will be converted entirely in the ordinary shares of the Company.

It is also worth noting that the Education businesses in Myanmar have exceeded its revenue volumes of pre-Covid-19 levels and EXERA was able to sustain a high revenue level and a single-digit growth. Management expects this trajectory trend to continue for the foreseeable future.

The Vietnam operations have shown improvements in the second half of FY2022 and future improvement is expected, given Vietnam's further improvement in economic recovery from Covid-19 due to high foreign direct investments and relatively lower inflation than other developing countries.

Therefore, as at the date of this report, the Group has adequate financial resources to cover its working capital needs for the next 12 months.

OUTLOOK

Management is focused on growing organically the Company's Education and Services businesses through partnerships with globally recognised franchises and continues to actively consider complementary acquisitions. The Group will continue to pursue its asset light strategy and increase the portfolio of businesses owned.

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

Through effective cash management, operational activities of non−profitable business segments will be minimised and profitability from business segments with strong cash flows will be reallocated to supplement business segments in expansionary phase. Accordingly, the Group may rely less on external financing and instead finance its organic growth.

The Board and management continue to remain positive on the overall macroeconomic environment underpinning the broader investment opportunity across ASEAN, with Vietnam and Myanmar as key contributors.

OTHER INFORMATION

Asia Strategic Holdings Limited (the "Company" or "Asia Strategic") is listed on the London Stock Exchange and incorporated and domiciled in Singapore. The address of its registered office 80 Raffles Place #32−01, UOB Plaza, Singapore 048624.

The financial information set out in this announcement does not constitute the Company's statutory accounts for the financial year ended 30 September 2022. The financial information for the financial year ended 30 September 2022 is derived from the Asia Strategic statutory accounts for the financial year ended 30 September 2022, which will be delivered to the Accounting and Corporate Regulatory Authority in Singapore. The auditors reported on those accounts; their report was unqualified. The statutory accounts for the year ended 30 September 2022 will be finalised based on the financial information presented by the Directors in this earnings announcement and will be delivered to the Accounting and Corporate Regulatory Authority in Singapore following the Company's Annual General Meeting.

This announcement was approved by the Directors on 30 January 2023.

 The accompanying notes form an integral part of these financial statements

 The accompanying notes form an integral part of these financial statements

The accompanying notes form an integral part of these financial statements

The accompanying notes form an integral part of these financial statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 The accompanying notes form an integral part of these financial statements