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RNS Number : 9710P
Matchtech Group PLC
02 April 2009
Matchtech Group plc
2 April 2009
Half year financial report for the six months ended 31 January 2009
Matchtech Group plc ("Matchtech" or the "Group"), one of the UK's leading
specialist technical recruitment companies, today announces its unaudited
results for the six months ended 31 January 2009.
Financial Highlights for the six months ended 31 January 2009
* Revenue up 18% to £138.0 (2008 H1: £116.6m)
* Net Fee Income (NFI) up 8% to £16.6m (2008 H1: £15.3m)
* Contract NFI up 12% & Permanent recruitment fees up 2%
* NFI grew 13% in Quarter 1 and 3 % in Quarter 2
* Operating profit up 3% to £6.4m (2008 H1: £6.2m)
* Operating profit margin 4.6% (2008 H1: 5.3%)
* Profit before tax up 7% to £6.1m (2008 H1: £5.7m)
* Basic EPS up 12% to 19.03p (2008 H1: 17.02p)
* Interim dividend maintained at 5.0 pence per share (2008: 5.0 pence)
* Cash flow from operations£4.1m (2008 H1: £8.7m)
* Debtor Days 41.8 days (2008 H1: 40.3 days)
* Net debt reduced to £3.7m (2008 H1: £5.4m)
* Banking facilities of £27.5m extended for 2 years until March 2011
Trading since 31 January 2009 & Outlook
* Permanent recruitment fees in February and March 2009 were 26% lower than 12
months previously (December 2008 and January 2009: 20% lower). Contractor
numbers at 31 March were essentially unchanged from 31 January 2009 however
clients are increasingly placing pressure on contractor pay rates and our
margins.
* Headcount has been reduced by 10% since 31 January 2009and savings of £1.0m
are expected to be realised in the year ending July 2010. In addition the Board
is focused on tightly controlling capital expenditure.
* Based upon current market conditions and expected run rates, the outlook for
remainder of financial year to 31 July 2009 is now below the Board's previous
expectations.
Commenting on the results, George Materna, Chairman of Matchtech said:
"We are pleased with these first half results in what are increasingly very
challenging economic conditions.
"In the six months to 31 January 2009 we have continued to grow; contract Net
Fee Income was up 12%, while permanent fees were essentially unchanged from the
same period last year. Operating margins have fallen due to a combination of
operational gearing and pay rates and margins being put under increasing
pressure. With lower interest costs and a write back of unvested LTIP charges,
we have increased Profits before tax by 7% to £6.1m. Basic earnings per share
were up 12% to 19.03 pence per share.
"Since the period end the Group has extended its banking facilities with
Barclays Bank for two years, giving the Group £27.5m of funding in place until
2011.
"The Board has also taken steps to align the Group's cost base with prevailing
market conditions. We have reduced headcount by 10% from 315 at 31 January 2009
to 286 at 31 March 2009. These actions, along with the high variable element of
both consultant and management remuneration and the flexibility and cost
benefits from the Group's single site model will allow us to effectively manage
the cost base going forward. We expect to make savings of c£1.0m in FY2010 plus
tight control on capital expenditure.
"The Group continues to focus on those clients that operate in the publicly
funded defence, transport and infrastructure sectors, where demand remains most
resilient.
"As stated in our Trading Update on 9 February 2009, the economic climate is
increasingly challenging, as evidenced by the significant reduction in growth in
Quarter 2. This has continued into Q3 and the Group has much reduced visibility
for the remainder of this financial year. Based upon current market conditions
and expected run rates, the outlook for remainder of financial year to 31 July
2009 is now below the Board's previous expectations. "
For further information please contact:
Matchtech Group plc 01489 898989
George Materna, Chairman
Adrian Gunn, Group Managing Director
Tony Dyer, Group Finance Director
Hogarth Partnership 020 7357 9477
John Olsen / James Longfield / Fiona Noblet
Arbuthnot Securities
James Steel / Katie Shelton 020 7012 2000
Background on Matchtech
Matchtech Group plc is a specialist temporary, contract and permanent staffing
business comprising of three operational business units that service the
technical and professional recruitment market place. All the business units
operate out of a single site location in Hampshire, the largest UK recruitment
centre.
Established in 1984 we have evolved over the years to become a leading provider
of recruitment outsourcing solutions. Our annual turnover for 2008/09 was
£258million making us the 19th largest recruitment agency in the UK and this
revenue has been achieved through organic growth.
The Group has a clear strategy to diversify its client base by offering a wider
range of skills and services within the recruitment sector from its four
business units, Engineering & Science, Built Environment & Professional
Services.
MATCHTECH GROUP PLC
Interim report for the period ended 31 January 2009
Chairman's statement
Operating review
We are pleased with these first half results in what continue to be very
challenging economic conditions.
The Group again saw growth in the Engineering and Professional Services, during
the first half of the financial year, with Built Environment broadly performing
at the same level as last year.
Sector 2009 H1 2008 H1 Change
£m £m %
Engineering
Net Fee Income 8.6 7.8 +10%
Operating Profit 3.7 3.4 +9%
Built Environment
Net Fee Income 4.2 4.2 0%
Operating Profit 1.7 1.8 -6%
Professional Services
Net Fee Income 3.8 3.2 +19%
Operating Profit 1.0 0.9 +11%
Engineering, our largest sector, continued to deliver growth. Demand remained
robust in the Oil & Gas, Defence Electronics and Aerospace but unsurprisingly
the Automotive sector (which accounts for 8% of this sector's NFI) has been
adversely affected the most. We have a strong established brand in the
Engineering sector and are working closely with clients to ensure that we
support them through the current economic slowdown.
In the Built Environment, public sector investment is a major driver in this
market and we have continued to see growth in infrastructure projects in Water
and Civil Engineering. Demand in privately funded building projects has, as
expected, reduced considerably. Overall the Built Environment has generated the
same net fee income as the first half of last year.
The foundations laid and investment in new staff in the Professional Services
sector has delivered good growth. However, with a higher proportion (around
48%) of permanent fee business than in the other 2 sectors (around 25%), there
is greater potential volatility in this sector.
The Group has maintained a healthy balance between contract and permanent
placements coupled with a highly diversified client and sector base providing a
degree of protection against market volatility.
2009 H1 2008 H1 Change
£m £m %
Permanent placements
Number of permanent placements 1,400 1,356 +3%
Permanent fees £5.2m £5.1m +2%
Average permanent fees per placement £3,708 £3,753 -1%
Contractors
Number of working contractors 4,528 4,541 0%
Contract Net Fee Income £11.4m £10.2m +12%
Net Fee Income
Contract 69% 67% +2%
Permanent 31% 33% -2%
Financial Overview
The Group delivered good results in very challenging market conditions with both
the Engineering and Professional Services sectors recording growth.
Revenue increased 18% to £138.0m (2008 H1: £116.6m), with Net Fee Income up 8%
to £16.6m (2008 H1: £15.3m).
Operating profit was £6.4m, an increase of 3% (2008 H1: £6.2m), Operating profit
included a write back of unvested LTIP charge of £0.3m (2008: £Nil) and
restructuring charges of £0.1m (2008: £Nil). The operating margin was 4.6% (2008
H1: 5.3%). Operating margins have fallen due to a combination of operational
gearing and pay rates and margins being put under increasing pressure.
With lower interest costs of £0.3m (2008: £0.5m) profits before tax were up by
7% to £6.1m (2008 H1: £5.7m).
Effective Rate of Tax
The effective rate of tax for the period is 27.1% (2008 H1: 30.8%). The
reduction is primarily due to the reduction in the Standard Rate of UK
Corporation tax from 30% to 28%.
Earnings per share
Basic earnings per share increased by 12% to 19.03p (2008 H1: 17.02p), with
fully diluted earnings per share increasing by 9% to 18.10p (2008 H1: 16.46p)
Cash flow and Net debt
Cash inflows from operations in the period were £4.1m (2008 H1: £8.7m)
representing cash conversion of 64% (2008 H1: 140%).
The major factor affecting the cash conversion relates to the timing effect on
the payment of the weekly payroll creditor in relation to the closing working
day of the period. At 31 July 2008 the period ended on a Thursday with a
creditor of £10.4m, whilst at 31 January 2009 the period ended on a Friday with
a creditor of £5.4m.
Capital expenditure was £0.3m (2008 H1: £0.7m).
Net debt (Bank loans and overdrafts plus cash) at 31 January 2009 was £3.7m (31
January 2008: £5.4m, 31 July 2008: £3.1m).
Debtor days at the end of the period stood at 41.8 (2008 H1: 40.3) with debtors
over 90 days overdue £0.4m (2008 H1: £0.6m) and unimpaired debtors over 90 days
overdue £0.0m (2008 H1: £0.5m)
Banking
Since the period end, the Group has extended its Confidential Invoice
Discounting facility with Barclays Bank. The £20m facility will be in place for
two years until 31 March 2011 at Barclays Bank Base Rate plus 1.9%. In addition
the Group has in place a revolving credit facility of £7.5m with Barclays Bank
until 27 May 2011.
Dividend
Reflecting the performance of our business in the first half and the current
economic conditions, the Board has declared a maintained interim dividend of 5.0
pence per share.
The interim dividend will be paid on 23 June 2009 to those shareholders on the
register at close of business on 5 June 2009.
People
Matchtech's key asset is the strength and stability of our management team and
the quality of our staff.
At the 31 January 2009 sales staff numbers stood at 215 (January 2008: 189, July
2008: 209), reflecting the continued growth seen in the period. However, with
the slowdown of demand seen in Quarter 2, we have taken steps to adjust the
workforce accordingly and as at 31 March 2009 sales staff numbers stood at 197.
We have also reduced headcount in our support staff by 11% and, as at as at 31
March 2009, support staff numbers stood at 89, down from 100 at 31 January
2009.
Whilst we continue to review the cost base we will balance this with the need to
retain quality staff to ensure we are able to react quickly to any improvement
in demand.
I would like to thank all our staff on behalf of our shareholders for their
strong and consistent contribution.
Board
Paul Raine, Resources Director, resigned from the Board and left the company by
mutual agreement on 6 February 2009.
On behalf of the Board, I would like to thank Paul for his contribution to the
development of Matchtech over the past 19 years. Matchtech is a much bigger and
stronger business than the one he joined and he leaves with our thanks and our
best wishes for the future.
There have been no other changes to the Board of directors during the period or
subsequently.
Risk
As previously disclosed, change in the economic environment is one of the
principal key risks for the Group and the Board remains vigilant to the
potential impacts of the 'credit crunch' and a recession within our major
markets.
The Group considers strategic, financial and operational risks and identifies
actions to mitigate those risks. Key risks and their mitigation are disclosed
in the 2008 Annual Report and no other significant new risks have been
identified in the period.
Trading since 31 January 2009 & Outlook
The Board has taken steps to ensure that the Group's cost base is appropriately
aligned with prevailing market conditions. We have reduced headcount by 10% from
315 at the period end to 286 at 31 March 2009. These actions, along with the
high variable element of both consultant and management remuneration and the
flexibility and cost benefits from the Group's single site model will allow us
to effectively manage the cost base going forward.
The Group continues to focus on those clients that operate in the publicly
funded defence, transport and infrastructure sectors, where demand remains most
resilient.
As stated in our Trading Update on 9 February 2009, the economic climate is
increasingly challenging, as evidenced by the significant reduction in growth in
Quarter 2, and the Group has much reduced visibility for the remainder of this
financial year
Permanent recruitment fees in February and March 2009 were 26% lower than 12
months previously (December 2008 and January 2009: 20% lower). Contractor
numbers at 31 March were essentially unchanged from 31 January 2009 but clients
are placing pressure on contractor pay rates and our margins.
"Based upon current market conditions and expected run rates, the outlook for
remainder of financial year to 31 July 2009 is now below the Board's previous
expectations.
George Materna
Chairman
2 April 2009
CONDENSED CONSOLIDATED INCOME STATEMENT
for the period ended 31 January 2009
Note 6 months 6 months 12 months
to 31/01/09 to 31/01/08 to 31/07/08
Unaudited Unaudited
CONTINUING OPERATIONS £'000 £'000 £'000
Revenue 2 138,015 116,562 258,830
Cost of Sales (121,435) (101,290) (225,596)
GROSS PROFIT 2 16,580 15,272 33,234
Administrative expenses (10,242) (9,119) (19,442)
OPERATING PROFIT 2 6,338 6,153 13,792
Finance income 4 18 79
Finance cost (277) (500) (1,074)
PROFIT BEFORE TAX 6,065 5,671 12,797
Income tax expense 3 (1,645) (1,745) (3,705)
PROFIT FOR THE PERIOD 4,420 3,926 9,092
All of the activities of the group are classed as continuing.
EARNINGS PER ORDINARY SHARE
pence pence pence
Basic 5 19.03 17.02 39.34
Diluted 5 18.10 16.46 38.25
CONDENSED CONSOLIDATED BALANCE SHEET
as at 31 January 2009
31/01/2009 31/01/2008 31/07/2008
Unaudited Unaudited
ASSETS £'000 £'000 £'000
Non-current assets
Property, plant and equipment 1,825 2,014 1,809
Intangible assets 165 186 170
Deferred tax assets 294 502 292
2,284 2,702 2,271
Current Assets
Trade and other receivables 7 34,086 29,039 38,565
Cash and cash equivalents 305 91 297
34,391 29,130 38,862
TOTAL ASSETS 36,675 31,832 41,133
LIABILITIES
Current liabilities
Trade and other payables (11,844) (11,677) (18,930)
Current tax liability (1,775) (1,773) (1,788)
Bank loans and overdrafts Short term borrowings (4,015) (2,556) (3,349)
Current portion of long term borrowings 0 (1,666) 0
(17,634) (17,672) (24,067)
Non-current liabilities
Long term borrowings 0 (1,251) 0
TOTAL LIABILITIES (17,634) (18,923) (24,067)
NET ASSETS 19,041 12,909 17,066
Called-up equity share capital 6 232 231 232
Share premium account 3,045 2,892 3,045
Other reserves 1,026 859 1,018
Retained earnings 14,738 8,927 12,771
TOTAL EQUITY 19,041 12,909 17,066
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the period ended 31 January 2009
6 months 6 months 12 months
to 31/01/09 to 31/01/08 to 31/07/08
Note Unaudited Unaudited Unaudited
£'000 £'000 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit after taxation 4,420 3,926 9,092
Adjustments for:
Depreciation 320 306 643
Profit on disposal of property, plant and equipment 0 (3) 27
Interest income (4) (18) (79)
Interest expense 277 500 1,074
Taxation expense recognised in profit and loss 1,645 1,745 3,705
(Increase)/decrease in trade and other receivables 4,480 2,902 (6,385)
Increase/ (decrease) in trade and other payables (7,087) (891) 6,313
Share based payment charge 72 250 540
Cash generated from operations 4,123 8,717 14,930
Interest paid (277) (500) (1,074)
Income taxes paid (1,716) (1,024) (3,241)
NET CASH FROM OPERATING ACTIVITES 2,130 7,193 10,615
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment (336) (708) (880)
Proceeds from sale of plant and equipment 6 37 62
Interest received 4 18 79
NET CASH USED IN INVESTING ACTIVITIES (326) (653) (739)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 0 64 218
Proceeds from borrowings 729 (5,096) (7,256)
Dividends paid (2,463) (2,148) (3,310)
NET CASH USED IN FINANCING ACTIVITIES (1,734) (7,180) (10,348)
NET INCREASE IN CASH AND CASH EQUIVALENTS 70 (640) (472)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 187 659 659
CASH AND CASH EQUIVALENTS AT END OF PERIOD 257 19 187
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 31 January 2009
Foreign currency translation reserve Share Capital Share Premium Other reserve Share based payment reserve Retained Earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 August 2007 0 230 2,829 224 386 7,154 10,823
Profit for the period 0 0 0 0 0 3,990 3,990
Total recognised income and expense for the period 0 0 0 0 0 3,990 3,990
Dividends 0 0 0 0 0 (2,149) (2,149)
Deferred tax movement re share options 0 0 0 0 0 (68) (68)
IFRS 2 credit 0 0 0 0 249 0 249
IFRS 2 reserves transfer 0 0 0 0 (87) 87 0
New share capital 0 1 63 0 0 0 64
0 1 63 0 162 (2,130) (1,904)
Balance at 31 January 2008 0 231 2,892 224 548 9,014 12,909
Balance at 1 August 2007 0 230 2,829 224 386 7,154 10,823
Profit for the year 0 0 0 0 0 9,092 9,092
Total recognised income and expense for the year 0 0 0 0 0 9,092 9,092
Dividends 0 0 0 0 0 (3,310) (3,310)
Deferred tax movement re share options 0 0 0 0 0 (296) (296)
IFRS 2 credit 0 0 0 0 539 0 539
IFRS 2 reserves transfer 0 0 0 0 (131) 131 0
New share capital 0 2 216 0 0 0 218
0 2 216 0 408 (3,475) (2,849)
Balance at 31 July 2008 0 232 3,045 224 794 12,771 17,066
Balance at 1 August 2008 0 232 3,045 224 794 12,771 17,066
Profit for the period 0 0 0 0 0 4,420 4,420
Total recognised income and expense for the period 0 0 0 0 0 4,420 4,420
Dividends 0 0 0 0 0 (2,463) (2,463)
Deferred tax movement re share options 0 0 0 0 0 (54) (54)
IFRS 2 credit 0 0 0 0 72 0 72
IFRS 2 reserves transfer 0 0 0 0 (64) 64 0
New share capital 0 0 0 0 0 0 0
0 0 0 0 8 (2,453) (2,445)
Balance at 31 January 2009 0 232 3,045 224 802 14,738 19,041
NOTES
forming part of the financial statements
1 THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
i The business of the Group
Matchtech Group plc is a human capital resources business dealing with contract
and permanent recruitment in the Private and Public sector. The Group is
organised in three sectors, Engineering, Built Environment and Professional
Services, with niche activities within each sector.
ii Basis of preparation of interim financial information
These interim condensed consolidated financial statements are for the six months
ended 31 January 2009. They have been prepared in accordance with IAS 34
"Interim Financial Reporting". They do not include all of the information
required for full annual financial statements, and should be read in conjunction
with the consolidated financial statements for the year ended 31 July 2008 which
have been filed with the Registrar of Companies. The auditor's report on those
financial statements was unqualified and did not contain a statement under
section 237 (2) and (3) of the Companies Act 1985.
These condensed consolidated interim financial statements (the interim financial
statements) have been prepared in accordance with the accounting policies set
out below which are based on the recognition and measurement principles of IFRS
in issue as adopted by the European Union (EU) and are effective at 31 July 2009
or are expected to be adopted and effective at 31 July 2009.
These financial statements have been prepared under the historical cost
convention. The accounting policies have been applied consistently throughout
the Group for the purposes of preparation of these condensed interim financial
statements. A summary of the principal accounting policies of the group are set
out below.
iii Basis of consolidation
The group financial statements consolidate those of the company and all of its
subsidiary undertakings drawn up to the balance sheet date. Subsidiaries are
entities over which the group has power to control the financial and operating
policies so as to obtain benefits from its activities. The group obtains and
exercises control through voting rights.
Acquisitions of subsidiaries are dealt with by the purchase method. The purchase
method involves the recognition at fair value of all identifiable assets and
liabilities, including contingent liabilities of the subsidiary, at the
acquisition date, regardless of whether or not they were recorded in the
financial statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are included in the
consolidated balance sheet at their fair values, which are also used as the
bases for subsequent measurement in accordance with group accounting policies.
iv Revenue
Revenue is measured by reference to the fair value of consideration received or
receivable by the group for services provided, excluding VAT and trade
discounts. Revenue on temporary placements is recognised upon receipt of a
client approved timesheet or equivalent. Revenue from permanent placements,
which is based on a percentage of the candidate's remuneration package, is
recognised when candidates commence employment.
v Property, plant and equipment
Property, plant and equipment is stated at cost or valuation, net of
depreciation and any provision for impairment.
Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:
Motor Vehicles 25.00% Reducing balance
Computer equipment 25.00% Straight line
Equipment 12.50% Straight line
Residual value estimates are updated as required, but at least
annually, whether or not the asset is revalued.
vi Intangible assets
Separately acquired software licences are included at cost and amortised on a
straight-line basis over the useful economic life of that asset at 20%-33%.
Provision is made against the carrying value of intangible assets where an
impairment in value is deemed to have occurred. Amortisation is recognised in
the income statement under administrative expenses.
vii Disposal of assets
The gain or loss arising on the disposal of an asset is determined as the
difference between the disposal proceeds and the carrying amount of the asset
and is recognised in the income statement.
viii Operating lease agreements
Rentals applicable to operating leases are charged against profits on a straight
line basis over the lease term. Lease incentives are spread over the term of the
lease.
ix Taxation
Current tax is the tax currently payable based on taxable profit for
the year.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between the
carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill, nor on the
initial recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax
assets are recognised to the extent that it is probable that the underlying
deductible temporary differences will be able to offset against future taxable
income. Current and deferred tax assets and liabilities are calculated at tax
rates that are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the income statement, except where they relate to items that are
charged or credited directly to equity (such as the revaluation of land) in
which case the related deferred tax is also charged or credited directly to
equity.
x Pension costs
The company operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the company. The annual
contributions payable are charged to the income statement as they accrue.
xi Share based payment
All share-based remuneration is ultimately recognised as an expense in the
income statement with a corresponding credit to "share-based payment reserve".
All goods and services received in exchange for the grant of any share-based
remuneration are measured at their fair values. Fair values of employee services
are indirectly determined by reference to the fair value of the share options
awarded. Their value is appraised at the grant date and excludes the impact of
non-market vesting conditions (for example, profitability and sales growth
targets).
If vesting periods or other non-market vesting conditions apply, the expense is
allocated over the vesting period, based on the best available estimate of the
number of share options expected to vest. Estimates are subsequently revised if
there is any indication that the number of share options expected to vest
differs from previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period. No adjustment is made to any expense
recognised in prior periods if share options ultimately exercised are different
to that estimated on vesting. Upon exercise of share options, proceeds received
net of attributable transaction costs are credited to share capital and share
premium.
xii Exceptional items
Non-recurring items which are sufficiently material are presented separately
within their relevant consolidated income statement category. This helps to
provide a better understanding of the group's financial performance.
xiii Business combinations completed prior to date of transition to IFRS
The group has elected not to apply IFRS 3 Business Combinations retrospectively
to business combinations prior to 1 August 2006.
Accordingly the classification of the combination (merger) remains unchanged
from that used under UK GAAP. Assets and liabilities are recognised at date of
transition if they would be recognised under IFRS, and are measured using their
UK GAAP carrying amount immediately post-acquisition as deemed cost under IFRS,
unless IFRS requires fair value measurement. Deferred tax is adjusted for the
impact of any consequential adjustments after taking advantage of the
transitional provisions.
xiv Financial assets
All financial assets are recognised when the group becomes a party to the
contractual provisions of the instrument. Financial assets are recognised at
fair value plus transaction costs.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Trade receivables
are classified as loans and receivables. Loans and receivables are measured
subsequent to initial recognition at amortised cost using effective interest
method, less provision for impairment. Any change in their value through
impairment or reversal of impairment is recognised in the income statement.
Provision against trade receivables is made when there is objective evidence
that the group will not be able to collect all amounts due to it in accordance
with the original terms of those receivables. The amount of the write-down is
determined as the difference between the asset's carrying amount and the present
value of estimated future cash flows.
A financial asset is derecognised only where the contractual rights to cash
flows from the asset expire or the financial asset is transferred and that
transfer qualifies for derecognition. A financial asset is transferred if the
contractual rights to receive the cash flows of the asset have been transferred
or the group retains the contractual rights to receive the cash flows of the
asset but assumes a contractual obligation to pay the cash flows to one or more
recipients. A financial asset that is transferred qualifies for derecognition if
the group transfers substantially all the risks and rewards of ownership of the
asset, or if the group neither retains nor transfers substantially all the risks
and rewards of ownership but does transfer control of that asset.
xv Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and
are recognised when the group becomes a party to the contractual provisions of
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