IRE-TEX CORPORATION BERHAD (Company No. 576121-A ... Dec 2014.pdf · YM Raja Said Abidin Bin Raja Shahrome (resigned on 3.11.2014) Teh Eng Aun (resigned on 3.11.2014) Teh Eng Huat

IRE-TEX CORPORATION BERHAD (Company No. 576121-A) (Incorporated in Malaysia)

REPORT AND FINANCIAL STATEMENTS

31 DECEMBER 2014

Registered office:

35, 1st Floor

Jalan Kelisa Emas 1

Taman Kelisa Emas

13700 Seberang Jaya

Penang

Principal place of business:

Plot 49 & 63, Lorong Perusahaan 2B

Kulim Industrial Estate

09000 Kulim

Kedah Darul Aman

Company No. 576121 A

IRE-TEX CORPORATION BERHAD (Incorporated in Malaysia)

REPORT AND FINANCIAL STATEMENTS

31 DECEMBER 2014

INDEX

*****

Page No.

DIRECTORS’ REPORT 1 - 8

STATEMENT BY DIRECTORS 9

STATUTORY DECLARATION 10

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS 11 - 14

STATEMENTS OF FINANCIAL POSITION 15 - 16

STATEMENTS OF PROFIT OR LOSS AND

OTHER COMPREHENSIVE INCOME 17

STATEMENTS OF CHANGES IN EQUITY 18 - 21

STATEMENTS OF CASH FLOWS 22 - 25

NOTES TO THE FINANCIAL STATEMENTS 26 - 119


- 1 -


DIRECTORS’ REPORT

The Directors hereby present their report together with the audited financial statements of the

Group and the Company for the financial year ended 31 December 2014.

Principal Activities

The principal activities of the Company consist of the provision of management services and

investment holding. The principal activities of its subsidiary companies are disclosed in Note 7 to

the financial statements.

There have been no significant changes in the nature of these activities during the financial year.

Financial Results

Group Company

RM RM

Net loss for the financial year (6,401,627) (4,724,401)

Attributable to:

Owners of the Parent (6,154,546) (4,724,401)

Non-controlling interests (247,081) -

(6,401,627) (4,724,401)

Reserves and Provisions

All material transfers to or from reserves and provisions during the financial year are as disclosed

in Note 18 to the financial statements.

Dividends

There were no dividends proposed, declared or paid by the Company since the end of the previous

financial year. The Board of Directors does not recommend any dividend in respect of the current

financial year.


- 2 -

Issue of Shares and Debentures

During the financial year, the Company increased its authorised ordinary share capital from

RM50,000,000 to RM500,000,000 through the creation of 1,125,000,000 ordinary shares of

RM0.40 each.

During the financial year, the Company issued:

(a) 14,303,938 new ordinary shares of RM0.40 each at RM5,721,575 for a total cash

consideration of RM5,166,939 for working capital purposes arising from conversion of 1% 5-

Year Irredeemable Convertible Unsecured Loan Stocks.

(b) 782,500 new ordinary shares of RM1.00 each for cash arising from the exercise of

employees’ share options at a weighted average exercise price of RM1.16 per ordinary share.

(c) the issued and paid-up share capital of the Company had been subdivided into RM47,001,400

from 47,001,400 ordinary shares of RM1.00 each to 117,503,500 ordinary shares of RM0.40

each. These subdivided shares were listed on the Main Market of Bursa Securities on 14 April

2014.

The new ordinary shares issued during the financial year rank pari passu in all respects with the

existing ordinary shares of the Company.

Options Granted Over Unissued Shares

No options were granted to any person to take up unissued shares of the Company during the

financial year apart from the issue of options pursuant to the Employees Shares Option Scheme

(“ESOS”).

Pursuant to the ESOS which become effective on 17 February 2004, options to subscribe for

ordinary shares of RM1.00 each were granted to eligible employees and executive directors of the

Group. The Company has extended the existing ESOS for another five years until 16 January 2014

in accordance with terms of the ESOS By-Laws.

The salient features and other terms of the ESOS are disclosed in the Note 28 to the financial

statements.

As at 31 December 2014, the options offered to take up unissued ordinary shares of RM1.00 each

and the exercise prices are as follows:

Number of share options

Grant Expiry Exercise At Lapsed/ At

date date price 1.1.2014 Exercised Forfeited 31.12.2014

RM

17.2.2004 16.1.2014 1.40 469,500 (311,500) (158,000) -

24.8.2007 16.1.2014 1.00 764,000 (471,000) (293,000) -


- 3 -

Rights Issue of Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) and Warrants

On 16 June 2014, the Company issued 470,014,000 units of 1% 5-year Rights Issues of ICULS of

RM0.075 nominal value on the basis of four (4) Rights ICULS for every one (1) ordinary shares of

RM0.40 each together with 58,751,722 free detachable warrants on the basis of one (1) warrants for

every eight (8) Rights ICULS subscribed for. The details of the ICULS and warrant are disclosed in

Notes 18 and 19 of the financial statements respectively.

Directors

The Directors in office since the date of the last report are:

Dato’ Dr. Yap Tatt Keat

Na Chiang Seng

Soo Tee Wei (appointed on 9.1.2014)

Collin Goonting A/L O.S.Goonting (appointed on 31.10.2014)

Abdul Rahim Bin Abdul Hamid (appointed on 4.11.2014)

Dr. Lai Chee Chuen (appointed on 4.11.2014)

See Toh Kean Yaw (resigned on 24.10.2014)

Fazrin Azwar Bin Dato’ Md. Nor (resigned on 27.10.2014)

YM Raja Said Abidin Bin Raja Shahrome (resigned on 3.11.2014)

Teh Eng Aun (resigned on 3.11.2014)

Teh Eng Huat (resigned on 25.2.2015)

Tey Por Yee (appointed on 30.5.2014 and resigned on 25.2.2015)


- 4 -

Directors’ Interests

The interests and deemed interests in the shares and options over shares of the Company and of its

related corporations (other than wholly-owned subsidiary companies) of those who were Directors

at financial year end (including their spouses or children) according to the Register of Directors’

Shareholdings are as follows:

Number of ordinary shares of RM1.00 each

At

Balance

prior

1.1.2014 Bought Sold to share split

Interest in the Company

Direct Interests

YM Raja Said Abidin Bin Raja Shahrome * 100,000 - (20,000) 80,000

Dato’ Dr. Yap Tatt Keat 5,505,354 309,000 - 5,814,354

See Toh Kean Yaw * 43,500 166,500 - 210,000

Teh Eng Huat 1,930,500 - - 1,930,500

Na Chiang Seng 1,714,285 - - 1,714,285

Fazrin Azwar Bin Dato’Md. Nor * 10,100 - - 10,100

Indirect Interests

See Toh Kean Yaw #* 150,000 - - 150,000

Teh Eng Huat # 643,300 - - 643,300

Number of ordinary shares of RM0.40 each

Balance

after

At

share split Bought Sold 31.12.2014


Direct Interests

YM Raja Said Abidin Bin Raja Shahrome * 200,000 - - -

Dato’ Dr. Yap Tatt Keat 14,535,887 - - 14,535,887

See Toh Kean Yaw * 525,000 100,000 (189,300) -

Teh Eng Huat 4,826,250 1,034,250 - 5,860,500

Na Chiang Seng 4,285,712 - (71,000) 4,214,712

Fazrin Azwar Bin Dato’ Md. Nor * 25,250 - - -

Tey Por Yee ^ 32,517,500 - - 32,517,500

Indirect Interests

See Toh Kean Yaw #* 375,000 - (375,000) -

Teh Eng Huat # 1,608,250 - (733,250) 875,000

# deemed interest by virtue of shares held by spouse.

^ at date of appointment.

* at date of resignation.


- 5 -

Directors’ Interests (Cont’d)

By virtue of his interest in the shares of the Company, Tey Por Yee is also deemed interested in the

shares of all the subsidiary companies during the financial year to the extent that the Company has

an interest under Section 6A of the Companies Act, 1965 in Malaysia.

Save as disclosed above, none of the other Directors in office at the end of the financial year had

any interest in shares in the Company or its related corporations during the financial year.

Details of ESOS granted to executive directors are as follow:

Number of share options over ordinary shares of

RM1.00 each

At Lapsed/ At

1.1.2014 Exercised Forfeited 31.12.2014


Dato’ Dr. Yap Tatt Keat 309,000 (309,000) - -

See Toh Kean Yaw 166,500 (166,500) - -

Number of 1% ICULS 2014/2019 of RM0.075

nominal value each

At At

16.6.2014 Bought Sold 31.12.2014


Direct Interests

See Toh Kean Yaw * 2,457,500 - (1,057,500) 1,400,000

Na Chiang Seng 17,142,848 - (17,142,848) -

Teh Eng Huat 19,305,000 - (19,305,000) -

Tey Por Yee 130,070,000 - (130,070,000) -

Indirect Interests

See Toh Kean Yaw #* 1,500,000 - (1,500,000) -

Teh Eng Huat # 6,433,000 - (6,433,000) -


- 6 -

Directors’ Interests (Cont’d)

Number of warrants

At At

16.6.2014 Bought Sold 31.12.2014


Direct Interests

See Toh Kean Yaw * 307,187 - (283,100) 24,087

Na Chiang Seng 2,142,856 - (2,142,856) -

Teh Eng Huat 2,413,125 - (2,413,125) -

Tey Por Yee 16,258,750 - (16,250,000) 8,750

Indirect Interests

See Toh Kean Yaw #* 187,500 - (187,500) -

Teh Eng Huat # 804,125 - (804,125) -

# deemed interest by virtue of shares held by spouse.

* at date of resignation.

Directors’ Benefits

Since the end of the previous financial year, no Director of the Company has received or become

entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments

received or due and receivable by Directors as shown in the financial statements) by reason of a

contract made by the Company or a related corporation with the Director or with a firm of which

the Director is a member, or with a company in which the Director has a substantial financial

interest, except as disclosed in Note 33 to the financial statements.

Neither during nor at the end of the financial year, was the Company a party to any arrangement

whose object was to enable the Directors to acquire benefits by means of the acquisition of shares

in, or debentures of, the Company or any other body corporate, other than those arising from the

share options granted under the ESOS, ICULS and warrant.

Other Statutory Information

(a) Before the statements of financial position and statements of profit or loss and other

comprehensive income of the Group and the Company were made out, the Directors took

reasonable steps:

(i) to ascertain that action had been taken in relation to the writing off of bad debts and the

making of allowance for doubtful debts and satisfied themselves that all known bad

debts had been written off and that adequate allowance had been made for doubtful

debts; and

(ii) to ensure that any current assets which were unlikely to realise their values as shown in

the accounting records in the ordinary course of business had been written down to an

amount which they might be expected so to realise.


- 7 -

Other Statutory Information (Cont’d)

(b) At the date of this report, the Directors are not aware of any circumstances:

(i) which would render the amounts written off for bad debts or the amount of the

allowance for doubtful debts in the financial statements of the Group and the Company

inadequate to any substantial extent; or

(ii) which would render the values attributed to the current assets in the financial statements

of the Group and the Company misleading; or

(iii) not otherwise dealt with in this report or the financial statements of the Group and the

Company which would render any amount stated in the financial statements misleading;

or

(iv) which have arisen which would render adherence to the existing method of valuation of

assets or liabilities of the Group and the Company misleading or inappropriate.

(c) At the date of this report, there does not exist:

(i) any charge on the assets of the Group and the Company which has arisen since the end

of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability in respect of the Group or the Company which has arisen since

the end of the financial year other than those arising in the normal course of business of

the Group and the Company.

(d) In the opinion of the Directors:

(i) no contingent liability or other liability has become enforceable or is likely to become

enforceable within the period of twelve months after the end of the financial year which

will or may affect the ability of the Group and the Company to meet its obligations as

and when they fall due;

(ii) the results of the operations of the Group and the Company during the financial year

were not substantially affected by any item, transaction or event of a material and

unusual nature, except as disclosed in the notes to the financial statements; and

(iii) except for those disclosed in Note 38 to the financial statements, the financial

performance of the Group and the Company for the financial year ended 31 December

2014 have not been substantially affected by any item, transaction or event of a material

and unusual nature, occurred in the interval between the end of the financial year and

the date of this report.

Significant Events during the Financial Year

Details of the significant events are disclosed in Note 37 to the financial statements.


- 15 -


STATEMENTS OF FINANCIAL POSITION

AS AT 31 DECEMBER 2014

2014 2013 2014 2013

Note RM RM RM RM

ASSETS

Non-current assets

Property, plant and equipment 4 44,744,323 18,302,051 131,245 14,052

Investment properties 5 27,317,830 5,317,830 - -

Goodwill on consolidation 6 1,531,947 - - -

Investment in subsidiary companies 7 - - 45,571,830 20,861,677

Other investments 8 549,243 2,029,023 549,243 549,243

Deferred tax assets 9 294,537 229,000 294,537 -

74,437,880 25,877,904 46,546,855 21,424,972

Current assets

Inventories 10 11,230,207 6,649,311 - -

Trade receivables 11 32,512,707 22,795,815 - -

Other receivables 12 19,127,415 7,801,604 3,504,706 5,203,806

Amount due from subsidiary

companies 13 - - 26,035,373 11,301,651

Tax recoverable 629,262 460,000 21,064 40,000

Fixed deposits with licensed banks 14 4,424,723 4,826,211 - -

Cash and bank balances 15 11,608,956 12,477,457 2,042,340 4,243,022

79,533,270 55,010,398 31,603,483 20,788,479

Non-current assets held for sale 16 - 12,273,702 - -

79,533,270 67,284,100 31,603,483 20,788,479

Total assets 153,971,150 93,162,004 78,150,338 42,213,451

EQUITY

Share capital 17 52,722,975 46,218,900 52,722,975 46,218,900

Reserves 18 30,658,871 4,903,501 22,665,326 (4,800,921)

Equity attributable to owners of

the parent 83,381,846 51,122,401 75,388,301 41,417,979

Non-controlling interests 926 31,262 - -

Total equity 83,382,772 51,153,663 75,388,301 41,417,979

Group Company


- 16 -


STATEMENTS OF FINANCIAL POSITION

AS AT 31 DECEMBER 2014 (CONT’D)

2014 2013 2014 2013

Note RM RM RM RM

LIABILITIES

Non-current liabilities

Loans and borrowings 19 16,804,784 7,204,928 1,227,237 -

Other payables 20 504,979 - - -

Deferred tax liabilities 9 1,029,762 431,000 - -

18,339,525 7,635,928 1,227,237 -

Current liabilities

Loans and borrowings 19 27,501,274 20,553,649 - -

Trade payables 21 16,825,999 7,252,202 - -

Other payables 20 7,817,580 6,308,337 791,250 470,614

Amount due to subsidiary

companies 13 - - 743,550 324,858

Derivative financial liabilities 22 - 202,225 - -

Provision for taxation 104,000 56,000 - -

52,248,853 34,372,413 1,534,800 795,472

Total liabilities 70,588,378 42,008,341 2,762,037 795,472

Total equity and liabilities 153,971,150 93,162,004 78,150,338 42,213,451

Group Company

The accompanying notes form an integral part of the financial statements.


- 17 -


STATEMENTS OF PROFIT OR LOSS AND

OTHER COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014

2014 2013 2014 2013

Note RM RM RM RM

Revenue 23 108,158,051 115,440,082 1,803,500 2,202,000

Cost of sales (94,586,488) (95,417,177) - -

Gross profit 13,571,563 20,022,905 1,803,500 2,202,000

Other income 13,087,729 2,214,867 69,141 155,993

Administrative expenses (23,648,468) (10,721,119) (6,444,573) (2,279,259)

Loss on disposal of investment in

subsidiary companies - (682,922) - (319,738)

Distribution costs (7,013,617) (7,131,587) - -

(Loss)/Profit from operation (4,002,793) 3,702,144 (4,571,932) (241,004)

Finance costs 24 (1,888,480) (1,412,945) (49,828) -

(Loss)/Profit before tax 25 (5,891,273) 2,289,199 (4,621,760) (241,004)

Taxation 26 (510,354) (426,173) (102,641) (1,801)

(Loss)/Profit for the financial

year, representing total

comprehensive income/(loss)

for the financial year (6,401,627) 1,863,026 (4,724,401) (242,805)

Total comprehensive

(loss)/income attributable to:

Owners of the parent (6,154,546) 1,022,693 (4,724,401) (242,805)

Non-controlling interests (247,081) 840,333 - -

(6,401,627) 1,863,026 (4,724,401) (242,805)

Earnings per share

Basic (loss)/earnings

per share (sen) 27(a) (5.04) 2.25

Diluted earnings per share (sen) 27(b) - 2.24

Group Company



- 18 -


STATEMENTS OF CHANGES IN EQUITY


Employee Foreign

Equity share currency Non-

Share Share components option Warrant translation Accumulated controlling Total

capital premium of ICULS reserves reserve reserve losses Total interests equity

Group RM RM RM RM RM RM RM RM RM RM

At 1 January 2014 46,218,900 4,921,765 - 301,923 - - (320,187) 51,122,401 31,262 51,153,663

Loss for the financial year,

representing total comprehensive

loss for the financial year - - - - - - (6,154,546) (6,154,546) (247,081) (6,401,627)

Transactions with owners:

Exercise of employee share 17, 18

options 782,500 124,600 - - - - - 907,100 - 907,100

Conversion of ICULS 17, 18 5,721,575 1,930,130 - - - - - 7,651,705 - 7,651,705

Lapsed of ESOS 18 - - - (301,923) - - 301,923 - - -

Issuance of ICULS 19 - - 21,802,809 - - - - 21,802,809 - 21,802,809

Issuance of warrants 18 - - - - 9,959,897 - - 9,959,897 - 9,959,897

Share issue expenses - (1,626,788) - - - - - (1,626,788) - (1,626,788)

Foreign exchange translation

reserve - - - - - 16,013 - 16,013 - 16,013

Acquisition of equity interests

in subsidiary company - - - - - - (296,745) (296,745) 216,745 (80,000)

Total transactions with owners 6,504,075 427,942 21,802,809 (301,923) 9,959,897 16,013 5,178 38,413,991 216,745 38,630,736

At 31 December 2014 52,722,975 5,349,707 21,802,809 - 9,959,897 16,013 (6,469,555) 83,381,846 926 83,382,772

Attributable to owners of the parent

Non-distributable

Note


- 19 -



FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014 (CONT’D)

Employee

share Non-

Share Share option Accumulated controlling Total

capital premium reserves losses Total interests equity

Group Note RM RM RM RM RM RM RM

At 1 January 2013 45,011,000 4,443,101 679,721 (667,154) 49,466,668 2,483,403 51,950,071

Profit for the financial year,


income for the financial year - - - 1,022,693 1,022,693 840,333 1,863,026


Shares issued under ESOS 17, 18 1,207,900 109,560 - - 1,317,460 - 1,317,460

Exercise of employee share options 18 - 369,104 (369,104) - - - -

Lapsed of ESOS 18 - - (8,694) 8,694 - - -

Dividends to owners of the Company 29 - - - (684,420) (684,420) - (684,420)

Disposal of equity interests

in subsidiaries - - - - - (3,292,474) (3,292,474)

Total transactions with owners 1,207,900 478,664 (377,798) (675,726) 633,040 (3,292,474) (2,659,434)

At 31 December 2013 46,218,900 4,921,765 301,923 (320,187) 51,122,401 31,262 51,153,663


Non-distributable


- 20 -




Employee

Equity share

Share Share components option Warrant Accumulated Total

capital premium of ICULS reserves reserve losses equity

Company Note RM RM RM RM RM RM RM

At 1 January 2014 46,218,900 4,921,765 - 301,923 - (10,024,609) 41,417,979



loss for the financial year - - - - - (4,724,401) (4,724,401)


Exercise of employee share options 17, 18 782,500 124,600 - - - - 907,100

Rights issue of ICULS 17, 18 5,721,575 1,930,130 - - - - 7,651,705

Lapsed of ESOS 18 - - - (301,923) - 301,923 -

Issuance of ICULS 19 - - 21,802,809 - - - 21,802,809

Issuance of warrants 18 - - - - 9,959,897 - 9,959,897

Share issue expenses (1,626,788) - - - - (1,626,788)

Total transactions with owners 6,504,075 427,942 21,802,809 (301,923) 9,959,897 301,923 38,694,723

At 31 December 2014 52,722,975 5,349,707 21,802,809 - 9,959,897 (14,447,087) 75,388,301


Non-distributable


- 21 -




Employee

share

Share Share option Accumulated Total

capital premium reserves losses equity

Company Note RM RM RM RM RM

At 1 January 2013 45,011,000 4,443,101 679,721 (9,106,078) 41,027,744



loss for the financial year - - - (242,805) (242,805)


Shares issued under ESOS 17, 18 1,207,900 109,560 - - 1,317,460

Exercise of employee share options 18 - 369,104 (369,104) - -

Lapsed of ESOS 18 - - (8,694) 8,694 -

Dividends to owners of the Company 29 - - - (684,420) (684,420)

Total transactions with owners 1,207,900 478,664 (377,798) (675,726) 633,040

At 31 December 2013 46,218,900 4,921,765 301,923 (10,024,609) 41,417,979


Non-distributable



- 22 -


2014 2013 2014 2013

RM RM RM RM

Cash flows from operating activities

(Loss)/Profit before tax (5,891,273) 2,289,199 (4,621,760) (241,004)

Adjustment for:

Bad debts written off 269,440 56,033 - -

Deposit forfeited - 50,000 - -

Depreciation of property, plant

and equipment 3,200,887 4,377,405 41,736 34,614

Fair value (gain)/loss of:

- Derivative financial instruments (202,225) 202,225 - -

- Investment properties - (256,806) - -

(Gain)/Loss on disposal of:

- Investment in subsidiary companies - 682,922 - 319,738

- Property, plant and equipment (11,270,898) 19,145 (14,999) -

- Other investments (128,376) - - -

Impairment loss on:

- Inventories 693,607 - - -

- Investment in subsidiary companies - - 690,000 -

- Goodwill 124,687 - - -

- Other investments - 295,000 - 295,000

- Trade receivables 5,799,404 - - -

- Other receivables 825,000 - - -

Finance costs 1,888,480 1,412,945 49,828 -

Finance income (161,047) (154,272) (52,732) (130,987)

Property, plant and equipment

written off 122,332 665 - -

Unrealised gain on

foreign exchange (80,389) (171,904) - -

Operating (loss)/profit before working

capital changes (4,810,371) 8,802,557 (3,907,927) 277,361

Changes in working capital:

Directors (724,732) - - -

Inventories (3,083,548) 4,092,969 - -

Receivables (17,720,301) (6,197,012) 11,904,278 (5,137,353)

Payables (4,867,805) 6,721,008 574,726 (87,083)

Cash (used in)/generated from

operations (31,206,757) 13,419,522 8,571,077 (4,947,075)

STATEMENTS OF CASH FLOWS


Group Company


- 23 -


2014 2013 2014 2013

Note RM RM RM RM

Cash flows from operating

activities (Cont'd)

Cash (used in)/generated from

operations (31,206,757) 13,419,522 8,571,077 (4,947,075)

Interest paid (1,888,480) (1,412,945) (49,828) -

Tax (paid)/refund (911,532) (802,764) (16,136) (41,801)

Net cash (used in)/generated

from operating activities (34,006,769) 11,203,813 8,505,113 (4,988,876)

Cash flows from investing activities

Acquisition of property, plant and

equipment 4(b) (24,467,107) (13,001,262) (159,000) (4,182)

Acquisition of subsidiary companies 7(a) (22,207,692) - - -

Acquisition of interest of non-controlling

interest 7(c) (80,000) - - -

Interest received 79,974 76,661 52,732 130,987

Investment in subsidiary companies - - (25,400,153) (1,900,000)

Net cash inflow from disposal of

subsidiary companies 7(d) - 1,102,829 - -

Proceeds from disposal of

other investments 1,608,156 - - -


property, plant and equipment 24,192,070 20,473 15,070 -


subsidiary companies - - - 2,713,439

Withdrawal of pledged fixed deposits 100,000 - - -

Net cash (used in)/generated

from investing activities (20,774,599) (11,801,299) (25,491,351) 940,244

Group Company


FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014 (CONT'D)


- 24 -


2014 2013 2014 2013

RM RM RM RM

Cash flows from financing activities

Dividends paid - (684,420) - (684,420)

Proceeds from exercise of employee

share options 907,100 1,317,460 907,100 1,317,460

Proceeds from finance lease liabilities - 567,000 - -

Proceed from bankers acceptance 3,432,000 5,003,000 - -

Payment of finance lease liabilities (1,141,160) (819,248) - -

Repayment of trust receipts - (98,467) - -

(Advance to)/Repayment from

subsidiary companies - - (24,912,745) 7,172,785

Proceed from term loans 8,711,155 5,200,000 - -

Repayment of term loans - (460,372) - -

Share issuance expenses (1,626,788) - (1,626,788) -

Issuance of ICULS 35,251,050 - 35,251,050 -

Proceeds from conversion of ICULS 5,166,939 - 5,166,939 -

Net cash generated from

operating activities 50,700,296 10,024,953 14,785,556 7,805,825

Net (decrease)/increase in cash

and cash equivalents (4,081,072) 9,427,467 (2,200,682) 3,757,193

Cash and cash equivalents at the

beginning of the financial year 14,460,620 4,945,258 4,243,022 485,829

Effect of exchange translation

differences on cash and cash

equivalents 16,013 87,895 - -


end of the financial year 10,395,561 14,460,620 2,042,340 4,243,022



Group Company


- 25 -


2014 2013 2014 2013

Note RM RM RM RM


end of the financial year

comprises:

Cash and bank balances 15 11,608,956 12,477,457 2,042,340 4,243,022

Fixed deposits with licensed banks 14 4,424,723 4,826,211 - -

Bank overdrafts 19 (2,690,318) (233,931) - -

13,343,361 17,069,737 2,042,340 4,243,022

Less: Fixed deposits pledged

with licensed banks 14 (2,947,800) (2,609,117) - -

10,395,561 14,460,620 2,042,340 4,243,022



Group Company

The accompanying notes from an integral part of the financial statements.


- 26 -


NOTES TO THE FINANCIAL STATEMENTS

1. Corporate Information

The Company is a public limited liability company, incorporated and domiciled in Malaysia

and is listed on the Main Market of Bursa Malaysia Securities Berhad.

The principal place of business of the Company is located at Plot 49 & 63, Lorong Perusahaan

2B, Kulim Industrial Estate, 09000 Kulim, Kedah Darul Aman.

The registered office of the Company is located at 35, 1st Floor, Jalan Kelisa Emas 1, Taman

Kelisa Emas, 13700 Seberang Jaya, Penang.

The principal activities of the Company consist of the provision of management services and

investment holding. The principal activities of its subsidiary companies are disclosed in Note

7 to the financial statements. There have been no significant changes in the nature of these

activities of the Company and its subsidiary companies during the financial year.

2. Basis of Preparation

(a) Statement of Compliance

The financial statements of the Group and the Company have been prepared in

accordance with Malaysian Financial Reporting Standards (“MFRSs”), International

Financial Reporting Standards and the requirements of the Companies Act, 1965 in

Malaysia.

The financial statements of the Group and the Company have been prepared under the

historical cost convention, unless otherwise indicated in the significant accounting

policies below.

Adoption of new and amended standards and IC Interpretation

During the financial year, the Group and the Company have adopted the following

amendments to MFRSs and IC Interpretation issued by the Malaysian Accounting

Standards Board (“MASB”) that are mandatory for current financial year:

Amendments to MFRS 10,

MFRS 12 and MFRS 127

Investment Entities

Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities

Amendments to MFRS 136 Recoverable Amount Disclosures for Non-Financial

Assets

Amendments to MFRS 139 Novation of Derivatives and Continuation of Hedge

Accounting

IC Interpretation 21 Levies


- 27 -

2. Basis of Preparation (Cont’d)

(a) Statement of Compliance (Cont’d)

Adoption of above amendments to MFRSs and IC Interpretation did not have any

significant impact on the financial statements of the Group and the Company.

Standards issued but not yet effective

The Group and the Company have not applied the following new MFRSs and

amendments to MFRSs that have been issued by the MASB but are not yet effective for

the Group and the Company:

Effective dates for

financial periods

beginning on or after

Amendments to MFRS 119 Defined Benefits Plans: Employee

Contributions

1 July 2014

Annual Improvements to MFRSs 2010 – 2012 Cycle 1 July 2014

Annual Improvements to MFRSs 2011 – 2013 Cycle 1 July 2014

MFRS 14 Regulatory Deferral Accounts 1 January 2016

Amendments to MFRS 11 Accounting for Acquisitions of

Interests in Joint Operations

1 January 2016

Amendments to MFRS 116

and MFRS 138

Clarification of Acceptable

Methods of Depreciation and

Amortisation

1 January 2016


and MFRS 141

Agriculture: Bearer Plants 1 January 2016

Amendments to MFRS 127 Equity Method in Separate

Financial Statements

1 January 2016


and MFRS 128

Sale or Contribution of Assets

between an Investor and its

Associate or Joint Venture

1 January 2016

Annual Improvements to MFRSs 2012 – 2014 Cycle 1 January 2016

Amendments to MFRS 10,

MFRS 12 and MFRS 128

Investment Entities: Applying the

Consolidation Exception

1 January 2016

MFRS 15 Revenue from Contracts with

Customers

1 January 2017

MFRS 9 Financial Instruments (IFRS 9

issued by IASB in July 2014)

1 January 2018


- 28 -


(a) Statement of Compliance (Cont’d)

Standards issued but not yet effective (Cont’d)

The Group and the Company intend to adopt the MFRSs when they become effective.

The initial applications of the abovementioned MFRSs are not expected to have any

significant impacts on the financial statements of the Group and the Company except as

mentioned below:

MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014)

MFRS 9 (IFRS 9 issued by IASB in July 2014) replaces earlier versions of MFRS 9 and

introduces a package of improvements which includes a classification and measurement

model, a single forward looking ‘expected loss’ impairment model and a substantially

reformed approach to hedge accounting. MFRS 9 when effective will replace MFRS 139

Financial Instruments: Recognition and Measurement.

MFRS 9 retains but simplifies the mixed measurement model and establishes three

primary measurement categories for financial assets: amortised cost, fair value through

other comprehensive income and fair value through profit or loss. The basis of

classification depends on the entity’s business model and the contractual cash flow

characteristics of the financial asset. Investments in equity instruments are required to be

measured at fair value through profit or loss with the irrevocable option at inception to

present changes in fair value in other comprehensive income not recycling. There is now

a new expected credit losses model that replaces the incurred loss impairment model

used in MFRS 139. For financial liabilities there were no changes to classification and

measurement except for the recognition of changes in own credit risk in other

comprehensive income, for liabilities designated at fair value through profit or loss.

MFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line

hedge effectiveness tests. It requires an economic relationship between the hedged item

and hedging instrument and for the ‘hedged ratio’ to be the same as the one management

actually use for risk management purposes. Contemporaneous documentation is still

required but is different to that currently prepared under MFRS 139.

The adoption of MFRS 9 will result in a change in accounting policy. The Group is

currently examining the financial impact of adopting MFRS 9.

MFRS 15 Revenue from Contracts with Customers

MFRS 15 deals with revenue recognition and establishes principles for reporting useful

information to users of financial statements about the nature, amount, timing and

uncertainty of revenue and cash flows arising from an entity’s contracts with customers.

Revenue is recognised when a customer obtains control of a good or service and thus has

the ability to direct the use and obtain the benefits from the good or service. The

Standard replaces MFRS 118 Revenue, MFRS 111 Construction Contracts and related

IC Interpretations. The Group is in the process of assessing the impact of this Standard.


- 29 -


(b) Functional and presentation currency

The financial statements are presented in Ringgit Malaysia (“RM”) which is the Group’s

and the Company’s functional currency and all values have been rounded to the nearest

RM except when otherwise stated.

(c) Significant accounting judgements, estimates and assumptions

The preparation of the Group’s financial statements requires management to make

judgements, estimates and assumptions that affect the reported amounts of revenues,

expenses, assets and liabilities, and the disclosure of contingent liabilities at the

reporting date. However, uncertainty about these assumptions and estimates could result

in outcomes that could require a material adjustment to the carrying amount of the asset

or liability affected in the future.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation

uncertainty at the end of the reporting period, that have a significant risk of causing a

material adjustment to the carrying amounts of assets and liabilities within the next

reporting period are set out below:

Useful lives of property, plant and equipment

The Group regularly reviews the estimated useful lives of property, plant and equipment

based on factors such as business plan and strategies, expected level of usage and future

technological developments. Future results of operations could be materially affected by

changes in these estimates brought about by changes in the factors mentioned above. A

reduction in the estimated useful lives of property, plant and equipment would increase

the recorded depreciation and decrease the value of property, plant and equipment.

Revaluation of investment properties

The Group carries its investment properties at fair value, with changes in fair value being

recognised in profit or loss. Fair value of investment properties was estimated by the

directors based on internal appraisal of market values of comparable properties.

The fair value of the properties is provided in Note 5.

Impairment of goodwill on consolidation

The Group determines whether goodwill is impaired at least on an annual basis. This

requires an estimation of the value-in-use of the cash-generating units to which the

goodwill is allocated. Estimating the value-in-use amount requires the Group to make an

estimate of the expected future cash flows from the cash-generating unit and also to

choose a suitable discount rate in order to calculate the present value of those cash flows.

The impairment assessment of goodwill is disclosed in Note 6.


- 30 -


(c) Significant accounting judgements, estimates and assumptions (Cont’d)

Key sources of estimation uncertainty (Cont’d)

Impairment of investment in subsidiary companies

The Company has recognised impairment loss in respect of its investment in subsidiary

companies. The Company carried out the impairment test based on the estimation of the

higher of the value-in-use or the fair value less cost to sell of the cash-generating units to

which the investment in subsidiary companies belong to. Estimating the recoverable

amount requires the Company to make an estimate of the expected future cash flows

from the cash-generating units and also to determine a suitable discount rate in order to

calculate the present value of those cash flows.

The carrying amount at the reporting date for investment in subsidiary companies is

disclosed in Note 7.

Fair value measurement of contingent consideration asset

Contingent consideration asset, resulting from business combination, is valued at fair

value at the acquisition date as part of the business combination. It is subsequently

remeasured to fair value at each reporting date. The determination of the fair value is

based on discounted cash flows. The key assumptions taken into consideration include

the probability of meeting each performance target and the discounted factor. The

carrying amount of contingent consideration asset is disclosed in Note 7.

Deferred tax assets

Deferred tax assets are recognised for all unused tax losses, unabsorbed capital

allowances and other deductible temporary differences to the extent that it is probable

that taxable profit will be available against which the unused tax losses, unabsorbed

capital allowances and other deductible temporary differences can be utilised.

Significant management judgement is required to determine the amount of deferred tax

assets that can be recognised, based upon the likely timing and level of future taxable

profits together with future tax planning strategies. Details of deferred tax assets are

disclosed in Note 9.

Inventories valuation

Inventories are measured at the lower of cost and net realisable value. The Group

estimates the net realisable value of inventories based on an assessment of expected sales

prices. Demand levels and pricing competition could change from time to time. If such

factors result in an adverse effect on the Group’s products, the Group might be required

to reduce the value of its inventories. Details of inventories are disclosed in Note 10.


- 31 -




Impairment of loans and receivables

The Group assesses at end of each reporting period whether there is any objective

evidence that a receivable is impaired. To determine whether there is objective evidence

of impairment, the Group considers factors such as the probability of insolvency or

significant financial difficulties of the receivable and default or significant delay in

payments.

Where there is objective evidence of impairment, the amount and timing of future cash

flows are estimated based on historical loss experience for assets with similar credit risk

characteristics. The carrying amounts at the reporting date for loans and receivables are

disclosed in Notes 11, 12 and 13 respectively.

Employee share options

The Group measures the cost of equity-settled transactions with employees by reference

to the fair value of the equity instruments at the date at which they are granted.

Estimating fair value for share-based payment transactions requires determining the most

appropriate valuation model, which is dependent on the terms and conditions of the

grant. This estimate also require determining the most appropriate inputs to the valuation

model including the expected life of the share option, volatility and dividend yield and

making assumptions about them. Details of assumptions made in respect of the share-

based payment scheme are disclosed in Note 28.

Income taxes

Judgment is involved in determining the provision for income taxes. There are certain

transactions and computations for which the ultimate tax determination is uncertain

during the ordinary course of business.

The Group recognises liabilities for expected tax issues based on estimates of whether

additional taxes will be due. Where the final tax outcome of these matters is different

from the amounts that were initially recognised, such differences will impact the income

tax and deferred tax provisions in the period in which such determination is made.

Details of income tax expense are disclosed in Note 26.

Contingent liabilities

Determination of the treatment of contingent liabilities is based on management’s view

of the expected outcome of the contingencies after consulting legal counsel for litigation

cases and internal and external experts to the Group, for matters in the ordinary course of

business. Details of contingent liabilities are disclosed in Note 32.


- 32 -




Fair value of financial instruments

Management uses valuation techniques in measuring the fair value of financial

instruments where active market quotes are not available. Details of the assumptions

used are given in the Note 35(c) regarding financial assets and liabilities. In applying the

valuation techniques management makes maximum use of market inputs, and uses

estimates and assumptions that are, as far as possible, consistent with observable data

that market participants would use in pricing the instrument. Where applicable data is

not observable, management uses its best estimate about the assumptions that market

participants would make. These estimates may vary from the actual prices that would be

achieved in an arm's length transaction at the end of the reporting period.

3. Significant Accounting Policies

The Group and the Company apply the significant accounting policies set out below,

consistently throughout all periods presented in the financial statements unless otherwise

stated.

(a) Basis of consolidation

(i) Subsidiary companies

Subsidiary companies are all entities (including structured entities) over which the

Group has control. The Group controls an entity when the Group is exposed to, or

has rights to, variable returns from its involvement with the entity and has the

ability to affect those returns through its power over the entity. Subsidiary

companies are fully consolidated from the date on which control is transferred to

the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations.

The consideration transferred for the acquisition of a subsidiary is the fair values of

the assets transferred, the liabilities incurred to the former owners of the acquiree

and the equity interests issued by the Group. The consideration transferred

includes the fair value of any asset or liability resulting from a contingent

consideration arrangement. Identifiable assets acquired and liabilities and

contingent liabilities assumed in business combination are measured initially at

their fair values at the acquisition date. The Group recognises any non-controlling

interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or

at the non-controlling interest’s proportionate share of the recognised amounts of

acquiree’s identifiable net assets.

Acquisition-related costs are expensed off in profit or loss as incurred.


- 33 -

3. Significant Accounting Policies (Cont’d)

(a) Basis of consolidation (Cont’d)

(i) Subsidiary companies (Cont’d)

If the business combination is achieved in stages, previously held equity interest in

the acquiree is re-measured at its acquisition date fair value and the resulting gain or

loss is recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair

value at the acquisition date. Subsequent changes to the fair value of the contingent

consideration that is deemed to be an asset or liability is recognised in accordance

with MFRS 139 Financial Instruments: Recognition and Measurement either in

profit or loss or other comprehensive income. Contingent consideration that is

classified as equity is not re-measured, and its subsequent settlement is accounted

for within equity.

Inter-company transactions, balances and unrealised gains or losses on transactions

between Group companies are eliminated. Unrealised losses are eliminated only if

there is no indication of impairment. Where necessary, accounting policies of

subsidiary companies have been changed to ensure consistency with the policies

adopted by the Group.

In the Company’s separate financial statements, investment in subsidiary companies

are stated at cost less accumulated impairment losses. On disposal of such

investments, the difference between net disposal proceeds and their carrying

amounts are recognised in profit or loss. Where an indication of impairment exists,

the carrying amount of the investment is assessed and written down immediately to

its recoverable amount. See accounting policy Note 3(l) to the financial statements

on impairment of non-financial assets.

(ii) Changes in ownership interests in subsidiary companies without change of control

Transactions with non-controlling interests that do not result in loss of control are

accounted for as equity transactions - that is, as transactions with the owners in their

capacity as owners. The difference between fair value of any consideration paid and

the relevant share acquired of the carrying value of net assets of the subsidiary

company is recorded in equity. Gains or losses on disposals to non-controlling

interests are also recorded in equity.

(iii) Disposal of subsidiary companies

If the Group control of a subsidiary companies, the assets and liabilities of the

subsidiary company, including any goodwill, and non-controlling interest are

derecognised at their carrying value on the date that control is lost. Any remaining

investment in the entity is recognised at fair value. The difference between the fair

value of consideration received and the amounts derecognised and the remaining

fair value of the investment is recognised as a gain or loss on disposal in profit or

loss. Any amounts previously recognised in other comprehensive income in respect

of that entity are accounted for as if the Group had directly disposed of the related

assets or liabilities.


- 34 -


(a) Basis of consolidation (Cont’d)

(iv) Goodwill on consolidation

The excess of the aggregate of the consideration transferred, the amount of any non-

controlling interest in the acquiree and the acquisition-date fair value of any

previous equity interest in the acquiree over the fair value of the identifiable net

assets acquired is recorded as goodwill. If the total consideration transferred, non-

controlling interest recognised and previously held interest measured at fair value is

less than the fair value of the net assets of the subsidiary company acquired (ie. a

bargain purchase), the gain is recognised in profit or loss.

Following the initial recognition, goodwill is measured at cost less accumulated

impairment losses. Goodwill is not amortised but instead, it is reviewed for

impairment annually or more frequent when there is objective evidence that the

carrying value may be impaired. See accounting policy Note 3(l) to the financial

statements on impairment of non-financial assets.

(b) Foreign currency translation

(i) Foreign currency transactions and balances

Transactions in foreign currency are recorded in the functional currency of the

respective Group entities using the exchange rates prevailing at the dates of the

transactions. At each reporting date, monetary items denominated in foreign

currencies are retranslated at the rates prevailing on that date. Non-monetary items

carried at fair value that are denominated in foreign currencies are retranslated at

the rates prevailing at the date when the fair value was determined. Non-monetary

items that are measured in terms of historical cost in a foreign currency are not

retranslated.

Exchange differences arising on the settlement of monetary items or on translating

monetary items at the reporting date are included in profit or loss except for

exchange differences arising on monetary items that form part of the Group’s net

investment in foreign operation. These are initially taken directly to the foreign

currency translation reserve within equity until the disposal of the foreign

operations, at which time they are recognised in profit or loss. Exchange

differences arising on monetary items that form part of the Company’s net

investment in foreign operation are recognised in profit or loss in the Company’s

financial statements or the individual financial statements of the foreign operation,

as appropriate.

Exchange differences arising on the translation of non-monetary items carried at

fair value are included in profit or loss for the reporting period except for the

differences arising on the translation of non-monetary items in respect of which

gains and losses are recognised in other comprehensive income. Exchange

differences arising from such non-monetary items are also recognised in other

comprehensive income.


- 35 -


(b) Foreign currency translation (Cont’d)

(ii) Foreign operations

The assets and liabilities of foreign operations denominated in functional

currencies other than RM, including goodwill and fair value adjustments arising on

acquisition, are translated to RM at the rate of exchange prevailing at the reporting

date, except for goodwill and fair value adjustments arising from business

combinations before 1 January 2012 (the date of transition to MFRS) which are

treated as assets and liabilities of the Company. The income and expenses of

foreign operations, excluding foreign operations in hyperinflationary economies,

are translated to RM at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income and

accumulated in the foreign currency translation reserve (“FCTR”) in equity.

However, if the operation is a non-wholly owned subsidiary company, then the

relevant proportionate share of the translation difference is allocated to the non-

controlling interests. When a foreign operation is disposed off such that control,

significant influence or joint control is lost, the cumulative amount in the FCTR

related that foreign operation is reclassified to profit or loss as part of the gain or

loss on disposal.

When the Group disposes of only part of its interest in a subsidiary company that

includes a foreign operation, the relevant proportion of the cumulative amount is

reattributed to non-controlling interests. When the Group disposes of only part of

its investment in an associate or joint venture that includes a foreign operation

while retaining significant influence or joint control, the relevant proportion of the

cumulative amount is reclassified to profit or loss.

(c) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and

accumulated impairment losses. The policy of recognition and measurement of

impairment losses is in accordance with Note 3(l).

(i) Recognition and measurement

Cost includes expenditures that are directly attributable to the acquisition of the

assets and any other costs directly attributable to bringing the asset to working

condition for its intended use, cost of replacing component parts of the assets, and

the present value of the expected cost for the decommissioning of the assets after

their use. The cost of self-constructed assets also includes the cost of materials and

direct labour. For qualifying assets, borrowing costs are capitalised in accordance

with the accounting policy on borrowing costs. All other repair and maintenance

costs are recognised in profit or loss as incurred.


- 36 -


(c) Property, plant and equipment (Cont’d)

(i) Recognition and measurement (Cont’d)

The cost of property, plant and equipment recognised as a result of a business

combination is based on fair value at acquisition date. The fair value of property is

the estimated amount for which a property could be exchanged on the date of

valuation between a willing buyer and a willing seller in an arm’s length

transaction after proper marketing wherein the parties had each acted

knowledgeably, prudently and without compulsion. The fair value of other items of

plant and equipment is based on the quoted market prices for similar items.

When significant parts of an item of property, plant and equipment have different

useful lives, they are accounted for as separate items (major components) of

property, plant and equipment.

Property, plant and equipment are derecognised upon disposal or when no future

economic benefits are expected from its use or disposal. Gains or losses arising on

the disposal of property, plant and equipment are determined as the difference

between the disposal proceeds and the carrying amount of the assets and are

recognised in profit or loss.

Capital work-in-progress consists of buildings and plant and machinery under

construction/installation for intended use as production facilities. The amount is

stated at cost and includes capitalisation of interest incurred on borrowings related

to property, plant and equipment under construction/installation until the property,

plant and equipment are ready for their intended use.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is

recognised in the carrying amount of the item if it is probable that the future

economic benefits embodied within the part will flow to the Group and its cost can

be measured reliably. The costs of the day-to-day servicing of property, plant and

equipment are recognised in the profit or loss as incurred.

(iii) Depreciation

Depreciation is recognised in the profit or loss on straight line basis to write off the

cost or valuation of each asset to its residual value over its estimated useful life.

Leased assets are depreciated over the shorter of the lease term and their useful

lives. Property, plant and equipment under construction are not depreciated until

the assets are ready for its intended use.


- 37 -


(c) Property, plant and equipment (Cont’d)

(iii) Depreciation (Cont’d)

Property, plant and equipment are depreciated based on the estimated useful lives

of the assets as follows:

Leasehold land Over remaining lease

Factory buildings 1.89%

Factory extension 2% - 10%

Plant, machinery and equipment 10% - 20%

Furniture, fittings and office equipment 10% - 50%

Renovation 1.89% - 10%

Electrical installation 10% - 20%

Motor vehicles 10% - 20%

Leasehold land refers to land with an unexpired lease period of less than fifty years

determined at the end of reporting period.

The residual values, useful lives and depreciation method are reviewed at each

reporting period and to ensure that the amount, method and period of depreciation

are consistent with previous estimates and the expected pattern of consumption of

the future economic benefits embodied in property, plant and equipment.

(d) Leases

The determination of whether an arrangement is, or contains, a lease is based on the

substance of the arrangement at the inception date, whether fulfilment of the arrangement

is dependent on the use of a specific asset or asset and the arrangement conveys a right to

use the asset, even if that right is not explicitly specific in an arrangement.

As lessee

(i) Finance lease

Leases in terms of which the Group or the Company assumes substantially all the

risks and rewards of ownership are classified as finance lease. Upon initial

recognition, the leased asset is measured at an amount equal to the lower of its fair

value and the present value of the minimum lease payments. Subsequent to initial

recognition, the asset is accounted for in accordance with the accounting policy

applicable to that asset.

Minimum lease payments made under finance leases are apportioned between

finance charges and reduction of the lease liability so as to achieve a constant rate

of interest on the remaining balance of the liability. Finance charges are recognised

in finance costs in the profit or loss. Contingent lease payments are accounted for

by revising the minimum lease payments over the remaining term of the lease

when the lease adjustment is confirmed.


- 38 -


(d) Leases (Cont’d)

As lessee (Cont’d)

(i) Finance lease (Cont’d)

Leasehold land which in substance is a finance lease is classified as a property,

plant and equipment.

(ii) Operating lease

Leases, where the Group or the Company does not assume substantially all the

risks and rewards of ownership are classified as operating leases and, except for

property interest held under operating lease, the leased assets are not recognised on

the statements of financial position. Property interest held under an operating lease,

which is held to earn rental income or for capital appreciation or both, is classified

as investment property and measured using fair value model.

Payments made under operating leases are recognised in profit or loss on a

straight-line basis over the term of the lease. Lease incentives received are

recognised in profit or loss as an integral part of the total lease expense, over the

term of the lease. Contingent rentals are charged to profit or loss in the reporting

period in which they are incurred.

Leasehold land which in substance is an operating lease is classified as prepaid

land lease payments.

As lessor

Leases in which the Group does not transfer substantially all the risks and rewards of

ownership of an asset are classified as operating leases. Initial direct costs incurred in

negotiating and arranging an operating lease are added to the carrying amount of the

leased asset and recognised over the lease term on the same basis as rental income.

Contingent rents are recognised as revenue in the period in which they are earned.

(e) Investment properties

Investment properties are properties held either to earn rental income or for capital

appreciation or for both. Investment properties are measured initially at cost, including

transaction costs. Subsequent to initial recognition, investment properties are stated at fair

value. Gains or losses arising from changes in the fair values of investment properties are

recognised in profit or loss in the reporting period in which they arise. The fair values are

determined by external professional valuers with sufficient experience with respect to both

the location and the nature of the investment property and supported by market evidence.

Investment properties are derecognised when either they are disposed of or when they

are permanently withdrawn from use and no future economic benefit is expected from

the disposal. Any gain or loss on the retirement or disposal of an investment property is

recognised in the profit or loss in the reporting period of retirement or disposal.


- 39 -


(f) Intangible assets

(i) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately

from goodwill are initially recognised at their fair values at the acquisition date

(which is regarded as their cost).

Subsequently to initial recognition, intangible assets acquired in a business

combination are reported at cost less accumulated amortisation and accumulated

impairment losses, on the same basis as intangible assets that are acquired

separately.

(ii) Derecognition of intangible assets

An intangible asset is derecognised on disposal, or when no future economic

benefits are expected from use or disposal. Gains or losses arising from

derecognition of an intangible asset, measured as the difference between the net

disposal proceeds and the carrying amount of the asset, are recognised in profit or

loss when the asset is derecognised.

See accounting policy Note 3(l) to the financial statements on impairment of non-

financial assets for intangible assets.

(g) Financial assets

Financial assets are recognised on the statements of financial position when, and only

when, the Group and the Company become a party to the contractual provisions of the

financial instrument.

Financial assets are initially recognised at fair value plus transaction costs except for

financial assets at fair value through profit or loss, which are recognised at fair value.

Transaction costs for financial assets at fair value through profit or loss are recognised

immediately in profit or loss.

The Group and the Company classify their financial assets depends on the purpose for

which the financial assets were acquired at initial recognition, into the following

categories:

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or

determinable payments that are not quoted in an active market. They are included

in current assets, except for those maturing later than 12 months after the end of the

reporting period which are classified as non-current assets.


- 40 -


(g) Financial assets (Cont’d)

(i) Loans and receivables (Cont’d)

After initial recognition, financial assets categorised as loans and receivables are

measured at amortised cost using the effective interest method, less impairment

losses. Gains and losses are recognised in profit or loss when the loans and

receivables are derecognised or impaired, and through the amortisation process.

(ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in

this category or not classified in any of the other categories. They are included in

non-current assets unless the investment matures or management intends to dispose

of the assets within 12 months after the end of the reporting period.

After initial recognition, available-for-sale financial assets are measured at fair

value. Any gains or losses from changes in fair value of the financial asset are

recognised in other comprehensive income, except that impairment losses, foreign

exchange gains and losses on monetary instruments and interest calculated using

the effective interest method are recognised in profit or loss. The cumulative gain

or loss previously recognised in other comprehensive income is reclassified from

equity to profit or loss as a reclassification adjustment when the financial asset is

derecognised. Interest income calculated using the effective interest method is

recognised in profit or loss. Dividends from an available-for-sale equity instrument

are recognised in profit or loss when the Group’s and the Company's right to

receive payment is established.

Investment in equity instruments that do not have a quoted market price in an

active market and whose fair value cannot be reliably measured are measured at

cost less impairment loss.

Regular way purchases or sales are purchases or sales of financial assets that require

delivery of assets within the period generally established by regulation or convention in

the marketplace concerned. All regular way purchases or sales of financial assets are

recognised and derecognised on the trade date i.e. the date that the Group and the

Company commit to purchase or sell the asset.

A financial asset is derecognised when the contractual rights to receive cash flows from

the financial asset has expired or has been transferred and the Group and the Company

have transferred substantially all risks and rewards of ownership. On derecognition of a

financial asset, the difference between the carrying amount and the sum of consideration

received and any cumulative gains or loss that had been recognised in equity is

recognised in profit or loss.


- 41 -


(h) Financial liabilities

Financial liabilities are classified according to the substance of the contractual

arrangements entered into and the definition of financial liabilities.

Financial liabilities are recognised on the statements of financial position when, and

only when, the Group and the Company become a party to the contractual provisions of

the financial instrument.

The Group and the Company classify their financial liabilities at initial recognition, into

the following categories:

(i) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities

held for trading and financial liabilities designated into this category upon initial

recognition.

Financial liabilities are classified as held for trading if they are incurred for the purpose

of repurchasing in the near term. This category also includes derivatives financial

instruments that are not designated as effective hedging instruments. Separated

embedded derivatives are also categorised as held for trading unless they are

designated as effective hedging instruments.

Gains or losses on financial liabilities held for trading are recognised in profit or

loss.

(ii) Other financial liabilities measured at amortised cost

The Group’s and the Company’s other financial liabilities comprise trade and other

payables and loans and borrowings.

Trade and other payables are recognised initially at fair value plus directly

attributable transaction costs and subsequently measured at amortised cost using the

effective interest method.

Loans and borrowings are recognised initially at fair value, net of transaction costs

incurred, and subsequently measured at amortised cost using the effective interest

method. Borrowings are classified as current liabilities unless the Group has an

unconditional right to defer settlement of the liability for at least 12 months after

the reporting date.

Gains and losses on financial liabilities measured at amortised cost are recognised

in profit or loss when the liabilities are derecognised, and through the amortisation

process.


- 42 -


(h) Financial liabilities (Cont’d)

(iii) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specific

payment to reimburse the holder for a loss it incurs because a specific debtor fails

to make payment when due in accordance with the original and modified terms of a

debt instrument.

Financial guarantee contracts are recognised initially as a liability at fair value,

adjusted for transaction costs that are directly attributable to the issuance of the

guarantee. Subsequently, the liability is measured at the higher of the best estimate

of the expenditure required to settle the present obligation at the reporting date and

the amount recognised less cumulative amortisation.

A financial liability is derecognised when, and only when, the obligation specified in the

contract is discharged or cancelled or expires. When an existing financial liability is

replaced by another from the same lender on substantially different terms, or the terms

of an existing liability are substantially modified, such an exchange or modification is

treated as a derecognition of the original liability and the recognition of a new liability,

and the difference in the respective carrying amounts is recognised in profit or loss.

(i) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the

statements of financial position if, and only if, there is a currently enforceable legal right

to offset the recognised amounts and there is an intention to settle on a net basis, or to

realise the assets and settle the liabilities simultaneously.

(j) Inventories

Raw materials, work-in-progress and finished goods are stated at the lower of cost and

net realisable value.

Cost of raw material is determined on a first-in-first out (or weighted average) basis.

Cost of finished goods and work-in-progress consists of direct material, direct labour and

an appropriate proportion of production overheads (based on normal operating capacity).

Net realisable value is the estimated selling price in the ordinary course of business, less

the estimated costs of completion and the estimated costs necessary to make the sale.


- 43 -


(k) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, bank

overdrafts and highly liquid investments that are readily convertible to known amount of

cash and which are subject to an insignificant risk of changes in value. For the purpose

of statements of cash flows, cash and cash equivalents are presented net of bank

overdrafts and pledged deposits.

(l) Impairment of assets

(i) Non-financial assets

The carrying amounts of non-financial assets (except for inventories, deferred tax

assets, assets arising from employee benefits, investment property measured at fair

value and non-current assets classified as held for sale) are reviewed at the end of

each reporting period to determine whether there is any indication of impairment.

If any such indication exists, the asset’s recoverable amount is estimated. For

goodwill and intangible assets that have indefinite useful lives, or that are not yet

available for use, the recoverable amount is estimated each period at the same time.

For the purpose of impairment testing, assets are grouped together into the smallest

group of assets that generates cash inflows from continuing use that are largely

independent of the cash inflows of other assets or cash-generating units. Subject to

operating segment ceiling test, for the purpose of goodwill impairment testing,

cash-generating units to which goodwill has been allocated are aggregated so that

the level at which impairment testing is performed reflects the lowest level at

which goodwill is monitored for internal reporting purposes. The goodwill

acquired in a business combination, for the purpose of impairment testing, is

allocated to a cash-generating unit or a group of cash-generating units that are

expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its

value-in-use and its fair value less costs of disposal. In assessing value-in-use, the

estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money

and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or cash-

generating unit exceeds its estimated recoverable amount. Impairment loss is

recognised in profit or loss, unless the asset is carried at a revalued amount, in

which such impairment loss is recognised directly against any revaluation surplus

for the asset to the extent that the impairment loss does not exceed the amount in

the revaluation surplus for that same asset. Impairment losses recognised in respect

of cash-generating units are allocated first to reduce the carrying amount of any

goodwill allocated to the cash-generating unit (group of cash-generating units) and

then to reduce the carrying amounts of the other assets in the cash-generating unit

(group of cash-generating units) on a pro rata basis.


- 44 -


(l) Impairment of assets (Cont’d)

(i) Non-financial assets (Cont’d)

An impairment loss in respect of goodwill is not reversed. In respect of other

assets, impairment losses recognised in prior periods are assessed at the end of

each reporting period for any indications that the loss has decreased or no longer

exists. An impairment loss is reversed only if there has been a change in the

estimates used to determine the recoverable amount since the last impairment loss

was recognised. The reversal is limited so that the carrying amount of the asset

does not exceed its recoverable amount, nor exceed the carrying amount that would

have been determined, net of depreciation or amortisation, had no impairment loss

been recognised for asset in prior years. Such reversal is recognised in the profit or

loss unless the asset is carried at a revalued amount, in which case the reversal is

treated as a revaluation increase.

(ii) Financial assets

All financial assets, other than those categorised as fair value through profit or loss,

investments in subsidiary companies, are assessed at each reporting date whether

there is any objective evidence of impairment as a result of one or more events

having an impact on the estimated future cash flows of the asset.

Financial assets carried at amortised cost

To determine whether there is objective evidence that an impairment loss on

financial assets has been incurred, the Group considers factors such as the

probability of insolvency or significant financial difficulties of the receivable and

default or significant delay in payments. For certain categories of financial assets,

such as trade receivables, assets that are assessed not to be impaired individually

are subsequently assessed for impairment on a collective basis based on similar

risk characteristics. Objective evidence of impairment for a portfolio of receivables

could include the Group's past experience of collecting payments, an increase in

the number of delayed payments in the portfolio past the average credit period and

observable changes in national or local economic conditions that correlate with

defaults on receivables.

If any such evidence exists, the amount of impairment loss is measured as the

difference between the assets’ carrying amount and the present value of estimated

future cash flows (excluding future expected credit losses that have not yet been

incurred) discounted at the financial asset’s original effective interest rate. The

carrying amount of the asset is reduced through the use of an allowance account

and the amount of impairment loss is recognised in profit or loss. Receivables

together with the associated allowance are written off when there is no realistic

prospect of future recovery.


- 45 -


(l) Impairment of assets (Cont’d)

(ii) Financial assets (Cont’d)

If, in a subsequent period, the amount of the impairment loss decreases and the

decrease can be related objectively to an event occurring after the impairment was

recognised in profit or loss, the impairment loss is reversed, to the extent that the

carrying amount of the asset does not exceed what the carrying amount would have

been had the impairment not been recognised at the date the impairment is

reversed. The amount of reversal is recognised in profit or loss.

Available-for-sale financial assets

Significant financial difficulties of the issuer or obligor, and the disappearance of

an active trading market are considerations to determine whether there is objective

evidence that investment securities classified as available-for-sale financial assets

are impaired. A significant or prolonged decline in the fair value of investments in

equity instruments below its cost is also an objective evidence of impairment.

If an available-for-sale financial asset is impaired, the amount of impairment loss is

recognised in profit or loss and is measured as the difference between its cost (net of

any principal payment and amortisation) and its current fair value, less any

impairment loss previously. When a decline in the fair value of an available-for-sale

financial asset has been recognised in other comprehensive income, the cumulative

loss in other comprehensive income is reclassified from equity to profit or loss.

Impairment losses on available-for-sale equity investments are not reversed in

profit or loss in the subsequent periods. Increase in fair value of equity instrument,

if any, subsequent to impairment loss is recognised other comprehensive income.

For available-for-sale debt investments, impairment losses are subsequently

reversed in profit or loss if an increase in the fair value of the investment can be

objectively related to an event occurring after the recognition of the impairment

loss in profit or loss.

Unquoted equity securities carried at cost

If there is objective evidence (such as significant adverse changes in the business

environment where the issuer operates, probability of insolvency or significant

financial difficulties of the issuer) that an impairment loss on financial asset carried

at cost has been incurred, the amount of the loss is measured as the difference

between the carrying amount of the financial asset and the Group’s share of net

assets or the present value of estimated future cash flows discounted at the current

market rate of return for a similar financial asset. Such impairment losses are not

reversed in subsequent periods.


- 46 -


(m) Share capital

(i) Ordinary shares

An equity instrument is any contract that evidences a residual interest in the assets

of the Group and the Company after deducting all of its liabilities. Ordinary shares

are equity instruments. Ordinary shares are recorded at the nominal value of shares

issued. Ordinary shares are classified as equity.

Dividends on ordinary shares are accounted for in equity as appropriation of

retained earnings and recognised as a liability in period in which they are declared.

(n) Compound financial instruments

A compound financial instrument is a non-derivative financial instrument that contains

both a liability and an equity component. Compound financial instruments issued by the

Group comprise convertible notes that can be converted to share capital at the option of

the holder, and the number of shares to be issued does not vary with changes in their fair

value.

The liability component of a compound financial instrument is recognised initially at the

fair value of a similar liability that does not have an equity conversion option. The equity

component is recognised initially at the difference between the fair value of the

compound financial instrument as a whole and the fair value of the liability component.

Any directly attributable transaction costs are allocated to the liability and equity

components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial

instrument is measured at amortised cost using the effective interest method. The equity

component of a compound financial instrument is not re-measured subsequent to initial

recognition except on conversion or expiry.

(o) Provisions

Provisions are recognised when there is a present legal or constructive obligation as a

result of a past event, when it is probable that an outflow of resources embodying

economic benefits will be required to settle the obligation and the amount of the

obligation can be estimated reliably.

Provisions are reviewed at each end of the reporting period and adjusted to reflect the

current best estimate. If it is no longer probable that an outflow of economic resources

will be required to settle the obligation, the provision is reversed. If the effect of the time

value of money is material, provisions are discounted using a current pre tax rate that

reflects, where appropriate, the risks specific to the liability. When discounting is used,

the increase in the provision due to the passage of time is recognised as a finance cost.


- 47 -


(o) Provisions (Cont’d)

Any reimbursement that the Group and the Company can be virtually certain to collect

from a third party with respect to the obligation is recognised as a separate asset.

However, this asset may not exceed the amount of the related provision. The relating

expense relating to any provision is presented in the statements of profit or loss and

other comprehensive income net of any reimbursement.

(p) Employee benefits

(i) Short term employee benefits

Wages, salaries, bonuses and social security contributions are recognised as an

expense in the reporting period in which the associated services are rendered by

employees of the Group and the Company. Short term accumulating compensated

absences such as paid annual leave are recognised when services are rendered by

employees that increase their entitlement to future compensated absences. Short

term non-accumulating compensated absences such as sick and medical leave are

recognised when the absences occur.

The expected cost of accumulating compensated absences is measured as

additional amount expected to be paid as a result of the unused entitlement that has

accumulated at the end of the reporting period.

(ii) Defined contribution plans

As required by law, companies in Malaysia contributions to the state pension

scheme, the Employee Provident Fund (“EPF”). Some of the Group’s foreign

subsidiary companies also make contributions to their respective countries’

statutory pension schemes. Such contributions are recognised as an expense in the

profit or loss as incurred. Once the contributions have been paid, the Group and the

Company have no further payment obligations.

(iii) Termination benefits

Termination benefits are payable when employment is terminated before the

normal retirement date or whenever an employee accepts voluntary redundancy in

exchange for these benefits. The Group recognises termination benefits when it is

demonstrably committed to either terminate the employment of current employees

according to a detailed plan without possibility of withdrawal; or providing

termination benefits as a result of an offer made to encourage voluntary

redundancy. In the case of an offer made to encourage voluntary redundancy, the

measurement of termination benefits is based on the number of employees

expected to accept the offer. Benefits falling due more than 12 months after end of

the reporting period are discounted to present value.


- 48 -


(p) Employee benefits (Cont’d)

(iv) Share-based payment transactions

Equity-settled Share-based Payment Transaction

The Group operates an equity-settled, share-based compensation plan for the

employees of the Group. Employee services received in exchange for the grant of

the share options is recognised as an expense in the profit or loss over the vesting

periods of the grant with a corresponding increase in equity.

For options granted to the employees of the subsidiary companies, the fair value of

the options granted is recognised as cost of investment in the subsidiary companies

over the vesting period with a corresponding adjustment to equity in the

Company’s financial statements.

The total amount to be expensed over the vesting period is determined by reference

to the fair value of the share options granted, excluding the impact of any non-

market vesting conditions (for example, profitability and sales growth targets).

Non-market vesting conditions are included in assumptions about the number of

options that are expected to be vested. At the end of each reporting date, the Group

revises its estimates of the number of share options that are expected to be vested.

It recognises the impact of the revision of original estimates, if any, in the profit or

loss, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited

to share capital (nominal value) and share premium when the options are exercised.

(q) Revenue

(i) Sale of goods

Revenue is measured at the fair value of consideration received or receivable, net

of returns and allowances, trade discount and volume rebates. Revenue from sale

of goods is recognised when the transfer of significant risk and rewards of

ownership of the goods to the customer, recovery of the consideration is probable,

the associated costs and possible return of goods can be estimated reliably, and

there is no continuing management involvement with the goods.

(ii) Rendering of services

Revenue from services rendered is recognised in the profit or loss based on the

value of services performed and invoiced to customers during the period.

(iii) Rental income

Rental income is accounted for on a straight-line basis over the lease terms. The

aggregate costs of incentives provided to lessees are recognised as a reduction of

rental income over the lease term on a straight-line basis.


- 49 -


(q) Revenue (Cont’d)

(iv) Interest income

Interest income is recognised on accrual basis using the effective interest method.

(v) Commissions

When the Group acts in the capacity of an agent rather than as the principal in a

transaction, the revenue recognised is the net amount of commission made by the

Group.

(vi) Management fee

Management fee is recognised on accrual basis when the services are rendered.

(r) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a

qualifying asset are capitalised as part of the cost of the assets, which are assets that

necessarily take a substantial period of time to get ready for theirs intended use or sale,

are capitalised as part of the cost of those assets. All other borrowing costs are

recognised in profit or loss in the period in which they are incurred. Borrowing costs

consist of interest and other costs that the Group and the Company incurred in

connection with the borrowing of funds.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences

when expenditure for the asset is being incurred, borrowing costs are being incurred and

activities that are necessary to prepare the asset for its intended use or sale are in

progress. Capitalisation of borrowing costs is suspended or ceases when substantially all

the activities necessary to prepare the qualifying asset for its intended use or sale are

interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending

their expenditure on qualifying assets is deducted from the borrowing costs eligible for

capitalisation.


- 50 -


(s) Income taxes

Tax expense in profit or loss comprises current and deferred tax. Current tax and

deferred tax is recognised in profit or loss except to the extent that it relates to a business

combination or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for

the year, using tax rates enacted or substantively enacted by the end of the reporting

period, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the liability method for all temporary differences

between the carrying amounts of assets and liabilities in the statements of financial

position and their tax bases. Deferred tax is not recognised for the temporary differences

arising from the initial recognition of goodwill, the initial recognition of assets and

liabilities in a transaction which is not a business combination and that affects neither

accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are

expected to be applied to the temporary differences when they reverse, based on the laws

that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax is based on the expected manner of realisation or

settlement of the carrying amount of the assets and liabilities, at the end of the reporting

period, except for investment properties carried at fair value model. Where investment

properties measured using fair value model, the amount of deferred tax recognised is

measured using the tax rates that would apply on sale of those assets at their carrying

amounts at the reporting date unless the property is depreciable and is held with the

objective to consume substantially all of the economic benefits embodied in the property

over time, rather than through sale. Deferred tax assets and liabilities are not discounted.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset

current tax liabilities and assets, and they relate to income taxes levied by the same tax

authority on the same taxable entity, or on different tax entities, but they intend to settle

current tax liabilities and assets on a net basis or their tax assets and liabilities will be

realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable

profits will be available against which the temporary difference can be utilised. Deferred

tax assets are reviewed at the end of each reporting period and are reduced to the extent

that it is no longer probable that the related tax benefit will be realised.

Unutilised reinvestment allowance and investment tax allowance, being tax incentives

that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it

is probable that the future taxable profits will be available against the unutilised tax

incentive can be utilised.


- 51 -


(t) Segments reporting

Operating segments are reported in a manner consistent with the internal reporting

provided to the chief operating decision-maker. The chief operating decision-makers are

responsible for allocating resources and assessing performance of the operating segments

and make overall strategic decisions. The Group’s operating segments are organised and

managed separately according to the nature of the products and services provided, with

each segment representing a strategic business unit that offers different products and

serves different markets.

(u) Contingencies

Where it is not probable that an inflow or an outflow of economic benefits will be

required, or the amount cannot be estimated reliably, the asset or the obligation is

disclosed as a contingent asset or contingent liability, unless the probability of inflow or

outflow of economic benefits is remote. Possible obligations, whose existence will only

be confirmed by the occurrence or non-occurrence of one or more future events, are also

disclosed as contingent assets or contingent liabilities unless the probability of inflow or

outflow of economic benefits is remote.

(v) Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be

recovered principally through a sale transaction rather than through continuing use. Such

non-current assets classified as held for sale are measured at the lower of their carrying

amount and fair value less costs to sell.

The criteria for held for sale classification is regarded as met only when the sale is highly

probable and the asset is available for immediate sale in its present condition subject

only to terms that are usual and customary for sale of such asset. Management must be

committed to the sale, which should be expected to qualify for recognition as a

completed sale within one year from the date of classification.

Property, plant and equipment are not depreciated or amortised once classified as held

for sale.

A discontinued operation is a component of the Group’s business, the operations and

cash flows of which can be clearly distinguished from the rest of the Group and which:

represents a separate major line of business or geographical area of operations;

is part of a single co-ordinated plan to dispose of a separate major line of business or

geographical area of operations; or

is a subsidiary acquired exclusively with a view to resale.


- 52 -


(v) Non-current assets held for sale (Cont’d)

Classification as a discontinued operation occurs at the earlier of disposal or when the

operation meets the criteria to be classified as held for sale.

When an operation is classified as a discontinued operation, the comparative statements

of profit or loss and other comprehensive income is re-represented as if the operation had

been discontinued from the start of the comparative period.


- 53 -

4. Property, plant and equipment

Plant, Furniture,

machinery fittings Capital

Leasehold Factory and and office Electrical Motor expenditure

land buildings equipment equipment Renovation installation vehicles in progress Total

Group RM RM RM RM RM RM RM RM RM

2014

At 1 January 2014 2,270,000 2,555,000 12,697,857 5,778,817 - 244,995 2,564,867 7,756,121 33,867,657

Acquired in business combinations - - 4,357,027 350,422 99,518 - 568,296 - 5,375,263

Additions - 3,901,243 4,236,019 865,205 - - 1,286,262 15,888,738 26,177,467

Disposals - - (1,386,494) (1,449,154) - - (647,091) - (3,482,739)

Reclassification between categories - 23,644,859 - - - - - (23,644,859) -

Reclassification from non-current

assets held for sale - 164,160 - - - - - - 164,160

Written off - - (834,398) (638,860) - - - - (1,473,258)

Foreign currency translation

differences - - 6,244 471 510 - 1,549 - 8,774

At 31 December 2014 2,270,000 30,265,262 19,076,255 4,906,901 100,028 244,995 3,773,883 - 60,637,324

Accumulated depreciation

At 1 January 2014 45,103 50,765 9,275,475 4,584,639 - 230,835 1,378,789 - 15,565,606

Acquired in business combinations - - 738,823 110,766 4,739 - 289,868 - 1,144,196

Charge for the financial year 67,651 370,728 1,896,439 317,490 52,397 4,116 492,066 - 3,200,887

Disposals - - (1,122,718) (1,021,482) - - (563,023) - (2,707,223)

Written off - - (793,068) (557,857) - - - - (1,350,925)

Reclassification from non-current

assets held for sale - 36,114 - - - - - - 36,114

Foreign currency translation

differences - - 2,944 363 24 - 1,015 - 4,346

At 31 December 2014 112,754 457,607 9,997,895 3,433,919 57,160 234,951 1,598,715 - 15,893,001

Carrying amount

At 31 December 2014 2,157,246 29,807,655 9,078,360 1,472,982 42,868 10,044 2,175,168 - 44,744,323


- 54 -

4. Property, plant and equipment (Cont’d)

Plant, Furniture,

machinery fittings Capital

Leasehold Factory and and office Electrical Motor expenditure

land buildings equipment equipment Renovation installation vehicles in progress Total

Group RM RM RM RM RM RM RM RM RM

2013

At 1 January 2013 4,836,405 7,499,885 31,761,441 6,278,863 5,438,614 1,830,531 3,807,565 624,648 62,077,952

Additions 2,270,000 2,576,379 988,026 194,719 15,222 - 317,073 7,756,121 14,117,540

Disposals - - (11,380) (1,350) - - (72,000) - (84,730)

Written off - - - (34,393) - - - - (34,393)

Reclassification - - 624,648 - - - - (624,648) -

Reclassfication to non-current

assets held for sale (4,836,405) (5,740,055) - - (4,633,550) - - - (15,210,010)

Disposal of subsidiary companies - (1,781,209) (20,664,878) (659,022) (820,286) (1,585,536) (1,487,771) - (26,998,702)

At 31 December 2013 2,270,000 2,555,000 12,697,857 5,778,817 - 244,995 2,564,867 7,756,121 33,867,657


At 1 January 2013 821,277 1,823,524 18,891,193 4,608,569 1,251,760 693,227 2,161,918 - 30,251,468

Charge for the financial year 136,356 353,022 2,869,159 398,493 132,522 121,775 366,078 - 4,377,405

Disposals - - (8,987) (675) - - (35,450) - (45,112)

Written off - - - (33,728) - - - - (33,728)

Reclassfication to non-current

assets held for sale (912,530) (1,142,728) - - (881,050) - - - (2,936,308)

Disposal of subsidiary companies - (983,053) (12,475,890) (388,020) (503,232) (584,167) (1,113,757) - (16,048,119)

At 31 December 2013 45,103 50,765 9,275,475 4,584,639 - 230,835 1,378,789 - 15,565,606

Carrying amount

At 31 December 2013 2,224,897 2,504,235 3,422,382 1,194,178 - 14,160 1,186,078 7,756,121 18,302,051


- 55 -


Furniture,

fittings

and office Motor

equipment vehices Total

Company RM RM RM

2014

Cost

At 1 January 2014 49,406 315,323 364,729

Additions 159,000 - 159,000

Disposals (1,200) (315,323) (316,523)

At 31 December 2014 207,206 - 207,206


At 1 January 2014 43,386 307,291 350,677

Charge for the financial year 33,705 8,031 41,736

Disposals (1,130) (315,322) (316,452)

At 31 December 2014 75,961 - 75,961

Carrying amount

At 31 December 2014 131,245 - 131,245

2013

Cost

At 1 January 2013 45,224 315,323 360,547

Additions 4,182 - 4,182

At 31 December 2013 49,406 315,323 364,729


At 1 January 2013 40,304 275,759 316,063

Charge for the financial year 3,082 31,532 34,614

At 31 December 2013 43,386 307,291 350,677

Carrying amount

At 31 December 2013 6,020 8,032 14,052


- 56 -


(a) Assets pledged as securities to financial institutions

The carrying amount of property, plant and equipment of the Group pledged as

securities for bank borrowings are as disclosed in Note 19 to the financial statements as

follows:

Group

2014 2013

RM RM

Leasehold land 2,157,246 2,224,897

Leasehold buildings 29,807,655 2,504,235

31,964,901 4,729,132

(b) Assets acquired by means of finance leases

The aggregate additional cost for the property, plant and equipment of the Group and the

Company during the financial year under cash payment and finance leases are as follows:

Group Company

2014 2013 2014 2013

RM RM RM RM

Cost of property,

plant and

equipment

purchased 26,177,467 14,117,540 159,000 4,182

Less: finance leases (1,714,788) (461,278) - -

Reclassified from

other receivables,

deposits and

prepayments - (655,000) - -

Foreign currency

translation

differences 4,428 - - -

Cash payment 24,467,107 13,001,262 159,000 4,182

(c) Assets held under finance lease

As at the financial year end, the carrying amounts of leased plant and equipment are as

follows:

Group

2014 2013

RM RM

Plant, machinery and equipment 2,510,429 2,080,245

Motor vehicles 1,812,432 883,323

4,322,861 2,963,568


- 57 -

5. Investment properties

Group

2014 2013

RM RM

At 1 January 5,317,830 5,061,024

Acquisition of business combination 22,000,000 -

Change in fair value recognised in profit or loss - 256,806

At 31 December 27,317,830 5,317,830

Included in the above are:

Short term Long term Leasehold

leasehold leasehold factory

land land building Total

RM RM RM RM

2014

At fair value

At 1 January - 1,460,562 3,857,268 5,317,830

Acquisition through

business combinations 8,000,000 - 14,000,000 22,000,000

At 31 December 8,000,000 1,460,562 17,857,268 27,317,830

2013

At fair value

At 1 January - 1,300,058 3,760,966 5,061,024

Change in fair value

recognised in profit

or loss - 160,504 96,302 256,806

At 31 December - 1,460,562 3,857,268 5,317,830

Leasehold land refers to land with remaining lease period of 37 to 53 years as at the end of the

reporting period.

Fair value basis of investment properties

Fair value of investment properties was estimated by the directors based on internal appraisal

of market values of comparable properties. The fair values are within level 2 of the fair value

hierarchy.

The increase in the fair values of RM Nil (2013: RM256,806) has been recognised in the

profit or loss during the financial year.

Policy on transfer between levels

The fair value of an asset to be transferred between levels is determined as of the date of the

event or change in circumstances that caused the transfer. There were no transfers between

levels during current and previous financial years.


- 58 -

5. Investment properties (Cont’d)

(c) Income and expenses recognised in profit or loss

Group

2014 2013

RM RM

Rental income 1,002,076 635,600

Direct operating expenses:

- Income generating investment properties 236,317 45,526

(d) Investment properties pledged as securities to financial institutions

Investment properties of the Group amounting to RM22,000,000 (2013: RM Nil) have

been pledged to secure banking facilities granted to the Group as disclosed in Note 19 to

the financial statements.

6. Goodwill on consolidation

Group

2014 2013

RM RM

Cost

Acquisition through business combination/At 31 December 1,656,634 -

Impairment loss

Impairment loss/At 31 December 124,687 -

Carrying amount

At 31 December 1,531,947 -

Impairment testing for cash-generating units (“CGU”) containing goodwill

For the purpose of impairment testing, goodwill is allocated to the Group’s operating divisions

which represent the lowest CGU level within the Group at which the goodwill is monitored

for internal management purposes.

The aggregate carrying amounts of goodwill allocated to each unit are as follows:

2014 2013

RM RM

Group

China manufacturing - -

Automation and investment properties 1,531,947 -

1,531,947 -


- 59 -

6. Goodwill on consolidation (Cont’d)

China manufacturing

During the financial year, as a result of the unexpected poor performance in China

manufacturing, the Group carried out a review of the recoverable amount of the unit.

The recoverable amount of the China manufacturing unit was based on its value-in-use,

determined by discounting future cash flow to be generated by the unit. The carrying amount

of the unit amounting to approximately RM2.655 million was determined to be higher than its

recoverable amount of RM2.530 million and an impairment loss of RM124,687 was

recognised. The impairment loss is recorded within administrative expenses in the statements

of profit or loss and other comprehensive income.

Value-in-use was determined by discounting the future cash flows expected to be generated

from the continuing use of the unit and was based on the following key assumptions:

(i) Cash flows were projected based on actual operating results and a three-year business

plan.

(ii) A pre-tax discount rate of 7% was applied in determining the recoverable amount of

the unit. The discount rate was estimated based on the weighted average cost of capital

of the Group plus a reasonable risk premium.

The management believes that no reasonably possible changes in any of the key assumptions

would cause the carrying values of this unit to differ materially from its recoverable amount.

Automation and investment properties

The recoverable amounts for the these CGUs were based on their value-in-use and were

determined by discounting the future cash flows generated from the continuing use of these

CGUs and were based on the following key assumptions:

(i) Cash flows were projected based on actual operating results and a three-year business

plan.

(ii) Revenue was projected at anticipated annual revenue growth of approximately 10%

per annum.

(iii) Expenses were projected at annual increase of approximately 9% per annum.

(iv) A pre-tax discount rate of 7% was applied in determining the recoverable amount of

the unit. The discount rate was estimated based on the weighted average cost of capital

of the Group plus a reasonable risk premium.

The management believes that no reasonably possible changes in any of the key assumptions

would cause the carrying values of this unit to differ materially from its recoverable amount.

The values assigned to the key assumptions represent management’s assessment of future

trends in the industry and are based on both external sources and internal sources.


- 60 -

7. Investment in subsidiary companies

Company

2014 2013

RM RM

In Malaysia:

At cost

Unquoted share 47,896,207 25,716,207

Less: Impairment loss (4,854,530) (4,854,530)

43,041,677 20,861,677

Outside Malaysia:

At cost

Unquoted share 3,220,153 -

Less: Impairment loss (690,000) -

2,530,153 -

45,571,830 20,861,677

During the financial year, as a result of the unexpected poor performance, the Group carried

out a review of the recoverable amount of Suzhou Styrotex Plastic Co. Ltd., a wholly-owned

subsidiary company in the Manufacturing segment.

The recoverable amount of the Company’s investment in Suzhou Styrotex Plastic Co. Ltd.

estimated based on value-in-use method was approximately RM2.530 million. An impairment

loss amounting to RM690,000 was recognised during the financial year. In determining value-

in-use for Suzhou Styrotex Plastic Co. Ltd., the cash flows were discounted at a rate of 7% on

a pre-tax basis.

The impairment loss was recognised in administrative expenses in the statements of profit or

loss and other comprehensive income.


- 61 -

7. Investment in subsidiary companies (Cont’d)

Details of the subsidiary companies are as follows:

Country of Effective interest (%)

Name of company Incorporation 2014 2013 Principal activities

Direct holding:

Ire-Tex (Malaysia) Malaysia 100 100 Design and manufacture of

Sdn. Bhd. protective packing

materials and other related

products and investment

holding.

Ire-Tex Electronics Malaysia 100 100 Contract manufacturing

Sdn. Bhd. services.

Ire-Tex (Johor) Malaysia 70 70 Design and manufacture of

Sdn. Bhd. packaging materials and

other related products.

Cal-Test Malaysia 100 100 Provide services of

Laboratory Sdn. calibration and testing of

Bhd. equipment and general

products.

GH Packaging Sdn. Malaysia 100 100 Manufacture of corrugated

Bhd. packaging materials and

other related products.

Styrotex (Asia Malaysia 50.01 50.01 Investment holding and

Pacific) Sdn. Bhd. sales commission agent.

TFH Corporate Malaysia 55 55 Sales and marketing of

Sdn. Bhd. agricultural waste related

Products.

Jumbo Universe Malaysia 100 70 Manufacturing of wooden

Sdn. Bhd. crates, pallets and other

related wood products.

Ire-Tex (Vietnam) Malaysia 100 100 Dormant

Co. Ltd.

(Incorporated in

Vietnam) *

Ire-Tex Packaging Malaysia 100 100 Manufacturing of

Sdn. Bhd. corrugated packaging

(Formerly known materials and other

as Ire-Tex Paper related products.

Packaging Sdn.

Bhd.)


- 62 -


Details of the subsidiary companies are as follows (cont’d):

Country of Effective interest (%)

Name of company Incorporation 2014 2013 Principal activities

Direct holding:

Ire-Tex Asset Malaysia 100 - Providing car rental

Management Sdn. services.

Bhd.

Suzhou Styrotex China 100 - Design and manufacture of

Plastic Co. Ltd. * protective packaging

materials.

Zoomic Malaysia 100 - Design, manufacturer and

Automation (M) systems consultant for all

Sdn. Bhd. types of industrial ,

automation systems and

manufacturer of LED.

Zoomic Malaysia 100 - Investment holding

Technology (M) company.

Sdn. Bhd.

Held through

Ire-Tex (Malaysia) Sdn. Bhd. Ire-Tex (KL) Sdn. Malaysia 70 70 Design and manufacture of

Bhd. protective packaging

materials and other related

products.

Held through

Ire-Tex Electronics Sdn. Bhd. Ire-Tex Malaysia 100 100 Sourcing, distributing and

Distribution Sdn. trading of raw materials,

Sdn. components and

finished products.

* Subsidiary companies not audited by UHY

The Group’s subsidiary companies which have non-controlling interests are not material

individually or in aggregate to the financial position, financial performance and cash flows of

the Group.


- 63 -


(a) Acquisition of subsidiary companies

Suzhou Styrotex Plastic Co. Ltd.

On 31 January 2014, the Company acquired all the shares in Suzhou Styrotex Plastic Co.

Ltd. (“SSPL”) for a cash consideration of RM3,220,153. SSPL is an approved enterprise

with foreign investment in the People’s Republic of China. The principal activity of

SSPL is design and manufacture of protective packaging materials. The acquisition of

SSPL would enable the Group to improve its business in China.

Zoomic Automation (M) Sdn. Bhd. and

On 24 April 2014, the Company acquired all the shares in Zoomic Automation (M) Sdn.

Bhd. (“ZASB”) for a cash consideration of RM8,200,000. ZASB is principally a

designer, manufacturer and systems consultant for all types of industrial machinery and

automation systems and provision of turnkey solutions to electrical and electronic

industries. The acquisition of ZASB would enable the Group ventures into the Industrial

Automation Business and other electrical and electronic related manufacturing business,

hence diversify its earnings base so as to strengthen the financial position of the Group

without relying solely on its existing packaging material manufacturing business.

Zoomic Technology (M) Sdn. Bhd.

On 24 April 2014, the Company acquired all the shares in Zoomic Technology (M) Sdn.

Bhd. (“ZTSB”) for a cash consideration of RM16,400,000. ZTSB is an investment

holding company where it owns and manages investment properties. The acquisition of

ZTSB would facilitate a smooth integration of ZASB’s business into the Group pursuant

to the acquisition of ZASB without any disruptions to ZASB’s on-going business

operations in view that ZASB would be able to continue to occupy the ZTSB’s property

for its business operations. This would also allow the Group to save on relocation costs

which would otherwise be incurred should the acquisition of ZTSB not be undertaken.

The following summarises the major classes of consideration transferred, and the

recognised amounts of assets acquired and liabilities assumed at the acquisition date:

Fair value of consideration transferred

ZASB & ZTSB SSPL Total

RM RM RM

Cash and cash equivalents 24,600,000 3,220,153 27,820,153

Contingent consideration asset (2,500,000) - (2,500,000)

Total consideration transferred 22,100,000 3,220,153 25,320,153


- 64 -


(a) Acquisition of subsidiary companies (Cont’d)

Fair value of identifiable assets acquired and liabilities assumed


RM RM RM

Property, plant and equipment 3,400,955 830,112 4,231,067

Investment properties 22,000,000 - 22,000,000

Inventories 1,719,474 471,481 2,190,955

Trade an other receivables 7,839,447 2,296,410 10,135,857

Cash and cash equivalents 1,102,402 2,367,669 3,470,071

Trade and other payables (14,171,902) (2,870,207) (17,042,109)

Provision for taxation (165,985) - (165,985)

Finance lease liabilities (147,075) - (147,075)

Deferred tax liabilities (1,009,262) - (1,009,262)

Total identifiable assets and liabilities 20,568,054 3,095,465 23,663,519

The fair value of trade and other receivables is RM10,135,857 and includes trade

receivables with a fair value of RM9,422,559. The gross contractual amount for trade

receivables due is RM26,366,984 of which RM16,944,425 is expected to be uncollectible.

Contingent consideration asset

In consideration of the Company acquired all the shares of ZASB and ZTSB owned by

the Teh Eng Huat and Khoo Hun Sniah (“Vendors”), the vendors jointly and severally

guarantees and covenants with the Company that:

(i) the aggregate of the audited after tax profits (“PAT”) of ZASB and ZTSB for the

2013 financial year shall not be less than RM2,000,000 (“2013 Guaranteed

Amount”);

(ii) the aggregate of the PAT of ZASB and ZTSB for the 2014 financial year shall not

be less than RM3,000,000 (“2014 Guaranteed Amount”);

(iii) if the 2013 PAT and/or the 2014 PAT amount to less than the 2013 Guaranteed

Amount and 2014 Guaranteed Amount (collectively, the “Guaranteed Profits”)

respectively, the vendors shall compensate the Company:

(a) within 7 days upon the receipt of a demand from the Company, such amount

equivalent to the difference between the 2013 PAT and the 2013 Guaranteed

Amount, or in the event ZASB and ZTSB suffer a loss in 2013 financial year,

then it shall be the sum equivalent to the total amount of loss after tax for the

2013 financial year and the 2013 Guaranteed Amount; and/or

(b) within 7 days upon the receipt of a demand from the Company, such amount


Amount, or in the event ZASB and ZTSB suffer a loss in 2014 financial year,

then it shall be the sum equivalent to the total amount of loss after tax for the

2014 financial year and the 2014 Guaranteed Amount.


- 65 -


(b) Acquisition of subsidiary companies (Cont’d)

Contingent consideration asset (cont’d)

(iv) In the event that the 2013 PAT tax is equivalent to or shall exceed the 2013

Guaranteed Amount, the Company and the vendors agree that such surplus amount


Amount shall be carried forward to the 2014 financial year and constitute part of

the 2014 PAT in the event the 2014 PAT is less than the 2014 Guaranteed Amount.

(v) If the total Guaranteed Profits is achieved in the 2013 financial year, the vendors

will be deemed to have met its obligations and the Company and the vendors shall

be forthwith deemed released from undertaking any further actions.

(vi) If the 2013 PAT exceeds the 2013 Guaranteed Amount, the Company shall agree

to allow the Vendors to withdraw up to such amount from Profit Guarantee

Security, to be determined by the following formula:

The Profit Guarantee Security is a sum of RM2,500,000, being a sum equivalent to

50% of the Guaranteed Profits to be retained by a David Lai & Tan, being the

solicitors for the Company in relation to the agreement, from the Balance Total

Purchase Price as security for the Guaranteed Profits.

(vii) The balance of the Profit Guarantee Security upon such amount released shall be

dealt with in the following manner:

(a) if the aggregate of the 2013 PAT and 2014 PAT amount to less than the

Guaranteed Profits, to be utilised to set off against the shortfall and the

balance, if any, shall be paid to the vendors;

(b) if the aggregate of the 2013 PAT and 2014 PAT amount to more than the

Guaranteed Profits, the full amount shall be paid to the vendors.

For the avoidance of doubt, the 2013 PAT and 2014 PAT shall exclude any gains

or losses resulting from reversals of provision for doubtful debts, recovery of bad

debts written off or reversals of any deferred tax assets, if any.

At the acquisition date, the fair value of the contingent consideration asset was estimated

to be RM2,500,000. There has been no change in the fair value since the acquisition

date.


- 66 -


(a) Acquisition of subsidiary companies (Cont’d)

Net cash outflow arising from acquisition of subsidiary companies


RM RM RM

Purchase consideration settled in cash 22,100,000 3,220,153 25,320,153

Cash and cash equivalents acquired (744,792) (2,367,669) (3,112,461)

21,355,208 852,484 22,207,692

Goodwill arising from business combinations

Goodwill was recognised as a result of the acquisition as follows:


RM RM RM

Total consideration transferred 22,100,000 3,220,153 25,320,153

Fair value of identifiable assets

acquired and liabilities assumed (20,568,053) (3,095,466) (23,663,519)

Goodwill 1,531,947 124,687 1,656,634

The goodwill recognised on the acquisition is attributable mainly to the skills and

technical talent of the acquired business’s work force and the synergies expected to be

achieved from integrating the subsidiary companies into the Group’s existing business.

Acquisition-related costs

The Group incurred acquisition-related costs of RM160,000 related to external legal fees

and due diligence costs. The expenses have been included in other operating expenses in

the profit or loss.

Impact of the acquisition on the statements of profit or loss and other comprehensive

income

From the date of acquisition, acquired subsidiary companies have contributed revenue of

RM17,279,863 and loss before tax of RM7,653,099. If the combination had taken place

at the beginning of 2014, the consolidated statements of profit or loss and other

comprehensive income would have included revenue of RM22,317,221 and loss before

tax of RM6,729,660.

There was no acquisition in the previous financial year.

(b) Incorporation of a new subsidiary company

On 16 January 2014, the Company subscribed for 2 ordinary shares of RM1.00 each

representing 100% of the total issued and paid-up capital of Ire-Tex Asset Management

Sdn. Bhd. (“ITAMSB”) for a cash consideration of RM2.00.


- 67 -


(c) Acquisition of non-controlling interests

On 29 August 2014, the Company acquired an additional 30% equity interest in Jumbo

Universe Sdn. Bhd. (“JUSB”) for RM80,000 in cash, increased its ownership from 70%

to 100%. The carrying amount of JUSB’s net assets in the Group’s financial statements

on the date of acquisition was RM722,482. The Group recognised a decreased in non-

controlling interests of RM216,745 and a decreased in retained profits of RM296,745.

The effect of changes in the equity interest in Jumbo Universe Sdn. Bhd. that is

attributable to owners of the Company: RM

Carrying amount of non-controlling interest acquired 216,745

Consideration paid to non-controlling interest 80,000

Decrease recognised in accumulated losses 296,745

(d) Disposal of a subsidiary companies 2013 On 11 November 2013, the Company entered into sale of shares agreements with the

non-controlling interest of Eppor-Pack Sdn. Bhd. and Powertude Sdn. Bhd., Renotex

Group Inc., to dispose of its remaining 51% equity interests in both subsidiary

companies for a total cash consideration of RM2,199,725 and RM513,714 respectively,

which had resulted a loss of RM682,922. Eppor-Pack Sdn. Bhd. and Powertude Sdn.

Bhd. were reported as part of the manufacture and energy supply segment respectively. The effect of the disposal of Eppor-Pack Sdn. Bhd. and Powertude Sdn. Bhd. on the

financial position of the Group as at the date of disposal was as follows:

RM

Property, plant and equipment 10,950,583

Inventories 916,192

Receivables 9,634,837

Cash and bank balances 2,200,718

Payables (11,465,828)

Borrowings (4,938,223)

Bank overdraft (590,108)

Provision for taxation (19,336)

Net assets 6,688,835

Non-controlling interests (3,292,474)

Loss on disposal on investment on subsidiaries (682,922)

Total disposal consideration 2,713,439

Less: Cash and cash equivalents (1,610,610)

Net cash inflow from disposal 1,102,829


- 68 -


There are no significant restrictions on the ability of the subsidiary companies to transfer

funds to the Group in the form of cash dividends or repayment of loans and advances.

Generally, for all subsidiary companies which are not wholly-owned by the Company, non-

controlling shareholders hold protective rights restricting the Company’s ability to use the

assets of the subsidiary companies and settle the liabilities of the Group, unless approval is

obtained from non-controlling shareholders.

8. Other investments

Group Company

2014 2013 2014 2013

RM RM RM RM

Available-for-sale financial assets

Unquoted shares, at cost 844,243 2,324,023 844,243 844,243

Less: Impairment loss (295,000) (295,000) (295,000) (295,000)

549,243 2,029,023 549,243 549,243

9. Deferred tax assets/(liabilities)

Group Company

2014 2013 2014 2013

RM RM RM RM

Deferred tax assets

At 1 January 229,000 40,000 - -

Recognised in profit or

loss (228,000) (242,000) - -

Equity component of

ICULS 294,537 - 294,537 -

(Over)/Under provision

in prior years (1,000) 431,000 - -

At 31 December 294,537 229,000 294,537 -

Deferred tax liabilities

At 1 January 431,000 492,000 - -

Recognised in profit or

loss (406,500) (46,000) - -

Acquisition of subsidiaries 1,009,262 - - -

Under/(Over) provision

in prior years (4,000) (15,000) - -

At 31 December 1,029,762 431,000 - -


- 69 -

9. Deferred tax assets/(liabilities) (Cont’d)

The net deferred tax assets and liabilities shown on the statements of financial position after

appropriate offsetting are as follows:

2014 2013 2014 2013

RM RM RM RM

Deferred tax assets (1,631,021) (274,280) (327,136) -

Deferred tax liabilities 2,366,246 476,280 32,599 -

735,225 202,000 (294,537) -

The components and movements of deferred tax assets and liabilities are as follows:

Group

Unutilised

Unutilised capital Reinvestment

tax losses allowances allowance Others Total

RM RM RM RM RM

Deferred tax assets

At 1 January 2013 (40,000) (100,750) - - (140,750)

Recognised in profit or loss (76,000) 59,470 - (117,000) (133,530)

At 31 December 2013 (116,000) (41,280) - (117,000) (274,280)

Recognised directly in equity - - - (362,106) (362,106)

Recognised in profit or loss 67,134 (963,362) (282,976) 184,569 (994,635)

At 31 December 2014 (48,866) (1,004,642) (282,976) (294,537) (1,631,021)

Accelerated

capital Revaluation

allowance of assets Provisions Total

RM RM RM RM


At 1 January 2013 594,900 - - 594,900

Recognised in profit or loss (100,620) - - (118,620)

At 31 December 2013 494,280 - - 476,280

Recognised in profit or loss 847,465 18,000 15,239 880,704

Acquired in business combination 681,000 328,262 - 1,009,262

At 31 December 2014 2,022,745 346,262 15,239 2,366,246

Company Group


- 70 -

9. Deferred tax assets/(liabilities) (Cont’d)

Company

Unutilised

tax losses Others Total

RM RM RM

Deferred tax assets

At 1 January 2014 - - -

Recognised directly in equity - (362,106) (362,106)

Recognised in profit or loss (32,599) 67,569 34,970

At 31 December 2014 (32,599) (294,537) (327,136)

Accelerated

capital

allowance Total

RM RM


At 1 January 2014 - -

Recognised in profit or loss 32,599 32,599

At 31 December 2014 32,599 32,599

Deferred tax assets have not been recognised in respect of the following temporary difference

due to uncertainty of its recoverability:

Group Company

2014 2013 2014 2013

RM RM RM RM

Unutilised tax losses 17,101,818 12,357,140 5,850,267 3,670,292

Unutilised capital allowance 3,512,543 1,975,422 13,972 -

Unutilised reinvestment

allowance 1,578,287 1,717,517 - -

Others 38,566 201,459 - -

22,231,214 16,251,538 5,864,239 3,670,292

Deferred tax assets have not been recognised in respect of these items as they may not have

sufficient taxable profits to be used to offset or they have arisen in subsidiary companies that

have a recent history of losses.


- 71 -

10. Inventories

Group

2014 2013

RM RM

Cost

Raw materials 4,220,311 1,582,816

Work-in-progress 414,533 982,914

Finished goods 3,338,734 2,914,925

Packing materials 161,506 167,478

8,135,084 5,648,133

Net realisable value

Raw materials 404,066 950,958

Work-in-progress 443,677 50,220

Finished goods 2,247,380 -

3,095,123 1,001,178

11,230,207 6,649,311

11. Trade receivables

Group

2014 2013

RM RM

Trade receivables 49,439,434 22,754,877

Amounts due from related parties 5,817,102 40,938

55,256,536 22,795,815

Less: Accumulated impairment losses

- Trade receivables (16,944,425) -

- Amounts due from related parties (5,799,404) -

32,512,707 22,795,815

Trade receivables are non-interest bearing and are generally on 30 to 90 days (2013: 30 to 90

days) term. They are recognised at their original invoice amounts which represent their fair

values on initial recognition.

Amounts due from related parties are unsecured.

Movements in the allowance for impairment losses of trade receivables are as follows: Group

2014 2013

RM RM

At 1 January - -

Impairment losses recognised 5,799,404 -

Acquired in business combinations 16,944,425 -

At 31 December 22,743,829 -


- 72 -

11. Trade receivables (Cont’d)

Analysis of the trade receivables ageing as at the end of the financial year is as follow:

Group

2014 2013

RM RM

Neither past due nor impaired 28,182,435 17,193,839

Past due not impaired:

Less than 30 days 2,737,069 3,597,527

31 to 60 days 908,113 656,555

61 to 90 days 323,650 1,347,894

More than 90 days 361,440 -

4,330,272 5,601,976

32,512,707 22,795,815

Impaired 22,743,829 -

55,256,536 22,795,815

Trade receivables that are neither past due nor impaired are creditworthy debtors with good

payment records with the Group.

As at 31 December 2014, trade receivables of RM4,330,272 (2013: RM5,601,976) were past

due but not impaired. These relate to a number of independent customers from whom there is

no recent history of default.

The trade receivables of the Group that are individually assessed to be impaired amounting to

RM22,743,829 (2013: RM Nil), related to customers that are in financial difficulties and have

defaulted on payments.

12. Other receivables

Group Company

2014 2013 2014 2013

RM RM RM RM

Other receivables 12,456,382 497,485 3,606 14,734

Less: Accumulated

impairment loss

(825,000)

- - -

11,631,382 497,485 3,606 14,734

Contingent consideration

assets (Note 7) 2,500,000 - 2,500,000 -

Refundable deposits 857,088 903,676 1,100 2,148

Deposit for purchase of:

- plant and machinery 7,001 45,000 - -

- motor vehicle 74,081 - - -

- land and building 556,986 - - -

Prepayments 3,500,877 6,355,443 1,000,000 5,186,924

19,127,415 7,801,604 3,504,706 5,203,806


- 73 -

12. Other receivables (Cont’d)

Movements in the allowance for impairment losses of trade receivables are as follows:

Group

2014 2013

RM RM

Impairment loss recognised/At 31 December 825,000 -

(a) As disclosed in Note 37 to the financial statements, on 3 June 2014, the Company’s

wholly owned subsidiary company, Zoomic Automation (M) Sdn. Bhd. (“ZASB”)

entered into an agreement with Future Rank Sdn. Bhd. (“FRSB”) for the purchase of

machinery amounting to RM16,500,000. Included in other receivables of the Group is an

amount of RM11,500,000 (2013: RM Nil) which represents payment made to FRSB.

Subsequent to the financial year end, the agreement was terminated due to unsatisfied

performance obligation of the supplier.

Subsequently, the Group entered into an agreement with a separate supplier to revamp

and upgrade the existing machines amounting to RM15,986,900. The Group also entered

into a tripartite agreement to assign the debt of RM10,675,000 owing from FRSB to the

new supplier. The debt of RM10,675,000 is derived from RM11,500,000 less a

cancellation penalty of RM825,000. As at the date of this report, the new supplier has

yet to fulfil its performance obligations under the agreement.

(b) As disclosed in Note 37 to the financial statements, on 6 June 2014, the Company

entered into an agreement with Midstream Resources Sdn. Bhd. for the implementation

of a Lean Manufacturing Program amounted to RM2,000,000 which would improve the

production efficiency of the Group. No specified timeline for delivery of the project

deliverables was stated in the agreement. Included in other receivables of the Group and

of the Company is an amount of RM1,000,000 (2013: RM Nil) which represents

advance payment made to the supplier. As at the date of this report, the supplier has yet

to complete its performance obligations under the agreement.

After considering all facts and circumstances, the Directors of the Group are confident that the

performance obligations with these suppliers shall be fulfilled and no allowance of impairment

loss is required as of the date of this report.


- 74 -

13. Amount due from/(to) subsidiary companies

Company

2014 2013

RM RM

Amount due from subsidiary companies

Trade related

Non-interest bearing 106,500 -

Non-trade related

Interest bearing 1,000,000 -

Non-interest bearing 24,928,873 11,301,651

25,928,873 11,301,651

26,035,373 11,301,651

Amount due to subsidiary companies

Non-trade related

Non-interest bearing 743,550 324,858

Amount due from subsidiary companies are unsecured, bear interest at 7.85% p.a. (2013: Nil).

Amount due from/(to) subsidiary companies with non-interest bearing are unsecured and

repayable on demand.

14. Fixed deposits with licensed banks

Group

2014 2013

RM RM

Unencumbered 1,476,923 2,217,094

Encumbered 2,947,800 2,609,117

4,424,723 4,826,211

Fixed deposits with licensed institutions amounting to RM2,947,800 (2013: RM2,609,117)

are pledged as securities for banking facilities granted to subsidiary companies and hence are

not available for general use.

The effective interest rates and maturities of fixed deposits of the Group as at the end of the

reporting period range from 2.90% to 3.30% (2013: 2.90% to 3.30%) per annum and 1 to 12

months (2013: 1 to 12 months) respectively.


- 75 -

15. Cash and bank balances

Group Company

2014 2013 2014 2013

RM RM RM RM

Cash and bank balances 7,923,306 7,191,807 1,659,693 560,375

Short-term deposits with

licensed institutions 3,685,650 5,285,650 382,647 3,682,647

11,608,956 12,477,457 2,042,340 4,243,022

The effective interest rates and maturities of short-term deposits of the Group and the

Company as at the end of the reporting period are as follows:

Group Company

2014 2013 2014 2013

RM RM RM RM

Interest rate (%) 2.88 to 2.95 2.88 to 2.95 2.88 to 2.95 2.88 to 2.95

Maturities (Days) 1 to 30 1 to 30 1 1

16. Non-current assets held for sale

Group

2014 2013

RM RM

Reclassified from property, plant and equipment - 12,273,702

The non-current assets held for sale consist of:

- Short term leasehold land - 3,923,875

- Building - 3,837,627

- Factory extension - 759,700

- renovation - 3,752,500

- 12,273,702

On 18 November 2013, a wholly-owned subsidiary, Ire-Tex (Malaysia) Sdn. Bhd., entered

into a sale and purchase agreement with a third party to dispose of the above mentioned assets.

The disposal was completed during current financial year.


- 76 -

17. Share capital

Group and Company

2014 2013

RM RM

Authorised:

At 1 January ^ 50,000,000 50,000,000

Created during the financial year 450,000,000 -

At 31 December * 500,000,000 50,000,000

Issued and fully paid shares

At 1 January ^ 46,218,900 45,011,000

Issuance of shares pursuant to ESOS 782,500 1,207,900

Conversion of ICULS 5,721,575 -

At 31 December * 52,722,975 46,218,900

^ Ordinary shares of RM1.00 each

* Ordinary shares of RM0.40 each

The holders of ordinary shares are entitled to receive dividends as and when declared by the

Company. All ordinary shares carry one vote per share without restrictions and rank equally

with regard to the Company’s residual assets.

During the financial year, the Company has undertaken a share split involving the subdivision

of every one (1) existing share of RM1.00 each in the Company into two and a half (2.5)

ordinary shares of RM0.40 each (“Share Split”).


- 77 -

18. Reserves

Group Company

2014 2013 2014 2013

Note RM RM RM RM

Non-

distributable

Share premium (a) 5,349,707 4,921,765 5,349,707 4,921,765

Employee share

option reserve (b) - 301,923 - 301,923

Accumulated

losses (6,469,555) (320,187) (14,447,087) (10,024,609)

Warrant reserve (c) 9,959,897 - 9,959,897 -

ICULS- Equity

portion 19(c) 21,802,809 - 21,802,809 -

Foreign currency

translation

reserve (d) 16,013 - - -

30,658,871 4,903,501 22,665,326 (4,800,921)

The nature of reserves of the Group and the Company are as follows:

(a) Share premium

Group and Company

2014 2013

RM RM

At 1 January 4,921,765 4,443,101

Issuance of shares pursuant to ESOS 124,600 109,560

Transfer from share option reserve upon exercise of

ESOS - 369,104

Conversion of ICULS 1,930,130 -

Share issue expenses (1,626,788) -

At 31 December 5,349,707 4,921,765

Share premium comprises the premium paid on subscription of shares in the Company

over and above the par value of the shares.


- 78 -

18. Reserves (Cont’d)

The nature of reserves of the Group and the Company are as follows: (Cont’d)

(b) Employee share option reserve

Group and Company

2014 2013

RM RM

At 1 January 301,923 679,721

Transfer to share premium - (369,104)

Lapsed of ESOS (301,923) (8,694)

At 31 December - 301,923

Employee share option reserve represents the equity-settled share options granted to

employees. The reserve is made up of the cumulative value of services received from

employees recorded over the vesting period commencing from the grant date of equity-

settled share options, and is reduced by the expiry or exercise of the share options.

Employee share option is disclosed in Note 28.

(c) Warrant reserve

Group and Company

2014 2013

RM RM

Arising from Right Issue with Warrants/

At 31 December 9,959,897 -

During the financial year, the Company allotted 58,751,722 free warrants to subscribers

of Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) pursuant to a

renounceable rights issue of 470,014,000 or RM35,251,050 nominal value of five (5)-

year, 1%, ICULS at 100% of the nominal value of RM0.075 each (“Rights ICULS”) on

the basis of four (4) RM0.075 nominal value of Rights ICULS for every one (1) ordinary

share of RM0.40 each of the Company held together with free detachable warrants on

the basis of one (1) warrant for every eight (8) Rights ICULS subscribed.

The fair value of the Warrants is RM0.331 each estimated using the Trinomial option

pricing model, taking into account the terms and conditions upon which the Warrants are

issued. The fair value of the Warrants measured at issuance date and the assumptions are

as follows:

Tenure 5 years

Exercise price RM0.80

Theoretical ex-all price RM0.746

Volatility rate 51.55%

Risk-free interest rate, per annum 4.09%

Expected dividend yield 0.82%

Period of volatility assessment Last 50 market days to 16 June 2014


- 79 -

18. Reserves (Cont’d)

The nature of reserves of the Group and the Company are as follows: (Cont’d)

(d) Foreign currency translation reserve

The foreign currency translation reserve represents exchange differences arising from

the translation of the financial statements of foreign operations whose functional

currencies are different from that of the Group’s presentation currency.

19. Loans and borrowings

Group Company

2014 2013 2014 2013

RM RM RM RM

Secured

Term loans (Note a) 15,327,360 6,616,205 - -

Finance lease liabilities

(Note b) 2,863,143 2,142,441 - -

Bankers acceptance

(Note a) 22,198,000 18,766,000 - -

Bank overdrafts (Note a) 2,690,318 233,931 - -

43,078,821 27,758,577 - -

Unsecured

ICULS – liability

component (Note c) 1,227,237 - 1,227,237 -

44,306,058 27,758,577 1,227,237 -


- 80 -

19. Loans and borrowings (Cont’d)

Group Company

2014 2013 2014 2013

RM RM RM RM

Non-current

Term loans 13,707,427 6,002,279 - -

Finance lease liabilities 1,870,120 1,202,649 - -

ICULS – liability

component 1,227,237 - 1,227,237 -

16,804,784 7,204,928 1,227,237 -

Current

Term loans 1,619,933 613,926 - -

Finance lease liabilities 993,023 939,792 - -

Bankers acceptance 22,198,000 18,766,000 - -

Bank overdrafts 2,690,318 233,931 - -

27,501,274 20,553,649 - -

44,306,058 27,758,577 1,227,237 -

(a) Bank borrowings

The term loans, bankers acceptance and bank overdrafts are secured by the following:

(i) First and third party legal charge over the leasehold land and building of the

subsidiary companies as disclosed in Notes 4 and 5 to the financial statements;

(ii) Facilities Agreements as principal instrument;

(iii) Letter of undertaking cum indemnity with respect to the bankers acceptance;

(iv) Certain fixed deposits of the subsidiary companies as disclosed in Note 14 to the

financial statements; and

(v) Corporate guarantee by the Company.


- 81 -


(a) Bank borrowings (Cont’d)

The average effective interest rates per annum are as follows:

Group Company

2014 2013 2014 2013

% % % %

Bank overdrafts 7.10 to 7.85 7.60 to 7.85 - -

Bankers acceptance 3.85 to 5.15 3.50 to 4.65 - -

Finance lease

liabilities 2.25 to 4.56 2.73 to 4.56 - -

ICULS 6.20 6.20 6.20 6.20

Term loans 5.10 to 5.85 5.10 to 5.60 - -

(b) Finance lease liabilities

Group

2014 2013

RM RM

Minimum lease payments:

Within one year 1,127,071 1,038,637

Later than one year and not later than two years 1,014,916 663,400

Later than two year and not later than five years 994,525 615,274

3,136,512 2,317,311

Less: Future finance charges (273,369) (174,870)

Present value of minimum lease payment 2,863,143 2,142,441

Present value of minimum lease payments:

Within one year 993,023 939,792

Later than one year and not later than two years 937,114 609,926

Later than two year and not later than five years 933,006 592,723

2,863,143 2,142,441

The Group leases plant, machinery, equipment and motor vehicles under finance lease

(Note 4). At the end of the lease term, the Group has the option to acquire the assets at a

nominal price deemed to be a bargain purchase option. There are no restrictive

covenants imposed by the lease agreement and no arrangements have been entered into

for contingent rental payment.


- 82 -


(c) Irredeemable Convertible Unsecured Loan Stocks (“ICULS”)

On 11 June 2014, the Company issued 470,014,000 or RM35,251,050 nominal value of

five (5)-year, 1%, ICULS at 100% of the nominal value of RM0.075 each (“Rights

ICULS”) on the basis of four (4) RM0.075 nominal value of Rights ICULS for every one

(1) ordinary share of RM0.40 each of the Company held together with free detachable

warrants on the basis of one (1) warrant for every eight (8) Rights ICULS subscribed.

The main features of the ICULS are as follows:

(i) The ICULS are convertible into new ordinary shares of RM0.40 each in the

Company at any time from the date of issue of the ICULS until the maturity date

on 10 June 2019

(ii) The conversion price of the ICULS is RM0.60 for every one (1) new ordinary

share of the Company

(iii) The ICULS may be converted in the following manner:

a. by surrendering nominal value of ICULS equivalent to the Conversion Price; or

b. by surrendering such number of ICULS together with cash such that in

aggregate it amounts to the Conversion Price.

(iv) Each registered holder of the ICULS shall have the right on any market day from

and including the issue date of the ICULS up to and including the maturity date of

the ICULS (“Maturity Date”) to convert such amount of ICULS held into fully

paid-up shares of the Company at the Conversion Price.

(v) The ICULS will not be redeemable for cash. All outstanding ICULS will be

mandatorily converted into new shares of the Company on the Maturity Date.

The residual value, after deducting the liability component from the fair value of the

instrument as a whole, is attributed to the equity component as follows:

Equity Liability

component of component of Total

ICULS (Note 18) ICULS

RM RM RM

At the date of issuance of

ICULS

- nominal value 21,802,809 1,227,237 23,030,046

At the date of issuance 21,802,809 1,227,237 23,030,046

Interest expenses - 49,828 49,828

Interest paid - (49,828) (49,828)

21,802,809 1,227,237 23,030,046


- 83 -

20. Other payables

Group Company

2014 2013 2014 2013

RM RM RM RM

Current

Other payables 4,488,889 2,444,907 48,301 45,690

Accruals 2,630,167 1,413,430 580,525 262,500

Refundable deposit

received 698,524 - 162,424 162,424

Non-refundable

deposits received - 2,450,000 - -

7,817,580 6,308,337 791,250 470,614

Non-current

Other payables 504,979 - - -

Non-current other payables

These amounts are non-interest bearing and repayable in 2 to 5 years.

21. Trade payables

Group

2014 2013

RM RM

Trade payables 16,825,999 7,252,202

Credit terms of trade payables of the Group ranged from 30 to 90 days (2013: 30 to 90 days)

depending on the terms of the contracts.

Included in trade payables are amounts of RM601,835 (2013: RM644,777) due to related

parties. These amounts are unsecured.


- 84 -

22. Derivative financial liabilities

Group

2014 2013

RM RM

Derivative held for trading at fair value

through profit or loss

- Forward exchange contracts:

- Nominal value - 3,213,600

- Liabilities - 202,225

Forward exchange contracts are used to manage the foreign currency exposure arising from

the Group’s receivables and payables denominated in currencies other than the functional

currencies of the Group entities. Most of the forward exchange contracts have maturities of

less than one year after the end of the reporting period. Where necessary, the forward

contracts are rolled over at maturity.

23. Revenue

Group Company

2014 2013 2014 2013

RM RM RM RM

Management fees - - 1,803,500 2,202,000

Sales of goods 107,820,498 115,234,276 - -

Rental income 336,576 - - -

Commission income 977 205,806 - -

108,158,051 115,440,082 1,803,500 2,202,000

24. Finance costs

Group Company

2014 2013 2014 2013

RM RM RM RM

Bank overdrafts 65,526 39,240 - -

Bankers acceptance 921,538 889,188 - -

Finance lease liabilities 148,291 226,519 - -

Term loans 699,069 236,819 - -

Other finance cost 54,056 21,179 49,828 -

1,888,480 1,412,945 49,828 -


- 85 -

25. (Loss)/Profit before tax

(Loss)/Profit before tax is determined after charging/(crediting) amongst other, the following

items:

Group Company

2014 2013 2014 2013

RM RM RM RM

Auditors’ remuneration

- statutory audits 106,901 67,013 16,000 15,000

- under/(over) provision

in prior year 4,710 (1,000) 3,000 -

- non-audit services 4,000 26,500 4,000 26,500

Bad debt written off 269,440 56,033 - -

Deposit forfeited - 50,000 - -

Depreciation of property,

plant and equipment 3,200,887 4,377,405 41,736 34,614

Fair value (gain)/loss of:

- derivative financial

instruments (202,225) 202,225 - -

- investment properties - (256,806) - -

Foreign exchange (gain)/

loss

- Realised (227,540) 53,952 (1,410) (25,006)

- Unrealised (80,389) (171,904) - -

(Gain)/Loss on disposal

of:

- investment in

subsidiary companies - 682,922 - 319,738

- property, plant and

equipment (11,270,898) 19,145 (14,999) -

- other investments (128,376) - - -

Impairment loss on:

- inventories 693,607 - - -

- investment in

subsidiary companies - - 690,000 -

- goodwill 124,687 - - -

- other investments - 295,000 - 295,000

- trade receivables 5,799,404 - - -

- other receivables 825,000 - - -

Interest income (161,047) (154,272) (52,732) (130,987)

Non-executive

directors’

remuneration 142,000 60,000 142,000 60,000

Property, plant and

equipment written off 122,332 665 - -


- 86 -

25. (Loss)/Profit before tax (Cont’d)

(Loss)/Profit before tax is determined after charging/(crediting) amongst other, the following

items: (Cont’d)

Group Company

2014 2013 2014 2013

RM RM RM RM

Rental expenses

- premises 2,906,789 3,184,299 27,000 32,400

- motor vehicles 289,500 57,900 120,000 -

- machinery and

equipment 23,916 198,731 - -

- warehouse 5,500 10,079 - -

- land 90,000 96,000 - -

Rental income (793,240) (694,562) - -

Staff costs (Note 30) 20,655,663 16,392,345 3,412,228 1,517,590

26. Taxation

Group Company

2014 2013 2014 2013

RM RM RM RM

Tax expenses

recognised in profit

or loss

Current tax 796,200 597,000 5,600 -

(Over)/Under provision

in prior years (26,552) 79,173 29,472 1,801

769,648 676,173 35,072 1,801

Deferred tax

- origination and reversal

of temporary

differences (262,294) 204,000 67,569 -

Change in tax rate - (8,000) - -


in prior years 3,000 (446,000) - -

510,354 426,173 102,641 1,801

Malaysian income tax is calculated at the statutory tax rate of 25% (2013: 25%) of the

estimate assessable profits for the financial year. Taxation for other jurisdiction is calculated at

the rates prevailing in the respective jurisdictions.


- 87 -

26. Taxation (Cont’d)

A reconciliation of income tax expense applicable to (loss)/profit before tax at the statutory

tax rate to income tax expense at the effective income tax rate of the Group and the Company

are as follows:

Group Company

2014 2013 2014 2013

RM RM RM RM

Profit/(Loss) before tax (5,891,273) 2,289,199 (4,621,760) (241,004)

At Malaysian statutory

tax rate of 25% (2013:

25%) (1,472,818) 572,300 (1,155,440) (60,251)

Expenses not deductible

for tax purposes 1,274,094 379,269 612,906 51,755

Income not subject

to tax (829,857) (254,565) (353) -

Utilisation of previously

unrecognised deferred

tax assets - - - -

Utilisation of previous

deferred tax assets

recognised (93,458) - - -

Net deferred tax

movements not

recognised 1,072,230 112,148 548,487 8,496

Movement of deferred

tax 516,146 (8,152) - -

Changes in tax rate - (8,000)

Others 67,569 - 67,569 -


in prior years (23,552) (366,827) 29,472 1,801

510,354 426,173 102,641 1,801


- 88 -

27. (Loss)/Earnings per share

(a) Basic (loss)/earnings per share

The basic (loss)/earnings per share are calculated based on the consolidated (loss)/profit

for the financial year attributable to the owners of the parent and the weighted average

number of ordinary shares in issue during the financial year as follows:

Group

2014 2013

RM RM

(Loss)/Profit attributable to ordinary

shareholders (6,154,546) 1,022,693

Weighted average number of ordinary shares in

issue

Issued ordinary shares at 1 January 45,420,680 44,944,464

Effect of ordinary shares issued during the

financial year 76,744,448 476,216

Weighted average number of ordinary shares at

31 December 122,165,128 45,420,680

Basic (loss)/earnings per ordinary shares (in sen) (5.04) 2.25

(b) Diluted (loss)/earnings per share

Diluted (loss)/earnings per share are calculated based on the adjusted consolidated (loss)/

profit for the financial year attributable to the owners of the parent and the weighted

average number of ordinary shares in issue during the financial year have been adjusted

for the dilutive effects of all potential ordinary shares as follows:

Group

2013

RM

(Loss)/Profit attributable to ordinary

shareholders of the Company 1,022,693

Weighted average number of ordinary shares used in

the calculation of basic earnings per share 45,420,680

Effect of share-based payment transactions 246,534

Weighted average number of ordinary shares at

31 December 45,667,214

Diluted earnings per ordinary shares (in sen) 2.24

The Group has no dilution in loss per ordinary share as the potential ordinary shares are

antilutive.


- 89 -

28. Employee benefits

Employees Share Option Scheme (“ESOS”)

The salient features of the ESOS scheme are, inter alia, as follows:

(i) The total number of new ordinary shares which are available to be issued under the

ESOS shall not exceed ten percent (10%) of the total issued and fully paid-up share

capital of the Company at any time.

(ii) The ESOS shall be capable of being exercised from 1 August 2004 to 16 January 2009.

On 26 November 2008, the Company has given its approval to extend the existing ESOS

expiring on 16 January 2009 for a further period of five years to 16 January 2014

pursuant to By-laws 19.1 of the Scheme. Options not exercised during the said period

shall become null and void.

(iii) The new ordinary shares to be issued and allotted upon any exercise of the option will

upon allotment and issuance rank pari passu in all respect with the existing issued and

fully paid-up ordinary shares of the Company except that the new ordinary shares will

not be entitled for any dividends, rights, allotments or other distribution declared, made

or paid to shareholders unless the new ordinary shares so allotted have been credited into

the relevant securities accounts of the shareholders maintained by Bursa Malaysia

Depository Sdn. Bhd. before the entitlement date and will be subject to all provisions of

the Articles of Association of the Company relating to transfer, transmission and

otherwise.

The fair value of equity-settled share options granted in the previous year was estimated using

binomial model, taking into account the terms and conditions upon which the options were

granted. The following table lists the inputs to the model used:

Fair value of share options granted on 24 August 2007:

Weighted average share price (RM) 0.88

Weighted average exercise price (RM) 1.00

Expected volatility (%) 21.82

Expected life (years) 6.40

Risk free rate (%) 4.04

The expected life of the option was based on historical data and is not necessarily indicative of

exercise patterns that may occur. The expected volatility reflects the assumption that the

historical volatility is indicative of future trends, which may also not necessarily be the actual

outcome. No other features of the options granted were incorporated into the measurement of

fair value.


- 90 -

28. Employee benefits (Cont’d)

2014 2013

Weighted Weighted

Number of average Number of average

share exercise share exercise

option price option price

Group RM RM

At 1 January 1,233,500 - 2,470,800 -

Forfeited during the

financial year (451,000) - (29,400) -

Exercise during the

financial year (782,500) 1.16 (1,207,900) 0.92

At 31 December - 1.16 1,233,500 0.92

During the financial year, 311,500 and 471,000 shares options were exercised at RM1.40 and

RM1.00 each respectively. The weighted average share price at the date of exercise for the

year was RM0.60 (2013: RM1.44).

29. Dividends

Group and Company

2014 2013

RM RM

Dividends recognised as distribution to ordinary

shareholders of the Company:

Final tax dividends paid in respect of the financial year

ended 31 Dcember 2012 (tax exempt dividend of

RM0.15 per ordinary share) - 684,420

30. Staff costs

Group Company

2014 2013 2014 2013

RM RM RM RM

Salaries, wages and other

emoluments 19,047,030 15,018,389 2,931,021 1,289,781

Social security

contributions 116,421 118,463 6,340 5,781

Defined contribution

plans 1,302,212 1,111,493 388,867 186,028

Fee 190,000 144,000 86,000 36,000

20,655,663 16,392,345 3,412,228 1,517,590


- 91 -

30. Staff costs (Cont’d)

Included in staff costs is aggregate amount of remuneration received and receivable by the

Executive Directors of the Company and the subsidiary companies during the financial year as

below:

Group Company

2014 2013 2014 2013

RM RM RM RM

Executive Directors

Existing Directors of the

Company

Salaries, bonus and other

emoluments 2,346,935 712,093 2,346,935 712,093

Social contribution

plan 2,273 - 2,273 -

Fees 86,000 36,000 86,000 36,000


plans 319,794 124,962 319,794 124,962

Estimated money vale of

benefits-in-kind - 14,700 - 14,700

2,755,002 887,755 2,755,002 887,755

Existing Directors of the

subsidiary companies

Salaries, bonus and other

emoluments 1,157,036 1,132,517 - -

Fees 104,000 120,000 - -


plans 77,740 95,479 - -

Estimated money vale of

benefits-in-kind - 6,500 - -

1,338,776 1,354,496 - -

Past Director of the

Company

Fees* 11,000 - 11,000 -

Total Executive

Directors’ remuneration 4,104,778 2,242,251 2,766,002 887,755

* This represent the remuneration paid to the Director until his resignation in Year 2013.


- 92 -

31. Commitments

Group Company

2014 2013 2014 2013

RM RM RM RM

Capital expenditure

Authorised and

contracted for:

- Acquired in business

combination - 23,724,816 - 23,724,816

- Property, plant and

equipment 5,537,324 7,440,644 - -

5,537,324 31,165,460 - 23,724,816

Authorised but not

contracted for

- Acquired in business

combination - 5,000,000 - -

- 5,000,000 - -

Operating lease commitments - as lessee

The future minimum lease payments payable under non-cancellable operating leases are:

Group

2014 2013

RM RM

Within one year 1,559,332 652,824

Later than one year but not later than two years 1,075,701 240,998

Later than two years but not later than five years 1,098,571 -

Later than five years 1,037,307 -

4,770,911 893,822

Operating lease commitments represent rentals payables for use of building and equipment.

Leases are negotiated for terms ranging from one to five years.


- 93 -

32. Contingencies

Group Company

2014 2013 2014 2013

RM RM RM RM

Contingent liabilities

Unsecured

Corporate guarantee

extended to banks and

financial institutions for

credit facilities granted

to a former subsidiary

- Limit - 11,900,708 - 11,900,708

Corporate guarantee

given to suppliers of

goods for credit term

granted to subsidiary

companies - - 1,000,000 1,000,000

Litigation

An oversea customer

has commenced an

action against one

of the subsidiary

company in respect of

a civil suit filed by

Airdex International

Inc. (“Airdex”)

alleging infringement

by Suzhou Styrotex

Plastic Co. Ltd. of

Airdex’s patent

in respect of its design

for Airfreight Pallet.

The claim estimated to

be RM1,652,437 should

the action be successful 1,652,437 - 1,652,437 -


- 94 -

33. Related party disclosures

(a) Identifying related parties

For the purposes of these financial statements, parties are considered to be related to the

Group if the Group or the Company has the ability, directly or indirectly, to control or

joint control the party or exercise significant influence over the party in making financial

and operating decisions, or vice versa, or where the Group or the Company and the party

are subject to common control. Related parties may be individuals or other entities.

Related parties also include key management personnel defined as those persons having

authority and responsibility for planning, directing and controlling the activities of the

Group either directly or indirectly. The key management personnel include all the

Directors of the Group.

(b) Significant related party transactions

Related party transactions have been entered into in the normal course of business under

normal trade terms. In addition to the related party balances disclosed in Notes 11, 13

and 21 to the financial statements, the significant related party transactions of the Group

and of the Company are as follows:

Group Company 2014 2013 2014 2013 RM RM RM RM

(i) Transactions with


- Management fee

income - - 1,803,500 2,052,000

- Interest income - - 30,325 -

- Rental of premises - - 27,000 32,400

- Rental of motor

vehicles - - 120,000 -

(ii) Transactions with

companies which are

accustomed to act in

accordance with the

directions of a director

of the Company:

- Sales of goods 5,007,231 - - -


- 95 -

33. Related party disclosures (Cont’d)

(b) Significant related party transactions (Cont’d)


(iii) Transactions with

companies in which

certain directors of the

Company have

substantial financial

interest:

- Sales of goods - 22,835 - -

- Purchase of goods 2,781,522 2,752,044 - -

(iv) Transactions with

companies in which a

former director of the

Company has

substantial financial

interest:

- Sales of goods - 35,000 - -

- Purchase of goods - 29,474 - -

- Utility charged - 371,697 - -

- Rental of premises - 27,500 - -

(v) Transactions with a

former director


(vi) Transactions with

persons connected

to a former director


(ix)Transactions with

directors of the

Company

- Disposal of motor

vehicles 15,000 - 15,000 -


- 96 -

33. Related party disclosures (Cont’d)

(c) Compensation of key management personnel

The remuneration of key management personnel is same as the Directors’ remuneration

as disclosed in Note 30.

34. Segment information

For management purposes, the Group is organised into business units based on their products

and services, and has three reportable segments as follows:

Manufacturing Contract manufacturing, conversation of corrugated paper boxes

and manufacturing of polymer-based packaging materials and other

related products.

Trading Trading of raw materials, computers, finished goods, wooden crates

and pallets, provision of testing and calibration services and sale

and marketing of agricultural waste related products.

Automation Design, manufacture and systems consultant for all types of

industrial machineries and automation systems and other electrical

and electronic related manufacturing business.

Investment holding Investment holding and provision of management services. This

reportable segment has been formed by aggregating the investment

holding segment and the management services segment, which are

regarded by management to exhibit similar economic

characteristics

Except as indicated above, no operating segments have been aggregated to form the above

reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of

making decisions about resource allocation and performance assessment. Segment

performance is evaluated based on profit or loss and is measured consistently with profit or

loss in the consolidated financial statements.

Transactions between segments are carried out on agreed terms between both parties. The

effects of such inter-segment transactions are eliminated on consolidation. The measurement

basis and classification are consistent with those adopted in the previous financial year.


- 97 -

34. Segment information (Cont’d)

Adjustments

Investment and

Manufacturing Trading Automation holding eliminations Consolidated

RM RM RM RM RM RM

2014

Revenue

External sales 96,613,285 2,957,093 6,597,319 1,990,354 - 108,158,051

Inter-segment sales 33,768,456 211,500 832,636 827,722 (35,640,314) -

Total revenue 130,381,741 3,168,593 7,429,955 2,818,076 (35,640,314) 108,158,051

Results

Loss from operation before interest income 7,437,174 (791,026) (7,514,794) (3,775,984) 480,790 (4,163,840)

Interest income 808,035 6,427 - 52,246 (705,661) 161,047

Loss for the financial year 8,245,209 (784,599) (7,514,794) (3,723,738) (224,871) (4,002,793)

Interest expenses (1,843,147) (295,588) (135,665) (319,741) 705,661 (1,888,480)

Loss before tax 6,402,062 (1,080,187) (7,650,459) (4,043,479) 480,790 (5,891,273)

Taxation (749,004) (27,192) 230,052 35,790 - (510,354)

Net loss for the financial year 5,653,058 (1,107,379) (7,420,407) (4,007,689) 480,790 (6,401,627)

Assets and liabilities

Segment assets 150,909,595 2,135,186 20,710,639 105,222,040 (125,006,310) 153,971,150

Segment liabilities 108,253,187 6,340,722 24,862,935 11,817,086 (80,685,552) 70,588,378

Other information

Capital expenditure 24,707,647 40,489 1,270,331 159,000 - 26,177,467

Depreciation of property, plant and equipment 2,549,245 267,658 342,248 41,736 - 3,200,887

Other material non-cash items (11,075,466) (201,951) 7,320,311 675,001 (690,000) (3,972,105)


- 98 -


Adjustments

Energy Investment and

Manufacturing Trading supply holding eliminations Consolidated

RM RM RM RM RM RM

2013

Revenue

External customers 100,778,011 14,627,071 35,000 - - 115,440,082

Inter-segment 30,169,938 1,488 1,945,000 2,202,000 (34,318,426) -

Total revenue 130,947,949 14,628,559 1,980,000 2,202,000 (34,318,426) 115,440,082

Results

Profit from operation before interest income 3,938,405 32,648 311,994 (735,175) - 3,547,872

Interest income 513,712 10,397 - 130,987 (500,824) 154,272

Profit for the financial year 4,452,117 43,045 311,994 (604,188) (500,824) 3,702,144

Interest expenses (1,516,030) (367,137) (30,602) - 500,824 (1,412,945)

Profit before taxation 2,936,087 (324,092) 281,392 (604,188) - 2,289,199

Taxation (394,372) (30,000) - (1,801) - (426,173)

Net profit for the financial year 2,541,715 (354,092) 281,392 (605,989) - 1,863,026

Assets and liabilities

Segment assets 100,878,680 3,982,492 - 42,213,451 (53,912,619) 93,162,004

Segment liabilities 66,980,259 7,080,649 - 795,472 (32,848,039) 42,008,341

Other information

Capital expenditure 14,107,060 6,298 - 4,182 - 14,117,540

Depreciation of property, plant

and equipment 3,752,446 265,410 324,935 34,614 - 4,377,405

Other material non-cash items (355,413) 254,771 - 977,922 - 877,280


- 99 -


Adjustments and eliminations

Interest income, finance costs, and fair value gains and losses on financial assets are not

allocated to individual segments as the underlying instruments are managed on a group basis.

Current taxes, deferred taxes and certain financial assets and liabilities are not allocated to

those segments as they are also managed on a group basis.

Capital expenditure consists of additions of property, plant and equipment, intangible assets

and investment properties including assets from the acquisition of subsidiary companies.

Inter-segment revenues and balances are eliminated on consolidation.

Other material non-cash items consist of the following items as presented in the respective

notes to the financial statements:

2014 2013

RM RM

Bad debts written off 269,440 56,033

Change in fair value of investment properties - (256,806)

Deposit forfeited - 50,000

Fair value of derivatives financial instrument (202,225) 202,225

Impairment loss on other investments - 295,000

(Gain) on disposal other investments (128,376) -

(Gain)/Loss on disposal of property, plant and

equipment (11,270,898) 19,145

Loss on disposal of investment in subsidiary companies - 682,922

Property, plant and equipment written off 122,332 665

Impairment loss on inventories 693,607 -

Impairment loss on trade receivables 5,799,404 -

Impairment loss on other receivables 825,000 -

Unrealised gain on foreign exchange (80,389) (171,904)

(3,972,105) 877,280

Geographic information

Revenue and non-current assets information based on the geographical location of customers

and assets respectively are as follow:

Group Revenue Non-current assets 2014 2013 2014 2013 RM RM RM RM

Malaysia 99,322,719 115,440,082 76,391,284 25,877,904

People’s Republic of

China 8,835,332 - 671,283 -

108,158,051 115,440,082 77,062,567 25,877,904


- 100 -


Geographic information (Cont’d)

Non-current assets for this purpose consist of property, plant and equipment and investment

properties.

Major customers

Revenue from one major customer amount to RM43,426,534 (2013: RM34,561,609), arising

from sales in the manufacturing and trading segment.

35. Financial instruments

(a) Classification of financial instruments

Financial assets and financial liabilities are measured on an ongoing basis either at fair

value or at amortised cost. The principal accounting policies in Note 3 describe how the

classes of financial instruments are measured, and how income and expense, including

fair value gains and losses, are recognised.

The following table analyses the financial assets and liabilities in the statements of

financial position by the class of financial instruments to which they are assigned, and

therefore by the measurement basis:


- 101 -

35. Financial instruments (Cont’d)

(a) Classification of financial instruments (Cont’d)

Financial

liabilities

Fair value measured at

Financial assets through Loans and amortised Available-

Group profit or loss receivables cost for-sale Total

2014 RM RM RM RM RM

Other investments - - - 549,243 549,243

Trade receivables - 32,512,707 - - 32,512,707

Other receivables - 12,488,470 - - 12,488,470

Contigent

consideration assset - - - 2,500,000 2,500,000

Fixed deposits with -

licensed banks - 4,424,723 - - 4,424,723

Cash and bank

balances - 11,608,956 - - 11,608,956

- 61,034,856 - 3,049,243 64,084,099

2013

Other investments - - - 2,029,023 2,029,023

Trade receivables - 22,795,815 - - 22,795,815

Other receivables - 1,446,161 - - 1,446,161

Fixed deposits with

licensed banks - 4,826,211 - - 4,826,211

Cash and bank -

balances - 12,477,457 - - 12,477,457

41,545,644 - 2,029,023 43,574,667

Financial liabilities

2014

Loan and borrowings - - 44,306,058 - 44,306,058

Trade payables - - 16,825,999 - 16,825,999

Other payables - - 8,322,559 - 8,322,559

- - 69,454,616 - 69,454,616

2013

Loan and borrowings - - 27,758,577 - 27,758,577

Trade payables - - 7,252,202 - 7,252,202

Other payables - - 6,308,337 - 6,308,337

Derivative financial

liabilities 202,225 - - - 202,225

202,225 - 41,319,116 - 41,521,341


- 102 -


(a) Classification of financial instruments (Cont’d)

Financial

liabilities

measured at

Financial assets Loan and amortised Available-

Company receivables cost for-sale Total

2014 RM RM RM RM

Other investments - - 549,243 549,243

Other receivables 4,706 - - 4,706

Contigent

consideration assset - - 2,500,000 2,500,000

Amount due from

subsidiary companies 26,035,373 - - 26,035,373

Cash and bank

balances 2,042,340 - - 2,042,340

28,082,419 - 3,049,243 31,131,662

2013

Other investments - - 549,243 549,243

Other receivables 16,882 - - 16,882

Amount due from

subsidiary companies 11,301,651 - - 11,301,651

Cash and bank

balances 4,243,022 - - 4,243,022

15,561,555 - 549,243 16,110,798


2014

Loan and borrowings - 1,227,237 - 1,227,237

Other payables - 791,250 - 791,250

Amount due to -


- 2,762,037 - 2,762,037

2013

Other payables - 470,614 - 470,614

Amount due to


- 795,472 - 795,472


- 103 -


(b) Financial risk management objectives and policies

The Group is exposed to financial risks arising from their operations and the use of

financial instruments. Financial risk management policy is established to ensure that

adequate resources are available for the development of the Group’s business whilst

managing its credit risk, liquidity risk, foreign currency risk and interest rate risk. The

Group operates within clearly defined guidelines that are approved by the Board and the

Group’s policy is not to engage in speculative transactions.

The following sections provide details regarding the Group’s exposure to the

abovementioned financial risks and the objectives, policies and processes for the

management of these risks.

(i) Credit risk

Credit risk is the risk of a financial loss to the Group if a customer or counterparty

to a financial instrument fails to meet its contractual obligations. The Group’s

exposure to credit risk arises principally from its receivables from customers and

deposits with banks and financial institutions. The Company’s exposure to credit

risk arises principally from loans and advances to subsidiary companies and

financial guarantees given to banks for credit facilities granted to subsidiary

companies.

The Group has adopted a policy of only dealing with creditworthy counterparties.

Management has a credit policy in place to control credit risk by dealing with

creditworthy counterparties and deposit with banks and financial institutions with

good credit rating. The exposure to credit risk is monitored on an ongoing basis and

action will be taken for long outstanding debts.

The Company provides unsecured loans and advances to subsidiary companies. It

also provides unsecured financial guarantees to banks for banking facilities granted

to certain subsidiary companies. The Company monitors on an ongoing basis the

results of the subsidiary companies and repayments made by the subsidiary

companies.

The carrying amounts of the financial assets recorded on the statements of financial

position at the end of the financial year represents the Group’s and the Company’s

maximum exposure to credit risk except for financial guarantees provided to banks

for banking facilities granted to certain subsidiary companies. The Company’s

maximum exposure in this respect is RM40,215,678 (2013: RM25,616,136),

representing the outstanding banking facilities of the subsidiary companies as at

the end of the reporting period. There was no indication that any subsidiary

company would default on repayment as at the end of the reporting period.


- 104 -


(b) Financial risk management objectives and policies (Cont’d)

(i) Credit risk (Cont’d)

Credit risk concentration

The Group determines concentrations of credit risk by monitoring its trade

receivables by reportable segments on an ongoing basis. The credit risk

concentration profiles of the Group’s trade receivables at the end of financial year

are as follows:

2014 2013

Group RM % RM %

Manufacturing 20,624,047 63 15,993,465 70

Trading - - 1,228,984 6

Automation 647,208 2 - -

21,271,255 65 17,222,449 76

At end of financial year, the highest percentage of concentration of the Group’s net

trade receivables was 63% (2013: 70%) in the manufacturing segment. The

customer base in this sector comprises a few large customers involved in the

industrial goods sector.

(ii) Liquidity risk

Liquidity risk refers to the risk that the Group or the Company will encounter

difficulty in meeting its financial obligations as they fall. The Group’s and the

Company’s exposure to liquidity risk arises primarily from mismatches of the

maturities of financial assets and liabilities.

The Group’s and the Company’s funding requirements and liquidity risk are

managed with the objective of meeting business obligations on a timely basis. The

Group finances its liquidity through internally generated cash flows and minimises

liquidity risk by keeping committed credit lines available.

The following table analyses the remaining contractual maturity for financial

liabilities. The tables have been drawn up based on the undiscounted cash flows of

financial liabilities based on the earliest date on which the Group and the Company

can be required to pay.


- 105 -



(ii) Liquidity risk (Cont’d)

On demand Total Total

or within contractual carrying

Group 1 year 1 to 2 years 2 to 5 years After 5 years cash flows amount

2014 RM RM RM RM RM RM

Non-derivative financial liabilities

Term loans 1,619,933 1,708,246 6,579,060 5,420,121 15,327,360 15,327,360

ICULS 318,356 318,356 769,361 - 1,406,073 1,227,327

Finance lease liabilities 1,127,071 1,014,916 994,525 - 3,136,512 2,863,143

Bankers acceptance 22,198,000 - - - 22,198,000 22,198,000

Bank overdrafts 2,690,318 - - - 2,690,318 2,690,318

Trade and other payables 24,643,579 - 504,979 - 25,148,558 25,148,558

52,597,257 3,041,518 8,847,925 5,420,121 69,906,821 69,454,706

2013


Term loans 855,484 862,644 1,893,613 4,106,344 7,718,085 6,616,205

Finance lease liabilities 1,038,637 663,400 615,274 - 2,317,311 2,142,441

Bankers acceptance 18,766,000 - - - 18,766,000 18,766,000

Bank overdrafts 233,931 - - - 233,931 233,931

Trade and other payables 13,560,539 - - - 13,560,539 11,110,539

Derivative financial liabilities

Gross - Currency forwards 202,225 - - - 202,225 202,225

34,656,816 1,526,044 2,508,887 4,106,344 42,798,091 39,071,341


- 106 -



(ii) Liquidity risk (Cont’d)

Company

On demand

or within

1 year

RM

1 to 2

years

RM

2 to 5

years

RM

After 5

years

RM

Total

contractual

cash flows

RM

Total

carrying

amount

RM

2014


ICULS 318,356 318,356 769,361 - 1,406,073 1,227,327

Other payables 791,250 - - - 791,250 791,250


companies 743,550 - - - 743,550 743,550

1,853,156 318,356 769,361 - 2,940,873 2,762,127

2013


Other payables 470,614 - - - 470,614 470,614


companies 324,858 - - - 324,858 324,858

795,472 - - - 795,472 795,472


- 107 -



(iii) Market risk

(a) Foreign currency risk The Group is exposed to foreign currency risk on transactions that are

denominated in currencies other than the respective functional currencies of

Group entities. The currencies giving rise to this risk are primarily Singapore

Dollar (SGD), Chinese Renminbi (RMB) and United States Dollar (USD). The Group has not entered into any derivative instruments for hedging or

trading purposes. Where possible, the Group will apply natural hedging by

selling and purchasing in the same currency. However, the exposure to

foreign currency risk is monitored from time to time by management.


- 108 -



(iii) Market risk (Cont’d)

(a) Foreign currency risk (Cont’d)

The carrying amounts of the Group’s foreign currency denominated financial assets and financial liabilities at the end of the

reporting period are as follows:

Denominated in

Group

USD

RM

SGD

RM

RMB

RM

Others

RM

Total

RM

2014

Deposits, cash and bank balances 391,054 343,501 26,437 - 760,992

Trade receivables 2,134,642 1,307,114 - - 3,441,756

Other receivables 88,414 - - - 88,414

Trade payables (1,769,412) (31,186) - (1,379) (1,801,977)

Other payables (230,411) (33,878) - (238,000) (502,289)

614,287 1,585,551 26,437 (239,379) 1,986,896

2013

Deposits, cash and bank balances 1,680,538 208,090 23,684 - 1,912,312

Trade receivables 2,700,666 801,901 - - 3,502,567

Other receivables 177,255 - 235,295 1,803 414,353

Trade payables (205) (6,798) (7,003)

Other payables (254,889) (148,005) - (5,494) (408,388)

Derivative financial liabilities (202,225) - - - (202,225)

4,101,140 855,188 258,979 (3,691) 5,211,616

Company

2014

Bank balances 2,619 - - - 2,619

2013

Bank balances 124,458 - - - 124,458


- 109 -




(a) Foreign currency risk (Cont’d)

Foreign currency sensitivity analysis

Foreign currency risk arises from Group entities which have a RM functional

currency. The exposure to currency risk of Group entities which do not have

a RM functional currency is not material and hence, sensitivity analysis is not

presented.

The following table demonstrates the sensitivity of the Group’s profit/(loss)

before tax to a reasonably possible change in the USD, SGD and RMB

exchange rates against RM, with all other variables held constant.

2014 2013

Group Effect on Effect on

Change in profit profit

currency rate before tax before tax

RM RM RM

USD Strengthened 5% (2013: 10%) 30,715 410,114

Weakened 5% (2013: 10%) (30,715) (410,114)

SGD Strengthened 5% (2013: 10%) 79,278 85,519

Weakened 5% (2013: 10%) (79,278) (85,519)

RMB Strengthened 5% (2013: 10%) 1,322 25,898

Weakened 5% (2013: 10%) (1,322) (25,898)

2014 2013

Company Effect on Effect on

Change in profit profit

currency rate before tax before tax

RM RM RM

USD Strengthened 5% (2013: 10%) 131 12,446

Weakened 5% (2013: 10%) (131) (12,446)

(b) Interest rate risk

The Group’s and the Company’s fixed rate deposits placed with licensed

banks and borrowings are exposed to a risk of change in their fair value due

to changes in interest rates. The Group’s and the Company’s variable rate

borrowings are exposed to a risk of change in cash flows due to changes in

interest rates.


- 110 -




(b) Interest rate risk (Cont’d)

The Group manages the interest rate risk of its deposits with licensed

financial institutions by placing them at the most competitive interest rates

obtainable, which yield better returns than cash at bank and maintaining a

prudent mix of short and long term deposits.

The Group manages its interest rate risk exposure from interest bearing

borrowings by obtaining financing with the most favourable interest rates in

the market. The Group constantly monitors its interest rate risk by reviewing

its debts portfolio to ensure favourable rates are obtained. The Group does

not utilise interest swap contracts or other derivative instruments for trading

or speculative purposes.

The interest rate profile of the Group’s and the Company’s significant

interest-bearing financial instruments, based on carrying amounts as at the

end of the reporting period was:

2014 2013

Group RM RM

Fixed rate instruments

Financial assets 4,424,723 4,826,211

Financial liabilities (2,863,143) (2,142,441)

1,561,580 2,683,770

Floating rate instruments

Financial assets 3,685,650 5,285,650

Financial liabilities (41,442,915) (25,616,136)

(37,757,265) (20,330,486)

Company

Fixed rate instruments

Financial liabilities 1,227,237 -

Floating rate instruments

Financial assets 382,647 3,682,647


- 111 -




(b) Interest rate risk (Cont’d)

Interest rate risk sensitivity analysis

Fair value sensitivity analysis for fixed rate instruments

The Group and the Company do not account for any fixed rate financial

assets and liabilities at fair value through profit or loss. Therefore, a change

in interest rates at the end of the reporting period would not affect profit or

loss.

Cash flow sensitivity analysis for floating rate instruments

A change in 25 basic point interest rate at the end of the reporting period

would have decreased the Group’s and the Company’s profit before tax by

RM96,177 (2013: RM67,511) respectively, arising mainly as a result of

lower/higher interest expense on floating rate loans and borrowings. This

analysis assumes that all other variables remain constant. The assumed

movement in basis points for interest rate sensitivity analysis is based on the

currently observable market environment.

(c) Fair value of financial instruments

The carrying amounts of receivables and payables, cash and cash equivalents and loans

and borrowings approximate their fair value due to the relatively short term nature of

these financial instruments and/or insignificant impact of discounting.

It was not practicable to estimate the fair value of investment in unquoted equity due to

the lack of comparable quoted prices in an active market and the fair value cannot be

reliably measured.

The table below analyses financial instruments carried at fair value and those not carried

at fair value for which fair value is disclosed, together with their fair values and carrying

amounts shown in the statements of financial position.


- 112 -


(c) Fair value of financial instruments (Cont’d)

Total fair Carrying

2014 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total value amount

Group RM RM RM RM RM RM RM RM RM RM

Financial assets

Contingent

consideration asset - - 2,500,000 2,500,000 - - - - 2,500,000 2,500,000

2014

Company

Financial assets

Contingent

consideration asset - - 2,500,000 2,500,000 - - - - 2,500,000 2,500,000

2013

Group


Derivatives - 202,225 - 202,225 - - - - 202,225 202,225

carried at fair value

Fair value financial instruments not Fair value financial instruments carried

at fair value


- 113 -


(c) Fair value of financial instruments (Cont’d)

(i) Level 1 fair value

Level 1 fair value is derived from quoted prices (unadjusted) in active markets for

identical assets or liabilities.

(ii) Level 2 fair value

Level 2 fair value is estimated using inputs other than quoted prices included

within Level 1 that are observable for the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from prices).

Derivatives

The fair value of forward exchange contracts is estimated by discounting the

difference between the contractual forward price and the current forward price for

the residual maturity of the contract using a risk-free interest rate (based on

government bond).

(iii) Level 3 fair value

Level 3 fair values for the financial assets and liabilities are estimated using

unobservable inputs.

Reconciliation of fair value measurement of Level 3 financial instruments

The only financial assets subsequently measured at fair value on Level 3 fair value

measurement represents contingent consideration asset relating to acquisition of

ZASB and ZTSB (see Note 7). No gain or loss for the financial year relating to this

contingent consideration asset has been recognised in profit or loss.

The following table shows the valuation techniques used in the determination of fair

values within Level 3, as well as key unobservable inputs used.

Financial instruments carried at fair value

Type

Valuation technique

and key inputs

Significant

unobservable

inputs

Relationship of

significant

unobservable

inputs to fair value

Contingent

consideration

asset in

business

combination

(Note 7)

Discounted cash flow

method was used to

capture the present

value of the expected

future economic

benefits that will flow

to the Group arising

from the contingent

consideration

Discount rate of

16% determined

based on the

weighted

average cost of

capital of the

Group plus a

reasonable risk

premium

A slight increase in

the discount rate

used in isolation

would result in a

significant decrease

in the fair value


- 114 -

36. Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to

continue as a going concern in order to provide returns for shareholders and benefits for other

stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of

dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to

reduce debt.

The Group monitors capital using a gearing ratio. The Group’s policy is to maintain a prudent

level of gearing ratio that complies with debt covenants. The gearing ratios at end of the

reporting period are as follows:

Group Company

2014 2013 2014 2013

RM RM RM RM

Trade payables 16,825,999 7,252,202 - -

Other payables 8,322,559 6,308,337 791,250 470,614

Amount due to

subsidiary companies - - 743,550 324,858

Total loan and

borrowings (Note 19) 44,306,058 27,758,577 1,227,237 -

69,454,616 41,319,116 2,762,037 795,472

Less: Deposits, cash

and bank

balances (Note

14 and 15) (13,085,879) (14,694,551) (2,042,340) (4,243,022)

Net debt 56,368,737 26,624,565 791,697 (3,447,550)

Total equity 83,382,772 51,153,663 75,388,301 41,417,979

Net debts and equity 139,751,509 77,778,228 76,107,998 37,970,429

Gearing ratio 0.40 0.34 0.01 - *

* The gearing ratio is not applicable as the Company have sufficient deposits, cash and bank

balances to settle the liabilities as at year end.

There were no changes in the Group’s approach to capital management during the financial

year.

The Group is not subject to any externally imposed capital requirements.


- 115 -

37. Significant events during the financial year

(i) The Company has on 8 January 2014 announced to Bursa Malaysia to undertake the

following proposals:

(a) Proposed share split, which involve the subdivision of every one existing ordinary

share of RM1.00 each in the Company into two and a half ordinary shares of

RM0.40 each;

(b) Proposed increase in its authorised share capital from RM50,000,000 comprising

50,000,000 existing shares to RM500,000,000 comprising 1,250,000,000 shares

subsequent to proposed share split.

(c) Proposed private placement of up to 11,870,000 new shares, representing up to

approximately 10% of the issued and paid-up share capital of the company after

the proposed share split.

(d) Proposed rights issue of up to RM39,172,350 nominal value of five year, 1%

irredeemable convertible unsecured loan stocks (“ICULS”) at 100% of the nominal

value of RM0.075 each (“Rights ICULS”) on the basis of RM0.30 nominal value

of the Rights ICULS for every one ordinary share held by the entitled shareholders

of the Company after the proposed share split, on an entitlement date to be

determined later together with up to 65,287,250 free detachable warrants on the

basis of one Warrant for every RM0.60 nominal value of the Rights ICULS

subscribed for.

(ii) On 14 April 2014, the company announced that the share split involving the subdivision

of every one (1) existing ordinary share of RM1.00 each in the company into two and a

half (2.5) ordinary shares of RM0.40 each has been completed.

(iii) On 3 June 2014, a wholly-owned subsidiary of the Company, Zoomic Automation (M)

Sdn. Bhd. (“ZASB”) entered into an agreement with Future Rank Sdn. Bhd. (“FRSB”),

for the purchase of machinery amounted to RM16,500,000. Payment of RM11,500,000

has been made to FRSB during the financial period. Subsequent to the financial year

end, the agreement was terminated due to unsatisfied performance obligation of the

supplier.

On 5 February 2015, the Group has entered into an agreement with Sanjung AMS Sdn.

Bhd. (“AMS”) to revamp and upgrade the existing machines amounting to

RM15,986,900. In conjunction with this, on 6 February 2015, the Group has entered into

a tripartite agreement to assign the debt of RM10,675,000 owing from FRSB to AMS.

The debt of RM10,675,000 is derived from RM11,500,000 less a cancellation penalty of

RM825,000.


- 116 -

37. Significant events during the financial year (Cont’d)

(iv) On 6 June 2014, the Company entered into an agreement with Midstream Resources Sdn.

Bhd. (“MRSB”) for for the implementation of a Lean Manufacturing Program amounted

to RM2,000,000 which would improve the production efficiency of the Group. No

specified timeline for delivery of the project deliverables was stated in the agreement.

RM1,500,000 advance payment has been made during the financial year. Of the

RM1,500,000 paid to MRSB, RM500,000 was expensed off to statements of profit or

loss and other comprehensive income on the basis that a preliminary report was received

from MRSB and RM1,000,000 remains as prepayment in other receivables.

To complete the performance obligations under the agreement, MRSB will conduct

training program for the Group. However, as at the date of this report, MRSB has yet to

complete its performance obligations under the agreement.

38. Subsequent events

(i) On 10 February 2015, the Board of Directors of ITCB wishes to announce that Ire-Tex

(Johor) Sdn Bhd ("ITJSB” or the "Purchaser" or the “Employer”), a subsidiary company

of ITCB had on 10 February 2015 entered into the following agreements:

(a) A sale and purchase agreement (“SPA 1”) with Modern Unit Sdn Bhd (Company

No. 833277-P) ("MUSB” or the "Vendor") for the proposed acquisition of a piece

of land known as HS(D) 541178, PTD 180984, Mukim Tebrau, Daerah Johor

Bahru, Negeri Johor measuring approximately 0.1263 Hectare (13,594 Square Feet)

or thereabouts bearing assessment address PTD 180984, Jalan Kempas Lama,

Kempas Lama, 81300 Skudai, Johor (“Land 1”) for a total cash consideration of

RM611,730.

(b) A sale and purchase agreement (“SPA 2”) with MUSB for the proposed

acquisition of a piece of land known as HS(D) 541179, PTD 180985, Mukim

Tebrau, Daerah Johor Bahru, Negeri Johor measuring approximately 0.1263

Hectare (13,594 Square Feet) or thereabouts bearing assessment address PTD

180985, Jalan Kempas Lama, Kempas Lama, 81300 Skudai, Johor (“Land 2”) for

a total cash consideration of RM611,730.

(c) A building agreement (“BA 1”) with Blessplus Sdn. Bhd. (Company No. 333162-

U) (“BSB” or the “Contractor”) to build a 1 storey with 2 Mezzanine Floors Semi-

Detached Factory with a total built-up area of 9,055 square feet or thereabouts to

be erected on the Land 1 for a total contract sum of RM2,173,200.

(d) A building agreement (“BA 2”) with BSB to build a 1 storey with 2 Mezzanine

Floors Semi-Detached Factory with a total built-up area of 9,055 square feet or

thereabouts to be erected on the Land 2 for a total contract sum of RM2,173,200.


- 117 -

38. Subsequent events (Cont’d)

(ii) On 17 February 2015, the Company announced that the approval granted by Bursa

Malaysia Securities Berhad on 18 February 2014 and 25 July 2014, for the

implementation of the Private Placement, had lapsed on 17 February 2015.

(iii) The Company has on 18 March 2015 announced to Bursa Malaysia to subscribe 50,000

ordinary shares of USD1.00 each, representing 100% equity interest in Aribar

Investment Ltd (“Aribar”). Consequent thereto, Aribar became a wholly-owned

subsidiary of ITCB.

39. Material litigation

On 13 February 2015, the company announced to Bursa Malaysia that it has been informed by

Suzhou Styrotex Plastic Co. Ltd. (“SSPC”), a wholly owned subsidiary company of the

Company incorporated in the People’s Republic of China and operating in Suzhou, had

received a summon in respect of a civil suit filed by Airdex International Inc. (“Airdex”)

alleging infringement by SSPC of Airdex’s patent in respect of its design for Airfreight Pallet.

The suit seeks enforcement and damages against SSPC for the following:

1. Demand for SSPC to stop production on Airfreight Pallet

2. Demand for SSPC’s molds in respect of Airfreight Pallet to be destroyed

3. Damages amounting to RMB3 million (Renminbi Three Million)

4. Court fees to be borne by SSPC

Hearing for the suit has been fixed on 2 March 2015.

Further to the Company’s announcement on 13 February 2015, the Company announced to

Bursa Malaysia on 17 February 2015 wishes to provide the following additional information

relating to the material litigation:

(a) There is no relationship between SSPC and Airdex, except that both companies were

engaged in the same business of production and selling of a Lightweight Polyfoam

Pallet. Thus, Airdex was a competitor to SSPC.

(b) SSPC is not a major subsidiary of the Company.

(c) In the event the Company lose the civil suit, the financial impact to the Group are as

follows:

(i) compensation damages claimed by plaintiff up to RMB3 million;

(ii) mold in respect of Airfreight Pallet to be destroyed. However, net book value of

the said asset had been fully depreciated and thus does not have any financial

impact; and

(iii) There is no impact on the operation because SSAP has stopped the production and

selling of Lightweight Polyfoam pallet.


- 118 -

40. Comparative figures

The financial statements of the Group and the Company for the financial year ended 31

December 2013 were audited by another auditor who expressed an unqualified opinion on

those financial statements on 25 April 2014.

41. Date of authorisation for issue

The financial statements were authorised for issue by the Board of Directors in accordance

with a resolution of the directors on 30 April 2015.


- 119 -

42. Supplementary information on the disclosure of realised and unrealised profits or losses

The following analysis of realised and unrealised retained earnings/(accumulated losses) of

the Group and the Company as at the reporting date is presented in accordance with the

directive issued by Bursa Malaysia Securities Berhad and prepared in accordance with the

Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses

in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing

Requirements, as issued by the Malaysian Institute of Accountants.


Total (accumulated

losses)/retained

earnings of the

Company and its


- realised (3,527,049) 3,295,588 (14,447,087) (10,024,609)

- unrealised 374,926 24,485 - -

(3,152,123) 3,320,073 (14,447,087) (10,024,609)

Less: Consolidation

adjustments (3,317,432) (3,640,260) - -

Total accumulated

losses (6,469,555) (320,187) (14,447,087) (10,024,609)

The disclosure of realised and unrealised profits or losses above is solely for complying with

the disclosure requirements stipulated in the directive of Bursa Malaysia Securities Berhad

and should not be applied for any other purposes.

Documents

IRE-TEX CORPORATION BERHAD (Company No. 576121-A ... Dec 2014.pdf · YM Raja Said Abidin Bin Raja Shahrome (resigned on 3.11.2014) Teh Eng Aun (resigned on 3.11.2014) Teh Eng Huat