DIRECTORS’ REPORT AND AUDITED FINANCIAL STATEMENTS - DENKO Financial Statement… · Company No.: 190155 - M DENKO INDUSTRIAL CORPORATION BERHAD (190155 - M) (Incorporated in Malaysia)

Company No.:

190155 - M

DENKO INDUSTRIAL CORPORATION BERHAD (190155 - M)

(Incorporated in Malaysia)

DIRECTORS’ REPORT AND AUDITED FINANCIAL STATEMENTS

31 MARCH 2013

Company No.:

190155 - M

DENKO INDUSTRIAL CORPORATION BERHAD


CONTENTS

PAGE

DIRECTORS’ REPORT 1 - 5

STATEMENT BY DIRECTORS 6

STATUTORY DECLARATION 6

INDEPENDENT AUDITORS’ REPORT 7 - 9

STATEMENTS OF FINANCIAL POSITION 10 - 12

STATEMENTS OF COMPREHENSIVE INCOME 13

STATEMENTS OF CHANGES IN EQUITY 14 - 15

STATEMENTS OF CASH FLOWS 16 - 18

NOTES TO THE FINANCIAL STATEMENTS 19 - 90

Company No.:

190155 - M

1



DIRECTORS’ REPORT

The Directors have pleasure in submitting their report and the audited financial statements of the

Group and of the Company for the financial year ended 31 March 2013.

PRINCIPAL ACTIVITIES

The Company is principally engaged in investment holding. The principal activities of the subsidiaries

are set out in Note 8 to the financial statements. There have been no significant changes in the nature

of these activities during the financial year.

RESULTS

Group Company

RM RM

Profit for the financial year attributable to owners of the parent 4,373,947 4,997,267

DIVIDEND

No dividend has been paid, declared or proposed by the Company since the end of the previous

financial year. The Directors do not recommend any final dividend payment in respect of the current

financial year.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year other than

those disclosed in the financial statements.

ISSUE OF SHARES AND DEBENTURES

There were no issues of new share or debentures during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

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

year.

Company No.:

190155 - M

2

DIRECTORS

The Directors who have held office since the date of the last report are:

Dato’ Ong Soon Ho

Dato’ Ong Choo Meng

Tan Chen Wei

Tan Sri Dato’ Seri Tan King Tai @ Tan Khoon Hai

Thoolasy Das Ponniah

Yoong Nim Chor

David Yaory (Appointed on 1 February 2013)

DIRECTORS’ INTERESTS

The Directors holding office at the end of the financial year and their beneficial interests in the

ordinary shares of the Company during the financial year ended 31 March 2013 as recorded in the

Register of Directors’ Shareholding kept by the Company under Section 134 of the Companies Act

1965 were as follows:

----- Number of ordinary shares of RM0.40 each -----

Balance Balance

as at as at

1.4.2012 Bought Sold 31.3.2013

Shares in the Company

Direct interests:

Dato’ Ong Soon Ho 4,845,500 - - 4,845,500

Dato’ Ong Choo Meng 14,507,500 - - 14,507,500

Tan Chen Wei 12,507,900 - - 12,507,900

Tan Sri Dato’ Seri Tan King Tai @

Tan Khoon Hai

6,200

-

-

6,200

Indirect interests:

Dato’ Ong Soon Ho * 14,507,500 - - 14,507,500

Dato’ Ong Choo Meng ^ 4,845,500 - - 4,845,500

* - By virtue of the shareholding of his child, Dato’ Ong Choo Meng

^ - By virtue of the shareholding of his father, Dato’ Ong Soon Ho

On 31 October 2012, the Company completed a capital reduction exercise pursuant to Section 64 of

the Companies Act 1965 to reduce the Company’s issued and paid-up ordinary share capital to

RM41,787,540 of RM0.40 each from RM104,468,853 of RM1.00 each by way of cancellation of

RM0.60 from the par value of each existing ordinary shares of the Company.

By virtue of their interests in the ordinary shares of the Company, Dato’ Ong Soon Ho and

Dato’ Ong Choo Meng are also deemed to be interested in the ordinary shares of all the subsidiaries to

the extent that the Company has an interest.

None of the other Directors holding office at the end of the financial year held any interest in the

ordinary shares in or debentures of the Company or of its related corporations.

Company No.:

190155 - M

3

DIRECTORS’ BENEFITS

Since the end of the previous financial year, none of the Directors have received or become entitled to

receive any benefit (other than a benefit included in the aggregate amount of emoluments received or

due and receivable by the 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 for any

benefits which may be deemed to have arisen by virtue of those transactions as disclosed in Note 26 to

the financial statements.

There were no arrangements during and at the end of the financial year, to which the Company is a

party, which had the object of enabling the Directors of the Company to acquire benefits by means of

the acquisition of shares in or debentures of the Company or any other body corporate.

OTHER STATUTORY INFORMATION REGARDING THE GROUP AND THE COMPANY

(I) AS AT THE END OF THE FINANCIAL YEAR

(a) Before the statements of comprehensive income and statements of financial position

of the Group and of the Company were made out, the Directors took reasonable steps:

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

bad debts and the making of provision for doubtful debts and have satisfied

themselves that all known bad debts had been written off and that adequate

provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their book values

in the ordinary course of business had been written down to their estimated

realisable values.

(b) In the opinion of the Directors, the results of the operations of the Group and of the

Company during the financial year have not been substantially affected by any item,

transaction or event of a material and unusual nature.

(II) FROM THE END OF THE FINANCIAL YEAR TO THE DATE OF THIS REPORT

(c) The Directors are not aware of any circumstances:

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

provision for doubtful debts in the financial statements of the Group and of the

Company inadequate to any material extent; and

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

statements of the Group and of the Company misleading; and

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

valuation of assets or liabilities of the Group and of the Company misleading or

inappropriate.

Company No.:

190155 - M

4

OTHER STATUTORY INFORMATION REGARDING THE GROUP AND THE COMPANY

(continued)

(II) FROM THE END OF THE FINANCIAL YEAR TO THE DATE OF THIS REPORT

(continued)

(d) In the opinion of the Directors:

(i) there has not arisen any item, transaction or event of a material and unusual nature

likely to affect substantially the results of the operations of the Group and of the

Company for the financial year in which this report is made; and

(ii) no contingent 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 of the Company to meet their

obligations as and when they fall due.

(III) AS AT THE DATE OF THIS REPORT

(e) There are no charges on the assets of the Group and of the Company which have arisen

since the end of the financial year to secure the liabilities of any other person.

(f) There are no contingent liabilities of the Group and of the Company which have arisen

since the end of the financial year.

(g) The Directors are not aware of any circumstances not otherwise dealt with in the report or

financial statements which would render any amount stated in the financial statements of

the Group and of the Company misleading.

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

Significant events during the financial year are disclosed in Note 30 to the financial statements.

SIGNIFICANT EVENT SUBSEQUENT TO THE END OF THE REPORTING PERIOD

Significant event subsequent to the financial year is disclosed in Note 31 to the financial statements.

Company No.:

190155 - M

5

AUDITORS

The auditors, BDO, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the Directors.

...................................................... ......................................................

Tan Chen Wei Dato’ Ong Choo Meng

Director Director

Johor Bahru

30 July 2013

Company No.:

190155 - M

6



STATEMENT BY DIRECTORS

In the opinion of the Directors, the financial statements set out on pages 10 to 89 have been drawn up

in accordance with Malaysian Financial Reporting Standards, International Financial Reporting

Standards, and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair

view of the financial position of the Group and of the Company as at 31 March 2013 and of their

financial performance and cash flows of the Group and of the Company for the financial year then

ended.

In the opinion of the Directors, the information set out in Note 33 on page 90 to the financial

statements has been compiled 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, issued by the Malaysian Institute of Accountants,

and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

On behalf of the Board,

...................................................... ......................................................

Tan Chen Wei Dato’ Ong Choo Meng

Director Director

Johor Bahru

30 July 2013

STATUTORY DECLARATION

I, Tan Quok Eow, being the Officer primarily responsible for the financial management of Denko

Industrial Corporation Berhad, do solemnly and sincerely declare that the financial statements set out

on pages 10 to 89 are, to the best of my knowledge and belief, correct and I make this solemn

declaration conscientiously believing the same to be true and by virtue of the provisions of the

Statutory Declarations Act, 1960.

Subscribed and solemnly )

declared by the abovenamed at )

Johor Bahru, Johor this )

30 July 2013 )

Before me:

Company No.:

190155 - M

7

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DENKO INDUSTRIAL CORPORATION BERHAD

Report on the Financial Statements We have audited the financial statements of Denko Industrial Corporation Berhad, which comprise the statements of financial position as at 31 March 2013 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 10 to 89. Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards, and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 March 2013 and of their financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Company No.:

190155 - M

8

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DENKO INDUSTRIAL CORPORATION BERHAD (continued)

Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: (a) In our opinion, the accounting and other records and the registers required by the

Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act.

(b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those proposes.

(c) The audit reports on the financial statements of the subsidiaries did not contain any

qualification or any adverse comment made under Section 174(3) of the Act. Other Reporting Responsibilities

The supplementary information set out in Note 33 to the financial statements is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (‘MIA Guidance’) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other Matters

As stated in Note 3 to the financial statements, Denko Industrial Corporation Berhad adopted Malaysian Financial Reporting Standards on 1 April 2012 with a transition date of 1 April 2011. These Standards were applied retrospectively by Directors to the comparative information in these financial statements, including the statements of financial position as at 31 March 2012 and 1 April 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year then ended 31 March 2012 and related disclosures. We were not engaged to report on the restated comparative information, and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Group and of the Company for the financial year ended 31 March 2013 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 April 2012 do not contain misstatements that materially affect the financial position as of 31 March 2013 and financial performance and cash flows for the year then ended.

Company No.:

190155 - M

9

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DENKO INDUSTRIAL CORPORATION BERHAD (continued)

Other Matters (continued) This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

BDO Se Kuo Shen AF : 0206 2949/05/14 (J) Chartered Accountants Chartered Accountant Johor Bahru 30 July 2013

Company No.:

190155 - M

10



STATEMENTS OF FINANCIAL POSITION

AS AT 31 MARCH 2013

Group

31.3.2013 31.3.2012 1.4.2011

Note RM RM RM

ASSETS

Non-current assets Property, plant and equipment 7 49,355,569 55,122,198 72,795,438

Current assets

Inventories 9 10,970,388 10,571,946 12,266,212

Trade and other receivables 10 18,678,039 15,868,770 19,196,302

Current tax assets 1,525,113 1,859,383 2,181,654

Cash and cash equivalents 11 1,502,033 2,111,560 3,348,125

32,675,573 30,411,659 36,992,293

Non-current assets classified as held for sale

12

-

6,866,059

783,500

TOTAL ASSETS 82,031,142 92,399,916 110,571,231

EQUITY AND LIABILITIES

Equity attributable to owners

of the parent Share capital 13 41,787,540 104,468,853 104,468,853

Reserves 14 5,684,703 7,254,436 7,254,436

Accumulated losses (8,133,029) (76,758,022) (67,569,676)

TOTAL EQUITY 39,339,214 34,965,267 44,153,613

Company No.:

190155 - M

11




AS AT 31 MARCH 2013 (continued)

Group 31.3.2013 31.3.2012 1.4.2011 Note RM RM RM

LIABILITIES

Non-current liabilities

Borrowings 15 4,613,783 6,323,958 14,800,663

Trade and other payables 17 1,404,963 8,894,948 3,786,845

Deferred tax liabilities 18 5,281,064 4,943,945 5,783,649

11,299,810 20,162,851 24,371,157

Current liabilities


Current tax liabilities 713,438 110,156 -

Borrowings 15 16,194,122 16,841,434 19,025,764

31,392,118 33,313,237 41,772,089

Liability attributable to non-current assets classified as held for sale 12 - 3,958,561 274,372

TOTAL LIABILITIES 42,691,928 57,434,649 66,417,618

TOTAL EQUITY AND

LIABILITIES 82,031,142 92,399,916 110,571,231

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

Company No.:

190155 - M

12




AS AT 31 MARCH 2013

Company

31.3.2013 31.3.2012 1.4.2011

Note RM RM RM

ASSETS

Non-current assets Investments in subsidiaries 8 50,088,631 50,088,631 58,797,291

Current assets

Trade and other receivables 10 2,252,897 147,126 366,755

Current tax assets 1,014,663 1,398,916 1,731,094

Cash and cash equivalents 11 61,273 1,533 114,777

3,328,833 1,547,575 2,212,626

TOTAL ASSETS 53,417,464 51,636,206 61,009,917

EQUITY AND LIABILITIES

Equity attributable to owners

of the parent

Share capital 13 41,787,540 104,468,853 104,468,853

Reserves 14 1,566,419 3,136,152 3,136,152

Retained earnings/(Accumulated losses) 14 4,997,267 (64,251,046) (53,671,669)

TOTAL EQUITY 48,351,226 43,353,959 53,933,336

LIABILITIES


Trade and other payables 17 - 471,848 -

Current liabilities


Borrowings 15 25,491 25,491 25,491

5,066,238 7,810,399 7,076,581

TOTAL LIABILITIES 5,066,238 8,282,247 7,076,581

TOTAL EQUITY AND

LIABILITIES 53,417,464 51,636,206 61,009,917


Company No.:

190155 - M

13



STATEMENTS OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 MARCH 2013

Group Company 2013 2012 2013 2012 Note RM RM RM RM Revenue 19 93,183,717 78,293,046 6,114,526 1,164,504

Cost of sales (79,490,826) (71,885,516) - -

Gross profit 13,692,891 6,407,530 6,114,526 1,164,504 Other operating income 5,973,372 1,183,261 - -

Marketing and distribution costs (3,568,450) (3,268,127) - -

Administrative expenses (6,194,920) (8,160,671) (1,064,747) (2,081,895)

Other operating expenses (2,888,540) (3,277,392) - (9,027,881) Finance costs (1,564,433) (2,291,103) - (10,801) Profit/(Loss) before tax 20 5,449,920 (9,406,502) 5,049,779 (9,956,073) Taxation 21 (1,075,973) 218,156 (52,512) (623,304)

Profit/(Loss) for the financial year 4,373,947 (9,188,346) 4,997,267 (10,579,377)

Other comprehensive income,

net of tax - - - -

Total comprehensive income/(loss) attributable to owners of the parent

4,373,947 (9,188,346) 4,997,267 (10,579,377)

Earnings/(Loss) per ordinary share

attributable to equity holders of

the Company:

Sen Sen

- Basic and diluted 22 4.2 (8.8)


Company No.:

190155 - M

14



STATEMENTS OF CHANGES IN EQUITY


Group Share Share Revaluation Accumulated

capital premium reserve losses Total

Note RM RM RM RM RM Balance as at 1 April 2011 104,468,853 3,136,152 4,118,284 (67,569,676) 44,153,613

Loss for the financial year - - - (9,188,346) (9,188,346)

Total comprehensive loss - - - (9,188,346) (9,188,346)

Balance as at 31 March 2012 104,468,853 3,136,152 4,118,284 (76,758,022) 34,965,267

Balance as at 1 April 2012 104,468,853 3,136,152 4,118,284 (76,758,022) 34,965,267

Capital reduction exercise 13 (62,681,313) (1,569,733) - 64,251,046 -

Total transactions with owners (62,681,313) (1,569,733) - 64,251,046 -

Profit for the financial year - - - 4,373,947 4,373,947

Total comprehensive income - - - 4,373,947 4,373,947

Balance as at 31 March 2013 41,787,540 1,566,419 4,118,284 (8,133,029) 39,339,214

Company No.:

190155 - M

15



STATEMENTS OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 31 MARCH 2013 (continued)

(Accumulated

Company Share Share losses)/Retained

capital premium earnings Total

Note RM RM RM RM

Balance as at 1 April 2011 104,468,853 3,136,152 (53,671,669) 53,933,336

Loss for the financial year - - (10,579,377) (10,579,377)

Total comprehensive loss - - (10,579,377) (10,579,377)

Balance as at 31 March 2012 104,468,853 3,136,152 (64,251,046) 43,353,959

Balance as at 1 April 2012 104,468,853 3,136,152 (64,251,046) 43,353,959

Capital reduction exercise 13 (62,681,313) (1,569,733) 64,251,046 - -

Total transactions with owners (62,681,313) (1,569,733) 64,251,046 -

Profit for the financial year - - 4,997,267 4,997,267

Total comprehensive income - - 4,997,267 4,997,267

Balance as at 31 March 2013 41,787,540 1,566,419 4,997,267 48,351,226


Company No.:

190155 - M

16



STATEMENTS OF CASH FLOWS


Group Company

2013 2012 2013 2012

Note RM RM RM RM

CASH FLOWS FROM

OPERATING ACTIVITIES

Profit/(Loss) before tax 5,449,920 (9,406,502) 5,049,779 (9,956,073)

Adjustments for:

Bad debts written off 35,353 1,425,439 - 319,221

Depreciation of property, plant

and equipment

7

6,592,543

7,572,939

-

-

Dividend income - - (6,114,526) (1,164,504)

Impairment losses on:

- investment in a subsidiary - - - 8,708,660

- property, plant and equipment 7.4 1,070,625 384,984 - -

- trade receivables 10 1,198,642 636,571 - -

- other receivables 74,514 - 131,444 -

Interest expense 20 1,564,433 2,291,103 - 10,801

Inventories written off 819,471 1,165,489 - -

Interest income (46,594) (50,376) - -

(Gain)/Loss on disposal of

property, plant and equipment

(4,410,729)

750,212

-

-

Unrealised gain on foreign

exchange

(742,701)

(256,780)

-

-

Property, plant and equipment

written off

77,550

153,548

-

-

Reversal on inventories written off (1,407,799) (252,453)

Reversal on impairment losses on:

- property, plant and equipment 7 - (166,975) - -

- trade receivables 10 (969,325) (535,498) - -

Operating profit/(loss) before

working capital changes - carried

forward

9,305,903

3,711,701

(933,303)

(2,081,895)

Company No.:

190155 - M

17





Group Company

2013 2012 2013 2012

Note RM RM RM RM

CASH FLOWS FROM

OPERATING ACTIVITIES

(continued)

Operating profit/(loss) before

working capital changes

- brought forward

9,305,903

3,711,701

(933,303)

(2,081,895)

Changes in working capital:

Inventories

189,886 781,230 - -

Trade and other receivables (3,148,453) 1,841,667 1,726,386 209,021

Trade and other payables (3,807,934) (3,355,378) (3,216,009) 586,101

Cash generated from/(used in)

operations

2,539,402

2,979,220

(2,422,926)

(1,286,773)

Tax paid (522,574) (189,121) - -

Tax refunded 721,272 - 697,872 -

Interest paid (742,474) (476,439) - -

Net cash from/(used in)

operating activities

1,995,626

2,313,660

(1,725,054)

(1,286,773)

CASH FLOWS FROM

INVESTING ACTIVITIES

Increase in deposits pledged to

licensed banks

1,520,998

(28,959)

-

-

Dividend received - - 5,748,394 873,378

Proceeds from disposal of

property, plant and equipment

4,486,260

2,738,341

-

-

Interest received 46,594 50,376 - -

Purchase of property, plant and

equipment

7.5

-

(43,059)

-

-

Net cash from investing activities

6,053,852

2,716,699

5,748,394

873,378

Company No.:

190155 - M

18





Group Company

2013 2012 2013 2012

Note RM RM RM RM

CASH FLOWS FROM

FINANCING ACTIVITIES

Interest paid (821,959) (1,814,664) - (10,801)

Repayments to)/Advances from

subsidiaries

-

-

(3,963,600)

310,952

Advances from Directors - 2,294,937 - -

Drawdown of bankers’

acceptances

50,886,000

43,781,000

-

-

Repayments of bankers’

acceptances

(48,810,265)

(43,962,000)

-

-

Repayments of term loans (7,078,525) (3,986,278) - -

Repayments to hire purchase

creditors

(1,313,258)

(2,512,179)

-

-

Net cash (used in)/from financing

activities

(7,138,007)

(6,199,184)

(3,963,600)

300,151

Net increase/(decrease) in cash

and cash equivalents

911,471

(1,168,825)

59,740

(113,244)

Cash and cash equivalents at

beginning of financial year

500,254

1,669,079

1,533

114,777

Cash and cash equivalents at end

of financial year

11(c)

1,411,725

500,254

61,273

1,533

The accompanying notes form an integral part of the financial statements

Company No.:

190155 - M

19



NOTES TO THE FINANCIAL STATEMENTS

31 MARCH 2013

1. CORPORATE INFORMATION

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

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

The registered office of the Company is located at Suite 1301, 13 Floor, City Plaza, Jalan Tebrau,

80300 Johor Bahru, Johor.

The principal place of business of the Company is located at No. 20, Jalan Hasil Dua, Kawasan

Perindustrian Jalan Hasil, 81200 Tampoi, Johor Bahru, Johor.

The financial statements are presented in Ringgit Malaysia (‘RM’), which is also the Company’s

functional currency.

The financial statements were authorised for issue in accordance with a resolution by the Board of

Directors on 30 July 2013.

2. PRINCIPAL ACTIVITIES

The Company is principally engaged in investment holding. The principal activities of the

subsidiaries are set out in Note 8 to the financial statements. There have been no significant changes

in the nature of these activities during the financial year.

3. BASIS OF PREPARATION

The financial statements of the Group and of the Company set out on pages 10 to 90 have been

prepared in accordance with Malaysian Financial Reporting Standards (‘MFRSs’), International

Financial Reporting Standards (‘IFRSs’) and the provisions of the Companies Act 1965 in Malaysia.

These are the Group and the Company’s first financial statements prepared in accordance with

MFRSs, and MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards has been

applied. In the previous financial years, the financial statements of the Group and of the Company

were prepared in accordance with Financial Reporting Standards (‘FRSs’) in Malaysia.

The Group and Company have consistently applied the same accounting policies in its opening

MFRS statements of financial position as at 1 April 2011 and throughout all financial years

presented, as if these policies had always been in effect.

However, Note 33 to the financial statements set out on page 90 has been prepared in accordance

with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses

in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as

issued by the Malaysian Institute of Accountants (‘MIA Guidance’) and the directive of Bursa

Malaysia Securities Berhad.

Company No.:

190155 - M

20

4. SIGNIFICANT ACCOUNTING POLICIES

4.1 Basis of accounting

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

historical cost convention except as otherwise stated in the financial statements.

The preparation of financial statements in conformity with MFRSs requires the Directors to

make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue

and expenses and disclosure of contingent assets and contingent liabilities. In addition, the

Directors are also required to exercise their judgement in the process of applying the

accounting policies. The areas involving such judgements, estimates and assumptions are

disclosed in Note 6 to the financial statements. Although these estimates and assumptions are

based on the Directors’ best knowledge of events and actions, actual results could differ from

those estimates.

4.2 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company

and all its subsidiaries. Subsidiaries are entities (including special purposes entities) over

which the Company has the power to govern the financial operating policies, generally

accompanied by a shareholding giving rise to the majority of the voting rights, as to obtain

benefits from their activities.

Subsidiaries are consolidated from the date on which control is transferred to the Group up to

the effective date on which control ceases, as appropriate.

Intragroup balances, transactions, income and expenses are eliminated on consolidation.

Unrealised gains arising from transactions with associates and joint ventures are eliminated

against the investment to the extent of the Group’s interest in the investee. Unrealised losses

are eliminated in the same way as unrealised gains, but only to the extent that there is no

impairment.

The financial statements of the subsidiaries are prepared for the same reporting period as that

of the Company, using consistent accounting policies. Where necessary, accounting policies

of subsidiaries are changed to ensure consistency with the policies adopted by the other

entities in the Group.

Non-controlling interests represents the equity in subsidiaries that are not attributable, directly

or indirectly, to owners of the Company, and is presented separately in the consolidated

statement of comprehensive income and within equity in the consolidated statement of

financial position, separately from equity attributable to owners of the Company. Profit or loss

and each component of other comprehensive income are attributed to the owners of the parent

and to the non-controlling interests. Total comprehensive income is attributed to non-

controlling interests even if this results in the non-controlling interests having a deficit balance.

Company No.:

190155 - M

21

4. SIGNIFICANT ACCOUNTING POLICIES (continued)

4.2 Basis of consolidation (continued)

Components of non-controlling interests in the acquiree that are present ownership interests

and entitle their holders to a proportionate share of the entity’s net assets in the event of

liquidation may be initially measured at either fair value or at the present ownership

instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net

assets. All other components of non-controlling interests shall be measured at their

acquisition-date fair values, unless another measurement basis is required by MFRSs. The

choice of measurement basis is made on an combination-by-combination basis. Subsequent to

initial recognition, the carrying amount of non-controlling interests is the amount of those

interests at initial recognition plus the non-controlling interests’ share of subsequent changes

in equity.

Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss

of control are accounted for as equity transactions. In such circumstances, the carrying

amounts of the controlling and non-controlling interests are adjusted to reflect the changes in

their relative interests in the subsidiary. Any difference between the amount by which the non-

controlling interest is adjusted and the fair value of consideration paid or received is

recognised directly in equity and attributed to owners of the parent.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the

difference between:

(i) the aggregate of the fair value of the consideration received and the fair value of any

retained interest; and

(ii) the previous carrying amount of the assets (including goodwill), and liabilities of the

subsidiary and any non-controlling interests.

Amounts previously recognised in other comprehensive income in relation to the subsidiary

are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings)

in the same manner as would be required if the relevant assets or liabilities were disposed of.

The fair value of any investments retained in the former subsidiary at the date when control is

lost is regarded as the fair value on initial recognition for subsequent accounting under MFRS

139 Financial Instruments: Recognition and Measurement or, where applicable, the cost on

initial recognition of an investment in associate or jointly controlled entity.

Company No.:

190155 - M

22


4.3 Business combinations

Business combinations from 1 April 2011 onwards

Business combinations are accounted for by applying the acquisition method of accounting.

Identifiable assets acquired, liabilities and contingent liabilities assumed in a business

combination are measured at their fair value at the acquisition date, except that:

(a) deferred tax assets or liabilities and liabilities or assets related to employee benefit

arrangements are recognised and measured in accordance with MFRS 112 Income Taxes

and MFRS 119 Employee Benefits respectively;

(b) liabilities or equity instruments related to share-based payment transactions of the acquiree

or the replacement by the Group of an acquiree’s share-based payment transactions are

measured in accordance with MFRS 2 Share-based Payment at the acquisition date; and

(c) assets (or disposal groups) that are classified as held for sale in accordance with MFRS 5

Non-current Assets Held for Sale and Discontinued Operations are measured in

accordance with that Standard.

Acquisition-related costs are recognised as expenses in the periods in which the costs are

incurred and the serviced are received.

Any contingent consideration payable is recognised at fair value at the acquisition date.

Measurement period adjustments to contingent consideration are dealt with as follows:

(a) If the contingent consideration is classified as equity, it is not remeasured and settlement is

accounted for within equity.

(b) Subsequent changes to contingent consideration classified as an asset or liability that is a

financial instrument within the scope of MFRS 139 are recognised either in profit or loss

or in other comprehensive income in accordance with MFRS 139. All other subsequent

changes are recognised in profit or loss.

In a business combination achieved in stages, previously held equity interests in the acquiree

are re-measured to fair value at the acquisition date and any corresponding gain or loss is

recognised in profit or loss.

The Group elects for each individual business combination, whether non-controlling interest in

the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling

interest’s proportionate share of the acquiree net identifiable assets.

Any excess of the sum of the fair value of the consideration transferred in the business

combination, the amount of non-controlling interest in the acquiree (if any), and the fair value

of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of

the acquiree’s identifiable assets and liabilities is recorded as goodwill in the statement of

financial position. The accounting policy for goodwill is set out in Note 4.10(a). In instances

where the latter amount exceeds the former, the excess is recognised as a gain on bargain

purchase in profit or loss on the acquisition date.

Company No.:

190155 - M

23


4.3 Business combinations (continued)

Business combinations before 1 April 2011

As part of its transition to MFRSs, the Group elected not to restate those business

combinations that occurred before the date of transition to MFRSs, i.e. 1 April 2011. Goodwill

represents the amount recognised under the previous FRS Framework in respect of

acquisitions prior to 1 April 2011.

4.4 Property, plant and equipment and depreciation

All items of property, plant and equipment are initially measured at cost. Cost includes

expenditures that are directly attributable to the acquisition of the asset.

Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset,

as appropriate, only when the cost is incurred and it is probable that the future economic

benefits associated with the asset will flow to the Group and the cost of the asset can be

measured reliably. The carrying amount of parts that are replaced is derecognised. The costs

of the day-to-day servicing of property, plant and equipment are recognised in the statement of

comprehensive income as incurred. Cost also comprises the initial estimate of dismantling

and removing the asset item and restoring the site on which it is located for which the Group

is obligated to incur when the asset is acquired, if applicable.

Each part of an item of property, plant and equipment with a cost that is significant in relation

to the total cost of the asset and which has different useful life, is depreciated separately.

After initial recognition, property, plant and equipment except for land and buildings are stated

at cost less accumulated depreciation and any accumulated impairment losses. The land and

buildings are stated at valuation, which is the fair value at the date of revaluation less any

subsequent accumulated depreciation and subsequent accumulated impairment losses.

Company No.:

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24


4.4 Property, plant and equipment and depreciation

The land and buildings are revalued with sufficient regularity to ensure that carrying amount

does not differ materially from that which would be determined using fair value at the end of

the reporting date. The surplus arising from such revaluations is credited to shareholders’

equity as a revaluation reserve and any subsequent deficit is offset against such surplus to the

extent of a previous increase for the same property. In all other cases, the deficit will be

charged to profit or loss. For a revaluation increase subsequent to a revaluation deficit of the

same asset, the surplus is recognised as income to the extent that it reverses the deficit

previously recognised as an expense with the balance of increase credited to revaluation

reserve.

Depreciation is calculated to write off the cost or valuation of the assets to their residual

values on a straight line basis over their estimated useful lives. The principal annual

depreciation periods and rates are as follows:

Leasehold land and buildings 60 years

Freehold buildings 2%

Plant and machinery 10%

Motor vehicles 15%

Furniture, fittings, equipment and renovation 10% - 20%

Freehold land has unlimited useful life and is not depreciated.

At the end of each reporting period, the carrying amount of an item of property, plant and

equipment is assessed for impairment when events or changes in circumstances indicate that

its carrying amount may not be recoverable. A write down is made if the carrying amount

exceeds the recoverable amount (see Note 4.7 to the financial statements on impairment of

non-financial assets).

The residual values, useful life and depreciation method are reviewed at the end of each

reporting period 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 the items of property, plant and equipment. If expectations differ from

previous estimates, the changes are accounted for as a change in an accounting estimate.

The carrying amount of an item of property, plant and equipment is derecognised on disposal

or when no future economic benefits are expected from its use or disposal. The difference

between the net disposal proceeds, if any, and the carrying amounts is included in profit or

loss and the revaluation surplus related to those assets, if any, is transferred directly to retained

earnings.

Company No.:

190155 - M

25


4.5 Leases and hire purchase

(a) Finance leases and hire purchase

Assets acquired under finance leases and hire purchase which transfer substantially all

the risks and rewards of ownership to the Group are recognised initially at an amount

equal to the fair value of the leased assets or, if lower, the present value of the minimum

lease payments, each determined at the inception of the lease.

The discount rate used in calculating the present value of the minimum lease payments

is the interest rate implicit in the leases, if this is practicable to determine; if not, the

Group’s incremental borrowing rate is used. Any initial direct costs incurred by the

Group are added to the amount recognised as an asset. The assets are capitalised as

property, plant and equipment and the corresponding obligations are treated as

liabilities. The property, plant and equipment capitalised are depreciated on the same

basis as owned assets.

The minimum lease payments are apportioned between the finance charges and the

reduction of the outstanding liability. The finance charges are recognised in profit or

loss over the period of the lease term so as to give a constant periodic rate of interest on

the remaining lease and hire purchase liabilities.

(b) Operating leases

A lease is classified as an operating lease if it does not transfer substantially all the risks

and rewards incidental to ownership.

Lease payments under operating leases are recognised as an expense on a straight-line

basis over the lease term.

(c) Leases of land and buildings

For leases of land and buildings, the land and buildings elements are considered

separately for the purpose of lease classification and these leases are classified as

operating or finance leases in the same way as leases of other assets.

The minimum lease payments including any lump-sum upfront payments made to

acquire the interest in the land and building are allocated between the land and the

buildings elements in proportion to the relative fair values of the leasehold interests in

the land element and the building element of the lease at the inception of the lease.

For a lease of land and buildings in which the amount that would initially be recognised

for the land element is immaterial, the land and buildings are treated as a single unit for

the purpose of lease classification and is accordingly classified as a finance or operating

lease. In such a case, the economic life of the buildings is regarded as the economic life

of the entire leased asset.

Company No.:

190155 - M

26


4.6 Investments

Subsidiaries

A subsidiary is an entity in which the Group and the Company has power to control the

financial and operating policies so as to obtain benefits from its activities. The existence and

effect of potential voting rights that are currently exercisable or convertible are considered

when assessing whether the Group has such power over another entity.

When control of a subsidiary is lost as a result of a transaction, event or other circumstance,

the Group would derecognise all assets, liabilities and non-controlling interests at their

carrying amount and to recognise the fair value of the consideration received. Any retained

interest in the former subsidiary is recognised at its fair value at the date control is lost. The

resulting difference is recognised as a gain or loss in profit or loss.

4.7 Impairment of non-financial assets

The carrying amounts of the Group’s and the Company’s assets, except for financial assets

(excluding investments in subsidiaries), inventories and non-current assets (or disposal

groups) 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.

Goodwill and intangible assets that have an indefinite useful life are tested annually for

impairment or more frequently if events or changes in circumstances indicate that the

goodwill or intangible asset might be impaired.

The recoverable amount of an asset is estimated for an individual asset. Where it is not

possible to estimate the recoverable amount of the individual asset, the impairment test is

carried out on the cash generating unit (‘CGU’) to which the asset belongs. Goodwill acquired

in a business combination is required from the acquisition date, allocated to each of the

Group’s CGU or groups of CGU that are expected to benefit from the synergies of the

combination giving rise to the goodwill irrespective of whether other assets or liabilities of the

acquiree are assigned to those units or groups of units.

The recoverable amount of an asset or CGU is the higher of its fair value less cost to sell and

its value in use.

Company No.:

190155 - M

27


4.7 Impairment of non-financial assets (continued)

In estimating the value in use, the estimated future cash inflows and outflows to be derived

from continuing use of the asset and from its ultimate disposal 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 for which the future cash flow estimates have not

been adjusted. An impairment loss is recognised in the statement of comprehensive income

when the carrying amount of the asset or the CGU, including the goodwill, exceeds the

recoverable amount of the asset or the CGU. The total impairment loss is allocated, first, to

reduce the carrying amount of any goodwill allocated to the CGU and then to other assets of

the CGU on pro-rata basis of the carrying amount of each asset in the CGU.

The impairment loss is recognised in profit or loss immediately except for the impairment on a

revalued asset where the impairment loss is recognised directly against the revaluation reserve

account to the extent of the surplus credited from the previous revaluation for the same asset

with the excess of the impairment loss charged to profit or loss.

An impairment loss on goodwill is not reversed in subsequent periods. An impairment loss for

other assets is reversed if, and only if, there has been a change in estimates used to determine

the assets’ recoverable amount since the last impairment loss was recognised.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not

exceed the carrying amount that would have been determined, net of depreciation or

amortisation, if no impairment loss had been recognised.

Such reversals are recognised as income immediately in profit or loss except for the reversal

of an impairment loss on a revalued asset where the reversal of the impairment loss is treated

as a revaluation increase and credited to the revaluation reserve accounts of the same asset.

However, to the extent that an impairment loss on the same revalued asset was previously

recognised in profit or loss, a reversal of that impairment loss is also recognised in profit or

loss.

4.8 Inventories

Inventories are stated at the lower of cost and net realisable value.

Cost is determined using the first-in, first out formula. The cost of raw materials and packing

materials comprises the original cost of purchase plus the cost of bringing the inventories to

their present location and condition. The cost of finished goods and work-in-progress includes

the cost of raw materials, direct labour, other direct cost and a proportion of production

overheads based on normal operating capacity of the production facilities.

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.

Company No.:

190155 - M

28


4.9 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one enterprise and a

financial liability or equity instrument of another enterprise.

A financial asset is any asset that is cash, an equity instrument of another enterprise, a

contractual right to receive cash on another financial asset from another enterprise, or a

contractual right to exchange financial assets or financial liabilities with another enterprise

under conditions that are potentially favourable to the Group.

A financial liability is any liability that is a contractual obligation to deliver cash or another

financial asset to another enterprise, or a contractual obligation to exchange financial assets or

financial liabilities with another enterprise under conditions that are potentially unfavourable

to the Group.

Financial instruments are recognised on the statement of financial position when the Group

has become a party to the contractual provisions of the instrument. At initial recognition, a

financial instrument is recognised at fair value plus, in the case of a financial instrument not at

fair value through profit or loss, transaction costs that are directly attributable to the

acquisition or issuance of the financial instrument.

An embedded derivative is separated from the host contract and accounted for as a derivative

if, and only if the economic characteristics and risks of the embedded derivative is not closely

related to the economic characteristics and risks of the host contract, a separate instrument

with the same terms as the embedded derivative meets the definition of a derivative, and the

hybrid instrument is not measured at fair value through profit or loss.

(a) Financial assets

A financial asset is classified into the following four (4) categories after initial

recognition for the purpose of subsequent measurement:

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

Financial assets at fair value through profit or loss comprise financial assets that are

held for trading (i.e. financial assets acquired principally for the purpose of resale in

the near term), derivatives (both, freestanding and embedded) and financial assets

that were specifically designated into this classification upon initial recognition.

Subsequent to initial recognition, financial assets classified as at fair value through

profit or loss are measured at fair value. Any gains or losses arising from changes

in the fair value of financial assets classified as at fair value through profit or loss

are recognised in profit or loss. Net gains or losses on financial assets classified as

at fair value through profit or loss exclude foreign exchange gains and losses,

interest and dividend income. Such income is recognised separately in profit or loss

as components of other income or other operating losses.

However, derivatives that is linked to and must be settled by delivery of unquoted

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

recognised at cost.

Company No.:

190155 - M

29


4.9 Financial instruments (continued)

(a) Financial assets (continued)

(ii) Held-to-maturity investments

Financial assets classified as held-to-maturity comprise non-derivative financial

assets with fixed or determinable payments and fixed maturity that the Group has the

positive intention and ability to hold to maturity.

Subsequent to initial recognition, financial assets classified as held-to-maturity are

measured at amortised cost using the effective interest method. Gains or losses on

financial assets classified as held-to-maturity are recognised in profit or loss when

the financial assets are derecognised or impaired, and through the amortisation

process.

(iii) Loans and receivables

Financial assets classified as loans and receivables comprise non-derivative financial

assets with fixed or determinable payments that are not quoted in an active market.

Subsequent to initial recognition, financial assets classified as loans and receivables

are measured at amortised cost using the effective interest method. Gains or losses on

financial assets classified as loans and receivables are recognised in profit or loss

when the financial assets are derecognised or impaired, and through the amortisation

process.

(iv) Available-for-sale financial assets

Financial assets classified as available-for-sale comprise non-derivative financial

assets that are designated as available for sale or are not classified as loans and

receivables, held-to-maturity investments or financial assets at fair value through

profit or loss.

Subsequent to initial recognition, financial assets classified as available-for-sale are

measured at fair value. Any gains or losses arising from changes in the fair value of

financial assets classified as available-for-sale are recognised directly in other

comprehensive income, except for impairment losses and foreign exchange gains and

losses, until the financial asset is derecognised, at which time the cumulative gains or

losses previously recognised in other comprehensive income are recognised in profit

or loss. However, interest calculated using the effective interest method is recognised

in profit or loss whilst dividends on available-for-sale equity instruments are

recognised in profit or loss when the Group’s right to receive payment is established.

Cash and cash equivalents include cash and bank balances, bank overdrafts, deposits and

other short term, highly liquid investments which are readily convertible to cash and are

subject to insignificant risk of changes in value.

Company No.:

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(a) Financial assets (continued)

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

financial asset has expired. On derecognition of a financial asset in its entirety, the

difference between the carrying amount and the sum of consideration received (including

any new asset obtained less any new liability assumed) and any cumulative gain or loss

that had been recognised directly in other comprehensive income shall be recognised in

profit or loss.

A regular way purchase or sale is a purchase or sale of a financial asset under a contract

whose terms require delivery of the asset within the time frame established generally by

regulation or marketplace convention.

(b) Financial liabilities

Financial instruments are classified as liabilities or equity in accordance with the

substance of the contractual arrangement. A financial liability is classified into the

following two (2) categories after initial recognition for the purpose of subsequent

measurement:

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

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

that are held for trading, derivatives (both, freestanding and embedded) and

financial liabilities that were specifically designated into this classification upon

initial recognition.

Subsequent to initial recognition, financial liabilities classified as at fair value

through profit or loss are measured at fair value. Any gains or losses arising from

changes in the fair value of financial liabilities classified as at fair value through

profit or loss are recognised in profit or loss. Net gains or losses on financial

liabilities classified as at fair value through profit or loss exclude foreign exchange

gains and losses, interest and dividend income. Such income is recognised

separately in profit or loss as components of other income or other operating losses.

(ii) Other financial liabilities

Financial liabilities classified as other financial liabilities comprise non-derivative

financial liabilities that are neither held for trading nor initially designated as at fair

value through profit or loss.

Subsequent to initial recognition, other financial liabilities are measured at

amortised cost using the effective interest method. Gains or losses on other

financial liabilities are recognised in profit or loss when the financial liabilities are

derecognised and through the amortisation process.

Company No.:

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(b) Financial liabilities (continued)

A financial liability is derecognised when, and only when, it is extinguished, i.e. when the

obligation specified in the contract is discharged or cancelled or expired. An exchange

between an existing borrower and lender of debt instruments with substantially different

terms are accounted for as an extinguishment of the original financial liability and the

recognition of a new financial liability. Similarly, a substantial modification of the terms

of an existing financial liability is accounted for as an extinguishment of the original

financial liability and the recognition of a new financial liability.

The difference between the carrying amount of a financial liability extinguished or

transferred to another party and the consideration paid, including any non-cash assets

transferred or liabilities assumed, is recognised in profit or loss.

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

payments to reimburse the holder for a loss it incurs because a specified debtor fails to

make payment when due in accordance with the original or modified terms of a debt

instrument.

The Group designates corporate guarantees given to banks for credit facilities granted to

subsidiaries as insurance contracts as defined in FRS 4 Insurance Contracts. The Group

recognises these insurance contracts as recognised insurance liabilities when there is a

present obligation, legal or constructive, 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 a reliable estimate can be made of the amount of the obligation.

At the end of every reporting period, the Group shall assess whether its recognised

insurance liabilities are adequate, using current estimates of future cash flows under its

insurance contracts. If this assessment shows that the carrying amount of the insurance

liabilities is inadequate, the entire deficiency shall be recognised in profit or loss.

Recognised insurance liabilities are only removed from the statement of financial position

when, and only when, it is extinguished via a discharge, cancellation or expiration.

(c) Equity

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

Group after deducting all of its liabilities. Ordinary shares are classified as equity

instruments.

Ordinary shares are recorded at the nominal value and proceeds in excess of the nominal

value of shares issued, if any, are accounted for as share premium. Both ordinary shares

and share premium are classified as equity. Transaction costs of an equity transaction are

accounted for as a deduction from equity, net of any related income tax benefit.

Otherwise, they are charged to profit or loss.

Interim dividends to shareholders are recognised in equity in the period in which they are

declared. Final dividends are recognised upon the approval of shareholders in a general

meeting.

Company No.:

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32



(c) Equity (continued)

The Group measures a liability to distribute non-cash assets as a dividend to the owners

of the Company at the fair value of the assets to be distributed. The carrying amount of

the dividend is remeasured at each reporting date and at the settlement date, with any

changes recognised directly in equity as adjustments to the amount of the distribution. On

settlement of the transaction, the Group recognises the difference, if any, between the

carrying amount of the assets distributed and the carrying amount of the liability in profit

or loss.

If the Company reacquires its own equity instruments, the consideration paid, including

any attributable transaction costs is deducted from equity as treasury shares until they are

cancelled. No gain or loss is recognised in profit or loss on the purchase, sale, issue or

cancellation of the Company’s own equity instruments. Where such shares are issued by

resale, the difference between the sales consideration and the carrying amount is shown

as a movement in equity.

4.10 Impairment of financial assets

The Group assesses whether there is any objective evidence that a financial asset is impaired

at the end of each reporting period.

(a) Loans and receivables

The Group collectively considers factors such as the probability of bankruptcy or

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

payments to determine whether there is objective evidence that an impairment loss on

loans and receivables has occurred. Other objective evidence of impairment include

historical collection rates determined on an individual basis and observable changes in

national or local economic conditions that are directly correlated with the historical

default rates of receivables.

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

difference between the financial asset’s carrying amount and the present value of

estimated future cash flows discounted at the financial asset’s original effective interest

rate. The impairment loss is recognised in profit or loss.

The carrying amount of loans and receivables is reduced through the use of an

allowance account.

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

relates to an event occurring after the impairment was recognised, the previously

recognised impairment loss is reversed to the extent that the carrying amount of the

asset does not exceed its amortised cost at the reversal date. The amount of impairment

reversed is recognised in profit or loss.

Company No.:

190155 - M

33


4.10 Impairment of financial assets (continued)

(b) Available-for-sale financial assets

The Group collectively considers factors such as significant or prolonged decline in fair

value below cost, significant financial difficulties of the issuer or obligor, and the

disappearance of an active trading market as objective evidence that available-for-sale

financial assets are impaired.

If any such objective evidence exists, an amount comprising the difference between the

financial asset’s cost (net of any principal payment and amortisation) and current fair

value, less any impairment loss previously recognised in profit or loss, is transferred

from equity to profit to loss.

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

loss in the subsequent periods. Instead, any increase in the fair value subsequent to the

impairment loss is recognised in other comprehensive income.

Impairment losses on available-for-sale debt investments are subsequently reversed in

profit or loss if the 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.

4.11 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of

a qualified asset is capitalised as part of the cost of the asset until when substantially all the

activities necessary to prepare the asset for its intended use or sale are complete, after which

such expense is charged to profit or loss. A qualifying asset is an asset that necessarily takes

a substantial period of time to get ready for its intended use or sale. Capitalisation of

borrowing cost is suspended during extended periods in which active development is

interrupted.

The amount of borrowing costs eligible for capitalisation is the actual borrowing costs

incurred on the borrowing during the period less any investment income on the temporary

investment of the borrowing.

All other borrowing cost is recognised in profit or loss in the period in which they are

incurred.

4.12 Income tax

Income taxes include all taxes on taxable profit. Taxes in the statements of comprehensive

income comprise current tax and deferred tax.

(a) Current tax

Current tax is the amount of income taxes payable or receivable in respect of the taxable

profit or loss for a period.

Current tax for the current and prior periods is measured at the amount expected to be

recovered from or paid to the taxation authorities. The tax rates and tax laws used to

compute the amount are those that have been enacted or substantively enacted by the end

of the reporting period.

Company No.:

190155 - M

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4.12 Income tax (continued)

(b) Deferred tax (continued)

Deferred tax is recognised in full using the liability method on temporary differences

arising between the carrying amount of an asset or liability in the statement of

financial position and its tax base.

Deferred tax is recognised for all temporary differences, unless the deferred tax arises

from goodwill or the initial recognition of an assets or liability in a transaction which

is not a business combination and at the time of transaction affects neither accounting

profit nor taxable profit.

A deferred tax asset is recognised only to the extent that it is probable that future

taxable profits will be available against which the deductible temporary differences,

unused tax losses and unused tax credits can be utilised. The carrying amount of a

deferred tax asset is reviewed at the end of each reporting period. If it is no longer

probable that sufficient taxable profits will be available to allow the benefit of part or

all of that deferred tax asset to be utilised, the carrying amount of the deferred tax asset

will be reduced accordingly. When it becomes probable that sufficient taxable profits

will be available, such reductions will be reversed to the extent of the taxable profits.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to

set off current tax assets against current tax liabilities and when the deferred income

taxes relate to the same taxation authority on either:

(i) the same taxable entity; or

(ii) different taxable entities which intend either to settle current tax liabilities and

assets on a net basis, or to realise the assets and settle the liabilities

simultaneously, in each future period in which significant amounts of deferred tax

liabilities or assets are expected to be settled or recovered.

Deferred tax would be recognised as income or expense and included in the profit or

loss for the period unless the tax relates to items that are credited or charged, in the

same or a different period, directly to equity, in which case the deferred tax will be

charged or credited directly to equity.

Deferred tax assets and liabilities are measured at the tax rates that are expected to

apply to the year when the asset is realised or the liability is settled, based on the

announcement of tax rates and tax laws by the Government in the annual budgets

which have the substantial effect of actual enactment by the end of the reporting

period.

Company No.:

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4.13 Provisions

Provisions are recognised when there is a present obligation, legal or constructive, 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 a reliable estimate can be made of the

amount of the obligation.

If the effect of the time value of money is material, the amount of a provision would be

discounted to its present value at a pre-tax rate that reflects current market assessments of

the time value of money and the risks specific to the liability. Provisions are reviewed at the end of each reporting period and adjusted to reflect the

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

economic benefits would be required to settle the obligation, the provision would be

reversed. Provisions are not recognised for future operating losses. If the Group has a contract that is

onerous, the present obligation under the contract shall be recognised and measured as a

provision. Provision for warranties is recognised based on the estimated liabilities to repair or replace

products when the underlying products or services are sold. The estimated liability is based

on historical warranty data and a weighting of all possible outcome against their associated

probabilities.

4.14 Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events whose existence

would be confirmed by the occurrence or non-occurrence of one or more uncertain future

events beyond the control of the Group or a present obligation that is not recognised because

it is not probable that an outflow of resources will be required to settle the obligation. A

contingent liability also arises in extremely rare cases where there is a liability that cannot

be recognised because it cannot be measured reliably. The Group does not recognise a

contingent liability but discloses its existence in the financial statements.

A contingent asset is a possible asset that arises from past events whose existence would be

confirmed by the occurrence or non-occurrence of one or more uncertain future events

beyond the control of the Group. The Group does not recognise contingent assets but

disclose its existence where inflows of economic benefits are probable, but not virtually

certain.

In the acquisition of subsidiaries by the Group under business combinations, contingent

liabilities assumed are measured initially at their fair value at the acquisition date.

Company No.:

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4.15 Employee benefits

4.15.1 Short term employee benefits

Wages, salaries, social security contributions, paid annual leave, paid sick leave, bonuses

and non-monetary benefits are recognised as expenses in the financial year when employees

have rendered their services to the Group.

Short term accumulating compensated absences such as paid annual leave are recognised as

an expense when employees render services that increase their entitlement to future

compensated absences. Short term non-accumulating compensated absences such as sick

leave are recognised when the absences occur and they lapse if the current period’s

entitlement is not used in full and do not entitle employees to a cash payment for unused

entitlement on leaving the Group. Bonuses are recognised as an expense when there is a present, legal or constructive

obligation to make such payments, as a result of past events and when a reliable estimate

can be made of the amount of the obligation.

4.15.2 Defined contribution plan

The Company and its subsidiaries incorporated in Malaysia make contributions to a

statutory provident fund. The contributions are recognised as a liability after deducting any

contributions already paid and as an expense in the period in which the employees render

their services.

4.16 Foreign currencies

4.16.1 Functional and presentation currency

Item included in the financial statements of each of the Group’s entities are measured using

the currency of the primary economic environment in which the Company operates (‘the

functional currency’). The consolidated financial statements are presented in Ringgit

Malaysia, which is the Company’s functional and presentation currency.

4.16.2 Foreign currency translations and balances

Transactions in foreign currencies are converted into Ringgit Malaysia at rates of exchange

ruling at the transaction dates. Monetary assets and liabilities in foreign currencies at the

reporting date are translated into Ringgit Malaysia at rates of exchange ruling at that date.

All exchange differences arising from the settlement of foreign currency transactions and

from the translation of foreign currency monetary assets and liabilities are included in profit

or loss in the period in which they arise. Non-monetary items initially denominated in

foreign currencies, which are carried at historical cost are translated using the historical rate

as of the date of acquisition, and non-monetary items which are carried at fair value are

translated using the exchange rate that existed when the values were determined for

presentation currency purposes.

Company No.:

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4.17 Revenue recognition

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

discounts and rebates.

Revenue is recognised to the extent that it is probable that the economic benefits associated

with the transaction will flow to the Group, and the amount of revenue and the cost incurred

or to be incurred in respect of the transaction can be reliably measured and specific

recognition criteria have been met for each of the Group’s activities as follows:

(a) Sale of goods

Revenue from sale of goods is recognised when significant risk and rewards of

ownership of the goods has been transferred to the customer and where the Group

retains neither continuing managerial involvement over the goods, which coincides

with delivery of goods and acceptance by customers.

(b) Management fees

Management fee in respect of rendering of management and consultation services is

recognised in the statement of comprehensive income when services are rendered.

(c) Dividend income

Dividend income is recognised when the right to receive payment is established.

(d) Interest income

Interest income is recognised as it accrues, using the effective interest method.

(e) Rental income

Rental income is recognised on an accrual basis unless collectability is in doubt.

4.18 Non-current assets (or disposal groups) held for sale

Non-current assets (or disposal groups) are classified as held for sale if their carrying

amounts will be recovered principally through a sale transaction rather than through

continuing use. For this to be the case, the assets (or disposal groups) must be available for

immediate sale in its present condition subject only to terms that are usual and customary

for sales of such assets (or disposal groups) and its sale must be highly probable. The

probability of shareholders’ approval (if required in the jurisdiction) is considered as part of

the assessment of whether the sale is highly probable.

Company No.:

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4.18 Non-current assets (or disposal groups) held for sale (continued)

The sale is expected to qualify for recognition as a completed sale within one year from the

date of classification. However, an extension of the period required to complete the sale

does not preclude the assets (or disposal groups) from being classified as held for sale if the

delay is caused by events or circumstances beyond the control of the Group and there is

sufficient evidence that the Group remains committed to its plan to sell the assets (or

disposal groups).

Immediately before the initial classification as held for sale, the carrying amounts of the

non-current assets (or all the assets and liabilities in a disposal group) are measured in

accordance with applicable MFRSs. On initial classification as held for sale, non-current

assets or disposal groups (other than investment properties, deferred tax assets, employee

benefits assets, and financial assets carried at fair value) are measured at the lower of

carrying amount before the initial classification as held for sale and fair value less costs to

sell. The differences, if any, are recognised in profit or loss as impairment loss.

The Group measures a non-current asset (or disposal group) classified as held for

distribution to owners at the lower of its carrying amount and fair value less costs to

distribute.

Non-current assets (or disposal groups) held for sale are classified as current assets (and

current liabilities, in the case of non-current liabilities included within disposal groups) in

the statement of financial position and are stated at the lower of carrying amount

immediately before initial classification and fair value less costs to sell and are not

depreciated. Any cumulative income or expense recognised directly in equity relating to the

non-current asset (or disposal group) classified as held for sale is presented separately.

If the Group has classified an asset (or disposal group) as held for sale but subsequently the

criteria for classification is no longer met, the Group ceases to classify the asset (or disposal

group) as held for sale. The Group measures a non-current asset that ceases to be classified

as held for sale (or ceases to be included in a disposal group classified as held for sale) at the

lower of:

(a) its carrying amount before the asset (or disposal group) was classified as held for sale,

adjusted for any depreciation, amortisation or revaluations that would have been

recognised had the asset (or disposal group) not been classified as held for sale; and

(b) its recoverable amount at the date of the subsequent decision not to sell.

4.19 Operating segments

Operating segments are defined as components of the Group that:

(a) engages in business activities from which it may earn revenues and incur expenses

(including revenues and expenses relating to transactions with other components of

the Group);

(b) whose operating results are regularly reviewed by the Group’s chief operating

decision maker in making decisions about resources to be allocated to the segment

and assessing its performance; and

(c) for which discrete financial information is available.

Company No.:

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4.19 Operating segments (continued)

An operating segment may engage in business activities for which it has yet to earn

revenues.

The Group reports separately information about each operating segment that meets any of

the following quantitative thresholds:

(a) Its reported revenue, including both sales to external customers and intersegment

sales or transfers, is 10 per cent or more of the combined revenue, internal and

external, of all operating segments.

(b) The absolute amount of its reported profit or loss is 10 per cent or more of the

greater, in absolute amount of:

(i) the combined reported profit of all operating segments that did not report a loss;

and

(ii) the combined reported loss of all operating segments that reported a loss.

(c) Its assets are 10 per cent or more of the combined assets of all operating segments.

Operating segments that do not meet any of the quantitative thresholds may be considered

reportable, and separately disclosed, if the management believes that information about the

segment would be useful to users of the financial statements.

Total external revenue reported by operating segments shall constitute at least 75 percent of

the Group’s revenue. Operating segments identified as reportable segments in the current

financial year in accordance with the quantitative thresholds would result in a restatement

of prior period segment data for comparative purposes.

4.20 Earnings per share

(a) Basic

Basic earnings per ordinary share for the financial year is calculated by dividing the

profit for the financial year attributable to owners of the parent by the weighted

average number of ordinary shares outstanding during the financial year.

(b) Diluted

Diluted earnings per ordinary share for the financial year is calculated by dividing

the profit for the financial year attributable to owners of the parent by the weighted

average number of ordinary shares outstanding during the financial year adjusted for

the effects of dilutive potential ordinary shares.

Company No.:

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5. ADOPTION OF NEW MFRSs AND AMENDMENT TO MFRSs

5.1 New MFRSs adopted during the current financial year

The Group and Company adopted the following Standards of the MFRS Framework that were issued by the Malaysian Accounting Standards Board (‘MASB’) during the financial year.

Title Effective Date

MFRS 1 First-time Adoption of Malaysian Financial Reporting

Standards

1 January 2012

MFRS 2 Share-based Payment 1 January 2012

MFRS 3 Business Combinations 1 January 2012

MFRS 4 Insurance Contracts 1 January 2012

MFRS 5 Non-current Assets Held for Sale and Discontinued

Operations

1 January 2012

MFRS 6 Exploration for and Evaluation of Mineral Resources 1 January 2012

MFRS 7 Financial Instruments: Disclosures 1 January 2012

MFRS 8 Operating Segments 1 January 2012

MFRS 101 Presentation of Financial Statements 1 January 2012

MFRS 102 Inventories 1 January 2012

MFRS 107 Statement of Cash Flows 1 January 2012

MFRS 108 Accounting Policies, Changes in Accounting Estimates and

Errors

1 January 2012

MFRS 110 Events After the Reporting Period 1 January 2012

MFRS 111 Construction Contacts 1 January 2012

MFRS 112 Income Taxes 1 January 2012

MFRS 116 Property, Plant and Equipment 1 January 2012

MFRS 117 Leases 1 January 2012

MFRS 118 Revenue 1 January 2012

MFRS 119 Employee Benefits 1 January 2012

MFRS 120 Accounting for Government Grants and Disclosure of

Government Assistance

1 January 2012

MFRS 121 The Effects of Changes in Foreign Exchange Rates 1 January 2012

MFRS 123 Borrowing Costs 1 January 2012

MFRS 124 Related Party Disclosures 1 January 2012

MFRS 126 Accounting and Reporting by Retirement Benefit Plans 1 January 2012

MFRS 127 Consolidated and Separate Financial Statements 1 January 2012

MFRS 128 Investments in Associates 1 January 2012

MFRS 129 Financial Reporting in Hyperinflationary Economies 1 January 2012

MFRS 131 Interests in Joint Ventures 1 January 2012

MFRS 132 Financial Instruments: Presentation 1 January 2012

MFRS 133 Earnings Per Share 1 January 2012

MFRS 134 Interim Financial Reporting 1 January 2012

MFRS 136 Impairment of Assets 1 January 2012

MFRS 137 Provisions, Contingent Liabilities and Contingent Assets 1 January 2012

MFRS 138 Intangible Assets 1 January 2012

MFRS 139 Financial Instruments: Recognition and Measurement 1 January 2012

MFRS 140 Investment Property 1 January 2012

MFRS 141 Agriculture 1 January 2012

Improvements to MFRSs (2008) 1 January 2012



Company No.:

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5. ADOPTION OF NEW MFRSs AND AMENDMENT TO MFRSs (continued)

5.1 New MFRSs adopted during the current financial year (continued)

The Group and Company adopted the following Standards of the MFRS Framework that were issued by the Malaysian Accounting Standards Board (‘MASB’) during the financial year. (continued)


IC Interpretation 1 Changes in Existing Decommissioning, Restoration

and Similar Liabilities

1 January 2012

IC Interpretation 2 Members’ Shares in Co-operative Entities and

Similar Instruments

1 January 2012

IC Interpretation 4 Determining Whether an Arrangement Contains a

Lease

1 January 2012

IC Interpretation 5 Rights to Interests Arising from Decommissioning,

Restoration and Environmental Rehabilitation Funds

1 January 2012

IC Interpretation 6 Liabilities Arising from Participating in a Specific

Market-Waste Electrical and Electronic Equipment

1 January 2012

IC Interpretation 7 Applying the Restatement Approach under MFRS

129 Financial Reporting in Hyper inflationary Economies

1 January 2012

IC Interpretation 9 Reassessment of Embedded Derivatives 1 January 2012

IC Interpretation 10 Interim Financial Reporting and Impairment 1 January 2012

IC Interpretation 12 Service Concession Arrangements 1 January 2012

IC Interpretation 13 Customer Loyalty Programmes 1 January 2012

IC Interpretation 14 MFRS 119 – The Limit on a Defined Benefit Asset,

Minimum Funding Requirements and their Interaction

1 January 2012

IC Interpretation 15 Agreements for the Construction of Real Estate 1 January 2012

IC Interpretation 16 Hedges of a Net Investment in a Foreign Operation 1 January 2012

IC Interpretation 17 Distributions of Non-cash Assets to Owners 1 January 2012

IC Interpretation 18 Transfers of Assets from Customers 1 January 2012

IC Interpretation 19 Extinguishing Financial Liabilities with Equity

Instruments

1 January 2012

IC Interpretation 107 Introduction of the Euro 1 January 2012

IC Interpretation 110 Government Assistance – No Specific Relation to

Operating Activities

1 January 2012

IC Interpretation 112 Consolidation – Special Purpose Entities 1 January 2012

IC Interpretation 113 Jointly Controlled Entities – Non-Monetary

Contributions by Venturers

1 January 2012

IC Interpretation 115 Operating Leases – Incentives 1 January 2012

IC Interpretation 125 Income Taxes – Changes in the Tax Status of an

Entity or its Shareholders

1 January 2012

IC Interpretation 127 Evaluating the Substance of Transactions

Involving the Legal Form of a Lease

1 January 2012

IC Interpretation 129 Service Concession Arrangements: Disclosures 1 January 2012

IC Interpretation 131 Revenue – Barter Transactions Involving

Advertising Services

1 January 2012

IC Interpretation 132 Intangible Assets – Web Site Costs 1 January 2012

Company No.:

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5.1 New MFRSs adopted during the current financial year (continued)

The Group and Company adopted the following Standards of the MFRS Framework that were issued by the Malaysian Accounting Standards Board (‘MASB’) during the financial year. (continued)

(a) Amendments to MFRS 1 Government Loans are mandatory for annual periods beginning on or after 1 January 2013. The Group has early adopted Amendments to MFRS 1 Government Loan in conjunction with the application of MFRS 1. Following the adoption of these Amendments, the Group has applied the requirements in MFRS 120 prospectively to

Government loans existing as at the date of transition to MFRSs.

(b) Amendments to MFRS 101 Clarification of the Requirements for Comparative Information are mandatory for annual periods beginning on or after 1 January 2013.

The Group has early adopted Amendments to MFRS 101 Clarification of the

Requirements for Comparative Information in conjunction with the application of MFRS 101. These Amendments clarify that the third statement of financial position is required only if a retrospective application, retrospective restatement or reclassification has a material effect on the information in the statement of financial position at the beginning of the preceding period. If the third statement of financial position is presented, these Amendments clarify that the related notes to the opening statement of

financial position need not be disclosed. Accordingly, there are no related notes disclosed in relation to the opening statement of financial position as at 1 April 2011.

(c) Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards are mandatory for annual periods beginning on or after 1 January 2013.

The Group has early adopted Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards in conjunction with the application of MFRS 1. These Amendments clarify that the first MFRS financial statements shall include at least three statements of financial position, two statements of profit or loss and other comprehensive income, two separate statements of profit or loss (if presented), two statements of cash flows and two statements of changes in equity and

related notes, including comparative information for all statements presented.

Company No.:

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5.2 New MFRSs that have been issued, but only effective for annual periods beginning on

or after 1 January 2013

The following are accounting standards, amendments and interpretations of the MFRS Framework that have been issued by the Malaysian Accounting Standards Board (‘MASB’) but have not been adopted by the Group and the Company.


Amendments to MFRS 101 Presentation of Items of Other

Comprehensive Income

1 July 2012

MFRS 10 Consolidated Financial Statements 1 January 2013

MFRS 11 Joint Arrangements 1 January 2013

MFRS 12 Disclosure of Interests in Other Entities 1 January 2013

MFRS 13 Fair Value Measurement 1 January 2013

MFRS 119 Employee Benefits (revised) 1 January 2013

MFRS 127 Separate Financial Statements 1 January 2013

MFRS 128 Investments in Associates and Joint Ventures 1 January 2013

Amendments to MFRS 7 Disclosures – Offsetting Financial Assets and

Financial Liabilities

1 January 2013

Amendments to MFRSs Annual Improvements 2009 – 2011 Cycle 1 January 2013

Amendments to MFRS 10, MFRS 11 and MFRS 12 Consolidated

Financial Statements, Joint Arrangements and Disclosure of Interests

in Other Entities: Transition Guidance

1 January 2013

IC Interpretation 20 Stripping Costs in the Production Phase of a

Surface Mine

1 January 2013

Amendments to MFRS 132 Offsetting Financial Assets and Financial

Liabilities

1 January 2014

Mandatory Effective Date of MFRS 9 and Transition Disclosures 1 January 2015

MFRS 9 Financial Instruments 1 January 2015

(a) Amendments to MFRS 101 Presentation of Items of Other Comprehensive Income are

mandatory for annual periods beginning on or after 1 July 2012.

These Amendments require the Group to group items presented in other

comprehensive income on the basis of whether they are potentially reclassifiable to

profit or loss subsequently (reclassification adjustments) or otherwise. It does not

change the option to present items of other comprehensive income either before tax or

net of tax. However, if the items are presented before tax, then the tax related to each

of the two (2) groups of other comprehensive income items shall be shown separately.

The Group is in the process of assessing the impact of implementing these

Amendments since the effects would only be observable for the financial year ending

31 March 2014.

Company No.:

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or after 1 January 2013 (continued)

The following are accounting standards, amendments and interpretations of the MFRS Framework that have been issued by the Malaysian Accounting Standards Board (‘MASB’) but have not been adopted by the Group and the Company. (continued)

(b) MFRS 10 is mandatory for annual periods beginning on or after 1 January 2013.

This Standard defines the principle of control and establishes control as the basis for

determining which entities are consolidated in the consolidated financial statements.

An investor controls an investee when it is exposed, or has rights, to variable returns

from its involvement with the investee and has the ability to affect those returns

through its power over the investee. The investor is required to reassess whether it

controls an investee if facts and circumstances indicate that there are changes to one

(1) or more of the three (3) elements of control.

The Group is in the process of assessing the impact of implementing this Standard

since the effects would only be observable for the financial year ending 31 March

2014.

(c) MFRS 11 is mandatory for annual periods beginning on or after 1 January 2013.

This Standard requires a party to a joint arrangement to determine the type of joint

arrangement in which it is involved by assessing its rights and obligations arising from

the arrangement. A joint arrangement is an arrangement of which two (2) or more

parties have joint control. Joint arrangements are classified into two (2) types; joint

operations and joint ventures. A joint operation is a joint arrangement whereby joint

operators have rights to the assets, and obligations for the liabilities, relating to the

arrangement. A joint venture is a joint arrangement whereby the joint venturers have

rights to the net assets of the arrangements. A joint operator recognises and measures

the assets and liabilities in relation to its interest in the arrangement in accordance with

applicable relevant MFRS, whereas a joint venture recognises the investment using the

equity method of accounting.



2014.

(d) MFRS 12 is mandatory for annual periods beginning on or after 1 January 2013.

This Standard establishes disclosure objectives and requirements that enable users of

financial statements to evaluate the nature of, and risks associated with, the Group’s

interests in other entities, and the effects of those interests on its financial position,

financial performance and cash flows.



2014.

Company No.:

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45





(e) MFRS 13 is mandatory for annual periods beginning on or after 1 January 2013.

This Standard establishes the principles for fair value measurement and replaces the

existing guidance on fair value measurement in different MFRSs.



2014.

(f) MFRS 119 is mandatory for annual periods beginning on or after 1 January 2013.

This revised Standard requires the Group to recognise all changes in the defined

benefit obligations and in the fair value of related plan assets when those changes

occur. The Group is also required to split the changes in the net defined benefit liability

or asset into the following three (3) components: service cost (presented in profit or

loss), net interest on the net defined benefit liability (presented in profit or loss) and

remeasurement of the net defined benefit liability (presented in other comprehensive

income and not recycled through profit or loss).



2014.

(g) MFRS 127 is mandatory effective for annual periods beginning on or after 1 January

2013.

This revised Standard contains accounting requirements for investments in

subsidiaries, joint ventures and associates in the separate financial statements of the

investor. An investor is required to account for those investments either at cost or in

accordance with MFRS 139 or MFRS 9 in the separate financial statements.



2014.

Company No.:

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(h) MFRS 128 is mandatory for annual periods beginning on or after 1 January 2013.

This revised Standard defines the equity method of accounting whereby the investment

in an associate or joint venture is initially measured at cost and adjusted thereafter for

the post-acquisition change in the investor’s share of net assets of the investee. The

profit or loss of the investor includes its share of the profit or loss of the investee and

the other comprehensive income of the investor includes its share of other

comprehensive income of the investee.



2014.

(i) Amendments to MFRS 7 Disclosures – Offsetting Financial Assets and Financial

Liabilities are mandatory for annual periods beginning on or after 1 January 2013.

These Amendments require disclosures that would enable users of the Group and the

Company’s financial statements to evaluate the effect or potential effect of netting

arrangements, including rights of set-off associated with the entity’s recognised

financial assets and recognised financial liabilities, on the Group and the Company’s

financial position.



31 March 2014.

Company No.:

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47





(j) Amendments to MFRSs Annual Improvements 2009 – 2011 Cycle are mandatory for annual periods beginning on or after 1 January 2013.

Amendments to MFRS 1 Repeated Application of MFRS 1 clarify that an entity that had applied MFRSs or IFRSs in the past but did not do so in its most recent previous annual financial statements must either apply MFRS 1 or MFRS 108 in the period that

the entity decides to reapply the FRS framework. The Group does not expect any impact on the financial statements upon adoption of these Amendments. Amendments to MFRS 1 Borrowing Costs clarify that a first-time adopter that capitalised borrowing costs in accordance with its previous GAAP before the date of transition to MFRSs shall carry forward without adjustment the amount previously

capitalised at the date of transition. Any borrowing costs incurred after the date of transition that relate to qualifying assets under construction at the date of transition would be accounted for in accordance with MFRS 123. The Group does not expect any impact on the financial statements upon adoption of these Amendments. Amendments to MFRS 116 Classification of Servicing Equipment clarify that items

such as spare parts, stand-by equipment and servicing equipment shall be recognised as property, plant and equipment when they meet the definition of property, plant and equipment. Otherwise, such items are classified as inventory. The Group does not expect any impact on the financial statements upon adoption of these Amendments. Amendments to MFRS 132 Tax Effect of Distribution to Holders of Equity Instruments

clarify that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction shall be accounted for in accordance with MFRS 112. The Group does not expect any impact on the financial statements upon adoption of these Amendments. Amendments to MFRS 134 Interim Financial Reporting and Segment Information for

Total Assets and Liabilities clarify that an entity shall disclose the total assets and liabilities for a particular reportable segment only when the amounts are regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the last annual financial statements for that reportable segment to be consistent with the requirements in MFRS 8. The Group does not expect any impact on the financial statements upon adoption of these Amendments.

Company No.:

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(k) Amendments to MFRS 10, MFRS 11 and MFRS 12 Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance are mandatory for annual periods beginning on or after 1 January 2013

These Amendments clarify the transition guidance in MFRS 10 and also provide

additional transition relief in MFRS 10, MFRS 11 and MFRS 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. A similar relief is also provided in MFRS 11 and MFRS 12. Additionally, entities would no longer be required to provide disclosures for unconsolidated structured

entities in periods prior to the first annual period that MFRS 12 is applied. The Group is in the process of assessing the impact of implementing these Amendments since the effects would only be observable for the financial year ending 31 March 2014.

(l) IC Interpretation 20 is mandatory for annual periods beginning on or after 1 January 2013.

This Interpretation clarifies that removed material that can be used to build up inventory is accounted for in accordance with the principles of MFRS 102. Other removed material, that provides access to deeper levels of material that would be

mined in future periods, is recognised as a non-current asset (referred to as a ‘stripping activity asset’) if the recognition criteria are met. This Interpretation requires stripping activity assets to be measured at cost at initial recognition. Subsequently, they are carried either at cost or revalued amount less depreciation or amortisation and any impairment losses.

The Group does not expect any impact on the financial statements arising from the

adoption of this Interpretation.

(m) Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities are

mandatory for annual periods beginning on or after 1 January 2014.

These Amendments provide application guidance for criteria to offset financial assets

and financial liabilities.



31 March 2015.

Company No.:

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(n) Mandatory Effective Date of MFRS 9 and Transition Disclosures is effective

immediately upon adoption of MFRS 9.

This Amendment modifies the effective date of MFRS 9 from 1 January 2013 to 1

January 2015. Transitional provisions in MFRS 9 were also amended to provide certain

relief from retrospective adjustments.

The Group is in the process of assessing the impact of implementing this Amendment


2016.

(o) MFRS 9 is mandatory for annual periods beginning on or after 1 January 2015.

This Standard addresses the classification and measurement of financial assets and

financial liabilities. All financial assets shall be classified on the basis of the Group’s

business model for managing the financial assets and the contractual cash flow

characteristics of the financial asset. Financial assets are initially measured at fair value

plus, in the case of a financial asset not at fair value through profit or loss, particular

transaction costs. Financial assets are subsequently measured at amortised cost, fair

value through other comprehensive income and fair value through profit or loss.

Financial liabilities are subsequently measured at amortised cost, except for financial

liabilities measured at fair value through profit or loss, transfer of financial asset not

qualifying for derecognition and financial guarantee contracts or commitments to

provide a below-market interest rate. However, changes due to own credit risk in

relation to the fair value option for financial liabilities shall be recognised in other

comprehensive income.



2016.

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6. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

6.1 Changes in estimates

Estimates are continually evaluated and are based on historical experience and other factors,

including expectations of future events that are believed to be reasonable under the

circumstances.

The Directors are of the opinion that there are no significant changes in estimates at the end

of the reporting period.

6.2 Critical judgments made in applying accounting policies

The following are the judgments made by Directors in the process of applying the Group’s

accounting policies that have the most significant effect on the amounts recognised in the

financial statements.

(a) Contingent liabilities

The determination of treatment of contingent liabilities is based on Director’s view of

the expected outcome of the contingencies for matters in the ordinary course of the

business.

(b) Contingent liabilities on corporate guarantees

The Directors are of the view that the chances of the financial institutions to call upon

the corporate guarantees are remote.

(c) Classification of leasehold land

The classification of leasehold land as a finance lease or an operating lease required the

use of judgement in determining the extent to which risks and rewards incidental to its

ownership lie. Due to the fact that there will be no transfer of ownership by the end of

the lease term and that the lease term does not constitute the major part of the indefinite

economic life of the land and that the present value of the minimum lease payments

amounts to at least substantially all of the fair value of the land at the inception of the

lease, management had determined that the leasehold land lease does not transfer

substantially all the risks and rewards to the Group and hence it is classified as

operating lease.

(d) Classification of non-current bank borrowings

Term loan agreements entered into by the Group include repayment on demand clauses

at the discretion of financial institutions. The Group believes that in the absence of a

default being committed by the Group, these financial institutions are not entitled to

exercise its right to demand for repayment. Accordingly, the carrying amount of the

term loans have been classified between current and non-current liabilities based on

their repayment period.

Company No.:

190155 - M

51

6. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

6.3 Key sources of estimation uncertainty

The following are 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 financial year.

(i) Depreciation of plant and machinery

The cost of plant and machinery is depreciated on a straight-line basis over the assets’

useful lives. The Directors estimate the useful lives of these plant and machinery as per

those disclosed in Note 4.4 to the financial statements. These are common life

expectancies applied in the packaging, plastic injection moulding and high precisions

plastic parts manufacturing industry. Changes in the expected level of usage and

technological developments could impact the economic useful lives and the residual

values of these assets, and therefore future depreciation charges could be revised.

(ii) Impairment of property, plant and equipment

The Group reviews the carrying amounts of the property, plant and equipment as at the

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

If any such indication exists, the assets’ recoverable amount is estimated.

While the Group believes that the assumptions are appropriate and reasonable, significant

changes in the assumptions may materially affect the assessment of recoverable amounts

and may lead to future impairment charges. The results of applying this impairment

assessment are disclosed in Note 7 to the financial statements.

(iii) Investments in subsidiaries

The Directors review material investments in subsidiaries for impairment when there is

an indication of impairment. The recoverable amounts of the investments in

subsidiaries are estimated based on fair value less cost to sell or value-in-use, whichever

is higher.

(iv) Deferred tax assets

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

allowances to the extent that it is probable that taxable profits will be available against

which the losses and capital allowances 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.

(e) Write down for obsolete or slow moving inventories

The Group writes down its obsolete or slow moving inventories based on assessment of

their estimated net selling price. Inventories are written down when events or changes in

circumstances indicate that the carrying amounts may not be recoverable. The

management specifically analyses sales trend and current economic trends when making a

judgement to evaluate the adequacy of the write down for obsolete or slow moving

inventories. Where expectations differ from the original estimates, the differences will

impact the carrying amount of inventories.

Company No.:

190155 - M

52

6. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

6.3 Key sources of estimation uncertainty (continued)

(f) Impairment of receivables

The Group and the Company makes impairment of receivables based on an assessment

of the recoverability of receivables. Impairment is applied to receivables where events

or changes in circumstances indicate that the balances may not be recoverable. The

management specifically analyses historical bad debts, customer concentration, current

creditworthiness, current economic trends and changes in customer payment terms when

making a judgment to evaluate the adequacy of impairment of receivables. Where

expectations are different from previous estimates, the difference will impact the

carrying amounts of receivables.

(vi) Fair values of borrowings

The fair values of borrowings are estimated by discounting future contractual cash flows

at the current market interest rates available to the Group for similar financial

instruments. It is assumed that the effective interest rates approximate the current

market interest rates available to the Group based on its size and its business risk.

Company No.:

190155 - M

53

7. PROPERTY, PLANT AND EQUIPMENT

Group

Balance as at

1.4.2012

Additions

Disposals

Written off

Balance as at

31.3.2013

2013 RM RM RM RM RM

Cost unless otherwise stated

Leasehold land - at valuation 1,050,000 - - - 1,050,000

Leasehold buildings - at valuation 1,450,000 - - - 1,450,000

Freehold land - at valuation 8,120,000 - - - 8,120,000

Buildings

- at valuation 19,290,000 - - - 19,290,000

Cargo lift 228,000 - - - 228,000

Plant and machinery 58,810,682 1,373,690 (768,110) (271,602) 59,144,660

Motor vehicles 2,632,464 280,079 (582,510) - 2,330,033

Furniture, fittings, equipment and renovation 24,022,963 395,851 (1,180) (180,449) 24,237,185

115,604,109 2,049,620 (1,351,800) (452,051) 115,849,878

Company No.:

190155 - M

54

7. PROPERTY, PLANT AND EQUIPMENT (continued)

Balance as at

1.4.2012

Additions

Disposals

Written off

Balance as at

31.3.2013

RM RM RM RM RM

2013

Accumulated depreciation

Leasehold land - at valuation 26,100 24,092 - - 50,192

Leasehold buildings - at valuation 36,042 33,270 - - 69,312

Buildings

- at valuation 482,251 385,800 - - 868,051

Cargo lift 3,420 4,560 - - 7,980

Plant and machinery 39,670,521 4,321,489 (712,797) (237,362) 43,041,851

Motor vehicles 2,301,529 109,757 (562,912) - 1,848,374

Furniture, fittings, equipment and renovation 17,030,655 1,713,575 (560) (137,139) 18,606,531

59,550,518 6,592,543 (1,276,269) (374,501) 64,492,291

Balance as at

1.4.2012

Charge for the

financial year

Balance as at

31.3.2013

RM RM RM

Impairment losses

Plant and machinery 884,847 1,040,000 1,924,847

Furniture, fittings, equipment and renovation 46,546 30,625 77,171

931,393 1,070,625 2,002,018

Company No.:

190155 - M

55


Group Reclassified

Balance as at

1.4.2011

Additions

Disposals

Written off

to non-current

assets held for

sale (Note 12)

Balance as at

31.3.2012

2012 RM RM RM RM RM RM

Cost unless otherwise stated

Leasehold land at - valuation 3,667,467 - - - (2,617,467) 1,050,000

Leasehold buildings - at valuation 6,420,831 - - - (4,970,831) 1,450,000

Freehold land

- at valuation 8,120,000 - - - - 8,120,000

- at cost

Buildings

- at valuation 19,290,000 - - - - 19,290,000

Cargo lift 182,400 45,600 - - - 228,000

Plant and machinery 65,529,595 8,377 (6,416,100) (311,190) - 58,810,682

Motor vehicles 2,846,611 141,617 (355,764) - - 2,632,464

Furniture, fittings, equipment and renovation 23,947,310 224,639 (48,000) (3,678) (97,308) 24,022,963

130,004,214 420,233 (6,819,864) (314,868) (7,685,606) 115,604,109

Company No.:

190155 - M

56


Reclassified

Balance as at

1.4.2011

Additions

Disposals

Written off

Reclassification

to non-current

assets held for

sale (Note 12)

Balance as at

31.3.2012

RM RM RM RM RM RM RM

2012

Accumulated depreciation

Leasehold land - at valuation 319,004 86,430 - - (83,944) (295,390) 26,100

Leasehold buildings - at valuation 544,257 125,270 - - (147,653) (485,832) 36,042

Buildings

- at valuation 96,451 385,800 - - - - 482,251

Cargo lift - 3,420 - - - - 3,420

Plant and machinery 38,009,536 4,769,401 (2,947,599) (160,817) - - 39,670,521

Motor vehicles 2,454,448 164,156 (317,075) - - - 2,301,529

Furniture, fittings, equipment and renovation 15,071,696 2,038,462 (40,675) (503) - (38,325) 17,030,655

56,495,392 7,572,939 (3,305,349) (161,320) (231,597) (819,547) 59,550,518

Balance as at

1.4.2011

Charge for the

financial year

Reversal of

impairment loss

Balance as at

31.3.2012

RM RM RM RM

Impairment losses

Plant and machinery 691,493 360,329 (166,975) 884,847

Furniture, fittings, equipment and renovation 21,891 24,655 - 46,546

713,384 384,984 (166,975) 931,393

Company No.:

190155 - M

57


Group

2013 2012

RM RM

Carrying amount

Leasehold land - at valuation 999,808 1,023,900

Leasehold buildings - at valuation 1,380,688 1,413,958

Freehold land

- at valuation 8,120,000 8,120,000

Freehold buildings

- at valuation 18,421,949 18,807,749

Cargo lift 220,020 224,580

Plant and machinery 14,177,962 18,255,314

Motor vehicles 481,659 330,935

Furniture, fittings, equipment and renovation 5,553,483 6,945,762

49,355,569 55,122,198

7.1 As at 31 March 2013, the entire property, plant and equipment of the Group have been

pledged as security for banking facilities granted to the Group (Note 15).

7.2 Property, plant and equipment acquired under hire purchase arrangement are as follows:

Group 2013 2012 RM RM

At carrying amount

Plant and machinery 4,896,924 7,230,953

Motor vehicles 106,792 134,942

5,003,716 7,365,895

7.3 Property, plant and equipment of the Group with carrying amount of RM25,379,133 (2012:

RM23,877,685) were fully depreciated and still in use.

7.4 During the financial year, the Group has recognised impairment losses of RM1,070,625 (2012:

RM384,984) for plant and equipment, which are idle and no longer in use.

7.5 The Group made the following cash payments to purchase property, plant and equipment:

Group

2013 2012

RM RM

Purchase of property, plant and equipment 2,049,620 420,233

Financed by hire purchase arrangement (1,355,879) (73,682)

Purchased under credit terms (693,741) (303,492)

- 43,059

Company No.:

190155 - M

58


7.6 Land and buildings of the Group were revalued in 2011. The valuations were carried out by

independent professional valuers by using indicative open market value basis, which were

determined by the exiting use basis and direct comparison basis.

7.7 Had the revalued assets of the Group been carried at cost less accumulated depreciation, the

carrying amount would have been as follows:

Group 2013 2012 RM RM

At carrying amount

Leasehold land 801,237 802,778 Leasehold buildings 1,485,569 1,488,426 Freehold land 7,686,000 7,686,000 Freehold buildings 14,355,393 14,686,376

24,328,199 24,663,580

8. INVESTMENTS IN SUBSIDIARIES

8.1 Investments in the subsidiaries are as follows:

Company

2013 2012

RM RM

Unquoted equity shares, at cost 65,557,291 65,557,291

Less: Impairment losses (15,468,660) (15,468,660)

50,088,631 50,088,631

In the previous financial year, an impairment loss of RM8,708,660 was recognised in the

statement of comprehensive income in respect of the Company’s investment in a subsidiary.

The recoverable amount was estimated based on its fair value less cost to sell as a result of

declining business operations.

8.2 The details of the subsidiaries are as follows:

Interest in

equity held by the

Country of Company

Name of company incorporation 2013 2012 Principal activities

Denko Management

Services Sdn. Bhd.

Malaysia 100% 100% Provision of management

services. Denko IPC Sdn. Bhd. Malaysia 100% 100% Production of packing material

and vacuum foams.

Lean Teik Soon Sdn. Bhd. Malaysia 100% 100% Wholesaler/retailer of foodstuff.

Winsheng Plastic Industry

Sdn. Bhd.

Malaysia 100% 100% Plastic injection moulding and

high precisions plastic parts.

Company No.:

190155 - M

59

9. INVENTORIES

Group 2013 2012 RM RM At cost Raw materials 1,331,404 1,711,037 Packing materials 190,400 107,995 Work-in-progress 2,016,964 2,454,709 Finished goods 7,431,620 6,298,205 10,970,388 10,571,946

Inventories recognised as cost of sales of the Group during the financial year amounted to

RM79,490,826 (2012: RM71,885,516).

10. TRADE AND OTHER RECEIVABLES

Group Company

2013 2012 2013 2012

RM RM RM RM

Trade receivables

Third parties 18,074,244 14,912,236 - -

Related party - 58,225 - -

Less: Impairment losses - third

parties

(420,313)

(193,789)

-

-

17,653,931 14,776,672 - -

Other receivables

Amounts owing by subsidiaries - - 2,234,665 146,126

Other receivables 594,069 400,616 131,444 -

Less: Impairment losses - other

receivables

(254,906)

(180,392)

(131,444)

-

339,163 220,224 2,234,665 146,126

Deposits 301,560 132,720 1,000 1,000

Loan and receivables 18,294,654 15,129,616 2,235,665 147,126

Prepayments 383,385 739,154 17,232 -

18,678,039 15,868,770 2,252,897 147,126

Company No.:

190155 - M

60

10. TRADE AND OTHER RECEIVABLES (continued)

(a) Trade receivables are non-interest bearing and the credit terms offered by the Group in respect

of trade receivables including the related party, ranged from thirty (30) days to ninety (90)

days (2012: thirty (30) days to ninety (90) days) from date of invoice. They are recognised at

their original invoice amounts which represent their fair values on initial recognition.

(b) The following bad debts have been written off against impairment losses:

Group Company

2013 2012 2013 2012

RM RM RM RM

Bad debts written off:

- trade receivables 2,793 1,106,218 - -

- other receivables - 319,221 - 319,221

(c) Amounts owing by subsidiaries are in respect of advances and payments made on behalf,

which are unsecured, interest-free and payable on demand in cash and cash equivalents.

(d) The currency exposure profile of receivables is as follows:

Group Company

2013 2012 2013 2012

RM RM RM RM

Ringgit Malaysia 14,579,930 13,739,754 2,252,897 147,126

United States of America

(‘US’) Dollar

4,098,109

2,107,446

-

-

Singapore Dollar - 21,570 - -

18,678,039 15,868,770 2,252,897 147,126

(e) The ageing analysis of trade receivables of the Group is as follows:

Group

2013 2012

RM RM

Neither past due nor impaired 15,873,223 14,226,441

Past due, not impaired

91 days to 120 days 1,235,367 352,800

121 days to 150 days 325,895 25,512

151 days to 180 days 219,446 170,258

More than 181 days - 1,661

1,780,708 550,231

Past due and impaired 420,313 193,789

18,074,244 14,970,461

Company No.:

190155 - M

61

10. TRADE AND OTHER RECEIVABLES (continued)

(e) The ageing analysis of trade receivables of the Group is as follows: (continued)

Receivables that are neither past due nor impaired

Trade receivables that are neither past due nor impaired are creditworthy debtors with good

payment records with the Group.

None of the trade receivables of the Group that are neither past due nor impaired have been

renegotiated during the financial year.

Receivables that are past due but not impaired

Trade receivables of the Group that are past due but not impaired are trade receivables with

creditworthiness and good payment records. They are unsecured in nature.

Receivables that are past due and impaired

Trade receivables of the Group that are past due and impaired at the end of the reporting period

are as follows:

Individually

impaired

2013 2012

Group RM RM

Trade receivables, gross 420,313 193,789

Less: Impairment losses (420,313) (193,789)

- -

Trade receivables that are individually determined to be impaired at the end of the reporting

period relate to those debtors that exhibit significant financial difficulties and have defaulted on

payments. These receivables are not secured by any collateral or credit enhancements.

The reconciliation of movement in the impairment losses on trade receivables is as follows:

Group

2013 2012

RM RM

At beginning of the financial year 193,789 1,198,934

Charge for the financial year 1,198,642 636,571

Reversal of impairment losses (969,325) (535,498)

Written off (2,793) (1,106,218)

At end of the financial year 420,313 193,789

Company No.:

190155 - M

62

11. CASH AND CASH EQUIVALENTS

Group Company

2013 2012 2013 2012

RM RM RM RM

Cash in hand and at bank 1,411,725 500,254 61,273 1,533

Deposits with licensed banks 90,308 1,611,306 - -

1,502,033 2,111,560 61,273 1,533

(a) Deposits with licensed banks of the Group have maturity period of 12 months (2012: 12

months) and with a weighted average effective interest rate of 4.3% (2012: 3.9%) per annum.

(b) Deposits with licensed banks of the Group were pledged to financial institutions as security

for banking facilities granted to a subsidiary as disclosed in Note 15 to the financial

statements.

(c) For the purpose of the statements of cash flows, cash and cash equivalents comprise the

following as at the end of the reporting period:

Group Company

2013 2012 2013 2012

RM RM RM RM

Cash and bank balances 1,411,725 500,254 61,273 1,533

Deposits with licensed banks 90,308 1,611,306 - -

1,502,033 2,111,560 61,273 1,533

Less: Deposits pledged

to licensed banks (90,308) (1,611,306) - -

1,411,725 500,254 61,273 1,533

(d) All cash and cash equivalents are denominated in RM.

12. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE

In the previous financial year, leasehold land and building of the Group with a carrying amount of

RM6,866,059 (Note 7) were presented as non-current assets held for sale following the Group’s

commitment to a plan on 31 March 2012 to dispose these assets. The disposal on the non-current

assets was completed in December 2012.

Liability attributable to the non-current assets classified as held for was as follows:

Group 2013 2012

RM

RM

Liability attributable to assets classified as held for sale

Term loan - 3,958,561

Company No.:

190155 - M

63

13. SHARE CAPITAL

Group and Company

2013 2012 Number Number of shares RM of shares RM

Ordinary shares of RM0.40 each (2012: RM1.00 each)

Authorised:

Balance as at beginning/end of the

reporting period 71,600,000 71,600,000 179,000,000 179,000,000

Issued and fully paid:

At beginning of the financial year 104,468,853 104,468,853 104,468,853 104,468,853 Capital reduction exercise - (62,681,313) - -

At end of the financial year 104,468,853 41,787,540 104,468,853 104,468,853

Following the approval of the shareholders vide the Extraordinary General Meeting held on 27 July

2012 and Court Order obtained on 31 October 2012, the Company completed a capital reduction

exercise pursuant to Section 64 of the Companies Act 1965 to reduce the Company’s issued and paid-

up ordinary share capital to RM41,787,540 of RM0.40 each from RM104,468,853 of RM1.00 each

by way of cancellation of RM0.60 from the par value of each existing ordinary shares of the

Company.

The owners of the parent are entitled to receive dividends as and when declared by the Company and

are entitled to one vote per ordinary share at meetings of the Company. All ordinary shares rank pari

passu with regard to the Company’s residual assets.

14. RESERVES

Group Company

2013 2012 2013 2012

RM RM RM RM

Non-distributable:

Share premium 1,566,419 3,136,152 1,566,419 3,136,152

Revaluation reserve 4,118,284 4,118,284 - -

5,684,703 7,254,436 1,566,419 3,136,152

(Accumulated losses)/Retained

earnings

(8,133,029)

(76,758,022)

4,997,267

(64,251,046)

The revaluation reserve, which are non-distributable, arose from the revaluation of the Group’s land

and buildings.

The Company has opted for single tier system and as result, there are no longer any restriction on the

Company to frank the payment of dividends out of its entire retained earnings as at the end of the

reporting period.

Company No.:

190155 - M

64

15. BORROWINGS

Group Company

2013 2012 2013 2012

RM RM RM RM



Secured:

Term loans 3,587,730

5,712,874 - -

Hire purchase creditors (Note 16) 1,026,053 611,084 - -

4,613,783 6,323,958 - -

Current liabilities

Secured:

Revolving credits 2,000,000 2,000,000 - -

Bills payables and bankers’

acceptances 11,829,735 9,754,000 - -

Term loans 1,329,593 2,324,413 - -

Hire purchase creditors (Note 16) 1,034,794 2,763,021 25,491 25,491

16,194,122 16,841,434 25,491 25,491

Total liabilities

Revolving credits 2,000,000 2,000,000 - -

Bills payable and bankers’

acceptances 11,829,735 9,754,000 - -

Term loans 4,917,323 8,037,287 - -

Hire purchase creditors (Note 16) 2,060,847 3,374,105 25,491 25,491

20,807,905 23,165,392 25,491 25,491

(a) The borrowings (other than hire purchase creditors) of the Group are secured by:

(i) A first and second party legal charges over the freehold land, leasehold land and

buildings and other assets of certain subsidiaries as disclosed in Note 7 and Note 12 to the

financial statements;

(ii) Registered debentures over the entire present and future fixed and floating property, plant

and equipment of certain subsidiaries as disclosed in Note 7 to the financial statements;

and

(iii) Pledged of deposits with licensed banks of a subsidiary is disclosed in Note 11 to the

financial statements.

(b) Information on financial risks of borrowings is disclosed in Note 29 to the financial statements.

(c) All borrowings are denominated in RM.

Company No.:

190155 - M

65

16. HIRE PURCHASE CREDITORS

Group Company

2013 2012 2013 2012

RM RM RM RM

Minimum hire purchase

payments:

- not later than one year 1,129,183 2,977,671 35,643 35,643

- later than one year and

not later than five years 1,160,542 570,929 - -

2,289,725 3,548,600 35,643 35,643

Less: Future interest charges (228,878) (174,495) (10,152) (10,152)

Present value of hire purchase

payments 2,060,846 3,374,105 25,491 25,491

Repayable as follows:

Current liabilities (Note 15):

- not later than one year 1,034,794 2,763,021 25,491 25,491

Non-current liabilities (Note 15):

- later than one year and

not later than five years 1,026,053 611,084 - -

2,060,847 3,374,105 25,491 25,491

Information on financial risks of hire purchase creditors is disclosed in Note 29 to the financial

statements.

17. TRADE AND OTHER PAYABLES

Group Company

Current 2013 2012 2013 2012

RM RM RM RM

Trade payables

Third parties 7,908,550 7,648,841 310,926 -

Related parties - 163,060 - -

7,908,550 7,811,901 310,926 -

Other payables and accruals

Other payables 3,332,424 4,941,940 374,850 731,776

Accruals 2,972,784 3,607,806 199,428 441,666

Amounts owing to Directors 270,800 - 270,800 -

Amount owing to a subsidiary - - 3,884,743 6,611,466

6,576,008 8,549,746 4,729,821 7,784,908

14,484,558 16,361,647 5,040,747 7,784,908

Company No.:

190155 - M

66

17. TRADE AND OTHER PAYABLES (continued)

Group Company

Non-current 2013 2012 2013 2012

RM RM RM RM

Trade payables

Third parties 151,019 3,498,053 - -

Related parties - 301,997 - -

151,019 3,800,050 - -

Other payables

Third parties - 2,405,716 - 277,666

Related party - 240,000 - -

Amounts owing to Directors 1,253,944 2,449,182 - 194,182

1,253,944 5,094,898 - 471,848

1,404,963 8,894,948 - 471,848

(a) Trade payables are non-interest bearing and the credit terms available to the Group ranged from

30 to 120 days (2012: 30 to 120 days) from date of invoice. Non-current portion is not payable

within the next 12 months.

(b) Included in other payables of the Group are amounts totalling RM802,365 (2012:

RM3,625,529) owing to machinery suppliers subject to an interest rate of 3.3% (2012: 3.2%)

per annum.

(c) Amount owing to a subsidiary is in respect of advances and payment made on behalf, which

are unsecured, interest-free and payable upon demand in cash and cash equivalents.

(d) In the previous financial year, non-trade amounts owing to related parties represented

subcontractor fees and advances, which were unsecured, interest-free and not payable within

the next 12 months.

(e) Amounts owing to Directors represent advances, which are unsecured, interest-free and not

payable within the next 12 months.

(f) The currency exposure profile of payables is as follows:

Group Company

Current 2013 2012 2013 2012

RM RM RM RM

Ringgit Malaysia 12,746,122 14,845,999 5,040,749 7,784,908

Japanese Yen 802,365 1,317,457 - -

US Dollar 748,649 21,328 - -

Singapore Dollar 187,422 120,098 - -

Thai Baht - 56,765 - -

14,484,558 16,361,647 5,040,749 7,784,908

Company No.:

190155 - M

67

17. TRADE AND OTHER PAYABLES (continued)

(g) The currency exposure profile of payables is as follows: (continued)

Group Company

Non-current 2013 2012 2013 2012

RM RM RM RM

Ringgit Malaysia 1,404,963 5,716,436 - 471,848

Japanese Yen - 2,308,072 - -

US Dollar - 838,022 - -

Singapore Dollar - 32,418 - -

1,404,963 8,894,948 - 471,848

18. DEFERRED TAX LIABILITIES

(a) The deferred tax liabilities are made up of the following:

Group

2013 2012

RM RM

At beginning of the reporting period 4,943,945 5,783,649

Recognised in profit or loss (Note 21) 337,119 (839,704)

At end of the reporting period 5,281,064 4,943,945

Presented after appropriate offsetting as follows:

Deferred tax assets - -

Deferred tax liabilities 5,281,064 4,943,945

5,281,064 4,943,945

(b) The components and movements of deferred tax liabilities and assets during the financial year

prior to offsetting are as follows:

Deferred tax liabilities of the Group

Property,

plant and Revaluation

equipment surplus Total

RM RM RM

At 1 April 2011 4,696,063 1,433,586 6,129,649

Recognised in profit or loss (965,877) - (965,877)

At 31 March 2012 3,730,186 1,433,586 5,163,772

Recognised in profit or loss 337,119 - 337,119

At 31 March 2013 4,067,305 1,433,586 5,500,891

Company No.:

190155 - M

68

18. DEFERRED TAX LIABILITIES (continued)

(b) The components and movements of deferred tax liabilities and assets during the financial year

prior to offsetting are as follows: (continued)

Deferred tax assets of the Group

Unabsorbed

Unutilised capital

tax losses allowances Others Total

RM RM RM RM

At 1 April 2011 (66,000) (186,000) (94,000) (346,000)

Recognised in profit or loss - (216,187) 90,014 126,173

At 31 March 2012 (66,000) (402,187) (3,986) (219,827)

Recognised in profit or loss - - - -

At 31 March 2013 (66,000) (402,187) (3,986) (219,827)

(c) The amounts of temporary differences for which deferred tax assets have not been recognised in

the statements of financial position are as follows:

Group Company

2013 2012 2013 2012

RM RM RM RM

Unutilised tax losses 3,021,469 4,597,256 - -

Others - 80,339 - -

3,021,469 4,677,595 - -

Deferred tax assets have not been recognised in respect of these items as it is not probable that

future taxable profit of certain subsidiaries will be available against which the deductible

temporary differences can be utilised.

The deductible temporary differences do not expire under the current tax legislation.

19. REVENUE

Group Company

2013 2012 2013 2012

RM RM RM RM

Dividends from unquoted shares in

subsidiaries

-

-

6,114,526

1,164,504

Sale of goods 93,183,717 78,293,046 - -

93,183,717 78,293,046 6,114,526 1,164,504

Company No.:

190155 - M

69

20. PROFIT/(LOSS) BEFORE TAX

Group Company

2013 2012 2013 2012

Note RM RM RM RM

Profit/(Loss) before tax is arrived

at after charging:

Auditors’ remuneration 100,000 100,000 47,000 47,000


and equipment 7 6,592,543 7,572,939 - -

Inventories written off 9 819,471 1,165,489 - -

Impairment losses on:

- investment in a subsidiary - - - 8,708,660

- property, plant and equipment 7 1,070,625 384,984 - -

- trade receivables 10 1,198,642 636,571 - -

Interest expense on:

- bank overdrafts 24,732 17,062 - -

- hire purchase creditors 159,138 348,535 - 10,801

- bills payables and bankers’

acceptance

558,605

477,133

-

-

- term loans 633,189 1,053,842 - -

- revolving credits 155,594 147,903 - -

- others 33,175 246,628 - -

1,564,433 2,291,103 - 10,801

Loss on disposal of property,

plant and equipment

-

750,212

-

-

Loss on foreign exchange - realised 830,832 555,802 - -

Property, plant and equipment

written off

77,550

153,548

-

-

Remuneration of the Directors of

the Company:

- fees 209,426 156,865 209,426 156,865

- other emoluments 33,500 1,050,514 33,500 214,202

Remuneration of the Directors of

the subsidiaries:

- emoluments other than fees 1,342,005 1,044,347 - -

1,584,931 2,251,726 242,926 371,067

Rental expenses on:

- car park 15,181 14,355 - -

- equipment 38,809 38,809 - -

- factory 81,000 4,981 - -

- hostel 325,395 346,836 - -

Company No.:

190155 - M

70

20. PROFIT/(LOSS) BEFORE TAX (continued)

Group Company

2013 2012 2013 2012

Note RM RM RM RM

Profit/(Loss) before tax is

arrived at after charging:

(continued)

And crediting:

Gain on disposal of

property, plant and equipment 4,410,730 - - -

Interest income 46,594 50,376 - -

Rental income 32,000 356,000 - -

Reversal of impairment losses on:

- property, plant and equipment 7 - 166,975 - -

- trade receivables 10 969,325 535,498 - -

969,325 702,473 - -

Reversal of inventories

written-off

1,407,799

252,453

-

-

Unrealised gain on foreign

exchange

742,701 256,780 - -

21. TAXATION

Group Company

2013 2012 2013 2012

RM RM RM RM

Current tax expense based on profit

for the financial year:

Malaysia income tax 1,085,565 114,000 366,132 291,126

(Over)/Under provision in prior years:

Malaysia income tax (346,711) 507,548 (313,620) 332,178

738,854 621,548 52,512 623,304

Deferred tax (Note 18)

Relating to origination and reversal of

temporary differences

255,000

(1,350,200)

-

-

Under provision in prior years 82,119 510,496 - -

337,119 (839,704) - -

1,075,973 (218,156) 52,512 623,304

Company No.:

190155 - M

71

21. TAXATION (continued)

The numerical reconciliation between tax expense and the product of accounting profit/(loss)

multiplied by applicable tax rate of the Group and of the Company is as follows:

Group Company 2013 2012 2013 2012 % % % % Applicable tax rate 25.0 (25.0) 25.0 (25.0)

Tax effects in respect of:

Non-allowable expenses 31.9 16.2 17.8 27.9

Non-taxable income (27.1) (1.1) (35.6) -

Utilisation of previously unrecognised

tax losses (5.6) (1.5) - -

24.2 (11.4) 7.2 2.9 (Over)/Under provision in prior years - income tax (6.4) 3.6 (6.2) 3.3 - deferred tax 1.9 5.4 - -

Average effective tax rate 19.7 (2.4) 1.0 6.2

Tax savings of the Group and the Company are as follows:

Group Company 2013 2012 2013 2012 RM RM RM RM

Arising from utilisation of unutilised

tax losses

305,103

137,946

-

-

The amount of temporary differences for which no deferred tax asset has been recognised at the

reporting date is as follows:

Group

2013 2012

RM RM

Unused tax losses 3,021,469 4,241,882

Company No.:

190155 - M

72

22. EARNINGS/(LOSS) PER ORDINARY SHARE

(a) Basic

The basic earnings/(loss) per ordinary share for the financial year is calculated by dividing the

profit/(loss) for the financial year attributable to equity holders of the Company by the weighted

average number of ordinary shares in issue during the financial year.

Group

2013 2012

RM RM

Profit/(Loss) attributable to equity holders of the Company 4,373,946 (9,188,346)

Weighted average number of ordinary shares in issue 41,787,540 104,468,853

Basic earnings/(loss) per ordinary share attributable to the

equity holders of the Company (Sen)

4.2

(8.8)

(b) Diluted

The diluted earnings per share of the Group for the financial years 2013 and 2012 are same as

the basic earnings per ordinary share of the Group as the Company has no dilutive potential

ordinary shares.

23. EMPLOYEE BENEFITS

The total employee benefits recognised in the statements of comprehensive income are as follows:

Group Company

2013 2012 2013 2012

RM RM RM RM

Salaries, allowances and overtime 18,904,533 17,974,410 242,926 430,741 Contributions to defined contribution

plan

1,173,854 1,088,737 - -

Other employee benefits 4,182 53,338 541 541

20,082,569 19,116,485 243,467 431,282

Included in the employee benefits of the Group and of the Company are Directors’ remuneration

which are disclosed in Note 26(c) to the financial statements.

24. COMMITMENTS

Non-cancellable operating lease commitment:

Group

2013 2012

RM RM

Minimum operating lease commitment:

- not later than one year - 32,340

- 32,340

Company No.:

190155 - M

73

25. CONTINGENT LIABILITIES

Company

2013 2012

Unsecured

RM RM

Corporate guarantees given to financial institutions for credit facilities

granted to subsidiaries 20,531,937

27,116,440

The Directors are of the view that the fair value of such corporate guarantee is negligible as the

chances of the financial institutions to call upon the corporate guarantee are remote.

26. RELATED PARTY DISCLOSURES

(a) Identities of related parties

Parties are considered to be related to the Group if the Group has the ability, directly or

indirectly, to control the party or exercise significant influence over the party in making

financial and operating decisions, or vice versa, or where the Group and the party are subject to

common control or common significant influence. Related parties may be individuals or other

entities.

The Company has controlling related party relationship with its subsidiaries.

The relationships between the Group and the related parties, other than those disclosed

elsewhere in the financial statements, are as follows:

Identities of related parties Relationship with the Group

Concordmold Technology Sdn. Bhd.

Brandplus Sdn. Bhd.

}

}

Companies in which family members of a

shareholder of the Company have substantial

financial interest

(b) In addition to the transactions and balances detailed elsewhere in the financial statements, the

Group and the Company had the following transactions with related parties during the financial

year:

Group Company

2013 2012 2013 2012

RM RM RM RM

Transaction with a person

connected to the shareholder of

the Company:

- Sub-contractor fees paid/payable 881,484 472,687 - -

- Sales of plastic parts and toolings 373,292 9,565 - -

The above transactions are entered in the ordinary course of business and established under

negotiated and mutually agreed terms.

Information regarding outstanding balances arising from related party transactions as at 31

March 2013 is disclosed in Note 10 and Note 17 to the financial statements.

Company No.:

190155 - M

74

26. RELATED PARTY DISCLOSURES (continued)

(c) Compensation of key management personnel

Key management personnel comprise persons other than the Directors of the Group having

authority and responsibility for planning, directing and controlling the activities of the Group

either directly or indirectly.

The remuneration of Directors and other key management personnel during the financial year

are as follows:

Group Company

2013 2012 2013 2012

RM RM RM RM

Directors:

- fees 209,426 156,865 209,426 156,865

- remuneration 1,226,268 1,916,277 33,500 214,202

Total short term employee

benefits

1,435,694

2,073,142

242,926

371,067

- defined contribution plan 149,237 178,584 - -

1,584,931 2,251,726 242,926 371,067

Other key management

personnel:

- short term employee benefits 4,016,709 2,353,131 - 60,900

- defined contribution plan 415,096 342,042 - -

4,431,805 2,695,173 - 60,900

6,016,736 4,946,899 242,926 431,967

Group Company

2013 2012 2013 2012

RM RM RM RM

Directors of the Company

Executive Directors:

Salaries and other emoluments 346,300 922,012 - 39,733

Defined contribution plan 39,601 74,700 - 120,667

385,901 996,712 - 160,400

Non-executive Directors:

Fees 209,426 210,667 209,426 117,131

Other emoluments 33,500 - 33,500 93,535

242,926 210,667 242,926 210,667

Directors of subsidiaries

Salaries and other emoluments 834,318 940,463 - -

Defined contribution plan 121,786 103,884 - - 956,104 1,044,347 - -

1,584,931 2,251,726 242,926 371,067

Company No.:

190155 - M

75

27. OPERATING SEGMENTS

(a) Denko Industrial Corporation Berhad and its subsidiaries are principally engaged in

manufacturing, trading, providing investment holding and management services.

Denko Industrial Corporation Berhad has arrived at two (2) reportable segments that are

organised and managed separately according to the nature of products and services, which

requires different business and marketing strategies. The reportable segments are summarised as

follows:

Manufacturing : Manufacture and sale of consumer and industrial products

Trading : Wholesaler/retailer of foodstuff

Other operating segments that do not constitute reportable segments comprise investment

holding and management services.

The accounting policies of operating segments are the same as those described in the summary

of significant accounting policies.

The Group evaluates performance on the basis of profit or loss from operations before tax.

Inter-segment revenue is priced along the same lines as sales to external customers and is

eliminated in the consolidated financial statements. These policies have been applied

consistently throughout the current and previous financial years.

Segment assets exclude tax assets.

Segment liabilities exclude tax liabilities. Even though loans and borrowings arise from

financing activities rather than operating activities, they are allocated to the segments based on

relevant factors (e.g. funding requirements).

Company No.:

190155 - M

76

27. OPERATING SEGMENT (continued)

(b) The following table provides an analysis of the Group’s revenue, results, assets, liabilities and

other information by business segment:

Other

operating

Manufacturing Trading segments Total

2013 RM RM RM RM

Revenue

Revenue from external customers 65,546,444 27,271,142 - 92,817,586

Inter-segment revenue 177,138 - 188,993 366,131

Total revenue 65,723,582 27,271,142 188,993 93,183,717

Interest income 46,594 - 46,594

Finance costs (1,333,872) (230,561) - (1,564,433)

Net finance expense (1,287,278) (230,561) - (1,517,839)


and equipment

(6,483,850)

(108,693)

-

(6,592,543)

Segment profit before income

tax

4,762,718

173,732

513,470

5,449,920

Taxation (1,103,123) (93,551) 120,701 (1,075,973)

Other material non-cash items:

- property, plant and equipment

written off

77,550

-

-

77,550

- inventories written off 448,832 370,639 - 819,471

- impairment losses on trade and

other receivables

- impairment losses on property,

plant and equipment

226,757

1,070,625

971,885

-

-

-

1,198,642

1,070,625

Additions to non-current assets

other than financial instrument

and deferred tax assets 2,020,970 28,650 - 2,049,620

Segment assets 68,294,836 12,127,484 83,709 80,506,029

Segment liabilities 27,296,806 7,607,080 1,793,539 36,697,425

Company No.:

190155 - M

77


(b) The following table provides an analysis of the Group’s revenue, results, assets, liabilities and

other information by business segment: (continued)

Other

operating

Manufacturing Trading segments Total

2012 RM RM RM RM

Revenue

Revenue from external customers 50,532,376 27,760,670 - 78,293,046

Inter-segment revenue 143,690 - (143,690) -

Total revenue 50,676,066 27,760,670 (143,690) 78,293,046

Interest income 50,376 - - 50,376

Finance costs (2,116,654) (163,648) - (2,291,103)

Net finance expense (2,066,278) (163,648) - (2,240,727)


and equipment

(7,463,417)

(109,522)

-

(7,572,939)

Segment loss before income tax (7,891,417)

(952,721)

(562,364)

(9,406,502)

Taxation (833,704) 110,156 505,392 (218,156)

Other material non-cash items:

- property, plant and equipment

written off

(150,372)

(3,176)

-

(153,548)

- inventories written off (947,979) (217,510) - (1,165,489)

- impairment losses on trade and

other receivables

(88,100)

(548,471)

-

(636,571)

Additions to non-current assets

other than financial instrument

and deferred tax assets 316,065 104,168 - 420,233

Segment assets 78,934,054 11,601,900 2,046 90,540,533

Segment liabilities 41,427,416 7,396,220 1,886,132 52,380,548

Company No.:

190155 - M

78


(c) Reconciliations of reportable segment assets and liabilities to the Group’s corresponding

amounts are as follows:

2013 2012

RM RM

Assets

Total assets for reportable segments 80,506,028 90,540,533

Tax assets 1,525,113 1,859,383

Group’s assets 82,031,141 92,339,916

Liabilities

Total liabilities for reportable segments 36,697,425 52,380,548

Tax liabilities 5,994,502 5,054,101

Group’s liabilities 42,691,927 57,434,649

(d) Geographical segments

No segment information by geographical location is presented as the Group’s operations are

predominantly located in Malaysia.

There is no revenue from any single external customer which is equal or more than 10 percent

of the Group’s revenue.

28. FINANCIAL INSTRUMENTS

(a) Capital management

The primary objective of the Group’s capital management is to ensure that entities of the

Group would be able to continue as going concerns while maximising the return to

shareholders. The overall strategy of the Group remains unchanged from financial year ended

31 March 2012.

The Group manages its capital structure and makes adjustments to it, in light of changes in

economic conditions. To maintain or adjust the capital structure, the Group may adjust the

dividend payment to shareholders, return capital to shareholders or issue new shares. No

changes were made in the objectives, policies or processes during the financial year ended 31

March 2013 and 31 March 2012.

The Group is not subject to any externally imposed capital requirements.

Pursuant to the requirements of Practice Note No. 17/2005 of the Bursa Malaysia Securities,

the Group is required to maintain a consolidated shareholders’ equity equal to or not less than

the 25% of the issued and paid-up capital (excluding treasury shares) and such shareholders’

equity is not less than RM40.0 million. The Company has complied with this requirement for

the financial year ended 31 March 2013.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus

net debt. The Group has a target gearing ratio of 10% to 50% determined as the proportion of

net debt to equity. The Group includes within net debt, loans and borrowings, trade and other

payables, less cash and bank balances. Capital represents equity attributable to the owners of

the parent less the fair value adjustment reserve.

Company No.:

190155 - M

79

28. FINANCIAL INSTRUMENTS (continued)

(a) Capital management (continued)

The Group manages its capital by regularly monitoring its current and expected liquidity

requirement and modify the combination of equity and borrowings from time to time to meet

the needs. Debt-to-equity ratios of the Group and of the Company are as follows:

Group Company

2013 2012 2013 2012

RM RM RM RM

Borrowings 20,807,904 23,165,392 25,491 25,491

Total equity 39,339,214 34,965,267 48,351,226 43,353,957

Debt-to-equity ratio 0.53 0.66 <0.01 <0.01

(b) Financial instruments

(i) Categories of financial instruments

Loans and

receivables

Fair value

through

profit or

loss

Available

for sale

Held to

maturity

Total

Group RM RM RM RM RM

2013

Financial assets

Trade and other

receivables, net

of prepayments

18,294,654

-

-

-

18,294,654

Cash and cash

equivalents

1,502,033

-

-

-

1,502,033

19,796,687 - - - 19,796,687

Fair value

through

profit or

loss

Other

financial

liabilities

Total

Group RM RM RM

2013

Financial liabilities

Trade and other payables - 15,889,521 15,889,521

Borrowings - 20,807,905 20,807,905

- 36,697,426 36,697,426

Company No.:

190155 - M

80


(b) Financial instruments (continued)

(i) Categories of financial instruments (continued)

Loans and

receivables

Fair value

through

profit or

loss

Available

for sale

Held to

maturity

Total

Group RM RM RM RM RM

2012

Financial assets

Trade and other

receivables, net

of prepayments

15,129,616

-

-

-

15,129,616

Cash and cash

equivalents

2,111,560

-

-

-

2,111,560

17,241,176 - - - 17,241,176

Fair value

through

profit or

loss

Other

financial

liabilities

Total

Group RM RM RM

2012



Borrowings - 23,165,392 23,165,392

- 48,421,987 48,421,987

Loans and

receivables

Fair value

through

profit or

loss

Available

for sale

Held to

maturity

Total

Company RM RM RM RM RM

2013

Financial assets

Trade and other

receivables, net of

prepayments

2,235,665

-

-

-

2,235,665

Cash and cash

equivalents

61,273

-

-

-

61,273

2,296,938 - - - 2,296,938

Company No.:

190155 - M

81


(b) Financial instruments (continued) (i) Categories of financial instruments (continued)

Fair value

through

profit or

loss

Other

financial

liabilities

Total

Company RM RM RM

2013



Borrowings - 25,491 25,491

- 5,066,238 5,066,238

Loans and

receivables

Fair value

through

profit or

loss

Available

for sale

Held to

maturity

Total

Company RM RM RM RM RM

2012

Financial assets

Trade and other

receivables, net of

prepayments

147,126

-

-

-

147,126

Cash and cash

equivalents

1,533

-

-

-

1,533

148,659 - - - 148,659

Fair value

through

profit or

loss

Other

financial

liabilities

Total

Company RM RM RM

2012



Borrowings - 25,491 25,491

- 8,282,247 8,282,247

Company No.:

190155 - M

82


(b) Financial instruments (continued)

(i) Fair value of financial instruments

The fair values of financial instruments that are not carried at fair value and whose

carrying amounts do not approximate its fair values are as follows:

Group

Carrying

amount Fair value

2013 Note RM RM

Recognised

Hire purchase creditors 16 2,060,846 1,795,341

Company

Carrying

amount Fair value

2012 Note RM RM

Recognised

Hire purchase creditors 16 3,374,105 3,124,522

(c) Determination of fair value

Methods and assumptions used to estimate fair value

The fair values of financial assets and financial liabilities are determined as follows:

(i) Financial instruments that are not carried at fair value and whose carrying amounts are a

reasonable approximation of fair value

The carrying amounts of financial assets and liabilities, such as trade and other receivables,

trade and other payables and borrowings, are reasonable approximation of fair value,

either due to their short-term nature or that they are floating rate instruments that are re-

priced to market interest rates on or near the end of the reporting period.

(ii) Hire purchase creditors and long term payables

The fair value of these financial instruments are estimated by discounting expected future

cash flows at market incremental lending rate for similar types of instruments at the end of

the reporting period.

Company No.:

190155 - M

83

29. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s financial risk management objective is to optimise value creation for its shareholders

whilst minimising the potential adverse impact arising from fluctuations in foreign currency

exchange and interest rates. It is, and has been throughout the period under review, the Group’s

policy that no trading and speculation in derivative financial instruments shall be undertaken.

The Group is exposed mainly to credit risk, foreign currency risk, liquidity and cash flow risk as

well as interest rate risk. Information on the management of the related exposures is detailed below:

(i) Credit risk

Cash deposits and receivables may give rise to credit risk, which requires the loss to be

recognised if a counter party fails to perform as contracted. Credit risk refers to the risk that

counterparty will default on its contractual obligations resulting in financial loss to the Group.

The Group seeks to control credit risk by setting counterparty credit limits and ensuring that

sales of products are made to customers with appropriate credit history. Receivables are

monitored by management on an ongoing basis.

The Group’s primary exposure to credit risk arises through its trade receivables.

Exposure to credit risk

At the end of the reporting period, the Group’s and the Company’s maximum exposure to

credit risk is represented by the carrying amount of each class of financial assets recognised in

the statements of financial position.

Credit risk concentration profile

The Group determines concentration of credit risk by monitoring the country and industry

sector profiles of its trade receivables on an ongoing basis. The credit risk concentration

profile of the Group’s and the Company’s trade receivables at the end of the reporting period

are as follows:

Group

2013 2012

Group RM % RM %

Malaysia 13,837,259 78% 12,704,812 86%

Other Asian countries 3,816,672 22% 1,695,956 11%

European countries - - 375,904 3%

17,653,931 100% 14,776,672 100%

At the end of the reporting period, there were no significant concentrations of credit risk other

than amounts owing by subsidiaries representing 99.1% (2012: 99.3%) of the total receivables

of the Company. The Group and the Company do not anticipate the carrying amount recorded

at the reporting period to be significantly different from the values that would eventually be

received.

Company No.:

190155 - M

84

29. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

(i) Credit risk

Financial assets that are neither past due nor impaired

Information regarding trade and other receivables that are neither past due nor impaired is

disclosed in Note 10 to the financial statements. Bank balances are placed with reputable

financial institutions with good standing. The Directors believe that the possibility of non-

performance by the financial institutions is remote on the basis of their financial strength.

Financial assets that are either past due or impaired

Information regarding trade and other receivables that are either past due or impaired is

disclosed in Note 10 to the financial statements.

(ii) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial

instrument will fluctuate because of changes in foreign exchange rates.

It is not the Group’s policy to enter into foreign exchange contracts in managing its foreign

exchange risk resulting from cash flows on transactions denominated in foreign currency.

The Group’s transactional currency exposures arise mainly from sales to its foreign customers

in foreign currency mainly USD. The Group also makes purchases from foreign suppliers in

USD. There is no formal hedging policy with respect to foreign currency risk exposure.

The Group did not enter into any forward foreign exchange contract during the financial year.

Foreign currency risk is monitored closely and managed to an acceptable level.

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s profit/(loss) net of tax to a

reasonably possible change in the United States Dollar (‘USD’) and Japanese Yen exchange

rate against the Ringgit Malaysia (‘RM’), with all other variables held constant.

Group

2013 2012

RM RM Profit net

of tax

Loss net

of tax

USD/RM - Strengthen by 10% (2012: 10%) 251,210 (93,630)

- Weaken by 10% (2012: 10%) (251,210) 93,630

Yen/RM - Strengthen by 10% (2012: 10%) (60,177) 271,915

- Weaken by 10% (2012: 10%) 60,177 (271,915)

Sensitivity analysis for foreign currency risk is presented only for significant balances

dominated in foreign currencies.

Company No.:

190155 - M

85


(iii) Liquidity and cash flow risk

Liquidity risk arises from the Group’s management of working capital. It is the risk that the

Group will encounter difficulty in meeting its financial obligations when due. The Group

actively manages its debts maturity profile, operating cash flows and the availability of

funding so as to ensure that all operating, investing and financing needs are met. In liquidity

risk management strategy, the Group measures and forecasts its cash commitments and

maintains a level of cash and cash equivalents deemed adequate to finance the Group’s

activities. The Group also aims at maintaining flexibility in funding by keeping its credit lines

available.

The table below summarises the maturity profile of the Group’s liabilities at the end of the

reporting period based on contractual undiscounted repayment obligations.

On demand

or within 1

year

1 to 2

years

2 to 5

years

Over 5

years

Total

RM RM RM RM RM

As at 31 March 2013

Group

Financial liabilities:

Trade and other

payables 15,718,502 171,019

- - 15,889,521

Borrowings 16,263,926 1,440,959 3,307,102 - 21,011,987

Total undiscounted

financial liabilities 31,982,428 1,611,977

3,307,102 - 36,901,507

Company


Trade and other

payables 5,040,747 - - - 5,040,747

Borrowings 25,491 - - - 25,491

Total undiscounted

financial liabilities 5,066,238 -

- - 5,066,238

Company No.:

190155 - M

86


(iii) Liquidity and cash flow risk (continued)

(iv) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the

Company’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s exposures to market risk of changes in interest rates relate primarily to the

Group’s interest-earning deposits and interest-bearing borrowings. There is no formal hedging

policy with respect to interest rate exposure.

On demand

or within 1

year

1 to 2

years

2 to 5

years

Over 5

years

Total

RM RM RM RM RM

As at 31 March 2012

Group


Trade and other

payables 16,361,647 8,894,948

- - 25,256,595

Borrowings 21,228,506 3,289,062 4,031,418 - 28,548,986

Total undiscounted

financial liabilities 37,590,153 12,184,010

4,031,418 - 53,805,581

Company


Trade and other

payables 7,784,908 471,848 - - 8,256,756

Borrowings 25,491 - - - 25,491

Total undiscounted

financial liabilities 7,810,399 471,848 - - 8,282,247

Company No.:

190155 - M

87


(iv) Interest rate risk (continued)

The following tables set out the carrying amounts, the weighted average effective interest rates as at the end of the reporting period and the remaining

maturities of the Group’s and the Company’s financial instruments that are exposed to interest rate risk:

Weighted

average

effective

interest Within 1 - 2 2 - 5 Over 5 Carrying

Group rate 1 year years years years amount

Note % RM RM RM RM RM

2013

Fixed rates

Deposits with licensed banks 11 3.2 90,308 - - - 90,308

Hire purchase creditors 16 6.6 1,034,794 264,739 761,314 - 2,060,847

Other payables 17 3.3 802,365 - - - 802,365

Floating rates

Revolving credits 15 8.1 2,000,000 - - - 2,000,000

Bills payables and bankers’ acceptances 15 4.3 11,829,735 - - - 11,829,735

Term loans 15 7.4 1,329,593 1,124,839 2,462,891 - 4,917,323

2012

Fixed rates

Deposits with licensed banks 11 3.1 1,611,306 - - - 1,611,306

Hire purchase creditors 16 7.1 2,763,021 593,113 17,971 - 3,374,105

Other payables 17 3.3 2,567,662 1,057,867 - - 3,625,529

Floating rates

Revolving credits 15 7.4 2,000,000 - - - 2,000,000

Bills payables and bankers’ acceptances 15 3.5 9,754,000 - - - 9,754,000

Term loans 15 7.5 2,324,413 2,126,674 3,586,200 - 8,037,287

Company No.:

190155 - M

88


(iv) Interest rate risk (continued)

Weighted

average

effective

interest Within 1 - 2 2 - 5 Over 5 Carrying

Company rate 1 year years years years amount

Note % RM RM RM RM RM

2013

Fixed rate

Hire purchase creditors 16 6.1 25,491 - - - 25,491

2012

Fixed rate

Hire purchase creditors 16 6.1 25,491 - - - 25,491

Sensitivity analysis for interest rate risk

At 31 March 2013, if interest rates at the date had been 100 basis points lower with all other variables held constant, the Group’s post-tax profit (2012:

Loss) for the year would have been RM198,410 (2012: RM259,990) higher (2012: Lower). If interest rates had been 100 basis points higher, with all

other variables held constant, the Group’s post-tax profit (2012: Loss) would have been RM198,410 (2012: RM259,990) lower (2012: higher). The

assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.

Company No.:

190155 - M

89

30. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

On 3 July 2012, the Company proposed a capital reduction exercise pursuant to Section 64 of the

Companies Act 1965 as follows:

(i) proposed reduction of the issued and paid-up share capital of the Company pursuant to section

of the Companies Act 1965 (‘the Act’) involving the cancellation of RM0.60 of the par value

of each ordinary share from RM1.00 to RM0.40 each;

(ii) proposed reduction of RM1,569,733 from the share premium account of the Company

pursuant to section 64 of the Act; and

(iii) proposed amendments of the Memorandum and Articles of Association of the Company to

facilitate the change in the par value of the ordinary shares of the Company.

The above proposals had been approved by the shareholders of the Company vide the Extraordinary

General Meeting held on 27 July 2012 and the Court Order was obtained on 31 October 2012.

31. SIGNIFICANT EVENT SUBSEQUENT TO THE END OF THE REPORTING PERIOD

On 28 June 2013, Lean Teik Soon Sdn. Bhd. (‘LTS’), a wholly owned subsidiary has been served a

requisite three (3) months' termination notice of the distribution agreement by Abbott Laboratories

(M) Sdn. Bhd. (‘Abbott’) to market, promote, sell and distribute Abbott’s range of milk products in

the territories of Penang, Kedah, Perlis and Langkawi.

Following the Board's instructions, the management is in the midst of engaging Abbott for further

discussions prior to establishing LTS's legal position on Abbott's unilateral termination.

32. EXPLANATION OF TRANSITION TO MFRSs

The Group and the Company are non-transitioning entities as defined by the MASB, and has

adopted the MFRS Framework during the financial year ended 31 March 2013. Accordingly, this is

the first financial statements of the Company prepared in accordance with MFRSs.

The accounting policies set out in Note 4 to the financial statements have been applied in preparing

the financial statements of the Company for the financial year ended 31 March 2013, as well as

comparative information presented in these financial statements for the financial year ended 31

March 2012 and in the preparation of the opening MFRS statements of financial position at 1 April

2011 (the date of transition of the Group to MFRSs).

The Group has assessed the impact of implementing these accounting standards, amendments and

interpretations since the effects would only be observable for the future financial year. There was

no material impact arising from the adoption of the MFRS Framework. Thus, no restatement of the

financial position as at 1 April 2011 is necessary.

Company No.:

190155 - M

90

33. SUPPLEMENTARY INFORMATION ON REALISED AND UNREALISED PROFITS OR

LOSSES AS AT 31 MARCH 2013

The (accumulated losses)/retained earnings as at the end of the reporting period may be analysed as

follows:

Group Company

2013 2012 2013 2012

RM RM RM RM

Total (accumulated losses)/retained

earnings of Denko Industrial Corporation

Berhad and its subsidiaries

- realised (3,765,467) (72,068,373) 4,997,267 (64,251,046)

- unrealised (4,367,562) (4,689,649) - -

Total Group/Company (accumulated

losses)/retained earnings as per

consolidated financial statements (8,133,029)

(76,758,022)

4,997,267

(64,251,046)

The supplementary information on realised and unreaslised profits or losses has been prepared in

accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised

Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing

Requirements, as issued by the Malaysian Institute of Accountants (‘MIA Guidance’) and the

directive of Bursa Malaysia Securities Berhad.

Documents

DIRECTORS’ REPORT AND AUDITED FINANCIAL STATEMENTS - DENKO Financial Statement… · Company No.: 190155 - M DENKO INDUSTRIAL CORPORATION BERHAD (190155 - M) (Incorporated in Malaysia)