IKHMAS JAYA GROUP BERHAD · for managing and supervising the design and method of construction for all projects carried out by our Group. He is also responsible for the special projects

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• Quality Products• Excellent Service• Maximising Stakeholders Return• Social Responsibilities• Safety, Health & Environment• Efficiency Driven• Employees Welfare• Teamwork• Innovations

• To be the leading bore piling and bridge specialist in the markets we serve.

• Providing innovative solutions that leverage on our capabilities as the preferred bore piling and bridge specialist in Malaysia.• To deliver sustainable value that determines a better future for all.

MISSION

OUR BUSINESS PHILOSOPHY & MODEL

VISION

TABLE OF

CONTENTS

CORPORATE

PROFILE

Vision & Mission

01 Corporate Profile

02 Corporate Milestones

03 Corporate Information

04 Corporate Structure

05 Directors’ Profile

09 Key Management’s Profile

10 Group 5-Year Financial Highlights

11 Management Discussion & Analysis

15 Sustainability Statement

21 Corporate Governance Overview

Statement

39 Audit and Risk Management

Committee Report

43 Statement on Risk Management and

Internal Control

46 Directors’ Responsibility Statement

47 Financial Statements

137 Additional Compliance Information

138 List of Properties

141 Analysis of Shareholdings

Ikhmas Jaya Group Berhad (“IJGB” or the “Group”) was founded in 1992 by Dato’ Ang Cheng Siong (Group Managing Director), Dato’ Ir. Dr. Khoo Ping Sen (Executive Director), Siew Mun Lout (Executive Director) and Yap Yoon Fatt (Head of Plant Division). IJGB is principally involved in engineering and construction of piling and foundation, bridges and buildings. Since the Group’s establishment, IJGB has accumulated an extensive track record of completed projects for both the public and private sectors to a total contract value of approximately RM2.7 billion.

IJGB is highly recognised in the industry for its diverse expertise and experiences across multiple discipline of engineering and has been involved in a number of high-profile projects such as the award-winning Putra and Prai Bridges, Klang Valley Mass Rapid Transit-Kajang Line, Kelana Jaya Light Rail Transit Extension, Paradigm Mall and KL Eco City just to name a few. Armed with its own in-house design and engineering professionals, IJGB is a competitive and formidable participant in the marketplace as a total multi-skilled solutions provider with a competitive edge and versatility to secure projects.

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a) Awarded a RM166.40 million contract to undertake the construction of a service apartment for Star Effort Sdn. Bhd.

b) Letter of award from Kayangan Kemas Sdn. Bhd. for a total contract value of RM65.30 million for sub-contract works for the construction of a bridge.

c) Letter of award from Gallimont Development Sdn. Bhd. for a total contract value of RM173.50 million for the construction of a 49 storey block of serviced apartments.

a) Listed on the Main Market of Bursa Malaysia Securities Berhad.b) Relocated and expanded our prefabricated buildings system manufacturing facility (“New

Manufacturing Facility”).c) Letter of award from MRCB Builders Sdn. Bhd. for a total contract value of RM161.12 million.

a) Letter of Award from MMC Engineering Services Sdn. Bhd. for RM13.85 million for Jacking Pits/Shaft using contiguous Bored Pile Method; and

b) Awarded a RM33.81 million contract from Symphony Crescent Sdn. Bhd. for the construction and completion of piling and substructure work for 2 blocks of business tower

a) Project completed for the following foundation and basement work: • Bukit Bintang City Centre • Symphony Crescent • Mayang Mall in Kuala Terengganub) Project completed for the following foundation work: • OPUS, Kuala Lumpur

a) Letter of award from Kerjaya Prospek (M) Sdn. Bhd. for a total contract value of RM78.00 million for subcontract works to execute and complete the Marine Bridge crossing the sea linking Jalan Seri Tanjung Pinang to STP2 Island, embankment at grade and all other associated civil engineering works for the proposed Seri Tanjung Pinang (Phase 2) Development (STP2), Pulau Pinang for Messrs Tanjung Pinang Development Sdn. Bhd.

b) Letter of award from Kementerian Sumber Asli & Alam Sekitar / Jabatan Pengairan Dan Saliran Malaysia for a total contract value of RM101.85 million to undertake the project “Rancangan Tebatan Banjir Sungai Pendang, Kedah Darul Aman: Menaiktaraf Sungai Choras/Sungai Sala dan Struktur-struktur serta Kerja-kerja Berkaitan”.

c) Letter of award from Putrajaya Ventures Sdn. Bhd. for a total contract value of RM58.75 million for the contract “Package 1: The Proposed Demolition works of existing 3 storey office building with a 2 level basement and 2 storey bungalow and proposed construction and completion of substructure works consist of a 2 level parking area at Basement 1, Basement 2 and partly level 1 and associated works on Lot 155, Jalan Ampang, Kuala Lumpur.

d) Letter of award from Mudajaya Corporation Berhad for a total contract value of RM38.52 million to undertake subcontract bored piling works (Zone 2 and 3) for the Construction and Completion of Light Transit Rail Line 3 (LRT3) from Bandar Utama to Johan Setia Package GS01: guideway, stations, park and ride, ancillary buildings and other associated works.

2015

2017

2019

2016

2018

CORPORATEMILESTONES

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BOARD OF DIRECTORS

Dato’ Ang Cheng SiongGroup Managing Director

Dato’ Ir. Dr. Khoo Ping SenExecutive Director

Siew Mun LoutExecutive Director

Ang Wei ZhenExecutive Director

HEAD OFFICENo. 35, 37 & 39, Jalan PJU 1A/41BPusat Dagangan NZX Ara Jaya, 47301 Petaling Jaya,Selangor Darul EhsanTel : (03) 7885 0626 / 0612 / 0691Fax : (03) 7883 0720Web : www.ikhmasjaya.comE-mail : [email protected]

STOCK EXCHANGE LISTINGMain Market of Bursa MalaysiaSecurities Berhad

STOCK NAME/CODEIKHMAS/5268

AUDITORSKPMG PLT(LLP0010081-LCA & AF0758)Level 10, KPMG Tower8, First Avenue Bandar Utama47800 Petaling Jaya,Selangor Daru EhsanTel : (03) 7721 3388Fax : (03) 7721 3399

Lim Kean LamIndependent Non-Executive Director

Leong Kah MunIndependent Non-Executive Director

Yong Kok YeeIndependent Non-Executive Director

SHARE REGISTRARBoardroom Share RegistrarsSdn Bhd (378993-D)11th Floor, Menara Symphony,No.5, Jalan Prof. Khoo Kay Kim,Seksyen 13, 46200 Petaling Jaya,Selangor Darul EhsanTel : (03) 7890 4700Fax : (03) 7890 4670

PRINCIPAL BANKERS• AmBank (M) Berhad• Bangkok Bank Berhad• Malayan Banking Berhad• MBSB Bank Berhad• Pac Lease Berhad (A Member of OCBC Group)

AUDIT & RISK MANAGEMENT COMMITTEEChairmanLeong Kah MunMembersLim Kean LamYong Kok Yee

NOMINATION & REMUNERATION COMMITTEEChairmanLim Kean LamMembersLeong Kah MunYong Kok Yee

COMPANY SECRETARIESCynthia Gloria Louis(MAICSA 7008306)SSM PC No. 201908003061Chew Mei Ling(MAICSA 7019175)SSM PC No. 201908003178

REGISTERED OFFICEUnit 621, 6th Floor,Block A Kelana Centre Point No. 3,Jalan SS7/19 Kelana Jaya47301 Petaling Jaya,Selangor Darul EhsanTel : (03) 7880 9699Fax : (03) 7880 8699

CORPORATEINFORMATION

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CORPORATESTRUCTURE

100%MM2 BuildersSdn. Bhd.

60%BE SpecialistSdn. Bhd.

100%Exofield PropertyManagementSdn. Bhd.

100%IJ GeotechnicSdn. Bhd.

100%Ikhmas Equipment Sdn. Bhd.

60%MM2 BuildingSystem Sdn. Bhd.

100%Ikhmas Jaya Sdn. Bhd.

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As our Group Managing Director, Dato’ Ang Cheng Siong is responsible for the overall management, strategic planning and business development of our Group.

He obtained his Diploma in Building Technology from Tunku Abdul Rahman College (now known as Tunku Abdul Rahman University College) in 1980. He subsequently obtained his Master of Business Administration (Finance) degree from the University of Hull, United Kingdom in 1992.

He began his career in 1980 with Pembinaan Leow Tuck Chui & Son Sdn. Bhd. as a Quantity Surveyor and left in 1981. He then joined Syarikat Manong Sdn. Bhd. in 1981 as a Site Supervisor. During his tenure in Syarikat Manong Sdn. Bhd., he was promoted to Senior Supervisor in 1983 and Site Agent in 1985. In 1988, he left Syarikat Manong Sdn. Bhd. and joined Ho Hup Construction Company Sdn. Bhd. (now known as Ho Hup Construction Company Berhad) as a Tender Manager. In 1992, he set up Ikhmas Jaya. Subsequently in 1994, he left Ho Hup Construction Company Berhad to manage Ikhmas Jaya.

He has accumulated more than 30 years of extensive experience and expertise in the construction field via his involvement in various types of projects involving buildings, highways, dams, marine works, laying pipes, bridges, breakwater constructions, sewerage treatment plants, water supply projects and sports complexes.

Dato’ Ir. Dr. Khoo Ping Sen is responsible for managing and supervising the design and method of construction for all projects carried out by our Group. He is also responsible for the special projects undertaken by our Group and our Group’s business development.

He graduated with a Bachelor of Engineering degree with Honours from Monash University, Australia in 1975. He was granted the Monash University Graduate Scholarship and pursued his doctorate degree at the same university and obtained his Doctor of Philosophy degree in Civil Engineering majoring in structures in 1979.

He began his career in 1979 with Wan Mohamed & Khoo Sdn. Bhd. as an Engineer. He was promoted to the positions of Senior Engineer, Associate, Senior Associate and Director before he left the company in 1990. In 1990, he joined Ho Hup Construction Company Sdn. Bhd. (now known as Ho Hup Construction Company Berhad) as a Senior Project Manager, where he was in charge of the Design Department and Bore Piling Division. In 1997, he left Ho Hup Construction Company Berhad as a General Manager to join Ikhmas Jaya in the same year as the Managing Director. He has been a member of the Institution of Engineers, Malaysia since 1983.

He has been involved in the construction industry for more than 35 years and his expertise is in the area of structural design which focuses on bridges, high-rise buildings and industrial buildings. He also specialises in bore piling and foundation works.

Male • Malaysian • Aged 68Executive Director(Appointed on 5 December 2013)

DATO’ IR. DR. KHOO PING SENMale • Malaysian • Aged 65Group Managing Director(Appointed on 5 December 2013)

DATO’ ANG CHENG SIONG

DIRECTORS’PROFILE

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As our Executive Director, Mr Ang Wei Zhen is responsible for developing and implementing strategic plans to promote cost efficiency within our Group’s overall operations. He is also responsible for business development. He graduated with a Bachelor of Applied Science degree majoring in Construction Management and Economics from the Curtin University of Technology, Australia in 2008.

He began his career with Rider Levett Bucknall Pty Ltd in Perth, Australia in 2008 as a Junior Quantity Surveyor, where he was primarily responsible for carrying out cost estimation work, document controls as well as producing bill of quantity. He left Rider Levett Bucknall Pty Ltd in 2009 and subsequently joined Ikhmas Jaya in the same year as Deputy Project Manager and Senior Quantity Surveyor. He was part of the management team involved in project coordination, project management, document control, cost control and cost forecasting.

Mr Siew Mun Lout is responsible for the day-to-day operations of all projects undertaken by our Group.

He graduated with a Bachelor of Engineering in Civil Engineering with Honours from the University of New South Wales, Australia in 1987.

He began his career with Syarikat Manong Sdn. Bhd. in 1987 as Site Engineer. In 1990, he left Syarikat Manong Sdn.Bhd. and joined Ho Hup Construction Company Sdn. Bhd. (now known as Ho Hup Construction Company Berhad) as a Site Engineer. He was subsequently promoted to the positions of Construction Engineer and Project Engineer before he left in 1994 to join Ikhmas Jaya as Project Manager in the same year. He was then promoted to Senior Project Manager in 1997 and promoted as General Manager of Rekavista in 1998. Subsequently in 2002, he was promoted to Executive Director of Ikhmas Jaya.

He has more than 25 years of construction experience in bridge works, earthworks and roadworks including breakwater constructions and was involved in numerous types of projects involving highways, dams, marine works, laying pipes, bridge constructions, bore piling and basement constructions.

Male • Malaysian • Aged 57Executive Director (Appointed on 4 July 2014)

Male • Malaysian • Aged 35Executive Director (Appointed on 4 July 2014)

SIEW MUN LOUT ANG WEI ZHEN

DIRECTORS’PROFILE

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Mr Leong Kah Mun is the Chairman of the Audit and Risk Management Committee and a Member of the Nomination and Remuneration Committee.

Mr Leong is a Chartered Accountant of Malaysian Institute of Accountants (MIA). He is also an Associate Member of the Institute of Internal Auditors Malaysia (IIAM) and a HRDF Certified Trainer.

Mr Leong is currently the managing partner of NGAGE Advisory PLT, a boutique corporate consultancy specializing in IPO advisories for Bursa Malaysia and Hong Kong Stock Exchange, corporate fund raising, corporate turnaround and restructuring, corporate governance, internal auditing, risk management and performance improvement. Mr Leong is also the founder & chief executive officer of Talent Workroom Sdn Bhd, a co-working space and HRDF Registered Training Provider.

Mr Leong began his career in statutory audit assurance and subsequently moved into senior positions in private and public listed companies in Main Market, with businesses in property development, main contractor, manufacturing, trading and quarrying.

Male • Malaysian • Aged 51Independent Non-Executive Director(Appointed on 1 June 2020)

LEONG KAH MUN

Mr Yong Kok Yee is a member of the Audit and Risk Management Committee and Nomination and Remuneration Committee.

Mr Yong has a total of 35 years working experience in building industry, construction and project management. Mr Yong started his career with a construction company as the Project Engineer/Chief Coordinator before joining several property development companies.

Mr Yong has overseen the successful completion of a few medium to large development projects with a combined GDV valued at RM2 billion and had successful revive a 120 beds hospital project and renegotiated with the client, contractors and suppliers on the outstanding payment, remaining works, supply of material and equipment required to complete the project.

In 2014, Mr Yong joined UM Builders Sdn Bhd as its CEO before leaving in 2018. During his tenure there, he had revamped the organisation structure and had managed to create a leaner and effective new team within 6 months. He had turned the company around from RM40 million deficit and had led the Company to successfully complete a 5 star rated hotel, a 36 storey high end service apartment and 500 units of landed strata title.

Male • Malaysian • Aged 56Senior Independent Non-Executive Director(Appointed on 1 June 2020)

YONG KOK YEE

DIRECTORS’PROFILE

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Notes:

1. Family Relationship with Director and/or Major Shareholder - Save

for Mr Ang Wei Zhen, the Executive Director who is the son of

Dato’ Ang Cheng Siong, the Group Managing Director and a Major

Shareholder of the Company, none of the other Directors have any

family relationship with any Director and/or Major Shareholder of the

Company.

2. Conflict of Interest - None of the Director have any conflict of interest

with the Company.

3. Conviction for Offences - None of the Directors have been convicted

for offences within the past five (5) years, other than traffic offences,

if any.

4. Public Sanction or Penalty - None of the Directors have any public

sanction or penalty imposed by any regulatory bodies during the

financial year.

5. Board Meetings - The number of board meetings attended by the

Directors of the Company are set out on page 23 of this Annual

Report.

6. Directors’ Shareholdings - The details of the Directors’ shareholdings

in the Company and its subsidiaries are disclosed on page 142 of this

Annual Report.

Mr Lim Kean Lam is the Chairman of the Nomination and Remuneration Committee and a member of the Audit and Risk Management Committee.

Mr Lim was admitted as an Advocate and Solicitor in the High Court of Malaya in March 1996.

In October 1996, Mr Lim founded his own legal firm namely K.L. Lim & Lee with the ambition to build the Firms reputation in personalized professional legal service to a growing discerning clientele including Hong Kong, China and Singapore. During these years, Mr Lim has outshine in the professional legal field and has been appointed to be the personal legal advisor by many prominent entrepreneur. The advisory works involved both litigation matters and conveyancing, corporate and land matters.

Besides Legal field, Mr Lim also ventured into an agency business and was appointed as Bank Outsource Agency by numerous local banks,

mainly focusing on the sale and marketing for bank products.

In 2014, Mr Lim further venture into other business arena related to safety and security, providing 24 hours centre monitoring system and respond team to assist members in emergency and distress situations. In the end of 2019, he founded another new business platform, mainly leverage on the current market trend on e-commerce based.

Mr Lim with his motto Give Back to Society has been helping the unfortunate group for more than two decade. He was awarded by CSR Malaysia Award in recognition of his contribution towards the needy and towards the society throughout the years.

Mr Lim was also awarded a Human Excellence Golden Award by United Nations University for Global Peace in December 2018 for his contribution towards the society.

Male • Malaysian • Aged 50Independent Non-Executive Director(Appointed on 1 June 2020)

LIM KEAN LAM

DIRECTORS’PROFILE

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For their profile, kindly refer to the Directors’ Profile on page 5 of the 2019 Annual Report.

For their profile, kindly refer to the Directors’ Profile on page 6 of the 2019 Annual Report.

Dato’ Ang Cheng SiongGroup Managing Director

Siew Mun LoutExecutive Director

Dato’ Ir. Dr. Khoo Ping SenExecutive Director

Ang Wei ZhenExecutive Director

Notes:

1. Family Relationship with Director and/or Major Shareholder - Save for Mr Ang Wei Zhen, the Executive Director who is the son of Dato’ Ang Cheng Siong, the Group Managing Director and a Major Shareholder of the Company, none of the Key Management have any family relationship with any Director and/ or Major Shareholder of the Company.

2. Conflict of Interest - None of the Key Management have any conflict of interest with the Company.

3. Conviction for Offences - Other than traffic offences, if any, none of the Key Management has been convicted for offences within the past 5 years.

4. Public Sanction or Penalty - None of the Key Management have any public sanction of penalty imposed by any regulatory bodies during the financial year.

Mr Choi graduated with Bachelor of Science (Hons) Majoring in Genetic & Biotech from University Kebangsaan Malaysia and had worked as a senior manager for more than 13 years in

a multi-national pharmaceutical company.

Currently, he is working as a local and off shore fund manager and M&A projects. As a fund manager, he is also responsible for Malaysia’s real estate, mutual funds, Private Equity, M&A and

corporate exercises with involving issuance of equities in Malaysia, Hong Kong, China, Korea, Australia, London and ASEAN region.

He is equipped with an extensive knowledge and experience in people management skills and to revamp and restructure company’s work force to enhance its competitiveness and efficiency.

He is a Fellow Member of the Association of Chartered Certified Accountants (ACCA - UK) and also a Chartered Accountant of the Malaysian Institute of Accountants (MIA). He joined Ikhmas

Jaya on 26 September 2017 as the Chief Financial Officer. He started his tax career with Ernst & Young and audit career with Deloitte Touche Tohmatsu.

He has more than 25 years of related work experience with a managerial role in financial reporting, audit, tax planning and compliance, corporate finance and corporate affairs in many

private limited companies (such as Shell Malaysia Trading, KAB Group, Acmar International, Halim Mazmin etc.) and local public listed companies (such as Turiya, MK Land, Ho Wah Genting,

Melewar Industrial Group, Berjaya Land etc.) spanning across various industries – investment holding, trading, manufacturing, property management, property investment and development,

and construction.

Mr Yap completed his Sijil Pelajaran Malaysia in 1981 and started his career as a Survey Assistant in 1982. In 1994, he joined Ikhmas Jaya as the Senior Operations Manager and were promoted to

his current position in 2010. He has more than 25 years of experience in the construction field in the areas of site supervision of heavy construction equipment for bored piles and earthworks

including managing and handling the site workers involved in earthworks, bore piling and basement constructions.

KEY MANAGEMENT’SPROFILE

YAP YOON FATTHead of Plant Division • Male • Malaysian • Aged 57

CHOI AH LOYChief Operating Officer • Male • Malaysian • Aged 54 • (Appointed on 1 June 2020)

THAM FOOK SUNChief Financial Officer • Male • Malaysian • Aged 51 • (Appointed on 27 September 2017)

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2015 RM’000

2016 RM’000

2017RM’000

2018RM’000

Restated

2019RM’000

Revenue 268,656 242,567 303,166 308,193 199,536

Profit/(Loss) Before Tax 32,765 15,159 9,695 (36,226) (155,468)

Profit/(Loss) After Tax 24,303 10,251 5,924 (32,607) (159,546)

Share Capital 130,000 130,000 173,992 182,542 191,687

Group Earnings/(Loss) Per Share (Sen) 5.63 2.17 1.32 (5.33) (27.97)

Total Assets 365,854 448,411 536,501 473,646 330,894

Net Assets per Share (RM) 0.36 0.37 0.39 0.32 0.05

REVENUE RM’000

PROFIT/(LOSS) BEFORE TAXRM’000

TOTAL ASSETS RM’000

PROFIT/(LOSS) AFTER TAXRM’000

2019

2019 2019

2019

30

8,1

93

(36

,22

6)

(15

5,4

68

)

(32

,60

7)

(15

9,5

46

)

47

3,6

46

2018

2018 2018

2018

30

3,1

66

9,6

95

5,9

24

53

6,5

01

2017

2017 2017

2017

199

,53

6

33

0,8

94

2016

2016 2016

2016

24

2,5

67

15,1

59

10,2

51

44

8,4

11

2015

2015 2015

2015

26

8,6

56

32

,76

5

24

,30

33

65

,85

4

GROUP 5-YEAR FINANCIAL HIGHLIGHTS

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Moving forward, the Group would like to focus their business strategies and goal in seeking more projects and order books on the infrastructure projects and building on medium rate flat.

“ “

OVERVIEW OF THE GROUP’S BUSINESS AND OPERATIONS

It was a challenging year for Ikhmas Jaya Group Berhad (“the Group”) in the year of 2019 (“FY2019”). The Group suffered losses as the Group was mainly focused on private projects rather than government projects. Today, the Group has realigned their business strategies to focus more on their improvement in participation of the market share in the up and coming Government infrastructure stimulus programmes and projects such as road & highways, transit & railway, water resources, sewerage, flood mitigation and ports. In addition, the Group has planned to implement the segmented workforce based on the Group’s business goal and human resource strategies.

At present, the Group’s order book of RM575.2 million will keep their business active in operation for the next two years. The Group continues to fine-tune and strengthen their core business with continuous improvement on their competitiveness in the market with more upcoming infrastructure projects aside from bore-piling and bridges projects. The Group will also enhance their expertise in design and build areas focussing on its infrastructure, bore-piling and bridges projects. The Group will keep on their effort to monitor and to take proactive action in its cost optimisation plan to reduce overhead cost or expenses to bridge the gaps and to mitigate its financial risks.

Moving forward, the Group would like to focus their business strategies and goal in seeking more projects and order books on infrastructure projects and building on medium rate flat. The Group is optimistic to increase their order book further going forward. Besides, the Group also believes that there will be an improvement on its income management in the future as they are taking proactive actions on its directions and business strategies.

MANAGEMENT DISCUSSION & ANALYSIS

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YEAR ON YEAR FINANCIAL REVIEW

FY2019RM’000

FY2018RM’000

% variance

Revenue 199,536 308,193 -35.3

Operating Loss (143,256) (23,837) >100

Loss Before Tax (155,468) (36,226) >100

Loss After Tax (159,546) (32,607) >100

Loss Attributable to Equity Holder (157,779) (28,961) >100

REVENUE

The Group generated lower revenue of RM199.5 million for FY2019, a decrease of 35% from that recorded in the preceding year ended 31 December 2018 (“FY 2018”) of RM308 million as all new projects such as flood mitigation project in Sungai Pendang –Kedah and Light Rail Transit 3 from Bandar Utama to Johan Setia Package GS09 (LRT3-GS09) have yet to move into their acceleration phase in their progress of construction. Whilst for the existing major key projects; they are either progressing towards their completion or are already completed and are now pending for finalisation of account. Thus, the revenue and earnings contribution during the current year had been relatively weaker in comparison.

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LOSS BEFORE TAX

The Group’s loss before tax was recorded at RM155.5 million for FY2019, an increase of approximately RM119.3 million or 330% as compared to RM36.2 million in FY2018. Provisional charge of RM17 million for Liquidated and Ascertained Damages (“LAD”), contract costs written off of RM49.1 million and impairment charges of RM52.2 million on contract assets, led to a loss before tax of RM155.5 million during the financial year ended 31 December 2019 as compared to a loss before tax of RM36.2 million incurred in FY2018.

As major projects are still in their initial take off phase, this had resulted in a temporary respite in revenue and earnings contribution to the Group in FY2019 as compared to its performance a year ago. This coupled with the charges for LAD, contract costs written off and impairment charges on contract assets had resulted in the Group’s underperformance in FY2019.

LIQUIDITY AND CAPITAL RESOURCES

Net cash from/(used in)FY2019RM’000

FY2018RM’000

Operating Activities 17,717 42,999

Investing Activities 10,106 1,897

Financing Activities (15,161) (53,018)

Net Increase / (Decrease) in Cash and Cash Equivalents 12,662 (8,122)

During the financial year, the Group’s cash and cash equivalents increased by RM20.8 million to RM12.7 million from a negative balance of RM8.1 million in previous year. Net cash generated from operations amounted to RM17.7 million and net cash generated from investing activities amounting to RM10.1 million.

GEARING

2019 2018RM’000 RM’000

Loans and borrowings 32,152 90,730

Lease liabilities 16,807 -

Less: Cash and cash equivalents (28,531) (37,852)

Net debt 20,428 52,878

Total equity 27,651 175,552

Gearing ratio 0.74 0.30

DIVIDENDS

No dividends were paid by the Company for FY2019.

REVIEW OF OPERATING ENVIRONMENT

Malaysian market tends to anticipate changes in the economy as gross domestic product is moderated to 4.3% -4.8% in 2019 (2018: 4.7%). Growth in the construction market recovered at 4th quarter of 2019 at 1% from 3rd quarter of 2019 at -1.5% . (Source: BNM report). The new Government has initiated reviews of several mega projects and would see a cut in the development expenditure in the budget 2019. However, the Government’s vision 2020 project will also boost the subsector construction projects in the next few years supported by the Government’s plan to improve the Country’s transport network and tourism infrastructure and increase the volume of renewable projects. Moreover, the Government efforts to address the Country’s housing shortage will help the industry to grow over the next five years.

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PROSPECT AND OUTLOOK

The Group expects the outlook for the next financial year to remain very challenging in view of the intense competition, weak and slowdown of domestic economic environment due to the implication of the Covid-19 outbreak. This impact of Covid-19 has affected most of the industries in Malaysia, especially tourism, construction, real estate, automotive, oil and gas, travel agencies, retail outlets and many more have been forced to close.

In spite of the challenging business environment, the Group will continue to strive harder with its prudent methodology to address the various challenges accordingly. In addition, the Group will strengthen its core competencies, increase operational efficiency and cost, strengthen its liquidity, lower its financial gearing risk, right size its productive capacity to continuously bid for new contracts, change its business strategies to focus and grow its core expertise in bore piling and substructure works, superstructure works, bridges, roads and other infrastructure works.

The Group is optimistic to overcome the slowdown in economic and competitiveness in the market with all these initiatives and action plans. Its order book stood at approximately RM575.2 million as at 31 December 2019. The Group is expecting the growth and improvement in the bottom lines results in years to come.

ACKNOWLEDGEMENTS

In conclusion, I wish to express my deepest gratitude to our shareholders, investors, clients, suppliers, business partners, bankers, government and regulatory bodies for their inspiring trust, patience and support to Ikhmas Jaya Group Berhad. We also express our appreciation to our loyal employees who are working hard around the clock to put in their effort and commitment for the Group despite challenges. In the coming years ahead, we will continue to explore more opportunities and strive harder to conquer any shortcomings and difficulties to generate value and growth for the Group for the benefits of our shareholders. Thank you.

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SUSTAINABILITYSTATEMENT

SUSTAINABILITY STATEMENT

Sustainability development becomes the key goal for Ikhmas Jaya Group Berhad (“IJGB” or “the Group”) to remain buoyant in today challenging economic environment. Sustainability’s goal and development helps IJGB to create a long term value to their stakeholders in its ecological, social and economic environment without compromising the needs of the future generations. This goal is currently embedded into IJGB’s mission statement and culture of ownership amongst employees for the benefits of stakeholders on its continuing sustainable environment, economic and social growth.

IJGB always ensure their sustainability journey by having its coherent strategies, new ideas, policies, framework, work practises and action plans that can help to mitigate any negative impact to the Group with positive returns on its environment, economic and social benefits.

IJGB believes that the requirement of this sustainability statement not only to adhere the Bursa Malaysia Securities Berhad (“Bursa Securities”) in its Market Listing Requirements (“Listing Requirement”) but also to embrace the values of good corporate citizen who practise transparency corporate governance.

IJGB will continue to initiate and build a good relationship with the stakeholders, including our customers, investors and vendors in order to achieve a successful implementation of sustainability growth. Thus, the group will identify and mitigate any material sustainability matters with the stakeholders promptly in order to manage risks and create opportunities to achieve sustainable goals.

IJGB will continue to initiate and build a good relationship with the

stakeholders, including our customers, investors and vendors in order to

achieve a successful implementation of sustainability growth.

SUSTAINABILITY DEVELOPMENT

ecological

social

economic environment

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SUSTAINABILITY GOVERNANCE

The Board of Directors (“Board”) is principally responsible for driving the sustainability governance for the Group. The Management is responsible to act and taking actions to ensure the followings are properly carried out.

HSE TRAINING AND PROGRAMMES 2019

Health, safety and environment (HSE) are crucial elements in all our activities. We also require our partners including subcontractors to ensure HSE issues are taken care of. HSE representatives for project site are responsible to make sure project is executed in compliance with Health, Safety and Environmental plan throughout the project duration to achieve safe project completion. Towards achieving HSE objective, various activities and training were conducted to train our personnel and to raise awareness about health, safety and environmental issue at project sites. In terms of environment, a few monitoring such as air quality, noise, vibration and water quality were conducted during project execution to ensure with the Department of Compliance Environment’s requirement.


Training Date Safety/ Environmental Training Project

21 Feb 2019 Fire & evacuation drill Stp Bridge 2

21 May 2019 Man overboard rescue drill Stp Bridge 2

25 May 2019 Safety lifting awareness Stp Bridge 2

27 June 2019 Oil & chemical spillage containment Stp Bridge 2

13 Feb 2019 Solid waste and public cleaning management Ampang Lot 155

5 March 2019 Environmental management Ampang Lot 155

9 April 2019 HSE Induction Ampang Lot 155

23 April 2019 Hazard effect & management process Ampang Lot 155

18 May 2019 Hot works hand tools and power tools Ampang Lot 155

20 May 2019 Scaffold awareness Ampang Lot 155

20 May 2019 Manual handling Ampang Lot 155

26 June 2019 Scaffold awareness Ampang Lot 155

24 July 2019 Basic rigging & slinging Ampang Lot 155

26 June 2019 Basic rigging & slinging Lrt3GS09

• Stakeholders engagement;

• Materiality assessment and identification of sustainability risks and opportunities; and

• Management of material sustainability risks and opportunities.

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These HSE trainings and programmes are focused in the following key areas:

• Planning for hazard identification, risk assessment and risk control, OHSAS management programme structure and responsibility

• Consultation and communication

• Emergency preparedness and response

• Training, awareness and competence

• Operational control

• Performance measuring, monitoring and improvement

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MATERIAL SUSTAINABILITY MATTERS

ECONOMIC

IJGB is committed to positively contribute to the sustainable economic growth for the Country. IJGB provides equal employment opportunities to the societies. Besides, IJGB also actively cultivates the culture of job ownership, equal learning opportunities and job satisfaction to their employees to engage them to build a cohesive team in the organisation for the long term contribution in terms of economic benefits for the Company and the Country.

IJGB views shareholders are the ultimate factors who contribute economic benefits positively to the Group. These shareholders are actively attending Group’s Annual General Meeting and well informed of the Group’s financial performance and position through IJGB online corporate website, https://www.ikhmasjaya.com. Information is comprehensive and up-to-date through Company’s website for public to access like annual report, corporate products, corporate information, activities and others.

IJGB takes proactive action in maintaining business sustainability through value its customers’ satisfaction and maintaining a good relationship with suppliers who are in their value chain for profit sustainable model. This is prominent especially in the era of fast-paced business environment that IJGB continues to enhance the Group’s competitiveness by improving its operation and cost efficiency in areas focusing on its core business of doing bore-piling, bridges projects and more of infrastructure projects in the future.

To further add value to our customers who are in our product value chain, IJGB constantly provides our staffs for different training programmes to improve their knowledge and skills in marketing and handling of customers. Our customers support team is trained to better support in matters pertaining to product enquiries and complaints. Besides, IJGB also maintains a healthy supply chain management through building its long-term relationship with its suppliers on its positive engagement. IJGB is maintaining a stringent control over the quality of the products by performing its stringent assessment in choosing its suppliers through the suppliers’ profile, track records, delivery timeliness, pricing, market reputation and product quality.


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We will always ensure that their products meet customers’ satisfaction in terms of quality

and environmentally safe building materials.

ENVIRONMENT

IJGB plays their responsibility in maintaining the environmental sustainability through recycling efforts, reducing wastage, managing and handling waste through cost monitoring processes and more usage of environmentally friendly building materials. Generally, the Group’s building process does not release any hazardous emissions to the environment.

IJGB will always ensure that their products meet customers’ satisfaction in terms of quality and environmentally safe building materials. Thus, IJGB continues to monitor and improve the Group’s health and safety performance through Health, Safety and Environment (HSE) programmes and ISO programmes. These HSE training programmes are provided to their employees as awareness programmes to train them on how to protect the environment and induction training programme on ISO 9001 is given to new employees to attend.

IJGB views that both HSE and ISO programmes help their businesses to prevent workplace injuries and illnesses by maintaining zero case of fire incident, zero non-conformance of authority instruction and zero incident or accident at workplace. Besides, these programmes also help the Company to improve their compliance with laws and regulations, reduce costs especially costs in workers’ compensation premiums, better engagement with workers through programme activities, increase productivity of workers and thus enhance the overall business operations.

IJGB always ensure that all the safety measures and controls are embedded into the Group’s policies and frameworks to safeguard the employees, customers, contractors, suppliers, local communities and other stakeholders against Occupational, Health and Safety risks at workplace.

As a responsible corporate organisation, IJGB regularly evaluates their operation processes towards its impact on the environment. IJGB works hard to make sure their processes are complying successfully with the Environmental, Health, Safety Laws and Regulations and this has shown in both IJGB and IJSB, who passes their surveillance audit of ISO 9001. Besides, in 2017, IJGB has obtained a certification for Occupational, Health and Safety Management Systems 18001 (“OHSAS 18001”) and ISO 14001.

Overall, it is our responsibility to ensure the environment is always being protected, to continue comply with the legal requirements on environmental issues as well as improve on Environmental Management Systems and Performance. In future, the Group will continue to ensure the stakeholders’ benefits are being taken care of with its aim of delivering sustainable environmental performance.

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SOCIAL

IJGB supports the sustainable social growth of investing in human capital and its management for its sustainable competitive advantage in today marketplace. IJGB views that finding the right talent with the right attitude is indeed importance and challenging in order to maintain a continuing growth of the Company.

In support of sustainable social growth, IJGB always creates the working environment which gives its staff a strong sense of belonging to the Company. IJGB organised a lot of staff appreciation events like birthday celebrations, Christmas day celebrations, Chinese New Year celebrations, Hari Raya luncheon, New Year Celebrations and others. Besides, IJGB also provided staff with Company’s uniform, outstation staff with home accommodation and transportation, in addition to medical benefits and other benefits being enjoyed by all staff. IJGB believes that Company’s events and staff benefits are a great way to highlight its core values and cultures.

In view of the sustainable competitive environment, the Group’s human resource planning has always included the succession planning exercises as part of the Group’s activities for the continuing success in business, in identifying and developing the talent which can fill up the critical roles in the future in times of crisis.

The Group views Corporate Social Responsibility (“CSR”) is important to embrace its responsibility for its actions and to encourage a positive return to the community. Thus, in years to come, the Company will like to inculcate the spirit of “contributing back to the community” by carrying out more CSR programmes and structured activities like visiting old folk home and orphanage home.

key common benefits

being enjoyed by

all staff

COMMITMENT

To further strengthen and improve our corporate governance and risk management process, IJGB will perform comprehensive risk assessment exercise to mitigate all related risks like cash flows problems, delayed in subcontractors payment and others risks by performing gap analysis, to provide practical recommendations, actions plans and strategies thereof to bridge the gaps.

As sustainability becomes the fundamental element of the business growth, IJGB will continue to place its priority and focus to take proactive action to practise, adds value and to contribute positively towards the sustainable growth of the economic, environment and social benefits.


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The Board of Directors (“the Board”) of Ikhmas Jaya Group Berhad (“the Company”) is committed to a corporate culture that is based on the principles and best practices of corporate governance and is practised by the Company and its subsidiaries (“the Group”).

The Group’s corporate governance framework is premised upon the following statutory provisions, best practices and guidelines:-

• Companies Act, 2016 (“the Act”);• Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“BMSB”);• Malaysian Code on Corporate Governance (“the Code”).

The Group will continue its endeavour to comply with all the key Principles and Best Practices of the Code in its effort to observe high standards of transparency, accountability and integrity. The Group believes that good corporate governance will help to realise long term shareholders’ value, whilst taking into account the interest of other stakeholders.

The following paragraphs describe how the Group has applied the Principles and Best Practices of the Code.

PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS

I. BOARD RESPONSIBILITIES

Practice 1.1 Roles and Responsibilities of the Board

The Board provides the overall governance as well as stewardship and oversight for the direction and management of the Company and Group.

In discharging its duties and functions effectively, the Board delegates certain responsibilities to its Board Committees. All committees have written terms of reference. These Committees are formed in order to enhance business and operating efficiency. The Chairman of the respective Committee will report to the Board the outcome of the Committees Meetings for the Board’s consideration and final decision. Minutes of the respective Meeting will be presented to the Board for its information. The Board retains full responsibility for the direction and control of the Company and the Group.

The Board establishes the vision and strategic objectives of the Group, directing policies, strategic action

plans and stewardship of the Group’s resources. The Board’s roles and responsibilities amongst others include:-

a. Reviewing and approving the overall strategic plans and direction of the Group;b. Ensuring that the statutory accounts of the Group are truthful and fairly stated and conform with

the relevant regulations including acceptable accounting policies approved financial reporting standards;

c. Reviewing and approving annual budgets, business expansion, restructuring plans, material acquisitions and disposals and issuance of new securities;

d. Overseeing and evaluating the conduct and performance of the Company and Group;e. Identifying principal risks and ensuring implementation of a proper risk management system; f. Establishing a succession plan; g. Overseeing the development and implementation of a shareholder communication policy for the

Company; h. Reviewing the adequacy and the integrity of the management information and internal control

system of the Group; and i. Be responsible for the overall corporate governance of the Group, including environmental and social

impact and the Group’s strategic direction, establishing goals for Management and monitoring the achievement of these goals.

CORPORATE GOVERNANCEOVERVIEW STATEMENT

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PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (CONT’D)

I. BOARD RESPONSIBILITIES (CONT’D)

Practice 1.2 Roles of the ChairmanPractice 1.3 Separation of roles of Chairman and Group Managing Director

The roles of the Chairman of the Board and the Group Managing Director are segregated. The Chairman is primarily responsible for the proper conduct and working of the Board whilst the Group Managing Director is responsible for the day-to-day running of the business and implementation of Board’s policies and decisions. The Group Managing Director is assisted by the Executive Directors, Senior Management and heads of each division in implementing and running of the Group’s day-to-day business operations. The roles of the Independent Non-Executive Chairman and the Group Managing Director are mentioned in the Board Charter which is made available in the Company’s website www.ikhmasjaya.com.

The Independent Directors provide unbiased and independent views to safeguard the interests of shareholders. They provide a broader view, independent assessment and opinions on management proposals presented by the Group Managing Director and Management.

Practice 1.4 Company Secretary

The Company Secretaries, Ms Cynthia Louis and Ms Chew Mei Ling are Associate members of the Malaysian Institute of Chartered Secretaries & Administrators.

The Company Secretaries whose appointment and removal are subject to the Board’s approval, attend Board and Board Committee meetings. The Board has direct access to the advice and services of the Company Secretaries who are responsible to the Board for ensuring that the Board procedures and compliance of the applicable rules and regulations are complied with.

In performing their duties, the Company Secretaries carry out, amongst others, the following tasks:-

• Statutory duties as required under the Act, Main Market Listing Requirements of BMSB and Capital Market and Services Act 2007;

• Facilitating and attending Board Meetings and Board Committee Meetings;• Maintaining records for the purpose of meeting statutory obligations;• Assisting the Board with the preparation of announcements for release to BMSB and the Securities

Commission Malaysia; and• Rendering advice and support to the Board and Management.

Practice 1.5 Information and Support for Directors

Prior to Board meetings, an agenda together with the relevant documents and information are distributed to all Directors at least five business days in advance of board meetings unless in unavoidable circumstances. The Senior Management and/or other relevant Board members will provide explanation of pertinent issues and recommendations. The issues would then be deliberated and discussed thoroughly by the Board prior to decision-making.

Apart from the above, the Board members are supplied with information and reports on financial, operational, corporate, regulatory, business development and audit matters by way of board reports or upon specific request to enable them to discharge their duties and responsibilities. Directors are notified of the corporate announcements released to BMSB, any amendment to BMSB Listing Requirements and any pertinent Regulatory changes. Directors have access to management and auditors for independent views and advice.

In furtherance of their duties, the Directors may seek independent professional advice if necessary, at the expense of the Company.


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Meetings and Time Commitment

The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of the Company during the financial year ended 31 December 2019. In compliance with the Listing Requirements, all the Directors do not hold directorships more than that prescribed under the Listing Requirements. There were six (6) Board of Directors’ Meetings held during the financial year ended 31 December 2019 and the details of the attendance of the Directors’ and Committees Meetings are as follows:-

DirectorsBoard of Directors ARMC NRC AGM

Dato’ Syed Ariff Fadzillah bin Syed Awalluddin (Resigned on 5 May 2020)

6/6 6/6 3/3 1/1

Dato’ Ang Cheng Siong 6/6 - - 1/1

Mr Siew Mun Lout 4/6 - - 1/1

Dato’ Ir. Dr. Khoo Ping Sen 5/6 - - 1/1

Mr Ang Wei Zhen 5/6 - - 1/1

Mr Yuen Choong Lai (Resigned on 5 May 2020)

6/6 6/6 3/3 1/1

En Dzulkifli David bin Abdullah (Resigned on 15 May 2020)

5/6 5/6 2/3 1/1

Ms Tan Ming-Li (Resigned on 4 October 2019)

3/4 3/4 2/2 1/1

Total Number of Meetings 6 6 3 1

ARMC - Audit & Risk Management Committee NRC - Nomination & Remuneration Committee AGM - Annual General Meeting

The above excludes the Directors who were appointed subsequent to the financial year.

The main activities carried out by the Board in year 2019 are set out below:-

• Reviewed and approved the annual report, quarterly results and financial statements;• Received updates on risk management and internal control;• Reviewed and validated the results of the 2019 Board Effectiveness Evaluation; and• Reviewed the terms of office and the contribution, performance and the effectiveness of the Board

and individual directors, the ARMC, NRC and each member of the Board Committees to ensure that they have carried out their duties in accordance with their respective terms of reference.

• Reviewed and approved the Private Placement exercise which was carried out in two tranches and collectively raised RM9.145 million.


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Practice 2.1 Board Charter

The Company has established and adopted a Board Charter which serves as a reference point for Board activities. The Board Charter provides guidance for Directors and Management regarding the responsibilities of the Board and Board Committees, the requirements of Directors in carrying out their stewardship roles and in discharging their fiduciary duties towards the Company as well as boardroom activities. The Board Charter can be found on the Company’s website at www.ikhmasjaya.com.

The Board will review the Board Charter as and when necessary to ensure it remains consistent with the Board’s objectives and responsibilities, and all the relevant standards of corporate governance.

The Board Charter was last reviewed in April 2018.

Practice 3.1 Code of Conduct and Ethics Practice 3.2 Whistleblowing Policies and Procedures

The Directors observe the Company Directors’ Code of Ethics established by the Companies Commission of Malaysia. The Code of Ethics is published in the Company’s website at www.ikhmasjaya.com.

The Board also has in place a Whistle Blowing Policy for employees to raise genuine concerns, without fear, about any suspected and/or known misconduct, wrongdoings, corruption, fraud, waste and/or abuse. The Whistle Blowing Policy is available for reference at the Company’s website at www.ikhmasjaya.com.

II. BOARD COMPOSITION

Practice 4.1 Board Composition and Independence

Board Composition

The Board currently consists of seven (7) members comprising three (3) Independent Non-Executive Directors and four (4) Executive Directors.

The Board has complied with Paragraph 15.02 of the Listing Requirements which requires at least two directors or one-third of the Board (whichever is the higher) to be Independent Directors. The Board took note of the requirement of Practice 4.1 of the Code which requires at least half of the Board comprise Independent Directors. However, the Board considers that its current size commensure with the present scope and scale of the Group’s business operation.

The Non-Executive Directors of the Company are independent of management and free from any business relationship which could materially interfere with the exercise of their judgment. They, particularly the Independent Non-Executive Directors, are actively involved in various Board Committees. They provide guidance, unbiased, fully balanced and independent and objective views.

It is a mandatory practice to have the Directors concerned to declare their interests and abstain from the decision-making process when a potential conflict of interest arises.


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II. BOARD COMPOSITION (CONT’D)

Changes in Board Composition

Changes to the composition of the Board since the preceding CG Statement until the date of this CG Statement were as follows:-

• Ms Tan Ming-Li resigned on 4 October 2019• Dato’ Abdul Manap Bin Abd Wahab and Ms Hon Shil Hong were appointed on 9 March 2020• Dato’ Syed Ariff Fadzillah bin Syed Awalluddin and Mr Yuen Choong Lai resigned on 5 May 2020• En Dzulkifli David bin Abdullah resigned on 15 May 2020• Ms Hon Shil Hong resigned on 21 May 2020• Dato’ Abdul Manap Bin Abd Wahab resigned on 27 May 2020 • Mr Yong Kok Yee, Mr Leong Kah Mun and Mr Lim Kean Lam were appointed on 1 June 2020.

Annual Assessment of Independence

Criteria have been set to assess the independence of candidate for directors and existing directors based on the guidelines set out in the Listing Requirements.

On an annual basis, the Directors are required to confirm their independence by completing the independence checklist.

None of the Independent Director had any relationships and/or transactions that could materially interfere with their independent judgements and decisions. The Board was truly satisfied with the level of independence demonstrated by all Independent Directors.

Practices 4.2 and 4.3 Tenure of Independent Director

The Code recommends that the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. Upon completion of the nine (9) years, an independent director may continue to serve on the Board subject to his re-designation as a non-independent director. In the event such Director is to be retained as an independent director, the Board must justify and seek annual shareholders’ approval. In the event the Board continues to retain the independent director after the twelfth (12th) year, annual shareholders’ approval must be sought through a two-tier voting process to retain the said director as an independent director.

The Board is mindful that the limitation of terms of service may result in a loss to the Company by

the exit of Board members who are making valuable and critical contributions and believes that the tenure of Independent Directors on the Board does not interfere with their objectives and independent judgement or their abilities to act in the best interest of the Company.

The Company does not have any Independent Non-Executive Director who has served more than nine (9) years as at the date of this Statement.

The NRC carried out an assessment of the Directors and recommended the re-election of directors at the Seventh (7th) AGM to the Board.


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II. BOARD COMPOSITION (CONT’D) Practices 4.4 and 4.5 Board Diversity

The Board acknowledges the importance of diversity as an essential virtue of good corporate governance and an attribute of a well-functioning Board. Diverse views enhance Board discussions and ensure that the discussions made by the Board have been considered from all points of view. The Board acknowledges that diversity presents itself in a number of forms, including but not limited to gender, age, cultural background, educational background, ethnicity, professional experience, skills and knowledge.

The Board takes appropriate measures to ensure that boardroom diversity is considered as part of its selection and recruitment exercise. However, the merits of the individual and the knowledge and expertise relevant to the Company will be the main criteria when considering the selection of new candidates to the Board.

Although the Company does not currently have a written policy on diversity pertaining to the selection

of its Board members, the Board has always taken into account diversity as one of the selection criteria of Board appointees as it recognises that a diversified Board will provide effective and dynamic discussions at the Board level.


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II. BOARD COMPOSITION (CONT’D) Practices 4.4 and 4.5 Board Diversity (cont’d)

The experience matrix, age and gender diversity of the Board during the financial year are as follows:-

Industry / Background experience Age composition Gender

Directors

Dato’ Syed Ariff

Fadzillah bin Syed

Awalluddin

(Resigned on 5 May

2020)

√ √ √ √ √ √

Dato’ Ang Cheng

Siong√ √ √ √ √ √

Mr Siew Mun Lout √ √ √ √ √ √Dato’ Ir. Dr. Khoo

Ping Sen√ √ √ √ √ √ √ √

Mr Ang Wei Zhen √ √ √ √Mr Yuen Choong Lai

(Resigned on 5 May

2020)

√ √ √ √ √

En Dzulkifli David bin

Abdullah

(Resigned on 15 May

2020)

√ √ √ √ √

Ms Tan Ming-Li(Resigned on 4 October 2019)

√ √ √ √


Pu

blic

Serv

ice

Pro

cu

rem

en

t/Su

pp

ly C

hain

Man

ag

em

en

t

Pro

ject M

an

ag

em

en

t

Leg

al/ R

eg

ula

tory

Acad

em

ic

Co

nsu

ltan

cy

Civ

il En

gin

eerin

g

Co

nstru

ctio

n M

an

ag

em

en

t

Eco

no

mic

s

35

-40

50

-55

56

-60

61 – 7

0

71 – 8

0

Acco

un

ting

/ Fin

an

ce /B

an

kin

g/ C

orp

ora

te F

inan

ce

Male

Fem

ale


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Practice 4.6 Sourcing of Directors

The Board does not set specific criteria for the assessment and selection of candidates for appointment as director. Consideration would be taken on the need to meet the regulatory requirements such as the Act and the Listing Requirements, the experience, integrity, wisdom, independence of the candidate, ability to make analytical inquiries, ability to work as a team to support the Board, possession of the required skill, qualification and expertise that would add value to the Board, understanding of the business environment and the willingness to devote adequate time and commitment to attend to the duties/functions of the Board.

The NRC is responsible to recommend candidates to the Board to fill vacancies arising from resignation, retirement or other reasons or if there is a need to appoint additional directors with the required skill or profession to the Board in order to close the competency gap in the Board identified by the NRC. The potential candidate may be proposed by existing directors, senior management, shareholders or third party referrals.

Upon receipt of the proposal, the NRC is responsible to conduct an assessment and evaluation on the proposed candidate.

The assessment/evaluation process may include among others, a review of the candidate’s resume, curriculum vitae and qualification. The NRC would also assess the candidate’s integrity, wisdom, independence, ability to make independent and analytical inquiries, ability to work as a team to support the Board, understanding of the business environment and the willingness to devote adequate time and commitment to attend to the duties/functions of the Board.

Upon completion of the assessment and evaluation of the proposed candidate, the NRC would make its recommendation to the Board. Based on the recommendation of the NRC, the Board would evaluate and decide on the appointment of the proposed candidate.

Practices 4.7 & 6.2 Nomination & Remuneration Committee (NRC)

The objective of the NRC is to assist the Board to implement procedures for selection of directors and assessing the effectiveness of the Board, Board Committees and contributions and performance of individual directors. Further, the NRC is to establish a framework on remuneration of the Board members and Senior Management and recommending the remuneration packages, in line with the business strategy, responsibilities and expertise, and long-term objectives of the Group.

The role of the NRC is to assist the Board in ensuring that the Board comprises individuals with the requisite skills, knowledge, professional expertise and character. The NRC also reviews the Board’s succession plan as well as the training and development needs of the Board.

The terms of reference of the NRC can be found on the Company’s website at www.ikhmasjaya.com. The Terms of Reference was reviewed by in April 2018.


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Practices 4.7 & 6.2 Nomination & Remuneration Committee (NRC) (cont’d) The composition and changes in the NRC (comprises exclusively of Independent Non-Executive

Directors) during the financial year under review and up to the date of this CG Statement are as follows:-

Chairman Mr Lim Kean Lam (Appointed on 1 June 2020)Dato’ Syed Ariff Fadzillah bin Syed Awalluddin (Resigned on 5 May 2020)

Members Mr Yong Kok Yee (Appointed on 1 June 2020)Mr Leong Kah Mun (Appointed on 1 June 2020)Mr Yuen Choong Lai (Resigned on 5 May 2020)En Dzulkifli David bin Abdullah (Resigned on 15 May 2020)Ms Hon Shil Hong (Appointed on 9 March 2020 and resigned on 21 May 2020)Dato’ Abdul Manap Bin Abd Wahab (Appointed on 9 March 2020 and resigned on 27 May 2020)Ms Tan Ming-Li (Resigned on 4 October 2019)

Practice 5.1 Evaluation of Board, Board Committees and Individual Directors

The Board evaluation comprised of a Board and Board Committee’s Assessment, Assessment by Individual Directors and Peer Assessments and Assessments of Independence of Independent Non-Executive Directors (“the Assessments”).

For Individual Performances and Board Evaluation, the assessment criteria include among others, contribution and performance, calibre and personality, Board mix and composition, quality of information and decision making as well as participation at Board and Committee Meetings. The NRC also undertook an evaluation on the ARMC and the assessment criteria include effectiveness and quality, external and internal audits and financial reporting. The criteria for assessing the independence of an Independent Director include the relationship between the Independent Director and the Group and his or her involvement in any significant transaction with the Group. The results and recommendations from the evaluation were reported to the Board for further consideration and action, if required.

Directors who are subject to re-election and at the next AGM shall be assessed by the NRC before recommendation is made to the Board and shareholders for the re-election.

Annual Assessment of Existing Directors & Board Committees

To ensure that the Board would be able to discharge its duties and responsibilities effectively, the NRC has during the financial year and up to the date of this CG Statement carried out:

(i) an assessment of the Directors, which includes the self-assessment carried out by the individual Directors;

(ii) a review on the retirement of Directors by rotation eligible for re-election at the 7th AGM;(iii) an assessment on the independence of the Independent Directors; (iv) a review and assessment on the composition and diversity of the Board Committees;(v) an evaluation on the ARMC and the assessment criteria include effectiveness and quality, external

and internal audits and financial reporting. The NRC was satisfied with the performance and effectiveness of the ARMC and its members and had recommended the extension of the term of office of its members for another year which was duly approved by the Board;


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II. BOARD COMPOSITION (CONT’D) Annual Assessment of Existing Directors & Board Committees (cont’d)

To ensure that the Board would be able to discharge its duties and responsibilities effectively, the NRC has during the financial year and up to the date of this CG Report carried out (cont’d):

(vi) an assessment and evaluation on the suitability of the proposed candidates, namely Dato’ Abdul Manap Bin Abd Wahab and Ms Hon Shil Hong for appointment as Independent Non-Executive Directors of the Company and upon obtaining the declaration and confirmation in writing on amongst others, their time commitment and other requisite requirements had recommended to the Board of Directors the appointment of Dato’ Abdul Manap Bin Abd Wahab and Ms Hon Shil Hong as Independent Non-Executive Directors;

(vii) a review and recommended to the Board the proposed Directors’ fees and benefits paid to Non-Executive Directors for the period from 28 July 2020 up to the next AGM to be tabled to the shareholders for approval at the forthcoming AGM; and

(viii) a review and recommended to the Board the proposed payment of Directors’ fees for the financial year ending 31 December 2020 to be tabled to the shareholders for approval at the forthcoming AGM.

There were no major concerns arising from the results of the Assessments. The feedback confirmed that the Board and each of its committee continue to operate effective and that each Director continues to make an effective contribution and demonstrates a strong commitment to the role.

The results of the Assessments form the basis for the NRC’s recommendation to the Board for the re-election of Directors at the forthcoming AGM.

Re-election of Directors

In accordance with the provisions of the Company’s Constitution, at least one-third (1/3) of the Directors for the time being or if their number is not three (3) or multiples of three (3), then the number nearest to one-third (1/3) shall retire from office and shall be eligible for re-election at each AGM. Consequently, each Director shall retire from office at least once in every three years but shall be eligible for re-election. Directors who are appointed to the Board during the year shall retire and seek re-election at the next AGM to be held following their appointments.

The following Directors will retire and eligible to offer themselves for re-election at the forthcoming AGM, in accordance with the Company’s Constitution:-

a) Clause 97 : Mr Yong Kok Yee Mr Leong Kah Mun Mr Lim Kean Lam

a) Clause 119 : Dato’ Ang Cheng Siong


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Directors’ Training

All the Directors of the Company have attended the Mandatory Accreditation Programme other than the newly appointed Independent Non-Executive Directors who were appointed on 1 June 2020. Directors are encouraged to attend relevant seminars and conferences to enhance their skills and knowledge and to keep abreast with the latest developments on laws and regulations.

The Board acknowledges that continuous education is vital for its Board members to gain insight and maintain awareness of the economy, technological advances, latest regulatory developments and management strategies. The NRC assesses from time to time the training needs of the Directors and ensures the fulfilment of such training deemed appropriate. The Board members are also encouraged to attend training programmes and seminars to keep abreast with developments in the industry as well as to enhance their professionalism and knowledge.

For the financial year under review, the training programmes and seminars attended by the Directors are as follows:

Directors Seminar/Forum/Conference/Training

Dato’ Syed Ariff Fadzillah bin Syed Awalluddin(Resigned on 5 May 2020)

• Business Transformation–Going To The Next Performance Level• Corporate Governance and Anti-Corruption• Preparation for Corporate Liability on Corruption (Malaysian Anti-Corruption Commission Act 2009)

Dato’ Ang Cheng Siong Implementation of Section 17A of the MalaysianAnti-Corruption Commission Act 2009 (“MACC Act”)

Dato’ Ir. Dr. Khoo Ping Sen Implementation of Section 17A of the MACC Act

Mr Siew Mun Lout Implementation of Section 17A of the MACC Act

Mr Ang Wei Zhen Implementation of Section 17A of the MACC Act

En Dzulkifli David bin Abdullah(Resigned on 15 May 2020)

Implementation of Section 17A of the MACC Act

Mr Yuen Choong Lai(Resigned on 5 May 2020)

Implementation of Section 17A of the MACC Act


• MFRS17: Understanding its Impact and Consequences• Demystifying and Diversity Conundrum: The Road to Business Excellence• FIDE Open Enrolment Programme - Raising Defences: Section 17A, MACC Act.



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III. REMUNERATION

Practice 6.1 Remuneration Policy and Procedures for Directors and Senior Management

The objectives of the Company’s remuneration policy on Directors’ remuneration is to attract, retain and motivate the Directors of the highest quality and to recognise and reward the high performing Directors for achieving the Company’s business and corporate goals.

The NRC shall ensure that the levels of remuneration are competitive in the market to attract and retain Directors of the quality required to manage the business of the Group. The NRC is entrusted under its terms of reference to assist the Board, amongst others, to recommend to the Board the remuneration of the Executive Directors. In the case of Non-Executive Directors, the level of remuneration shall reflect the experience and level of responsibilities undertaken by each of the Non-Executive Directors concerned.

The fees for Directors are determined by the Board with the approval from Shareholders at the AGM. No Director is involved in deciding his own remuneration.

Practices 7.1 and 7.2 Disclosure of Remuneration of Directors and Senior Management

Details of Directors’ remuneration for the financial year ended 31 December 2019 are set out as below:-

Fees

Salaries, Bonuses,

IncentivesOther

EmolumentsN1

Benefits-in kindN2 Total

Group (RM) (RM) (RM) (RM) (RM)

Executive DirectorsDato’ Ang Cheng Siong - 720,000 87,586 - 807,586

Dato’ Ir. Dr. Khoo Ping Sen - 540,000 65,986 - 605,986

Mr Siew Mun Lout - 480,000 59,258 - 539,258

Mr Ang Wei Zhen - 240,000 30,458 - 270,458

Executive Directors of subsidiaries Mr Chong Chee Ken - 243,000 64,080 - 307,080

Mr Lim Tock King - 243,000 25,920 - 268,920

Non-Executive DirectorsDato’ Syed Ariff Fadzillah bin Syed Awalluddin (Resigned on 5 May 2020)

48,000 - - 16,000 64,000


40,000 - - 13,000 53,000


46,000 - - 16,000 62,000


30,000 - - 9,000 39,000

Total 164,000 2,466,000 333,288 54,000 3,017,288

N1 Other Emoluments comprised allowances, Employer’s Provident Fund contribution, Social Security Welfare contribution and Employment Insurance Scheme contribution.

N2 Benefits-in-Kind comprised meeting allowance.The above excludes the Directors who were appointed subsequent to the financial year.


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III. REMUNERATION (CONT’D)

Practices 7.1 and 7.2 Disclosure of Remuneration of Directors and Senior Management (cont’d)

Details of Directors’ remuneration for the financial year ended 31 December 2019 are set out as below (cont’d):-

Fees

Salaries, Bonuses,

IncentivesOther

EmolumentsN1

Benefits-in kindN2 Total

Company (RM) (RM) (RM) (RM) (RM)

Executive DirectorsDato’ Ang Cheng Siong - 120,000 14,993 - 134,993

Dato’ Ir. Dr. Khoo Ping Sen - 120,000 14,993 - 134,993

Mr Siew Mun Lout - 120,000 15,229 - 135,229

Mr Ang Wei Zhen - 120,000 15,229 - 135,229

Non-Executive DirectorsDato’ Syed Ariff Fadzillah bin Syed Awalluddin (Resigned on 5 May 2020)

48,000 - - 16,000 64,000


40,000 - - 13,000 53,000


46,000 - - 16,000 62,000


30,000 - - 9,000 39,000

Total 164,000 480,000 60,444 54,000 758,444


N2 Benefits-in-Kind comprised meeting allowance.The above excludes the Directors who were appointed subsequent to the financial year.

Saved as disclosed above, there were no other remuneration paid for services rendered by any Director to the Company and the Group for the financial year ended 31 December 2019.

The Directors who are shareholders of the Company had abstained from voting at the previous 6th AGM and shall abstain from voting at the forthcoming 7th AGM on Resolutions pertaining to their Directors’ fees, benefits and their respective re-election as Directors.

(i) Directors’ Fees/Meeting Allowance The Company will be seeking the approval of the shareholders at the forthcoming AGM for the

Proposed Director Fees of up to RM210,000 for the financial year ending 31 December 2020 and meeting allowance of up to RM85,000 for the period from the forthcoming 7th AGM up to the next AGM. The fees will not be paid until the approval of the shareholders in the forthcoming AGM.

(ii) Non-Executive Directors The Non-Executive Directors are not entitled to any other benefits or incentive plan.


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III. REMUNERATION (CONT’D)

Practices 7.1 and 7.2 Disclosure of Remuneration of Directors and Senior Management (cont’d)

(iii) Group Managing Director The Group Managing Director is not entitled to the above Directors’ fee or any meeting fees for

Board or Board Committee meetings he attends for the Company. The Group Managing Director’s remuneration package is reflected in his service contract as structured taking into account the fixed compensation which includes basic salary and allowances including retirement benefits, hospitalisation and surgical insurance and a variable performance-linked bonus.

(iv) Senior Management The aggregate remuneration of the Senior Management (excluding Group Executive Directors) for

the financial year ended 31 December 2019, is as follows: -

Group LevelSalaries, Bonuses,

IncentivesOther

EmolumentsN1

Benefits-In-KindN2

(RM) (RM) (RM)Mr Yap Yoon Fatt 200,000 - 250,000 - -

Mr Tham Fook Sun 150,000 - 200,000 - -


N2 Benefits-in-Kind comprised meeting allowance.

PRINCIPLE B - EFFECTIVE AUDIT AND RISK MANAGEMENT

Practice 8.1 Audit and Risk Management Committee Composition and ChairmanPractice 8.4 (Step Up) Independence of the Audit and Risk Management Committee

The ARMC is made up exclusively of Independent Directors based on the Step-Up recommendation of the Code and also fulfils the requirements of the Listing Requirement of which requires the ARMC comprise no fewer than three (3) members and that all members must be Non-Executive Directors with a majority of them being Independent Directors.

The Chairman of the ARMC is an Independent Director. The role and responsibilities of the ARMC as well as their rights are set out in the Terms of Reference contained on the corporate website at www.ikhmasjaya.com.

The present composition and changes in the ARMC during the financial year under review and up to the date of this CG Statement are as follows:-

Chairman: Mr Leong Kah Mun (Appointed on 1 June 2020) Mr Yuen Choong Lai (Resigned on 5 May 2020)

Members : Mr Yong Kok Yee (Appointed on 1 June 2020) Mr Lim Kean Lam (Appointed on 1 June 2020) Dato’ Syed Ariff Fadzillah bin Syed Awalluddin (Resigned on 5 May 2020) En Dzulkifli David bin Abdullah (Resigned on 15 May 2020) Ms Hon Shil Hong (Appointed on 9 March 2020 and Resigned on 21 May 2020) Dato’ Abdul Manap Bin Abd Wahab (Appointed on 9 March 2020 and Resigned on 27 May 2020) Ms Tan Ming-Li (Resigned on 4 October 2019)

The Terms of Reference of the ARMC was last reviewed in April 2018.

Details of the activities carried out by the ARMC in FYE 2019 are set out on pages 39 to 42.


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PRINCIPLE B - EFFECTIVE AUDIT AND RISK MANAGEMENT (CONT’D)

Practices 8.2 and 8.3 Oversight and Assessment of the Suitability and Independence of External Auditors

The Company’s independent External Auditors fill an essential role for the shareholders by enhancing the reliability of the Group’s financial statements and giving assurance of that reliability to users of the financial statements.

The Board has established a formal and transparent arrangement for maintaining appropriate relationships with the External Auditors in seeking professional advice and ensuring the compliance with the relevant regulations and applicable approved accounting standards in Malaysia. The external auditors attend ARMC meetings when necessary and have direct access to the ARMC and Internal Auditors for independent discussion.

Independence of Auditors

The Board through the ARMC reviews and assess the independence of the External Auditors on a yearly basis. The ARMC works closely with the Management team in assessing the suitability of the external auditor. The areas of assessment include among others, the external auditors’ objectivity and independence, audit fees, size and competency of the audit team, audit strategy, audit reporting and partner involvement.

The External Auditors, in supporting their independence, provided the ARMC with a written assurance confirming their independence throughout the conduct of the audit engagement in accordance with the relevant professional and regulatory requirements. The External Auditors have provided such declaration in their annual audit plan presented to the ARMC during the financial year.

In the event a former audit partner is appointed as a member of the ARMC, the former key audit partner is to observe a cooling-off period of at least two (2) years before being appointed.

The ARMC meets periodically to carry out its functions and duties pursuant to its terms of reference. During the financial year, the ARMC met the External Auditors twice without the presence of the Management.

The non-statutory audit fees incurred for services rendered to the Group by KPMG for financial year 2019 was RM248,000 (FY2018: RM245,000).

The Board has considered the non-audit fees provided during the year by KPMG and is satisfied that the provision of those non-audit services during the year by KPMG does not compromise the Auditors’ independence.

The ARMC and the Board are satisfied with the performance, competence and independence of the External Auditors and the Board had recommended their re-appointment for shareholders’ approval at the forthcoming AGM.

Practice 8.5 Financial Literacy of the ARMC

The ARMC possesses the right mix of skills to discharge its duties effectively.

For the financial year under review, the Committee was led by Mr Yuen Choong Lai, a member of the Malaysian Institute of Accountants (MIA) who has the necessary financial knowledge to provide satisfactory input on financial matters. The ARMC also comprises members with accounting, finance, banking, corporate, public service and management control backgrounds, all of whom are financially literate and provide diverse perspectives that strengthen the quality of deliberations.


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PRINCIPLE B - EFFECTIVE AUDIT AND RISK MANAGEMENT (CONT’D)

Practices 9.1 and 9.2 Risk Management and Internal Control Framework

The Board has an overall responsibility in maintaining a sound internal control system that provides reasonable assurance of effective and efficient operations and compliance with internal procedures and guidelines.

The Group’s approach to risk management and the principal risks faced by the Group are disclosed on the Statement on Risk Management and Internal Control as set out on pages 43 to 45 of the Annual Report.

Practices 10.1 and 10.2 Internal Audit Function

The Group has outsourced its internal audit (IA) function to a professional service firm which is independent of the activities and operations of the Group.

The IA function is tasked by the Board to undertake continuous review and assessment on the adequacy, efficiency and effectiveness of risk management, control and governance processes implemented in the Group.

The outsourced internal auditors report directly to the ARMC. Details on the internal audit function are set out in the ARMC Report and the Statement on Risk Management and Internal Control of this Annual Report.

The IA function has unrestricted access to the ARMC and is invited to attend meetings to facilitate the deliberation of audit reports. The minutes of the ARMC meetings are then tabled to the Board for information and serve as useful references, especially if there are pertinent issues that any Directors wish to highlight or seek clarification.

PRINCIPLE C - INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH SHAREHOLDERS

Financial reporting

The Board, through the ARMC, endeavours to provide and present a balanced view and meaningful assessment of the Group’s financial performance to its shareholders, primarily through the Annual Reports and quarterly announcements of the Group’s results to BMSB. The Board is assisted by the ARMC in overseeing the Group’s financial reporting process and the accuracy, consistency and appropriateness of the use and application of accounting policies.

On a yearly basis, the ARMC meets with the External Auditors to go through the Audit Planning Memorandum prior to commencement of audit. In addition, the ARMC also meets with the External Auditors to discuss their report to the ARMC following completion of their audit. The External Auditors share with the ARMC any significant issues on the financial statements and regulatory updates. The ARMC obtains assurance from the External Auditors on the Company’s compliance with the applicable approved financial reporting standards.

Statement of Directors’ Responsibilities

The Directors acknowledge and are responsible for ensuring that proper accounting records are kept to reflect the reasonable accuracy of the financial position of the Company and the Group and to ensure the financial statements comply with all relevant rules and regulations.

The Directors have a general responsibility for taking reasonable steps to safeguard the assets of the Group and to prevent, minimise and detect fraud and other irregularities.


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PRINCIPLE C - INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH SHAREHOLDERS (CONT’D)

Corporate Disclosures Policies and Procedures

Practice 11.1 Communication with Stakeholders

Recognising the importance of timely dissemination of information to shareholders and other stakeholders, the Board is committed to ensuring that the shareholders and other stakeholders are well informed of major developments of the Company and the information is communicated to them through the following:-

(i) The Annual Report;

(ii) The various disclosures and announcements made to BMSB including the Quarterly Results and Annual Results;

(iii) Briefings to the Company’s key investors or other investment community in order to provide them a better understanding of the Group’s operations and explanation to any concern highlighted; and

(iv) The website at www.ikhmasjaya.com which shareholders as well as members of the public are invited to access for the latest information on the Group.

Practice 11.2 Integrated Reporting

The Group has yet to adopt integrated reporting.

Practice 12.1 Notice of Annual General Meeting

The Company’s AGM serves as a principal forum for dialogue with shareholders. Shareholders are encouraged to meet and communicate with the Board at the AGM and to vote on all resolutions. Extraordinary General Meetings are held as and when required.

The Company sends out the Notice of AGM at least 28 days before the meeting in order to facilitate the full understanding and evaluation of the issues involved.

Practice 12.2 Directors to attend General Meetings

All the Directors, including the Chairman of the ARMC and NRC would attend the General Meetings to allow the shareholders to raise questions and clarify any issues they may have relating to each resolution tabled for approval.

Practice 12.3 Electronic Voting

General Meetings are currently convened in a specified venue and resolutions put forth are voted by the members present in person or by proxy at the said venue of the meeting

Considering the cost involved, it is currently not economically justifiable to enable voting in absentia or remote shareholders’ participation. However, the Company will monitor the development of technology and market practice to facilitate shareholders participation and the Board may consider implementing the same in the future.

The existing proxy form authorising proxies or Chairman of the meeting or in the case of a corporation, the appointment of a corporate representative is an alternative measure adopted by the Company.


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PRINCIPLE C - INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH SHAREHOLDERS (CONT’D)

Corporate Disclosures Policies and Procedures (cont’d)

Practice 12.3 Electronic Voting (cont’d)

At the 6th AGM of the Company, all resolutions were put to the vote and Independent Scrutineer was appointed to verify the votes and the results of the voting were announced instantaneously at the meeting.

STATEMENT ON COMPLIANCE WITH BEST PRACTICES OF THE CODE

This statement is prepared in compliance with Paragraph 15.25 of the Listing Requirements and it is to be read together with the CG Report 2019 of the Company which is available in the Company’s website at www.ikhmasjaya.com. The Board is satisfied that the Company has complied with the Code during the financial year with regard to the recommendations supporting the Principles except as otherwise stated.

This statement was presented and approved at the Board of Directors’ Meeting held on 26 June 2020.


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The Board of Directors of Ikhmas Jaya Group Berhad (“Company”) is pleased to present the report of the Audit and Risk Management Committee for the financial year ended 31 December 2019.

COMPOSITION AND MEETINGS

The composition and changes in the Audit and Risk Management Committee (“ARMC” or “the Committee”) during the financial year under review and up to the date of this ARMC Report are as follows:-

Chairman: Mr Yuen Choong Lai (Senior Independent Non-Executive Director) (Resigned wef 5 May 2020) Mr Leong Kah Mun (Independent Non-Executive Director) (Appointed wef 1 June 2020)

Members : Ms Tan Ming-Li (Independent Non-Executive Director) (Resigned on 4 October 2019) Dato’ Syed Ariff Fadzillah bin Syed Awalluddin (Independent Non-Executive Director) (Resigned wef 5 May 2020) En Dzulkifli David bin Abdullah (Independent Non-Executive Director) (Resigned wef 15 May 2020) Dato’ Abdul Manap Bin Abd Wahab (Independent Non-Executive Director) (Appointed wef 9 March 2020 and Resigned wef 27 May 2020) Ms Hon Shil Hong (Independent Non-Executive Director) (Appointed wef 9 March 2020 and Resigned wef 21 May 2020) Mr Yong Kok Yee (Senior Independent Non-Executive Director) (Appointed wef 1 June 2020) Mr Lim Kean Lam (Independent Non-Executive Director) (Appointed wef 1 June 2020)

There were six (6) meetings held during the financial year ended (“FYE”) 31 December 2019 and the record of attendance of the Committee Members is as follows:-

Number of MeetingsAttended Held

Mr Yuen Choong Lai(Resigned on 5 May 2020)

6 6

Dato’ Syed Ariff Fadzillah bin Syed Awalluddin(Resigned on 5 May 2020)

6 6

En Dzulkifli David bin Abdullah(Resigned on 15 May 2020)

5 6


3 3


Terms of Reference

The Terms of Reference of the ARMC found under the “Official Documents” section of the Company’s website at www.ikhmasjaya.com and was reviewed in 2018.

AUDIT AND RISK MANAGEMENTCOMMITTEE REPORT

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COMPOSITION AND MEETINGS (CONT’D)

Composition

1. The members of the Committee are to be appointed by the Board based on the recommendation of the Nomination and Remuneration Committee from amongst the Directors of the Company who fulfil the following requirements:-(a) the Committee must comprise of no fewer than three (3) members;(b) all members of the Committee must be Non-Executive Directors, with a majority of them being

Independent Directors;(c) all members of the Committee should be financially literate; and(d) at least one member of the Committee must fulfil the expertise requisite of the Bursa Malaysia

Securities Berhad (“Bursa Securities”) Main Market Listing Requirements (“Listing Requirements”) as follows:(i) he must be a member of the Malaysian Institute of Accountants (“MIA”); or(ii) if he is not a member of the MIA, he must have at least three (3) years’ working experience

and:(1) he must have passed the examinations specified in Part I of the First Schedule of the

Accountants Act 1967; or(2) he must be a member of one of the associations of accountants specified in Part II of the

First Schedule of the Accountants Act 1967; or(iii) fulfils such other requirements as prescribed or approved by Bursa Securities.

2. In the event a former audit partner is being appointed as a member of the ARMC, it would be the compulsory requirement that the former key audit partner(s) to observe a cooling-off period of at least two (2) years before being appointed.

3. No Alternate Director shall be appointed as a member of the Committee.

4. If a member of the Committee resigns, dies or for any reason ceases to be a member resulting in the non-compliance of paragraph 1 above, the Board must fill the vacancy within three (3) months.

5. The terms of office and performance of the Committee and each of its members shall be reviewed by the Nomination and Remuneration Committee annually. However, the appointment terminates when a member ceases to be a Director.

6. The Board shall have the discretion as it deems fit to rescind and/or revoke the appointment of any person(s) in the Committee.

ChairmanThe members of the Committee shall elect a Chairman from amongst their number, who shall be an Independent Non-Executive Director. In the absence of the Chairman, the members shall elect any one of the members present at the meeting to be the Chairman of the meeting.

Secretary The Company Secretary shall be the Secretary of the ARMC.

Meetings1. The Committee shall meet at least four (4) times a year and such additional meetings as the Chairman

shall decide.

2. The quorum for a Committee Meeting shall be at least two (2) members; the majority present must be Independent Directors.


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Meetings (cont’d) 3. The External Auditors have the right to appear and be heard at any meeting of the Committee and shall

appear before the Committee when required to do so.

4. The non-member Directors and employees of the Company and of the Group shall normally attend the meetings at the Committee’s invitation, to assist in its deliberations and resolutions of matters raised. However, at least twice a year, the Committee should meet with the External Auditors without the presence of the executive board members and employees.

The Internal Auditors shall present and discuss the internal audit reports and other related matters.

5. In addition to the availability of detailed minutes of the Committee Meetings to the Board, the Chairman of the Committee at each Board Meeting, will report a summary of significant matters and resolutions.

6. A resolution in writing signed or approved via letter, telex, email or facsimile by all Committee members shall be effective for all purposes of a resolution passed at a meeting of the Committee duly convened, held and constituted. Any such resolution may be contained in a single document or may consist of several documents all in the like form signed by one or more members.

Summary of Activities

During the financial year under review and up to the date of approval for issuance of this Report, the Committee had, in discharging its functions and duties, carried out, among others, the following activities:-

Financial Reporting Review

• Reviewed the Group’s audited financial statements and made recommendation to the Board for approval.

• Reviewed the unaudited quarterly reports and announcements and made recommendation to the Board for consideration and approval.

External Audit

• Reviewed the Audit Plan covering among others, the audit scope, audit methodology, timetable and milestones, audit materiality and audit focus areas.

• Assessed the suitability of Messrs KPMG PLT before recommendation to the Board for tabling for shareholders’ approval on their re-appointment as the external auditors of the Company.

• Reviewed and discussed on the audit for FYE 31 December 2019. Also, without the presence of Executive Directors and Management, discussed with the External Auditors on the assistance provided by the Management during the course of audit for FYE 31 December 2019 and if there were any matters that they would want to bring to the attention of the Committee.

• Reviewed the audit fees before recommending to the Board for approval.


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Internal Audit and Risk Management

• Reviewed, discussed and approved the outsourced internal auditors’ audit plan and fees for 2019.

• Reviewed and deliberated on the outsourced internal auditors’ report conducted follow-up on the areas of Project Management of Bukit Bintang City Centre (“BBCC Project”).

• Discussed with the Internal Auditors without the presence of Executive Directors and Management on Internal Auditor’s observations during the course of their audit.

Related Party Transactions

• Reviewed the related party transactions and conflict of interest situation that may arise within the Company and the Group.

Others

• Reviewed the Statement on Risk Management and Internal Control for inclusion in the Annual Report.

INTERNAL AUDIT FUNCTION

The Group has appointed an external service provider to carry out the internal audit function, namely RCA Corporate Services Sdn. Bhd. The outsourced Internal Auditors act independently with impartiality, proficiency and exercise due professional care, and reports directly to the Committee.

The Internal Auditors undertook regular reviews and audit assignments based on the Internal Audit Plan which was presented to, and approved by the Committee.

The audits were performed using a risk based approach and designed to test the Group’s established framework of controls to ascertain that they were operating effectively.

In FYE 31 December 2019, the Internal Auditors conducted follow-up internal audit reviews to assess the adequacy and effectiveness of the internal control and compliance with the Company’s policies and procedures for the BBCC Project Management; which principally covers:

• Origination of Contracts – Tendering and Contract Award• Project Resources and Schedule Planning• Subcontractors Sourcing, Evaluation and Award• Project Progress Tracking• Progress Claims Billing• Subcontractors Progress Claims Payment• Non-Conformance Issues, Corrective Actions and Preventive Actions• Health, Safety and Environment

The reports on audits undertaken on the business areas, together with the internal control assessment, findings, recommendations and Management’s response and actions, were tabled to the Committee for deliberation.

The fees incurred by the Group in relation to the outsourced internal audit function for FYE 31 December 2019 was RM6,000.


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INTRODUCTION

This Statement on Risk Management and Internal Control is made in accordance with the paragraph 15.26(b) of Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and the Malaysian Code on Corporate Governance 2017 (“the Code”), which requires Malaysian public listed companies to maintain a sound system of risk management and internal control to safeguard shareholders’ investment and company’s assets.

BOARD RESPONSIBILITIES

The Board affirms its overall responsibility over the Group’s system of risk management and internal controls, which includes the existence of an appropriate control environment and framework and the review of its effectiveness and adequacy. The system of internal control covers governance, risk management, financial strategy, organisational, operational, regulatory and compliance control matters. The Board recognises that the system is designed to manage, rather than eliminate, the risks of not adhering to the Group’s policies and procedures and achieving goals. Therefore, it should be noted that control systems can only provide reasonable but not absolute assurance against material misstatement or loss.

RISK MANAGEMENT

In providing oversight of risk management framework and policies of the Group, the Board is assisted by the Audit and Risk Management Committee (“ARMC”) to:

• Ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ investments and the Group’s assets; and

• Ascertain the nature and extent of principal risks that may impact the Group’s strategic objectives.

The Group has put in place an Enterprise Risk Management (“ERM”) framework which comprises the following elements:

• Communicate and disseminate across the organisation the vision, mission, role and direction of the Group;

• Provide guiding principles and approach towards risk management;• Process of identification, assessment, and evaluation, control, monitoring and management to mitigate

and minimise the principal risks which adversely affect the Group’s business;• Creation of a culture of risk-awareness and risk ownership for more effective and efficient management

of risks;• Regular review, tracking and reporting on keys risks identified and corresponding mitigation procedures;

and• Regular review of the effectiveness of the system of internal controls.

The framework is applied to determine, evaluate and manage principal risks of the Group. This is complemented by the system of internal controls that is integrated into the Group’s operations and processes.

With the implementation of the ERM framework, the management and reporting of principal risks are structured and organised into the following broad risk categories to facilitate risk mitigation:

• Strategic, which are risks that impact the business direction of the Group. Initiatives are taken to identify and highlight any developments that may impact the Group’s business and these are brought to the Board’s attention;

• Operational, which are risks that affect the operational efficiency and effectiveness of the Group’s activities and products. The Group endeavours to adopt best practices and standards in the various areas of operations so as to achieve operational efficiency;

• Financial, which are risks related to financial processes and reporting. Internal controls are set in place to minimize any financial misstatements and the Group adopts the financial reporting standards issued by the Malaysian Accounting Standards Board in the preparation of financial statements;

• Competency, which are risks associated with knowledge and resources in operational management and activities. Standard Operating Procedures are in place for guidance and these are supplemented with training and development programs where relevant.

STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTROL

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RISK MANAGEMENT (CONT’D)

Risk management principles, policies, procedures and practices are updated on an ongoing basis to ensure relevance and compliance with current/applicable laws and regulations and are made available to all employees.

The Board undertakes to pursue the necessity for continuous improvements in its internal control system and risk management process in order to achieve its goals, enhance stakeholder value and ensure sustainability of the businesses over the long term.

The Board has delegated the responsibility of reviewing the adequacy and integrity of the internal control system to the ARMC. The ARMC assesses the adequacy and integrity of the internal control system and its compliance with the Group’s policies and procedures through independent reviews performed by the outsourced internal audit function. In this respect, the Board, through the ARMC receives and reviews reports on internal controls from the outsourced internal audit function. The outsourced internal audit function reports directly to the ARMC.

The previous ARMC members who were working together with the Management to identify, evaluate and manage significant risks for the financial year under review have resigned in May 2020. The current ARMC shall continue to evaluate the existing risk management practices, and where appropriate revise such practices accordingly.

KEY ELEMENTS OF THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

• Control Environment

The Board is committed towards maintaining a adequate control structure and environment for the proper conduct of the Group’s business operations and towards achieving a sound system of internal controls.

Management has established structures, reporting lines and appropriate authorities and responsibilities, in pursuit of the Group’s objectives. There is a defined organisation structure with scopes of responsibility, lines of reporting, and appropriate levels of delegated authority, including proper approval and authorisation limits. This is reinforced by a process of hierarchical reporting which provides sufficient and relevant documentation and auditable trail of accountability.

• Control Activities

The Group has in place standard operating procedures to facilitate the provision of regular and comprehensive information to management, covering financial and operational performance and key business indicators, for monitoring and decision making. During the year, numerous deficiencies in key areas are identified and improvements are required to enhance the risk mitigation measures in order to address the rising exposure to potential adverse credit, liquidity and legal risks.

• Information and Communication

The Board communicates and disseminates across the organisation the vision, mission and strategic direction of the Group. The management sets out key policies and procedures in the Standard Operating Procedure documents.


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KEY ELEMENTS OF THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS (CONT’D)

• Monitoring Activities

The Group’s operating procedures are designed to facilitate tracking and evaluation of financial and operating results and performance. The monitoring activities are supported by the outsourced internal audit function. In 2019, there was no internal audit carried out except for one follow up review and the findings on the Group’s internal controls weaknesses are reported to the ARMC.

The Board continues to review and implement measures to strengthen the internal control environment of the Group.

CONCLUSION

The Board is of the view that the risk management and internal control systems under review need to be realigned with further strengthening in light of the challenges, to address the immediate future needs of the Group. Material losses, contingencies or uncertainties that would require disclosure are disclosed in the Group’s financial statements.

The Board has also received assurance from the Group Managing Director that the Group’s risk management and internal control systems in place for the financial year 2019 are in operation, in all material aspects. Nevertheless, the Board and the Management acknowledged weaknesses in the system of internal control and will continue to take pertinent measures to sustain and, where required, to improve the Group’s risk management and internal control systems in meeting the Group’s strategic objectives.

This statement is made in accordance with a resolution of the Board dated 30 June 2020.


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The Directors have overall responsibility for ensuring that the annual financial statements of the Group and the Company are drawn up in accordance with the applicable approved accounting standards in Malaysia, the provisions of the Companies Act 2016; and that these financial statements give a true and fair view of the financial position, financial performance and cash flows of the Group for the financial year ended 31 December 2019.

To ensure that financial statements are properly drawn up, the Directors have taken the following measures:-

• adopted suitable accounting policies and applying them consistently;• made judgements and estimates that are prudent and reasonable;• ensured applicable accounting standards have been followed, subject to any material departures

disclosed and explained in the financial statements; and• prepared the financial statements on the going concern basis, unless it is inappropriate to presume that

the Group and the Company will continue in business.

The Directors are responsible for ensuring that the Company keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and the Company and which enable them to ensure that the financial statements comply with the Companies Act 2016. The Directors have overall responsibility for taking such steps that are reasonably open to them to safeguard the assets of the Group and the Company to prevent and detect fraud and other irregularities.

DIRECTORS’ RESPONSIBILITYSTATEMENT

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FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2019

48 Directors’ Report52 Statement by Directors53 Statutory Declaration54 Independent Auditors’ Report to the Members61 Statement of Financial Position62 Statements of Profit or Loss and Other Comprehensive

Income63 Statement of Changes in Equity65 Statement of Cash Flows68 Notes to the Financial Statements

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The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2019.

PRINCIPAL ACTIVITIES

The Company is principally engaged in investment holding activities, piling and foundation works. The principal activities of the subsidiaries are as stated in Note 6 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

ULTIMATE HOLDING COMPANY

The Company is a subsidiary of Ikhmas Jaya Holdings Sdn. Bhd., of which is incorporated in Malaysia and regarded by the Directors as the Company’s ultimate holding company, during the financial year.

RESULTS

Group CompanyRM’000 RM’000

Loss for the year attributable to:

Owners of Company (157,779) (161,836)

Non-controlling interests (1,767) -

(159,546) (161,836)

RESERVES AND PROVISIONS

There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial statements.

DIVIDENDS

No dividend was paid during the financial year and the Directors do not recommend any dividend to be paid for the financial year under review.

DIRECTORS OF THE COMPANY

Directors who served during the financial year until the date of this report are:

Dato’ Ang Cheng Siong Dato’ Ir. Dr. Khoo Ping Sen Siew Mun LoutAng Wei ZhenLeong Kah Mun (appointed on 1 June 2020)Lim Kean Lam (appointed on 1 June 2020)Yong Kok Yee (appointed on 1 June 2020)Tan Ming-Li (resigned on 4 October 2019) Dato’ Syed Ariff Fadzillah bin Syed Awalluddin (resigned on 5 May 2020)Yuen Choong Lai (resigned on 5 May 2020)Dzulkifli David bin Abdullah (resigned on 15 May 2020)Dato’ Abdul Manap bin Abd Wahab (appointed on 9 March 2020 and resigned on 27 May 2020)Hon Shil Hong (appointed on 9 March 2020 and resigned on 21 May 2020)

DIRECTORS’ REPORTFOR THE YEAR ENDED 31 DECEMBER 2019

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DIRECTORS OF THE COMPANY (CONT’D)

The Directors of the Company’s subsidiaries (excluding Directors who are also Directors of the Company) in office during the financial year until the date of this report are:

Chong Chee KenLim Tock KingPang Kim LeenYap Yoon Fatt

DIRECTORS’ INTERESTS IN SHARES

The interests and deemed interests in the shares of the Company and of its related corporations of those who were Directors at financial year end (including the interests of the spouses or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary sharesAt Disposal/ At

1.1.2019 Acquired Transfer 31.12.2019Interests in the holding company, Ikhmas Jaya Group BerhadDato’ Ang Cheng Siong 163,000 - - 163,000

Yuen Choong Lai 233,800 - - 233,800

Dzulkifli David bin Abdullah 48,000 - - 48,000

Deemed interests in the CompanyDato’ Ang Cheng Siong (1) 325,000,000 - (42,700,000) 282,300,000

Dato’ Ir. Dr. Khoo Ping Sen (1) 325,000,000 - (42,700,000) 282,300,000

Note:

(1) Deemed interested by virtue of their interests in Ikhmas Jaya Holdings Sdn. Bhd. pursuant to Section 8 of the Companies Act 2016.

By virtue of their interests in the ordinary shares of the Company, Dato’ Ang Cheng Siong and Dato’ Ir. Dr. Khoo Ping Sen are also deemed interested in the ordinary shares of the subsidiaries during the financial year to the extent that Ikhmas Jaya Group Berhad has an interest.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Company or of related corporations) 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.

There were no arrangements during and at the end of the financial year which had the object of enabling 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.

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ISSUE OF SHARES AND DEBENTURES

During the financial year, the Company issued 20,000,000 and 23,000,000 new ordinary shares at RM0.21 and RM0.215 per ordinary share respectively via private placements to eligible investors for a total consideration of RM9,145,000 for the purpose of working capital. The new ordinary shares issued rank pari passu in all respects with the existing shares of the Company.

There were no other changes in the issued and paid up share capital of the Company and no debenture was issued 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.

INDEMNITY AND INSURANCE COSTS

There were no indemnity given to or insurance effected for any Director, officer or auditor of the Company during the financial year.

OTHER STATUTORY INFORMATION

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i) all known bad debts have been written off and adequate provision made for doubtful debts, and

ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise.

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

i) that would render the amount written off for bad debts or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or

iv) not otherwise dealt with in this report or the financial statements that would render any amount stated in the financial statements of the Group and of the Company misleading.

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

i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year other than those disclosed in Note 24 to the financial statements.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.


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OTHER STATUTORY INFORMATION (CONT’D)

In the opinion of the Directors, except for the contract costs written off, impairment losses on trade receivables and contract assets as disclosed in Note 20 to the financial statements, the financial performance of the Group and of the Company for the financial year ended 31 December 2019 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

SIGNIFICANT EVENTS

Significant events during the financial year end are disclosed in Note 28 to the financial statements.

SUBSEQUENT EVENTS

Subsequent events after the financial year end are disclosed in Note 29 to the financial statements.

AUDITORS

The auditors, KPMG PLT, have indicated their willingness to accept re-appointment.

The auditors’ remuneration is disclosed in Note 20 to the financial statements.

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

…………………………………………………………Dato’ Ang Cheng SiongDirector

…………………………………………………………Dato’ Ir. Dr. Khoo Ping SenDirector

Kuala Lumpur,

Date: 30 June 2020


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STATEMENT BY DIRECTORS PURSUANT TOSECTION 251(2) OF THE COMPANIES ACT 2016

In the opinion of the Directors, the financial statements set out on pages 61 to 136 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 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 December 2019 and of their financial performance and cash flows for the financial year then ended.

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

…………………………………………………………Dato’ Ang Cheng SiongDirector

…………………………………………………………Dato’ Ir. Dr. Khoo Ping SenDirector

Kuala Lumpur,

Date: 30 June 2020

STATEMENT BY DIRECTORS

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STATUTORY DECLARATION PURSUANT TOSECTION 251(1)(B) OF THE COMPANIES ACT 2016

I, Dato’ Ang Cheng Siong, the Director primarily responsible for the financial management of Ikhmas Jaya Group Berhad, do solemnly and sincerely declare that the financial statements set out on pages 61 to 136 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the declaration to be true, and by virtue of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed Dato’ Ang Cheng Siong, NRIC: 550223-10-5309, at Kuala Lumpur in the Federal Territory on 30 June 2020.

…………………………………………………………Dato’ Ang Cheng Siong

Before me:

Commissioner for OathsWilayah Persekutuan

STATUTORY DECLARATION

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INDEPENDENT AUDITORS’ REPORTTO THE MEMBER OF IKHMAS JAYA GROUP BERHAD

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of Ikhmas Jaya Group Berhad, which comprise the statements of financial position as at 31 December 2019 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 61 to 136.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2019, and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our auditors’ report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Material Uncertainty Related to Going Concern

We draw attention to Note 1(b) of the financial statements, which indicates that the Group and the Company incurred a net loss after taxation of RM159.5 million and RM161.8 million respectively for the financial year ended 31 December 2019 and, as of that date, the current liabilities of the Group exceeded its current assets by RM21.6 million. These conditions, along with other matters as set forth in Note 1(b) and Note 29.4, indicate that material uncertainties exist that may cast significant doubt on the ability of the Group and the Company to continue as going concerns. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

i) Revenue and profit recognition and contract accounting

Refer to Note 2(o)(i)-Significant accounting policy: Revenue and other income-Revenue, Note 11-Trade and other receivables and Note 16-Revenue.

The key audit matter

Construction contract accounting is inherently complex and there are significant judgements involved in estimating the costs to complete the projects.

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Key Audit Matters (cont’d)

i) Revenue and profit recognition and contract accounting (cont’d)

The key audit matter (cont’d)

Revenue from fixed price construction contracts is recognised over time based on cost incurred method while the contract costs related to satisfied performance obligations are recognised as cost of sales when incurred. It requires involvement of our more senior personnel to assess the evaluation of contracts with customers performed by the Group and the Company and requires us to exercise significant judgement to assess the allocation of transaction price to each performance obligation and the timing of revenue recognition.

Profit recognition on contracts is a key audit matter because of the judgement involved in preparing estimates of the forecast costs on contracts. An error in the estimated profit on contracts could result in a material variance in the amount of profit or loss recognised to date and in the current period. The profit recognition on contracts involves key judgements over the expected recovery of costs arising from variations and claims. The potential outcome for contracts can either individually or collectively have a material impact on the financial statements, whether through error or management bias.

As the status of contracts are updated on a regular basis, the Directors are required to exercise significant judgement in the assessment of contract variations which would impact the forecast profits on contracts. The key judgements over the expected recovery of costs for a contract arise from the following:

• Variations to the contract requested by the customer; • Claims made against the customer for delays or other additional costs for which the customer is

liable;• Liquidated and ascertained damages; and• Completeness and accuracy of forecast costs to complete the contract and the ability to deliver the

contract within the forecast timelines.

The potential contract outcome can cover a wide range of scenarios, which can be individually material. In addition, changes in the judgements, and the related estimates, as contracts progress, can result in material adjustments to margin, which can be either positive or negative.

How the matter was addressed in our audit

We used a variety of quantitative and qualitative factors to select contracts with higher risk of material error according to their size or the complexity of contract accounting estimates for detailed testing. In this area, our audit procedures included, among others:

• Evaluate the appropriateness of the accounting policies based on requirements of MFRS 15, our business understanding and industry practice.

• Review management’s assessment on the application of MFRS 15 for appropriateness and review the impact/adjustments quantified by the management, if any.

• Assess the design and implementation of key controls over the recognition of contract revenue, profit margin, related receivables and payables.

• Inspect the selected contracts and challenge the management’s estimates on both current and future financial performance.

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i) Revenue and profit recognition and contract accounting (cont’d)

How the matter was addressed in our audit (cont’d)

• Review management’s key judgements inherent in the budgeted costs of the projects and carry out the following procedures:

i. Test the existence and valuation of claims and variation orders both within the contract revenue and contract costs via inspection of correspondence with customers and sub-contractors;

ii. Assess the management’s ability to deliver the contracts within the budgeted timelines and ascertain if there is any exposure to liquidated and ascertained damages for late delivery of contract works; and

iii. Inspect performance subsequent to the end of the reporting period in order to support year end judgements.

• Assess whether the revenue, profit and the related receivables and payables recognised in the financial statements are in line with the Group’s accounting policies and relevant accounting standards.

• Review the appropriateness of the budgeted costs and compare the actual costs incurred against the budgeted costs to determine whether there are any costs overrun for on-going and completed projects.

• Review management’s assessment on the exposure to liquidated and ascertained damages and/or foreseeable losses to ascertain that these are appropriately assessed and accounted for adequately.

• Consider the adequacy of the Group’s disclosures in respect of the judgements taken with respect to profit recognition and the key risks relating to these amounts.

• Assess the completeness, accuracy and relevance of disclosures required by MFRS 15.

ii) Valuation of trade receivables and contract assets

Refer to the Note 2(k)(i)-Significant accounting policy: Impairment of financial assets, Note 11-Trade and other receivables, Note 10-Contract assets and Note 23.4-Financial instruments-Credit risk.


The Group has RM82,263,000 and RM18,889,000 of trade receivables past due more than 90 days and of credit impaired trade receivables and contract assets respectively, they accounted for 31% of the total assets of the Group. The collectability of the Group’s trade receivables, including contract assets and the valuation of the allowance for impairment of trade receivables and contract assets is therefore a key audit matter due to the significant judgements and the level of uncertainty involved.


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ii) Valuation of trade receivables and contract assets (cont’d)


Our audit procedures included, among others:

• Review Expected Credit Loss (“ECL”) models developed by management in accordance with the requirements of MFRS 9, Financial Instruments.

• Evaluate the reasonableness of management’s key judgements and estimates made, including selection and application of the methods, assumptions and data in making the estimates.

• Assess the appropriateness and test mathematical accuracy of models applied.

• Assess the adequacy of ECL provided by management.

• Ascertain the accuracy of receivables ageing.

• Test the retention balances by corroborating the retention sum amount to customer correspondence and the original contracts. For retentions that are overdue, review the status of the projects and assess the recoverability of such balances.

• Assess the completeness, accuracy and relevance of disclosures required by MFRS 7, Financial Instruments: Disclosures.

iii) Valuation of investments in subsidiaries and amount due from subsidiaries-Company level

Refer to Note 2(a)(i)-Significant accounting policy: Subsidiaries, Note 6-Investments in subsidiaries and Note 11-Trade and other receivables.


As at 31 December 2019, the Company had investments in subsidiaries of RM98,650,000, net of impairment of RM98,500,000. The Company also has amount due from subsidiaries totalling RM101,818,000, net of impairment of RM59,798,000.

One of the group entities reported a significant loss in year ended 31 December 2019 and recorded a deficit in shareholder’s fund as at 31 December 2019. This has therefore increased the risk that the Company’s investments in subsidiaries might exceed their recoverable amounts and the collectability of the amount due from subsidiaries may be in doubt.

We identified the valuation of investments in subsidiaries and amount due from subsidiaries as key audit matters because:

• of their significance to total assets in the Company’s financial statements; and

• they required us to exercise judgement in evaluating the appropriateness of the assumptions used by the management in deriving the recoverable amount.


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iii) Valuation of investments in subsidiaries and amount due from subsidiaries-Company level (cont’d)


Our audit procedures included, among others:

• Check management’s assessment on indicators of impairment in investments in subsidiaries and amount due from subsidiaries.

• Assess the basis and assumptions used by the management in deriving the recoverable amounts of the investments in subsidiaries and amount due from subsidiaries.

• Assess the adequacy of impairment losses made by management.

• Assess the completeness, accuracy and relevance of disclosures required by MFRS 136, Impairment of assets and MFRS 7, Financial Instruments: Disclosures.

Information Other than the Financial Statements and Auditors’ Report Thereon

The Directors of the Company are responsible for the other information. The other information comprises the information included in the Directors’ Report and Statement on Risk Management and Internal Control but does not include the financial statements of the Group and of the Company and our auditors’ report thereon, which we obtained prior to the date of this auditors’ report, and the remaining parts of the annual report, which are expected to be made available to us after that date.

Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditors’ report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the remaining parts of the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Directors of the Company and take appropriate actions in accordance with approved standards on auditing in Malaysia and International Standards on Auditing.

Responsibilities of the Directors for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.


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59

Responsibilities of the Directors for the Financial Statements (cont’d)

In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the ability of the Group and of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control of the Group and of the Company.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

• Conclude on the appropriateness of the Director’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group or of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.


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Auditors’ Responsibilities for the Audit of the Financial Statements (cont’d)

We communicate with Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditors’ report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matter

This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG PLT Chan Kah Mun(LLP0010081-LCA & AF 0758) Approval Number: 03350/01/2022 JChartered Accountants Chartered Accountant

Petaling Jaya, Selangor

Date: 30 June 2020


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STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2019

Group CompanyNote 2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Restated Restated

AssetsProperty, plant and equipment 3 16,938 93,200 - -

Right-of-use assets 4 26,686 - - -

Investment properties 5 10,585 12,721 793 625

Investments in subsidiaries 6 - - 150 98,650

Other investments 7 4 226 - -

Contract assets 10 11,916 28,735 - -

Deferred tax assets 8 - 2,493 - -

Total non-current assets 66,129 137,375 943 99,275

Inventories 9 254 866 - -

Contract assets 10 67,900 119,702 1,935 1,280

Trade and other receivables 11 160,818 173,559 43,548 94,816

Current tax assets 2,644 4,292 7 460

Cash and cash equivalents 12 28,531 37,852 12 7,729

260,147 336,271 45,502 104,285

Assets classified as held for sale 4,618 - - -

Total current assets 264,765 336,271 45,502 104,285

Total assets 330,894 473,646 46,445 203,560

EquityShare capital 13 191,687 182,542 191,687 182,542

Reserve 13 (156,032) (753) (161,083) 753

Equity attributable to owners of

the Company 35,655 181,789 30,604 183,295

Non-controlling interest (8,004) (6,237) - -

Total equity 27,651 175,552 30,604 183,295

LiabilitiesLoans and borrowings 14 1,947 22,656 - -

Lease liabilities 8,427 - - -

Deferred tax liabilities 8 6,469 5,333 - -

Total non-current liabilities 16,843 27,989 - -

Trade and other payables 15 223,107 185,159 5,242 3,258

Contract liabilities 10 22,351 14,959 10,599 10,039

Loans and borrowings 14 30,205 68,074 - 6,968

Lease liabilities 8,380 - - -

Current tax liabilities 2,357 1,913 - -

Total current liabilities 286,400 270,105 15,841 20,265

Total liabilities 303,243 298,094 15,841 20,265

Total equity and liabilities 330,894 473,646 46,445 203,560

The notes on pages 68 to 136 are an integral part of these financial statements.

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RM’000 RM’000 RM’000 RM’000Revenue 16 199,536 308,193 7,962 15,087

Cost of sales (264,668) (303,501) (7,523) (14,623)

Gross (loss)/profit (65,132) 4,692 439 464

Other income 12,368 2,148 99 123

Administrative expenses (12,525) (15,126) (2,411) (1,413)

Net loss on impairment of financial instruments and contract assets (64,482) (10,428) (59,798) -

Other operating expenses (13,485) (5,123) (99,850) -

Results from operating activities (143,256) (23,837) (161,521) (826)

Finance income 17 916 1,123 135 242

Finance costs 18 (13,128) (13,512) (450) (491)

Loss before tax (155,468) (36,226) (161,836) (1,075)

Income tax 19 (4,078) 3,619 - (72)

Loss and total comprehensive expense for the year 20 (159,546) (32,607) (161,836) (1,147)

Loss and total comprehensive expense attributable to:Owner of Company (157,779) (28,961) (161,836) (1,147)

Non-controlling interest (1,767) (3,646) - -

Loss and total comprehensive expense for the year (159,546) (32,607) (161,836) (1,147)

Basic loss per ordinary share (sen) 21 (27.97) (5.33)


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019

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63

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2019

A

ttri

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STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2019

Non-distributableRetained

earnings/Share (Accumulated Total

capital losses) equityCompany RM’000 RM’000 RM’000At 1 January 2018 173,992 1,900 175,892

Contributions by and distributions to

owners of the CompanyShares issued during the financial year 8,550 - 8,550

Total transactions with owners of the Company 8,550 - 8,550

Loss and total comprehensive expense for the year - (1,147) (1,147)

At 31 December 2018 182,542 753 183,295

Contributions by and distributions to owners of the CompanyShares issued during the financial year 9,145 - 9,145

Total transactions with owners of the Company 9,145 - 9,145

Loss and total comprehensive expense for the year - (161,836) (161,836)

At 31 December 2019 191,687 (161,083) 30,604

Note 13.1


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STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2019



Cash flows from operating activities

Loss before tax (155,468) (36,226) (161,836) (1,075)

Adjustments for:Depreciation of property, plant and equipment 3 5,229 15,905 - -

Depreciation of right-of-use assets 4 8,593 - - -

Depreciation of investment properties 5 236 248 - -

Gain on disposal of property, plant and equipment (10,440) (990) - -

Loss on disposal of right-of-use assets 2,722 - - -

Gain on disposal of investment properties (2,344) - - -

Loss on disposal of other investment 62 - - -

Property, plant and equipment written off 3 - 3 - -

Impairment losses on: - -

- property, plant and equipment 291 400 - -

- investment properties 1,212 - - -

- trade receivables 9,724 8,868 - -

- other receivables 2,590 450 - -

- contract assets 69,188 1,060 - -

- amount due from a related company - 50 - -

- amount due from a subsidiary - - 59,798 -

- investment in a subsidiary - - 98,500 -

Deposits written off - 621 - -

Bad debts written off - 113 - -

Contract costs written off 49,149 39,442 - -

Inventories written off - 37 - -

Write down of inventories 782 745 - -

Finance income 17 (916) (1,123) (135) (242)

Finance costs 18 13,128 13,512 450 491

Operating (loss)/profit before changes in working capital (6,262) 43,115 (3,223) (826)

Inventories (170) (1,416) - -

Trade and other receivables 6,526 21,077 (8,530) (2,917)

Trade and other payables 70,538 (16,576) 1,855 (14,080)

Contract assets (53,641) (10,654) (694) (140)

Contract liabilities 7,392 14,959 560 10,039

Cash generated from/(used in) operations 24,383 50,505 (10,032) (7,924)

Tax paid (5) (533) - (524)

Tax refund 1,648 11 453 11

Interest paid (8,309) (6,984) (450) (491)

Net cash from/(used in) operating activities 17,717 42,999 (10,029) (8,928)

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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 (CONT’D)



Cash flows from investing activitiesAcquisition of property, plant and equipment (i) (108) (1,233) - -

Proceeds from disposal of other investment 160 - - -

Proceeds from disposal of property,

plant and equipment 3,785 2,007 - -

Proceeds from disposal of right-of- use assets 3,736 - - -

Proceeds from disposal of investment properties 1,617 - - -

Interest received 916 1,123 135 242

Net cash from investing activities 10,106 1,897 135 242

Cash flows from financing activitiesRepayment of bankers’ acceptances and trust receipts (10,359) (15,049) - -

Repayment of loans and other borrowings (4,433) (18,253) - -

Proceeds from issuance of shares 9,145 8,550 9,145 8,550

Repayment of lease liabilities (14,850) (13,036) - -

Decrease/(Increase) in pledged fixed deposits 8,862 (8,702) 7,700 (193)

Interest paid (3,526) (6,528) - -

Net cash (used in)/from financing activities (15,161) (53,018) 16,845 8,357

Net increase/(decrease) in cash and cash equivalents 12,662 (8,122) 6,951 (329)

Cash and cash equivalents at 1 January (ii) (35,260) (27,138) (6,939) (6,610)

Cash and cash equivalents at 31 December (ii) (22,598) (35,260) 12 (6,939)

Cash outflows for leases as a lessee

Included in net cash from operating activitiesPayment relating to short-term

leases 20 489 - - -

Payment relating to leases of low-value assets 20 74 - - -

Interest paid in relation to lease liabilities 18 1,540 - - -

Included in net cash from financing activitiesPayment of lease liabilities 14,850 - - -

Total cash outflows for leases 16,953 - - -


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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 (CONT’D)

(i) Acquisition of property, plant and equipment

During the year, the Group acquired property, plant and equipment with an aggregate cost of RM108,000 (2018: RM12,256,000), of which RM nil (2018: RM9,791,000) were acquired by means of finance leases. The amount remains payable to the vendor at the end of the reporting period is RM nil (2018: RM1,232,000).

(ii) Cash and cash equivalents

Cash and cash equivalents included in the statements of cash flows comprise the following statements of financial position amounts:


RM’000 RM’000 RM’000 RM’000Fixed deposits with licensed banks 27,991 36,853 - 7,700

Less: Pledged deposits 12 (27,991) (36,853) - (7,700)

- - - -

Cash and bank balances 12 540 999 12 29

Bank overdrafts 14 (23,138) (36,259) - (6,968)

(22,598) (35,260) 12 (6,939)

The notes on pages 68 to 136 are an integral part of these financial statements

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68

NOTES TO THEFINANCIAL STATEMENTS

lkhmas Jaya Group Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The addresses of the principal place of business and registered office of the Company are as follows:

Principal place of business Registered officeNo. 35, 37 & 39 Unit 621, 6th Floor, Block A

Jalan PJU 1A/41B Kelana Centre Point

Pusat Dagangan NZX No. 3, Jalan SS17/9, Kelana Jaya

Ara Jaya, PJU 1A 47301 Petaling Jaya

47301 Petaling Jaya Selangor, Malaysia

Selangor, Malaysia

The consolidated financial statements of the Company as at and for the financial year ended 31 December 2019 comprise the Company and its subsidiaries (together referred to as the “Group” and individually referred to as “Group entities”).

The Company is principally engaged in investment holding activities, piling and foundation works. The principal activities of the subsidiaries are as stated in Note 6 to the financial statements.

The immediate and ultimate holding company during the financial year was Ikhmas Jaya Holdings Sdn. Bhd., a company incorporated in Malaysia.

These financial statements were authorised for issue by the Board of Directors on 30 June 2020.

1. BASIS OF PREPARATION

(a) Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

The following are accounting standards, interpretations and amendments of the MFRSs that have been issued by the Malaysian Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Company:

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2020• Amendments to MFRS 3, Business Combinations – Definition of a Business• Amendments to MFRS 101, Presentation of Financial Statements and MFRS 108, Accounting

Policies, Changes in Accounting Estimates and Errors – Definition of Material• Amendments to MFRS 9, Financial Instruments, MFRS 139, Financial Instruments: Recognition

and Measurement and MFRS 7, Financial Instruments: Disclosures –Interest Rate Benchmark Reform

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 June 2020• Amendments to MFRS 16, Leases – Covid-19-Related Rent Concessions

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2021 (IASB has deferred the effective date of IFRS 17 to annual reporting periods beginning on or after 1 January 2023; MASB has yet to announce the change of date)• MFRS 17, Insurance Contracts

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1. BASIS OF PREPARATION (CONT’D)

(a) Statement of compliance (cont’d) MFRSs, interpretations and amendments effective for annual periods beginning on or after 1

January 2022• Amendments to MFRS 101, Presentation of Financial Statements – Classification of Liabilities

as Current or Non-current • Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards

(Annual Improvements to MFRS Standards 2018 – 2020)• Amendments to MFRS 9, Financial Instruments (Annual Improvements to MFRS Standards

2018 – 2020)• Amendments to Illustrative Examples accompanying MFRS 16, Leases (Annual Improvements

to MFRS Standards 2018 – 2020)• Amendments to MFRS 141, Agriculture (Annual Improvements to MFRS Standards 2018 –

2020)• Amendments to MFRS 3, Business Combinations – Reference to the Conceptual Framework • Amendments to MFRS 116, Property, Plant and Equipment – Proceeds before Intended Use • Amendments to MFRS 137, Provisions, Contingent Liabilities and Contingent Assets – Onerous

Contracts-Cost of Fulfilling a Contract

MFRSs, interpretations and amendments effective for annual periods beginning on or after a date yet to be confirmed• Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in

Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The Group and the Company plan to apply the abovementioned accounting standards, interpretations and amendments, where applicable:

• from the annual period beginning on 1 January 2020 for those amendments that are effective for annual periods beginning on or after 1 January 2020;

• from the annual period beginning on 1 January 2021 for the amendment that is effective for annual periods beginning on or after 1 June 2020; and

• from the annual period beginning on 1 January 2022 for those amendments that are effective for annual periods beginning on or after 1 January 2022.

The Group and the Company do not plan to apply MFRS 17, Insurance Contracts that is effective for annual periods beginning on or after 1 January 2021 as it is not applicable to the Group and the Company.

The initial application of the accounting standards, interpretations or amendments are not expected to have any material financial impacts to the current period and prior period financial statements of the Group and the Company.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis other than as disclosed in Note 2 and on the assumption that the Group and the Company are going concerns.


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(b) Basis of measurement (cont’d)

The financial statements have been prepared on the historical cost basis other than as disclosed in Note 2 and on the assumption that the Group and the Company are going concerns.

The Group and the Company incurred a net loss after taxation of RM159.5 million and RM161.8 million respectively for the financial year ended 31 December 2019 and, as of that date, the current liabilities of the Group exceeded its current assets by RM21.6 million. These conditions indicate that there is a material uncertainty on the ability of the Group and the Company to meet their obligations as and when they fall due and to continue as going concerns.

The going concern basis of preparation is highly dependent on the successful implementation of the proposed fund-raising initiatives that will be undertaken by the Company upon obtaining shareholders’ and relevant authorities approvals, the disposal of identified assets within the Group in order to generate cash inflows, securing new projects and attaining positive cash flows from its operations as well as continuing support from its bankers and creditors so as to enable the Group to meet its obligations as and when they fall due.

In considering the appropriateness of the going concern assumption, the Directors have considered the viability of the proposed fund-raising initiatives. On 25 June 2020, a private placement of up to 39.46% of the existing paid-up capital of the Company seeking to raise cash of approximately RM13 million was proposed and announced. Although the investors have been identified for the proposed private placement and subscription agreements have been signed with these investors in which some cash proceeds received by the Company in June 2020 (see Note 29.5 for details), the proposed private placement is subject to the approval from relevant authorities and shareholders.

In addition to the aforesaid private placement, the Group is also in the process of finalising other fund-raising initiatives which amongst others, would include, issuance of new ordinary shares and convertible securities to improve its financial position and cash flows.

At the approval date of these financial statements, the Directors believe that the aforesaid fund-raising initiatives will be implemented successfully, accordingly, the financial statements are prepared on a going concern basis. In the event that the funding initiatives are not successful, and that support of bankers and creditors are not forthcoming, the Group and the Company may be unable to realise their assets and discharge their liabilities in the normal course of business. Accordingly, the financial statements of the Group and the Company may require adjustments relating to the recoverability and classification of recorded asset amounts and to the classification and additional amounts of liabilities that may be necessary.

(c) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.


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(d) Use of estimates and judgements

The preparation of the financial statements in conformity with MFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

• Note 4 - Extension options and incremental borrowing rate in relation to leases

Some leases of site offices and staffs’ accommodations contain extension options only exercisable by the Group up to a period of 2 years before the end of the contract period. Where applicable, the Group seeks to include extension options in new leases to provide operational flexibility. The Group assesses at lease commencement by applying significant judgement whether it is reasonably certain to exercise the extension options. Group entities consider all facts and circumstances including their past practice and any cost that will be incurred to change the asset if an option to extend is not taken, to help them determine the lease term.

The Group also applied judgement and assumptions in determining the incremental borrowing rate of the respective leases. Group entities first determine the closest available borrowing rates before using significant judgement to determine the adjustments required to reflect the term, security, value or economic environment of the respective leases.

• Note 6 - Investments in subsidiaries

The Company assesses the impairment of investments in subsidiaries when there is an indication of impairment. The carrying amounts are disclosed in Note 6. The recoverable amounts of investments in subsidiaries were determined based on fair value less cost to sell and involves significant judgements and assumptions.

• Note 10 and 11 - Measurement of expected credit loss (“ECL”) allowances for contract assets and trade receivables

The loss allowances for contract assets and trade receivables are based on the assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment model, based on the Group’s past experience, existing market conditions as well as forward looking estimates as at the end of the reporting period.


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(d) Use of estimates and judgements (cont’d)

• Note 16 - Revenue from contracts with customers

The Group and the Company recognise revenue from contracts with customers arising from their construction contract activities in the profit or loss by using the input method. The input method is measured by reference to the actual costs incurred for work performed to date to the estimated total costs for the construction contract.

Significant judgement is required in determining the progress towards complete satisfaction of performance obligations, the extent of the costs incurred, the estimated total revenue and costs, and the variable considerations: Liquidated and Ascertained Damages (“LAD”) charges. In making the judgement, the Group and the Company evaluate based on past experience and external economic factors.

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to the periods presented in these financial statements and have been applied consistently by Group entities, unless otherwise stated.

Arising from the adoption of MFRS 16, Leases, there are changes to the accounting policies applied to lease contracts entered into by the Group entities as compared to those applied in previous financial statements. The impacts arising from the changes are disclosed in Note 30.

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.

(ii) Business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.


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2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(a) Basis of consolidation (cont’d)

(ii) Business combinations (cont’d)

For new acquisitions, the Group measures the cost of goodwill at the acquisition date as:• the fair value of the consideration transferred; plus• the recognised amount of any non-controlling interests in the acquiree; plus• if the business combination is achieved in stages, the fair value of the existing equity

interest in the acquiree; less• the net recognised amount (generally fair value) of the identifiable assets acquired and

liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

(iii) Acquisitions of non-controlling interests

The Group accounts for all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

(iv) Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or as a financial asset depending on the level of influence retained.

(v) Joint arrangements

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements’ returns.

A joint arrangement is classified as “joint operation” when the Group or the Company has rights to the assets and obligations for the liabilities relating to an arrangement. The Group and the Company account for each of its share of the assets, liabilities and transactions, including its share of those held or incurred jointly with the other investors, in relation to the joint operation.


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(a) Basis of consolidation (cont’d)

(vi) Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and other comprehensive income for the year between non-controlling interests and owners of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(vii) Restructuring among common shareholders

During a restructuring where the combining entities are controlled by the same parties both before and after the combination, book value accounting is applied. The assets and liabilities acquired are recognised in the consolidated financial statements at their respective carrying amounts without restatement. The differences between the cost of acquisition and the nominal value of the shares acquired are taken to merger reserve (or adjusted against any suitable reserve in the case of debit differences). The other components of equity of the acquired entities are added to the same components within Group equity.

(viii) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting period, except for those that are measured at fair value which are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of equity instruments where they are measured at fair value through other comprehensive income or a financial instrument designated as a cash flow hedge, which are recognised in other comprehensive income.


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(c) Financial instruments

(i) Recognition and initial measurement

A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without significant financing component) or a financial liability is initially measured at fair value plus or minus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issuance. A trade receivable without a significant financing component is initially measured at the transaction price.

An embedded derivative is recognised separately from the host contract where the host contract is not a financial asset, and accounted for separately if, and only if, the derivative is not closely related to the economic characteristics and risks of the host contract and the host contract is not measured at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

(ii) Financial instrument categories and subsequent measurement

Financial assets

Categories of financial assets are determined on initial recognition and are not reclassified subsequent to their initial recognition unless the Group or the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change of the business model.

(a) Amortised cost

Amortised cost category comprises financial assets that are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets are not designated as fair value through profit or loss. Subsequent to initial recognition, these financial assets are measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Interest income is recognised by applying effective interest rate to the gross carrying amount except for credit impaired financial assets (see Note 2(k)(i)) where the effective interest rate is applied to the amortised cost.

(b) Fair value through profit or loss

All financial assets not measured at amortised cost are measured at fair value through profit or loss. This includes derivative financial assets (except for a derivative that is a designated and effective hedging instrument). On initial recognition, the Group or the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost as at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.


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(c) Financial instruments (cont’d)

(ii) Financial instrument categories and subsequent measurement (cont’d)

Financial assets (cont’d)

(b) Fair value through profit or loss (cont’d)

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value. Net gains or losses, including any interest or dividend income, are recognised in profit or loss.

All financial assets, except for those measured at fair value through profit or loss are subject to impairment assessment (see Note 2(k)(i)).

Financial liabilities

The categories of financial liabilities at initial recognition are as follows:

Amortised cost

Other financial liabilities not categorised as fair value through profit or loss are subsequently measured at amortised cost using the effective interest method.

Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gains or losses on derecognition are also recognised in profit or loss.

(iii) Financial guarantee contracts

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.

Financial guarantees issued are initially measured at fair value. Subsequently, they are measured at higher of:

• the amount of the loss allowance; and

• the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance to the principles of MFRS 15, Revenue from Contracts with Customers.

Liabilities arising from financial guarantees are presented together with other provisions.

(iv) Derecognition

A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or are transferred, or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset are transferred to another party. On derecognition of a financial asset, the difference between the carrying amount of the financial asset and the sum of consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss.


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(c) Financial instruments (cont’d)

(iv) Derecognition (cont’d)

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expires. A financial liability is also derecognised when its terms are modified and the cash flows of the modified liability are substantially different, in which case, a new financial liability based on modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount of the 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.

(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within “other income” and “other operating expenses” respectively in profit or loss.

(ii) Subsequent costs

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iii) Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately.


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(d) Property, plant and equipment (cont’d)

(iii) Depreciation (cont’d)

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment from the date that they are available for use. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:

• Buildings 50 years • Motor vehicles 5-8 years• Machinery and equipment 5-10 years• Furniture, fittings and equipment 10 years

Depreciation methods, useful lives and residual values are reviewed at the end of the reporting period, and adjusted as appropriate.

(e) Leases

The Group has applied MFRS 16, Leases using the modified retrospective approach with practical expedients, with effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2019). Accordingly, the comparative information presented for 2018 has not been restated – i.e. it is presented, as previously reported under MFRS 117, Leases and related interpretations.

Current financial year

(i) Definition of a lease

A contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

• the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

• the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

• the customer has the right to direct the use of the asset. The customer has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the customer has the right to direct the use of the asset if either the customer has the right to operate the asset; or the customer designed the asset in a way that predetermines how and for what purpose it will be used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices. However, for leases of properties in which the Group is a lessee, it has elected not to separate non-lease components and will instead account for the lease and non-lease components as a single lease component.


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(e) Leases (cont’d)

Current financial year (cont’d)

(ii) Recognition and initial measurement

(a) As a lessee

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the respective Group entities’ incremental borrowing rate. Generally, the Group entities use their incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:• fixed payments, including in-substance fixed payments less any incentives

receivable;• variable lease payments that depend on an index or a rate, initially measured using

the index or rate as at the commencement date;• amounts expected to be payable under a residual value guarantee; • the exercise price under a purchase option that the Group is reasonably certain to

exercise; and• penalties for early termination of a lease unless the Group is reasonably certain not

to terminate early.

The Group excludes variable lease payments that linked to future performance or usage of the underlying asset from the lease liability. Instead, these payments are recognised in profit or loss in the period in which the performance or use occurs.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(b) As a lessor

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.

If an arrangement contains lease and non-lease components, the Group applies MFRS 15 to allocate the consideration in the contract based on the stand-alone selling prices.


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Current financial year (cont’d)

(ii) Recognition and initial measurement (cont’d)

(b) As a lessor (cont’d)

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. It assesses the lease classification of a sublease with reference

to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sublease as an operating lease.

(iii) Subsequent measurement

(a) As a lessee

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a revision of in-substance fixed lease payments, or if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

(b) As a lessor

The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of “revenue”.

Previous financial year

As a lessee

(i) Finance lease

Leases in terms of which the Group or the Company assumed substantially all the risks and rewards of ownership were classified as finance leases. Upon initial recognition, the leased asset was measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset was accounted for in accordance with the accounting policy applicable to that asset.


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Previous financial year (cont’d)

As a lessee (cont’d)

(i) Finance lease (cont’d)

Minimum lease payments made under finance leases were apportioned between the finance expense and the reduction of the outstanding liability. The finance expense was allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments were accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment was confirmed.

Leasehold land which in substance was a finance lease is classified as property, plant and equipment.

(ii) Operating lease

Leases, where the Group or the Company did not assume substantially all the risks and rewards of ownership were classified as operating leases and, except for property interest held under operating lease, the leased assets were not recognised on the statement of financial position. Property interest held under an operating lease, which was held to earn rental income or for capital appreciation or for both, was classified as investment property and measured using the cost model.

Payments made under operating leases were recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals were charged to profit or loss in the reporting period in which they were incurred.

Leasehold land which in substance was an operating lease was classified as prepaid lease payments.

(f) Investment properties

Investment properties carried at cost

Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment properties initially and subsequently measured at cost are accounted for similarly to property, plant and equipment.

(g) Inventories

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

The cost of inventories is calculated using the weighted average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of work-in-progress and finished goods, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated net selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.


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(h) Contract asset/Contract liability

A contract asset is recognised when the Group’s or the Company’s right to consideration is conditional on something other than the passage of time. A contract asset is subject to impairment in accordance to MFRS 9, Financial Instruments (see Note 2(k)(i)).

A contract liability is stated at cost and represents the obligation of the Group or the Company to transfer goods or services to a customer for which consideration has been received (or the amount is due) from the customers.

(i) Contract cost

(i) Incremental cost of obtaining a contract

The Group or the Company recognises incremental costs of obtaining contracts when the Group or the Company expects to recover these costs.

(ii) Cost to fulfil a contract

The Group or the Company recognises a contract cost that relate directly to a contract or to an anticipated contract as an asset when the cost generates or enhances resources of the Group or the Company, will be used in satisfying performance obligations in the future and it is expected to be recovered.

These contract costs are initially measured at cost and amortised on a systematic basis that is consistent with the pattern of revenue recognition to which the asset relates. An impairment loss is recognised in profit or loss when the carrying amount of the contract cost exceeds the expected revenue less expected cost that will be incurred. Where the impairment condition no longer exists or has improved, the impairment loss is reversed to the extent that the carrying amount of the contract cost does not exceed the amount that would have been recognised had there been no impairment loss recognised previously.

(j) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in fair value with original maturities of three months or less, and are used by the Group and the Company in the management of their short term commitments. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

(k) Impairment

(i) Financial assets

The Group and the Company recognise loss allowances for expected credit losses on financial assets measured at amortised cost, debt investments measured at fair value through other comprehensive income, contract assets and lease receivables. Expected credit losses are a probability-weighted estimate of credit losses.

The Group and the Company measure loss allowances at an amount equal to lifetime expected credit loss, except for debt securities that are determined to have low credit risk at the reporting date, cash and bank balance and other debt securities for which credit risk has not increased significantly since initial recognition, which are measured at 12-month expected credit loss. Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime expected credit loss.


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(k) Impairment (cont’d)

(i) Financial assets (cont’d)

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit loss, the Group and the Company consider reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information, where available.

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of the asset, while 12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within the 12 months after the reporting date. The maximum period considered when estimating expected credit losses is the maximum contractual period over which the Group and the Company are exposed to credit risk.

The Group and the Company estimate the expected credit losses on trade receivables using a provision matrix with reference to historical credit loss experience.

An impairment loss in respect of financial assets measured at amortised cost is recognised in profit or loss and the carrying amount of the asset is reduced through the use of an allowance account.

An impairment loss in respect of debt investments measured at fair value through other comprehensive income is recognised in profit or loss and the allowance account is recognised in other comprehensive income.

At each reporting date, the Group and the Company assess whether financial assets carried at amortised cost and debt securities at fair value through other comprehensive income are credit-impaired. A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

The gross carrying amount of a financial asset is written off (either partially or full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group or the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s or the Company’s procedures for recovering the amounts due.

(ii) Other assets

The carrying amounts of other assets (except for inventories, contract assets and deferred tax assets) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units.


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84


(k) Impairment (cont’d)

(ii) Other assets (cont’d)

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amounts of the other assets in the cash-generating unit (or a group of cash-generating units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the 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. Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised.

(l) Equity instruments

Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.

(i) Issue expenses

Costs directly attributable to the issue of instruments classified as equity are recognised as a deduction from equity.

(ii) Ordinary shares

Ordinary shares are classified as equity.

(m) Employee benefits

(i) Short-term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.


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(m) Employee benefits (cont’d)

(ii) State plans

The Group’s contributions to statutory pension funds are charged to profit or loss in the financial year to which they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future repayments is available.

(n) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

(o) Revenue and other income

(i) Revenue

Revenue is measured based on the consideration specified in a contract with a customer in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. The Group or the Company recognises revenue when (or as) it transfers control over a product or service to customer. An asset is transferred when (or as) the customer obtains control of the asset.

The Group or the Company transfers control of a good or service at a point in time unless one of the following overtime criteria is met:

(a) the customer simultaneously receives and consumes the benefits provided as the Group or the Company performs;

(b) the Group’s or the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

(c) the Group’s or the Company’s performance does not create an asset with an alternative use and the Group or the Company has an enforceable right to payment for performance completed to date.

(ii) Rental income

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease.

(iii) Interest income

Interest income is recognised as it accrues using the effective interest method in profit or loss.

(iv) Dividend income

Dividend income is recognised in profit or loss on the date that the Group’s or the Company’s right to receive payment is established.


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(p) Borrowing cost

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

(q) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(r) Earnings per ordinary share

The Group presents basic earnings per share data for its ordinary shares (“EPS”).

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.


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(s) Fair value measurements

Fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value is categorised into different levels in a fair value hierarchy based on the inputs used in the valuation technique as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: unobservable inputs for the asset or liability.

The Group recognises transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.

(t) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Operating segment results are reviewed regularly by the chief operating decision maker, which in this case is the Group Managing Director, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

(u) Contingent liabilities

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.


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3. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

3.1 Impairment loss

During the financial year ended 31 December 2019, the Group has recognised an impairment loss of RM291,000 (2018: RM400,000) with respect to machinery and equipment following the planned cessation of business operations of MM2 Building System Sdn. Bhd..

3.2 Security

At 31 December 2019, freehold land and buildings of the Group with an aggregate carrying amount of RM2,160,000 and RM507,000 (2018: RM8,116,000 and RM2,646,000) respectively are pledged as security for the bank facilities granted to the Group (see Note 14).

3.3 Transfer to investment property

In 2018, a building with a carrying amount of RM870,000 was transferred to investment property because it was leased to a third party.

3.4 Disposals

During the year, the Group disposed of certain property, plant and equipment for a consideration of RM22,132,000 of which RM3,785,000 was received in cash and RM16,173,000 (2018: RM nil) was contra off with its creditors. The amount remains receivable from the disposals at the end of the reporting period is RM2,174,000 (2018: RM nil).

3.5 Transfer to assets held for sale

During the financial year ended 31 December 2019, office buildings with a carrying amount of RM4,618,000 (2018: RM nil) was transferred to assets held for sale because the Group plans to sell its office buildings and leased the buildings back for 5.5 years. This sale and leaseback transaction enabled the Group to raise working capital while continue to use the office buildings. The transaction has been completed as at the date of this report.

3.6 Plant and equipment subject to operating lease

The Group leases some of its plant and equipment to third parties. The leases are short-term and lease to customers upon request.

The Group generally does not require a financial guarantee on the lease arrangement. The plant and equipment will be for own use when not leasing. These leases do not include residual value guarantees in line with the short term nature of the leases.

The following are recognised in profit or loss:

2019 2018Group RM’000 RM’000Lease income 3,718 1,015


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4. RIGHT-OF-USE ASSETS

BuildingsMotor

vehicle

Machinery and

equipment TotalGroup RM’000 RM’000 RM’000 RM’000

At 1 January 2019 446 1,818 52,722 54,986

Additions 546 - - 546

Depreciation (348) (286) (7,959) (8,593)

Derecognition* - (756) (19,497) (20,253)

At 31 December 2019 644 776 25,266 26,686

* Derecognition of the right-of-use assets during 2019 as a result of disposal.

The Group leases site offices and staff accommodations that run between one year to eight years, with an option to renew the lease after that date. Plant and equipment under finance lease liabilities have been reclassified to right-of-use assets as at 1 January 2019. In assessing the right-of-use assets, the Directors made significant assumptions on extension options and incremental borrowing rate.

4.1 Disposals

During the year, the Group disposed of certain right-of-use assets for a consideration of RM17,531,000 of which RM3,736,000 was received in cash and the remaining balance of RM13,795,000 (2018: RM nil) was contra off with its creditors.


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5. INVESTMENT PROPERTIES

Freehold Buildingsland and under

Note buildings construction TotalGroup RM’000 RM’000 RM’000At costAt 1 January 2018 3,890 625 4,515

Additions 5.1 8,445 - 8,445

Transfer from property, plant and equipment (Note 3) 1,083 - 1,083

Other 5.2 (780) - (780)

At 31 December 2018/1 January 2019 12,638 625 13,263

Additions - 168 168

Disposal 5.3 (1,084) - (1,084)

At 31 December 2019 11,554 793 12,347

Accumulated depreciationAt 1 January 2018 95 - 95

Depreciation for the year 248 - 248

Transfer from property, plant and equipment (Note 3) 213 - 213

Other 5.2 (14) - (14)

At 31 December 2018/1 January 2019 542 - 542

Depreciation for the year 236 - 236

Impairment loss 5.4 1,212 - 1,212

Disposal (228) - (228)

At 31 December 2019

Accumulated depreciation 550 - 550

Accumulated impairment loss 1,212 - 1,212

1,762 - 1,762

Carrying amountsAt 1 January 2018 3,795 625 4,420

At 31 December 2018/1 January 2019 12,096 625 12,721

At 31 December 2019 9,792 793 10,585

5.1 Additions

These investment properties represent settlement in kind made by a contract customer (see Note 11.2). At 31 December 2019, the strata titles for the four serviced apartments have yet to be issued to the Group.

5.2 Other

In 2018, the vendor, a subsidiary of a contract customer, had terminated the Sale and Purchase Agreement entered with the Group dated 29 January 2015 in relation to the investment property.

5.3 Disposals

During the year, the Group disposed of an investment property for a consideration of RM3,200,000 of which RM1,617,000 was received in cash and the remaining balance was contra off with its creditors of RM1,583,000 (2018: RM nil).


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5. INVESTMENT PROPERTIES (CONT’D)

5.4 Impairment loss

During the financial year ended 31 December 2019, the Group has recognised an impairment loss of RM1,212,000 (2018: RM nil) based on fair value less cost of disposal estimated using the market approach.

Buildings under construction

2019 2018Company RM’000 RM’000Cost

At 1 January 625 625

Additions 168 -

At 31 December 793 625

The following are recognised in profit or loss in respect of investment properties:

2019 2018Group RM’000 RM’000Rental income 318 388

Direct operating expenses:

- non-income generating investment properties (241) (248)

The operating lease payments to be received are as follows:

2019 2018Group RM’000 RM’000Less than one year 9 10

Total undiscounted lease payments 9 10

Fair value information

Fair value of investment properties is categorised as follows:

2019 2018Group RM’000 RM’000Level 3Freehold land and buildings 9,856 16,428

Valuation process applied by the Company for Level 3 fair value

The fair value of the investment properties is estimated by the Directors using the market comparison method. The market comparison method entails critical analysis of recent transacted values of comparable properties in the neighbourhood and making adjustment for differences such as differences in location, size and shape of land, age and condition of the building, tenure, title restrictions, if any and other relevant characteristics.

Security

Investment properties of the Group amounting to RM9,792,000 (2018: RM12,096,000) are charged to secure banking facilities granted to the Group (see Note 14).


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5. INVESTMENT PROPERTIES (CONT’D)

Buildings under construction

Two (2018: Two) serviced apartments of the Group and of the Company at year end are currently under construction and the fair values of the said properties are unable to be determined in view of the uncertainties involved in estimating their fair values.

6. INVESTMENTS IN SUBSIDIARIES

2019 2018Company RM’000 RM’000Unquoted shares, at cost 98,910 98,910

Less: allowance for impairment losses (98,760) (260)

150 98,650

Details of the subsidiaries are as follows:

Effectiveownership

interest

Name of entityCountry of

incorporation Principal activities 2019 2018% %

Ikhmas Jaya Sdn. Bhd. and its subsidiaries:

Malaysia Piling and foundation works, construction of bridges and buildings, and other civil works

100 100

IJ Geotechnic Sdn. Bhd. Malaysia Dormant 100 100

Ikhmas Equipment Sdn. Bhd. Malaysia Rental of plant, machinery and equipment

100 100

* Rekavista Sdn. Bhd. and its subsidiary:

Malaysia Dormant 100 100

Rekavista (Sarawak) Sdn. Bhd. Malaysia Dormant 100 100

MM2 Building System Sdn. Bhd. and its subsidiary:

Malaysia Manufacturing of prefabricated building system. The entity ceased operation during the year.

60 60

MM2 Builders Sdn. Bhd. Malaysia Dormant 60 60

BE Specialist Sdn. Bhd. Malaysia General civil and building construction

60 60

Exofield Property Management Sdn. Bhd.

Malaysia Property Management 100 100

* Disposed of subsequent to end of reporting period (see Note 29.1).


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6. INVESTMENTS IN SUBSIDIARIES (CONT’D)

Impairment on investment in a subsidiary

The Company has reviewed the carrying value of investments in the subsidiaries at each financial year-end and impairment losses will be recognised at a level considered adequate to provide for the potential non-recoverability of investments in subsidiaries. The level of allowance is evaluated by the management on the basis of factors that affect the recoverability of the investments. These factors include, but not limited to, the activities and financial position of the respective entities and market factors. The management reviews and identifies balances that are to be impaired on a continuous basis.

During the year, the management noted an indication of impairment with respect to an investment in a subsidiary. The subsidiary incurred significant net loss after taxation for the financial year ended 31 December 2019 and, as of that date, the current liabilities of the subsidiary exceeded its current assets and there was a deficit in equity attributable to owners of the company.

The management determines the recoverable amount of the investment in the subsidiary using the fair value less costs of disposal method. The recoverable amount of the subsidiary is derived using the adjusted financial position of the said subsidiary.

Based on the impairment assessment performed by the Company, an impairment loss of RM98,500,000 (2018: RM nil) was made and recognised in “other operating expenses”.

6.1 Non-controlling interests in subsidiaries

The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows:

BE Specialist Sdn. Bhd.

MM2 Building System Sdn. Bhd. and its

subsidiary Total2019 RM’000 RM’000 RM’000NCI percentage of ownership interest and voting interest 40% 40%

Carrying amount of NCI 211 (8,215) (8,004)

Profit/(Loss) attributable to NCI 146 (1,913) (1,767)

Summarised financial information before intra-group eliminationAs at 31 DecemberNon-current assets 889 49

Current assets 4,632 13,751

Non-current liabilities (530) -

Current liabilities (4,464) (34,337)

Net assets/(liabilities) 527 (20,537)

Year ended 31 DecemberRevenue 7,459 -

Profit/(Loss) for the year/total comprehensive income/(expense) 366 (4,783)

Cash flows from/(used in) operating activities 212 (14)

Cash flows used in investing activities (107) -

Cash flows used in financing activities (16) -

Net increase/(decrease) in cash and cash equivalents 89 (14)

2018NCI percentage of ownership interest and voting interest 40% 40%

Carrying amount of NCI 64 (6,301) (6,237)

Profit/(Loss) attributable to NCI 249 (3,895) (3,646)


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6. INVESTMENTS IN SUBSIDIARIES (CONT’D)

6.1 Non-controlling interests in subsidiaries (cont’d)

The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows (cont’d):

BE Specialist Sdn. Bhd.

MM2 Building System Sdn. Bhd. and its

subsidiary2018 RM’000 RM’000Summarised financial information before intra-group eliminationAs at 31 DecemberNon-current assets 885 475

Current assets 2,597 17,632

Current liabilities (3,321) (33,861)

Net assets/(liabilities) 161 (15,754)

Year ended 31 DecemberRevenue 9,431 1,717

Profit/(Loss) for the year/total comprehensive income/(expense) 622 (9,737)

Cash flows from/(used in) operating activities 219 (11)

Cash flows used in investing activities (727) -

Cash flows from financing activities 482 -

Net decrease in cash and cash equivalents (26) (11)

7. OTHER INVESTMENTS

2019 2018Group RM’000 RM’000Fair value through profit or loss:

- Quoted investments held for trading 4 4

- Club memberships - 222

4 226

During the year, the Group disposed of its investment in club memberships which was carried at fair value through profit or loss for a consideration of RM160,000.


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8. DEFERRED TAX ASSETS AND LIABILITIES

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Assets Liabilities Net2019 2018 2019 2018 2019 2018

Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Property, plant and equipment - - (6,469) (8,595) (6,469) (8,595)

Provisions - 2,977 - - - 2,977

Tax loss carry-forwards - 2,603 - - - 2,603

Other items - 175 - - - 175

Tax assets/(liabilities) - 5,755 (6,469) (8,595) (6,469) (2,840)

Set off of tax - (3,262) - 3,262 - -

Net tax liabilities - 2,493 (6,469) (5,333) (6,469) (2,840)

Movement in temporary differences during the financial year

Recognised Recognisedin profit in profit

At or loss At or loss At1.1.2018 (Note 19) 31.12.2018 (Note 19) 31.12.2019

Group RM’000 RM’000 RM’000 RM’000 RM’000

Property, plant and equipment (9,902) 1,307 (8,595) 2,126 (6,469)

Provisions 1,517 1,460 2,977 (2,977) -

Tax loss carry-forwards - 2,603 2,603 (2,603) -

Other items 175 - 175 (175) -

(8,210) 5,370 (2,840) (3,629) (6,469)

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items (stated at gross):

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Provisions 99,666 - - -

Unabsorbed capital allowances 9,539 6,713 - -

Tax losses carry-forwards 63,170 27,495 2,556 407

Other deductible temporary differences 55 - - -

172,430 34,208 2,556 407

In accordance with the provision of the Finance Act 2018, the unutilised tax losses are available for utilisation in the next seven years, for which, any excess at the end of the seventh year, will be disregarded. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group and the Company can utilise the benefits therefrom.

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9. INVENTORIES

2019 2018Group RM’000 RM’000Construction materials on site 254 84

Finished goods - 782

254 866

Recognised in profit or loss:

Inventories recognised as cost of sales 179 1,034

Inventories written off - 37

Write-down to net realisable value 782 745

10. CONTRACT ASSETS/(LIABILITIES)

Group Company2019 2018 2019 2018


Non-currentContract assets 11,916 28,735 - -

CurrentContract assets 67,900 119,702 1,935 1,280

Contract liabilities (22,351) (14,959) (10,599) (10,039)

The contract assets primarily relate to the Group’s rights to consideration for work completed on construction contracts but not yet billed at the reporting date.

The contract liabilities primarily relate to the advance consideration received from a customer for construction contract, of which revenue is recognised overtime during the construction of a project.

Significant changes to contract assets/(liabilities) balances during the period are as follows:

Group Company2019 2018 2019 2018


Contract liabilities at the beginning of the period recognised as revenue 2,608 6,532 39 -

Contract liabilities at the beginning at the period not recognised as revenue due to change in time frame 12,351 2,351 10,000 -

Contract assets at the beginning of the period not transferred to trade receivables due to change in time frame 29,751 86,717 - -

Decrease in revenue recognised in previous period arising from:

- Change in variable consideration (15,020) (1,841) - -


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11. TRADE AND OTHER RECEIVABLES


RM’000 RM’000 RM’000 RM’000CurrentTradeTrade receivables from contracts with customers

11.1, 11.2, 11.3 152,292 162,278 878 662

Non-tradeAmount due from ultimate holding company 11.4 - - 617 614

Amount due from subsidiaries 11.4 - - 42,020 93,433

Amount due from related companies 11.4 - - 11 -

Advances to suppliers 1,573 2,650 - -

Other receivables 4,968 5,977 15 78

Deposits 869 1,314 7 7

Prepayments 1,116 1,340 - 22

8,526 11,281 42,670 94,154

160,818 173,559 43,548 94,816

11.1 Included in trade receivables at 31 December 2019 are retention sums related to construction work-in-progress. Retention sums are unsecured, interest free and expected to be collected as follows:

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Within 1 year 44,370 40,252 - -

1 - 2 years 12,027 19,198 - -

2 - 3 years 7,151 3,121 832 -

3 - 4 years 803 459 - -

More than 4 years - 79 - -

64,351 63,109 832 -

Included in retention sums receivable within one year are amounts overdue totalling RM7,571,000 (2018: RM10,480,000).

11.2 Included in trade receivables of the Group at 31 December 2019 is an amount of RM46,942,000 (2018: RM53,059,000) due from a customer of which the outstanding sum will be settled via serviced apartments. These units earmarked for settlement will be transferred to the Group when they are free from encumbrances.

11.3 Included in trade receivables of the Group are receivables amounting to RM12,836,000 (2018: RM11,160,000) assigned to the bank for factoring facilities (see Note 14).

11.4 Amounts due from ultimate holding company, subsidiaries and related companies are unsecured, interest free and repayable on demand.

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12. CASH AND CASH EQUIVALENTS

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Cash and bank balances 540 999 12 29

Fixed deposits placed with licensed banks 27,991 36,853 - 7,700

28,531 37,852 12 7,729

The fixed deposits placed with licensed banks of the Group and of the Company amounting to RM27,991,000 (2018: RM36,853,000) and RM nil (2018: RM7,700,000) respectively are pledged to financial institutions as security for bank guarantee and credit facilities granted to the Group and the Company as disclosed in Note 14.

13. CAPITAL AND RESERVES

13.1 Share capital

Group and CompanyNumber Number

of shares Amount of shares Amount2019 2019 2018 2018’000 RM’000 ’000 RM’000

Issued and fully paid up:

Ordinary share

At 1 January 545,350 182,542 530,350 173,992

Issued during the financial year 43,000 9,145 15,000 8,550

At 31 December 588,350 191,687 545,350 182,542

Ordinary shares

During the financial year, the Company issued 20,000,000 and 23,000,000 new ordinary shares at RM0.21 and RM0.215 per ordinary share respectively via private placements to eligible investors for a total consideration of RM9,145,000 for the purpose of working capital. The new ordinary shares issued rank pari passu in all respects with the existing shares of the Company.

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.

13.2 Merger deficit

The merger deficit comprises the difference between the cost of acquisition and the nominal value of shares acquired during the acquisition of Ikhmas Jaya Sdn. Bhd. in the financial year ended 31 December 2015.

13.3 Equity reserve

The equity reserve represents waiver of debts by ultimate holding company (see Note 28.2).


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14. LOANS AND BORROWINGS


RM’000 RM’000 RM’000 RM’000Non-currentFinance lease liabilities 14.1 - 17,139 - -

Secured term loans 1,947 5,517 - -

1,947 22,656 - -

CurrentSecured bank overdrafts 23,138 36,259 - 6,968

Secured bankers’ acceptances/ trust receipts 1,849 12,208 - -

Finance lease liabilities 14.1 - 13,526 - -

Secured factoring facility 3,340 5,754 - -

Secured term loans 1,878 327 - -

30,205 68,074 - 6,968

32,152 90,730 - 6,968

Termination of bank overdraft facility

During the year, there are additional covenants imposed by a bank and the overdraft facility amounting to RM802,000 has been withdrawn subsequent to the end of reporting period.

Security

The term loans are secured over the Group’s land and buildings (see Note 3.2 and Note 5).

Bank overdrafts, factoring and trade finance facilities are secured by freehold land (see Note 3.2), deposits placed with licensed banks (see Note 12) and assignment of trade receivables (see Note 11.3).

14.1 Finance lease liabilities

Finance lease liabilities are payable as follows:

PresentFuture value of

minimum minimumlease lease

payments Interest paymentsGroup 2018 2018 2018

RM’000 RM’000 RM’000Less than one year 14,962 (1,436) 13,526

Between one and five years 18,493 (1,354) 17,139

33,455 (2,790) 30,665

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14. LOANS AND BORROWINGS (CONT’D)

14.2 Reconciliation of movement of liabilities to cash flows arising from financing activities

Adjustment

Net changesfrom

financingcash flows

on initial

Acquisitionof new

lease

application of MFRS 16 Adjusted

1 JanuaryAt 31

DecemberAt 1 January (Note 30)Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’0002019Bankers’ acceptances and trust receipts 12,208 - 12,208 (10,359) - 1,849

Term loans and other borrowings 11,598 - 11,598 (4,433) - 7,165

Lease liabilities 30,665 446 31,111 (14,850) 546 16,807

54,471 446 54,917 (29,642) 546 25,821

2018Bankers’ acceptances and trust receipts 27,257 - 27,257 (15,049) - 12,208

Term loans and other borrowings 29,851 - 29,851 (18,253) - 11,598

Finance lease liabilities 33,910 - 33,910 (13,036) 9,791 30,665

91,018 - 91,018 (46,338) 9,791 54,471

15. TRADE AND OTHER PAYABLES



CurrentTradeAmount due to a subsidiary 15.1 - - - 276

Trade payables 15.2 147,347 98,581 2,239 1,813

Accruals 24,262 36,946 - -

171,609 135,527 2,239 2,089

Non-tradeAmount due to directors 15.1 6,078 4,673 - -

Other payables 15.3 30,867 33,383 1,984 378

Accruals 14,553 11,576 1,019 791

51,498 49,632 3,003 1,169

223,107 185,159 5,242 3,258

15.1 The amounts due to a subsidiary and directors are unsecured, interest free and repayable on demand.

15.2 Included in trade payables of the Group at 31 December 2019 are retention sums payable amounting to RM21,405,000 (2018: RM15,177,000).

15.3 Included in other payables of the Group at 31 December 2019 is an amount due to the ultimate holding company amounting to RM12,301,000 (2018: RM13,187,000). The amount due to the ultimate holding company is unsecured, interest free and repayable on demand.


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16. REVENUE


RM’000 RM’000 RM’000 RM’000Revenue from contracts with customers- Construction contracts 16.3 195,500 305,407 7,962 15,087

- Sales of goods and services - 1,383 - -

195,500 306,790 7,962 15,087

Other revenue

- Equipment hiring income 3,718 1,015 - -

- Rental income 318 388 - -

4,036 1,403 - -

Total revenue 199,536 308,193 7,962 15,087

Timing and recognition- Overtime 195,500 305,407 7,962 15,087

- At a point of time - 1,383 - -

195,500 306,790 7,962 15,087

16.1 Nature of goods and services

The following information reflects the typical transactions of the Group:

Nature of goods or services

Timing of recognition or method used to recognised revenue

Significant payment terms

Variable element in considerations

Warranty

Construction contracts

Revenue is recognised over time using the cost incurred method.

Based on agreed milestones, certified by architects.

Liquidated and Ascertained Damages (“LAD”) will be imposed when the projects experienced delay.

Defect liability period of 2 years is given to the customer.

Sales of goods and services

Revenue is recognised when the goods and services are delivered and accepted by the customers at their premises.

Credit period of 60 days from invoice date.

Not applicable. Not applicable.

16.2 Transaction price allocated to the remaining performance obligations

The following table shows revenue from performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period. The disclosure is only providing information for contracts that have a duration of more than one year.

2020 2021 2022 Total

Group RM'000 RM'000 RM'000 RM'000

Construction contracts 284,968 265,264 24,973 575,205

The above revenue does not include variable consideration.

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16. REVENUE (CONT’D) 16.2 Transaction price allocated to the remaining performance obligations (cont’d)

The Group applies the following practical expedients:

• exemption on disclosure of information on remaining performance obligations that have original expected durations of one year or less.

• exemption not to adjust the promised amount of consideration for the effects of a significant financing component when the period between the transfer of a promised good or service to a customer and when the customer pays for that good or service is one year or less.

16.3 Significant assumptions on variable considerations

In deriving the revenue recognised for construction contracts, the Directors made significant assumptions and judgement on the variable considerations pertaining to Liquidated and Ascertained Damages (“LAD”). The estimation of LAD is highly judgemental and the eventual settlement sum is subject to negotiation between the relevant parties base on the facts and circumstances specific to the projects.

During the year under review, significant assumptions are made in the following projects:

1) Project A

Ikhmas Jaya Sdn. Bhd. (“IJSB”), a group entity, has been awarded a construction contract valued at RM166,400,000 on 18 December 2015. The contract requires IJSB to complete and deliver the project by 1 June 2018, failing which, LAD of RM50,000 per day will be imposed until the completion of the project. An extension of time was granted up to 29 June 2018. The Certificate of Practical Completion for the project was issued on 28 June 2019.

On 20 May 2020, the Group received Writ of Summon and Statement of Claims for LAD amounting to RM18,340,319. The Group is in the midst of appointing a solicitor for the legal proceedings. (See Note 24(i) for more information).

As at 31 December 2019, management has assessed the conditions and accrued LAD based on most likely settlement amount.

2) Project B

IJSB has been awarded a construction contract valued at RM152,000,000 on 17 November 2015. The contract requires IJSB to complete and deliver the project by 19 July 2017, failing which, LAD of RM30,000 per day will be imposed until the completion of the project. An extension of time was granted up to 30 September 2017. The project has been suspended in August 2017 pending negotiation on omission of work. Based on the Certificate of Practical Completion issued by the customer, the project has been completed on 13 May 2020.

The customer has on 13 May 2020 claimed and deducted RM13,800,000 from certified interim payment as LAD. Management has disputed the entire LAD sum and had filed a suit against the customer at the Kuala Lumpur High Court on 21 May 2020. (See Note 24(l) for more information).

The variable considerations recorded for the above projects are highly dependent on the facts and circumstances in respective project and the eventual settlement may be different from the amount claimed.


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17. FINANCE INCOME

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Interest income on financial assets calculated using the effective interest method - at amortised cost

- interest received from licensed banks 916 892 135 242

- others - 231 - -

916 1,123 135 242

18. FINANCE COSTS

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Interest expense of financial liabilities that are not at fair value through profit or loss:

- lease liabilities 1,540 2,185 - -

- secured term loans 282 364 - -

- secured bank overdrafts 2,706 2,783 450 491

- unsecured bankers’ acceptances/trust receipts 680 1,516 - -

- secured factoring facility 441 2,055 - -

- overdue interest to suppliers 6,896 4,201 - -

- others 583 408 - -

13,128 13,512 450 491

19. INCOME TAX

Recognised in profit or loss

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Current tax expense- Current year 356 968 - -

- Under provision in prior years 93 783 - 72

449 1,751 - 72

Deferred tax expense- Origination and reversal of temporary differences 1,235 (5,215) - -

- Under/(Over) provision in prior years 2,394 (155) - -

3,629 (5,370) - -

Total income tax expense/(credit) 4,078 (3,619) - 72

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19. INCOME TAX (CONT’D)

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Reconciliation of tax expense/(credit)Loss before tax (155,468) (36,226) (161,836) (1,075)

Income tax calculated using Malaysian tax rate of 24% (2018: 24%) (37,312) (8,694) (38,841) (258)

Non-deductible expenses 5,730 3,554 38,325 78

Effect of deferred tax assets not recognised 33,173 893 516 180

1,591 (4,247) - -

Under provision in prior years 2,487 628 - 72

4,078 (3,619) - 72

20. LOSS FOR THE YEAR


RM’000 RM’000 RM’000 RM’000Loss for the year is arrived at after charging:Auditors’ remuneration

- Statutory audit fees 220 213 40 35

- Non-audit fees 248 245 184 171

Material (income)/expensesBad debts (recovered)/written off (101) 113 - -

Contract costs written off 49,149 39,442 - -

Deposits (recovered)/written off (32) 621 - -

Depreciation of investment properties 5 236 248 - -

Depreciation of property, plant and equipment 3 5,229 15,905 - -

Depreciation of right-of-use assets 4 8,593 - - -

Impairment losses on:

- Amount due from a subsidiary - - 59,798 -

- Amount due from a related company - 50 - -

- Trade receivables 9,724 12,504 - -

- Contract assets 69,188 1,060 - -

- Other receivables 2,590 450 - -


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20. LOSS FOR THE YEAR (CONT’D)


RM’000 RM’000 RM’000 RM’000Material (income)/expenses (cont’d)Impairment losses on (continued):

- Investment properties 1,212 - - -

- Property, plant and equipment 291 400 - -

- Investment in a subsidiary - - 98,500 -

Inventories written off 9 - 37 - -

Property, plant and equipment written off 3 - 3 - -

Personnel expenses (including key management personnel):

- Contributions to Employees’ Provident Fund 1,194 1,094 58 58

- Wages, salaries and others 10,916 10,619 701 729

Realised gain on foreign exchange - (3) - -

Write down of inventories 9 782 745 - -

(Gain)/Loss on disposal of:

- Investment properties (2,344) - - -

- Property, plant and equipment (10,440) (990) - -

- Right-of-use assets 2,722 - - -

- Other investments 62 - - -

Reversal of impairment losses

on trade receivables - (3,636) - -

Expenses/(income) arising from leasesRental expenses on premises - 65 - -

Expenses relating to leases of low-value assets 118 - - -

Expenses relating to short-term leases 759 - - -

Lease income (4,036) (1,403) - -

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21. EARNINGS PER ORDINARY SHARE

The calculation of basic earnings per ordinary share at 31 December 2019 was based on the loss attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding, calculated as follows:

2019 2018Group RM’000 RM’000Loss attributable to ordinary shareholders (157,779) (28,961)

2019 2018’000 ’000

Weighted average number of ordinary shares at 31 December 564,087 543,295

2019 2018sen sen

Basic loss per ordinary share (27.97) (5.33)

Diluted earnings per ordinary share is not presented as the Group has no shares or other instruments with potential dilutive effects as at 31 December 2019 (2018: None).

22. SEGMENT REPORTING

The Group is predominantly involved in civil and building construction, which is the only reportable segment. Other non-reportable segments comprise manufacturing and sales of prefabricated building system and rental of plant, machinery and equipment. None of these segments met the quantitative thresholds for reporting segments in 2019 and 2018. All the Group’s operations are carried out in Malaysia.

Major customers

The significant segment of the Group is civil and building construction. As at the end of the reporting period, five (2018: three) major customers with respective revenue equals or more than 10% of the Group’s total revenue and contributed, in aggregate, 69% (2018: 58%) to the Group’s total revenue.


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23. FINANCIAL INSTRUMENTS

23.1 Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

(a) Fair value through profit or loss (“FVTPL”) - Mandatorily required by MFRS 9(b) Amortised cost (“AC”)

CarryingNote amount AC FVTPL

RM’000 RM’000 RM’0002019GroupFinancial assetsOther investments 7 4 - 4

Trade and other receivables 159,702 159,702 -

Cash and cash equivalents 12 28,531 28,531 -

188,237 188,233 4

Financial liabilitiesLoans and borrowings 14 (32,152) (32,152) -

Trade and other payables 15 (223,107) (223,107) -

(255,259) (255,259) -

2018, restatedFinancial assetsOther investments 7 226 - 226

Trade and other receivables 172,219 172,219 -

Cash and cash equivalents 12 37,852 37,852 -

210,297 210,071 226

Financial liabilitiesLoans and borrowings 14 (90,730) (90,730) -

Trade and other payables 15 (185,159) (185,159) -

(275,889) (275,889) -

2019CompanyFinancial assetsTrade and other receivables 43,548 43,548

Cash and cash equivalents 12 12 12

43,560 43,560

Financial liabilitiesTrade and other payables 15 (5,242) (5,242)

2018, restatedCompanyFinancial assetsTrade and other receivables 94,794 94,794

Cash and cash equivalents 12 7,729 7,729

102,523 102,523

Financial liabilitiesLoans and borrowings 14 (6,968) (6,968)

Trade and other payables 15 (3,258) (3,258)

(10,226) (10,226)

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23. FINANCIAL INSTRUMENTS (CONT’D)

23.2 Net gains and losses arising from financial instruments

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Net (losses)/gains on:Financial assets at amortised cost (11,265) (8,979) (59,663) 242

Financial liabilities at amortised cost (11,588) (13,509) (450) (491)

(22,853) (22,488) (60,113) (249)

23.3 Financial risk management

The Group has exposure to the following risks from its use of financial instruments:

• Credit risk• Liquidity risk• Market risk

23.4 Credit risk

Credit risk is the risk of a financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s exposure to credit risk arises principally from its receivables from customers. The Company’s exposure to credit risk arises principally from its receivables from customers and advances to subsidiaries. There are no significant changes as compared to prior periods.

Trade receivables and contract assets

Risk management objectives, policies and processes for managing the risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Normally, credit evaluations are performed on customers requiring credit over a certain amount.

At each reporting date, the Group or the Company assesses whether any of the trade receivables and contract assets are credit impaired.

The gross carrying amounts of credit impaired trade receivables and contract assets are written off (either partially or full) when there is no realistic prospect of recovery. This is generally the case when the Group or the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. Nevertheless, trade receivables and contract assets that are written off could still be subject to enforcement activities.

There are no significant changes as compared to previous year.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk arising from trade receivables and contract assets are represented by the carrying amounts in the statement of financial position.


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23.4 Credit risk (cont’d)

Trade receivables and contract assets (cont’d)

Recognition and measurement of impairment losses

In managing credit risk of trade receivables, the Group manages its debtors and takes appropriate actions (including but not limited to legal actions) to recover long overdue balances. The Group’s debt recovery process is as follows:

a) Above 90 days past due after contractual credit term, the Group will start to initiate a structured debt recovery process which is monitored by the project management and finance teams; and

b) If there is any indication that the past due debts are uncollectible, the Group will commence a legal proceeding against the customer.

The Group uses an allowance matrix to measure expected credit losses (“ECLs”) of trade receivables for all segments. Consistent with the debt recovery process, invoices which are past due after contractual credit term for more than 90 days will be considered as credit impaired.

Loss rates are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to 90 days past due and adjusted for the historical loss experiences.

Loss rates are based on actual credit loss experience over the past two years. The Group also considers differences between (a) economic conditions during the period over which the historical data has been collected, (b) current conditions and (c) the Group’s view of economic conditions over the expected lives of the receivables.

The Group also assessed the risk of loss of certain customers individually based on their financial information and past trend of payments.

The Group assessed the recoverability of contract assets of each project individually based on progress claims submitted.

The following table provides information about the exposure to credit risk and ECLs for trade receivables and contract assets which are grouped together as they are expected to have similar risk nature.

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Recognition and measurement of impairment losses (cont’d)

Gross carrying amount ECL Net balance RM’000 RM’000 RM’000

Group2019Current (not past due) 128,055 (724) 127,331

1 – 30 days past due 1,052 (244) 808

31 – 60 days past due 164 (53) 111

61 – 90 days past due 2,761 (55) 2,706

132,032 (1,076) 130,956

Credit impairedMore than 90 days past due 85,303 (3,040) 82,263

Individually impaired 111,000 (92,111) 18,889

328,335 (96,227) 232,108

Trade receivables 178,271 (25,979) 152,292

Contract assets 150,064 (70,248) 79,816

328,335 (96,227) 232,108

Company2019Current (not past due) 2,699 - 2,699

Credit impairedMore than 90 days past due 114 - 114

2,813 - 2,813

Trade receivables 878 - 878

Contract assets 1,935 - 1,935

2,813 - 2,813

Group2018Current (not past due) 221,770 (739) 221,031

1 – 30 days past due 1,685 (284) 1,401

31 – 60 days past due 1,193 (25) 1,168

61 – 90 days past due 1,284 (93) 1,191

225,932 (1,141) 224,791

Credit impairedMore than 90 days past due 19,996 (2,010) 17,986

Individually impaired 97,102 (14,164) 82,938

343,030 (17,315) 325,715

Trade receivables 178,533 (16,255) 162,278

Contract assets 164,497 (1,060) 163,437

343,030 (17,315) 325,715

Company2018Current (not past due) 1,520 - 1,520

1 – 30 days past due 422 - 422

1,942 - 1,942

Trade receivables 662 - 662

Contract assets 1,280 - 1,280

1,942 - 1,942


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The movements in the allowance for impairment in respect of trade receivables and contract assets during the year are shown below.

Trade receivablesLifetime

ECLCredit

impairedContract

assets TotalGroup RM’000 RM’000 RM’000 RM’000Balance at 1 January 2018 6,323 1,064 - 7,387

Reclassification to credit impaired (3,172) 3,172 - -

Net remeasurement of ECL - 8,868 1,060 9,928

Balance at 31 December 2018/ 1 January 2019 3,151 13,104 1,060 17,315

Net remeasurement of ECL 965 8,759 69,188 78,912

Balance at 31 December 2019 4,116 21,863 70,248 96,227

Company

As at the end of the reporting period, the Company did not recognise any allowance for impairment losses.

Cash and cash equivalents

The cash and cash equivalents are held with banks and financial institutions. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

These banks and financial institutions have low credit risks. In addition, some of the bank balances are insured by government agencies and are used as collateral for the credit facilities granted to the Group. Consequently, the Group and the Company are of the view that the loss allowance is not material and hence, it is not provided for.

Other receivables

Credit risks on other receivables are mainly arising from project deposits and advances paid to creditors. These deposits will be received upon completion of each project. The advances to suppliers are unsecured, interest free and will be offset against future purchases.

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

As at the end of the reporting period, the Group has recognised allowance for impairment losses of RM2,590,000 (2018: RM450,000).

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Inter-company advances


The Group and the Company provide unsecured advances to subsidiaries and ultimate holding company. The Group and the Company monitor the results of the subsidiaries and ultimate holding company regularly.


As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

Advances provided are not secured by any collateral nor supported by any other credit enhancements.

Recognition and measurement of impairment losses

Generally, the Group and the Company consider advances to subsidiaries and ultimate holding company have low credit risk. The Group and the Company assume that there is a significant increase in credit risk when a subsidiary’s or ultimate holding company’s financial position deteriorates significantly. As the Group and the Company are able to determine the timing of payments of the subsidiaries’ and ultimate holding company’s advances when they are payable, the Group and the Company consider the advances to be in default when the subsidiaries or ultimate holding company are not able to pay when demanded. The Group and the Company consider a subsidiary’s or ultimate holding company’s advance to be credit impaired when:• The subsidiary or ultimate holding company is unlikely to repay its advance to the Company

in full;• The subsidiary’s or ultimate holding company’s advance is overdue for more than 365 days; or• The subsidiary or ultimate holding company is continuously loss making and is having a deficit

shareholders’ fund.

The Group and the Company determine the probability of default for these advances individually using internal information available.

The following table provides information about the exposure to credit risk and ECLs for subsidiaries’ and ultimate holding company’s advances.

Gross carrying amount

Impairment loss

allowanceNet

balance 2019 RM’000 RM’000 RM’000CompanyLow credit risk 3,879 - 3,879

Credit impaired 98,556 (59,798) 38,758

102,435 (59,798) 42,637


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Inter-company advances (cont’d)


The movement in the allowance for impairment in respect of subsidiaries’ and ultimate holding company’s advances during the year is as follows:

Credit impaired

Company RM’000Balance at 1 January 2019 -

Net remeasurement of loss allowance (59,798)

Balance at 31 December 2019 (59,798)

The significant increase in net measurement of loss allowance of the Company is primarily due to a subsidiary which is continuously loss making and is having a deficit in shareholder’s fund.

As at 31 December 2018, there was no allowance for impairment recognised in respect of inter-company advances.

Financial guarantees


The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to a subsidiary. The Company monitors on an ongoing basis the results of the subsidiary and repayments made by the subsidiary.


The maximum exposure to credit risk of the Company amounts to RM51,507,000 (2018: RM85,967,000) representing the guarantees given to subsidiaries’ creditors and outstanding banking facilities of the subsidiaries as at the end of the reporting period.

The financial guarantees have not been recognised since the fair value on initial recognition and the associated loss allowances, if any, were not material.

23.5 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

As of 31 December 2019, the Group’s current liabilities exceeded its current assets by RM21,635,000. This may cast significant doubt on the ability of the Group to meet its obligations as and when they fall due. The Group has embarked on fund raising initiatives as disclosed in Note 1(b). The ability of the Group to meet its obligations is highly dependent on the successful implementation of those initiatives.

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23.5 Liquidity risk (cont’d)

Maturity analysis (cont’d)

Carrying amount

Contractual interest rate

Contractual cash flows

Under 1 year

Company RM’000 % RM’000 RM’0002019Non-derivative financial liabilitiesTrade and other payables 5,242 - 5,242 5,242

Financial guarantees - - 51,507 51,507

5,242 56,749 56,749

2018, restatedNon-derivative financial liabilitiesSecured bank overdrafts 6,968 8.65 6,968 6,968

Trade and other payables 3,258 - 3,258 3,258

Financial guarantees - - 85,967 85,967

10,226 96,193 96,193

23.6 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other prices that will affect the Group’s financial position or cash flows.

Investments


Investments are allowed only in club membership and liquid securities with counterparties that have a rating equal to or better than the Group.


As at the end of the reporting period, the Group and the Company have only invested in domestic securities. The maximum exposure to price risk is represented by the carrying amounts in the statement of financial position. The investments are unsecured.

23.6.1 Interest rate risk

The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Investments in equity securities and short term receivables and payables are not significantly exposed to interest rate risk.


The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings.

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23.6 Market risk (cont’d)

23.6.1 Interest rate risk (cont’d)

Exposure to interest rate risk

The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments, based on carrying amounts as at the end of the reporting period were:

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000Fixed rate instrumentsFinancial assets 27,991 36,853 - 7,700

Financial liabilities (21,996) (48,627) - -

Floating rate instrumentsFinancial liabilities (26,963) (42,103) - (6,968)

Interest rate risk sensitivity analysis

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate at the end of the reporting period would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points (“bp”) in interest rates at the end of the reporting period would have increased/(decreased) post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables remained constant.

Profit or (loss)100 bp 100 bp 100 bp 100 bp

increase decrease increase decrease2019 2019 2018 2018

RM’000 RM’000 RM’000 RM’000GroupFloating rate instruments (205) 205 (320) 320

CompanyFloating rate instruments - - (53) 53

23.7 Fair value information

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings reasonably approximate their fair values due to the relatively short term nature of these financial instruments.


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23.7 Fair value information (cont’d)

Level 1 fair value

Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical financial assets or liabilities that the entity can access at the measurement date.

Level 2 fair value

Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the financial assets or financial liabilities, either directly or indirectly.

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period.

Transfers between Level 1 and Level 2 fair values There has been no transfer between Level 1 and 2 fair values during the financial year (2018: no

transfer in either directions).

Level 3 fair value

Level 3 fair value is estimated using unobservable inputs for the financial assets and liabilities.

The following table shows the valuation techniques used in the determination of fair values within Level 3, as well as the key unobservable inputs used in the valuation models.

Financial instruments not carried at fair value

Type Description of valuation technique and inputs used

Finance lease liabilities and secured term loans

Discounted cash flows using a rate based on the current market rate of borrowings of the respective Group entities at the reporting date.

Valuation processes applied by the Group for Level 3 fair value

The Group uses discounted cash flows in respect of the measurement of fair values of financial instruments. The management has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.


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24. CONTINGENCIES

2019 2018Company RM’000 RM’000GuaranteesGuarantees given to:

-Subsidiaries’ creditors 19,337 34,678

-Banks for facilities granted to subsidiaries 32,170 51,289

51,507 85,967

LITIGATION

(a) Signature Cabinet Sdn. Bhd. vs D.J. Design & Suppliers Sdn. Bhd. & Ikhmas Jaya Sdn. Bhd. (“IJSB”)

On 1 December 2016, a Court action by way of Writ and Statement of Claim was initiated by Signature Cabinet Sdn. Bhd. (“the Plaintiff”) against D.J. Design & Suppliers Sdn. Bhd. as the 1st Defendant and IJSB as the 2nd Defendant for outstanding payment of RM1,261,303.14 (“the outstanding sum”).

By a Letter of Award dated 8 December 2014 issued by IJSB as the main contractor, IJSB has appointed the Plaintiff as the Nominated Sub-Contractor for the supply, delivery and installation of kitchen cabinets for 150 units of service apartments (“the works”) at Lot 83, Seksyen 88 Jalan Damai off Jalan Ampang, Kuala Lumpur, Wilayah Persekutuan (“the Project”). The 1st Defendant is the owner of the Project.

A collateral agreement dated 29 June 2016 was signed between the Plaintiff and the 1st Defendant for direct payment of the outstanding sum following a discussion held between the same parties on 29 June 2016.

On 31 May 2017, all parties under the Court action had recorded a Consent Judgement wherein the 1st Defendant is to pay the Plaintiff an amount totalling RM1,425,215.51 by instalments as follows:-

1) RM500,000.00 - on or before 27.6.2017;2) RM308,405.17 - on or before 15.7.2017;3) RM308,405.17 - on or before 15.8.2017; and4) RM308,405.17 - on or before 15.9.2017.

At the date of these financial statements, IJSB was made to understand by the Plaintiff’s lawyer and the 1st Defendant that only the remaining balance amount of RM158,405.34 out of the Judgement Sum of RM1,425,215.51 is still owing to the Plaintiff by the 1st Defendant.

The litigation case does not impact the Group’s financial results as the Plaintiff is a nominated sub-contractor appointed by the 1st Defendant and IJSB acts as a coordinator for the works. IJSB

is not a party to the agreement.

(b) Tunjang Jitu Sdn. Bhd. vs Kerajaan Negeri Kuala Terengganu & United Overseas Bank (M) Bhd.

The Kerajaan Negeri Kuala Terengganu (“1st Defendant”) has awarded to Tunjang Jitu Sdn. Bhd. (“Plaintiff”) a contract for a project known as “Merekabentuk, Membina, Menyiapkan dan Menyelenggara 160 Unit (5 Tingkat) Rumah Pangsa Mampu Milik di Pulau Redang, Kuala Terengganu” (“the Project”) valued at RM27.975 million and the Plaintiff has in turn awarded the Project to Ikhmas Jaya Sdn. Bhd. (“IJSB”) as the sub-contractor.

IJSB provided a performance bond to the 1st Defendant on behalf of the Plaintiff wherein the bond was issued by United Overseas Bank (M) Bhd. (“2nd Defendant”) for an amount of RM1,428,740. On 11 March 2018, the 1st Defendant called upon the bond based on purported termination of the main contract due to alleged delay in completing the Project.

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24. CONTINGENCIES (CONT’D)

LITIGATION (CONT’D)

(b) Tunjang Jitu Sdn. Bhd. vs Kerajaan Negeri Kuala Terengganu & United Overseas Bank (M) Bhd. (cont’d)

The Plaintiff and IJSB had appointed solicitors to initiate a legal action against the 1st Defendant wherein the former is claiming for among others, outstanding sum for works performed and also an injunction to prohibit the 1st Defendant from calling and 2nd Defendant from releasing the bond to the 1st Defendant until the disposal of the above action. An ex-parte injunction had been obtained on 21 March 2018 and the inter-parte hearing was held on 31 July 2018 where the Kuala Terengganu High Court (“the Court”) decided in favour of the 1st Defendant. Hence, the court injunction to stop the 2nd Defendant from releasing the Performance Bond to the 1st Defendant is no longer in place.

A Notice of Motion was filed for the purpose of obtaining an Erinford Injunction Order at the Court of Appeal in lieu of the dismissal by the learned Kuala Terengganu High Court judge to grant interim Erinford Injunction Order on 12 September 2018 pending disposal by way of inter-parte hearing.

The Court of Appeal had allowed the Plaintiff’s application for Erinford Injunction Order. The 1st Defendant is restricted in its claim on the performance bond secured by IJSB until the case is heard in the Court of Appeal.

Case management for the Injunction Appeal had been fixed on 10 December 2018. The Plaintiff had filed an application with supporting affidavit to amend the writ of summons and statement of claim. Hearing for the amended application had been fixed on 28 January 2019.

Following the aforesaid, the Court of Appeal had instructed the parties to file the following:

• Written Submissions;• Bundle of Authorities;• Executive Summary; and• Common Core Bundle.

The subsequent case management took place on 28 March 2019. The case had been fixed for trial from 26 May 2019 to 29 May 2019. Hearing of the case was then adjourned to 15 July 2019.

The Court of Appeal had instructed the parties to file Written Submission, Bundle of Authorities, Executive Summary and Common Core Bundle on 15 June 2020 and reply to Written Submission on 30 June 2020. The Court of Appeal has fixed on 14 July 2020. The Erinford Injunction is still in place until 14 July 2020.

(c) Cemix Concrete (M) Sdn. Bhd. vs Ikhmas Jaya Sdn. Bhd. (“IJSB”) and Ikhmas Jaya Group Berhad (“IJGB”)

Shah Alam High Court Writ between Cemix Concrete (M) Sdn. Bhd. (“The Plaintiff”), Ikhmas Jaya Sdn. Bhd. (“The 1st Defendant”) and Ikhmas Jaya Group Berhad (“The 2nd Defendant”) (Collectively “The Defendants”).

The Plaintiff had sold and delivered ready mix concrete materials to IJSB. IJSB had failed to settle the principal sum apart from RM500,000 paid on 6 April 2018. The outstanding principal sum is RM3,180,452.78.

IJGB has provided a guarantee to the Plaintiff and is liable to pay all monies payable by IJSB, including interest and costs incurred by the Plaintiff in acquiring judgment for the remaining monies owed by IJSB, on condition that it does not exceed RM5 million and is subject to annual renewal.


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(c) Cemix Concrete (M) Sdn. Bhd. vs Ikhmas Jaya Sdn. Bhd. (“IJSB”) and Ikhmas Jaya Group Berhad (“IJGB”) (cont’d)

Pursuant to a Credit Application dated 21 June 2012, IJSB is liable to pay interest at 1.5% per month from the date of expiry of credit term up to the date of full settlement. The accrued interest as of 30 April 2018 amounted to RM96,233.16 and this interest will continue to accrue from 1 May 2018 up to the date of full settlement.

On 18 May 2018, IJSB and IJGB had been served a Writ of Summons (“Writ”) and Statement of Claim (“SoC”) dated 4 May 2018 by the solicitors of the Plaintiff. The Plaintiff is claiming the principal sum of RM3,180,452.78, interest, costs and other reliefs.

The Defendants and the Plaintiff had reached an amicable settlement arrangement and following which, the Plaintiff had on 4 June 2018 filed to the High Court a Notice of Discontinuance to withdraw the Writ and SoC served on the Defendants.

As at the date of these financial statements, the out of court settlement had been concluded for RM3,266,694 and out of this sum, RM2,200,000 had been paid thus leaving a remaining balance of RM1,066,694 to be settled in due course.

The liability has been accrued for in the financial statements.

(d) Ikhmas Jaya Sdn. Bhd. (“IJSB”) vs ASM Development (KL) Sdn. Bhd.

IJSB through its solicitors had on 15 August 2018 served a sealed copy of the Writ of Summons (“Writ”) and Statement of Claim (“SoC”) against ASM Development (KL) Sdn. Bhd. (“the Defendant”).

IJSB is claiming RM14,583,765 from ASM Development (KL) Sdn. Bhd. being the outstanding balance of the certified contractual work done. It had been fixed for case management on 20 November 2019 and the High Court had recorded Consent Judgement against the Defendant for the sum of RM11,641,061 on the same date.

On 14 November 2019, the Defendant had filed fresh suit of counter claim for defect works and delay in completion of works against IJSB for the sum of RM13,325,867 in midst of filing their defense.

On 18 February 2020, IJSB’s solicitors had filed a fresh legal suit against the Defendant for an additional claim of RM2,942,704 in a separate case as instructed by the Court.

The case has been fixed for Case Management on 8 July 2020.

(e) Syarikat Logam Unitrade Sdn. Bhd. vs Ikhmas Jaya Sdn. Bhd. (“IJSB”) and Ikhmas Jaya Group Berhad (“IJGB”)

Shah Alam High Court Writ between Syarikat Logam Unitrade Sdn. Bhd. (“The Plaintiff”), Ikhmas Jaya Sdn. Bhd. (“The 1st Defendant”) and Ikhmas Jaya Group Berhad (“The 2nd Defendant”) (Collectively “The Defendants”).

At the request of IJSB, the Plaintiff had agreed to supply and deliver to IJSB, various construction materials from time to time on a 60 days or on a maximum credit term of 120 days and subject to the terms and conditions contained in the Statement of Arrangement dated 1 February 2018, Purchase Orders, Delivery Orders, Tax Invoice and Sales Invoices.

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(e) Syarikat Logam Unitrade Sdn. Bhd. vs Ikhmas Jaya Sdn. Bhd. (“IJSB”) and Ikhmas Jaya Group Berhad (“IJGB”) (cont’d)

On 5 September 2019, IJSB and IJGB had been served a Writ of Summons (“Writ”) and Statement of Claim (“SoC”) dated 3 September 2019 by the solicitors of the Plaintiff.

Pursuant to a Settlement Agreement dated 15 October 2018 (“Settlement Agreement A”) entered into between the Plaintiff and IJSB, IJSB agreed that the total outstanding sum inclusive of late payment charges as at 31 August 2018 amounted to RM24,027,392 and shall be settled in the manner as stated in the Settlement Agreement A.

Pursuant to a Settlement Agreement dated 22 November 2019 (“Settlement Agreement B”) entered into between the Plaintiff and IJSB, IJSB agreed that the total outstanding sum inclusive of late payment charges as at 31 October 2019 amounted to RM10,939,431 and shall be settled in the manner as stated in the Settlement Agreement B.

IJGB had provided a Corporate Guarantee dated 1 January 2019 to guarantee the amount due and owing by IJSB to the Plaintiff in the aggregate limit up to RM10 million.

The Court has fixed the date for Hearing of application for Summary Judgment on 24 June 2020.

Both parties have agreed to record Consent Judgment. The Court has vacated the date of 24 June 2020 and adjourned the case to 2 July 2020 to record Consent Judgment.


(f) Lafarge Concrete (Malaysia) Sdn. Bhd. vs Ikhmas Jaya Sdn. Bhd. (“IJSB”) and Ikhmas Jaya Group Berhad (“IJGB”)

Kuala Lumpur High Court Writ between Lafarge Concrete (Malaysia) Sdn. Bhd. (“The Plaintiff”), Ikhmas Jaya Sdn. Bhd. (“The 1st Defendant”) and Ikhmas Jaya Group Berhad (“The 2nd Defendant”) (Collectively “The Defendants”).

On 27 September 2019, IJSB and IJGB had been served a Writ of Summons (“Writ”) and Statement of Claim (“SoC”) dated 24 September 2019 and 25 September 2019 respectively by the solicitors of the Plaintiff.

By an application to open a trading account dated 25 August 2014 (“the Agreement”), the Plaintiff at the request of IJSB agreed to sell and had delivered goods to IJSB pursuant to terms set out in the Agreement.

IJGB had executed a Letter of Guarantee dated 17 May 2016 to guarantee all the amount owing by IJSB for the purchase of the goods including interest and losses incurred by the Plaintiff. The Plaintiff is seeking payment from the Defendants for the sum of RM2,172,376 (RM2,041,457 being the principal sum and RM130,919 being interest) calculated as at 5 September 2019.

Plaintiff has filed an application for Summary Judgment and Order and has been recorded with cost of RM4,000 on 13 January 2020. IJSB will propose for a settlement arrangement.



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(g) Lembaga Kumpulan Wang Simpanan Pekerja vs Ikhmas Jaya Sdn. Bhd. (“IJSB”), Khoo Ping Sen, Siew Mun Lout, Ang Cheng Siong and Ang Wei Zhen

Kuala Lumpur High Court Writ between Lembaga Kumpulan Wang Simpanan Pekerja (“The Plaintiff”), Ikhmas Jaya Sdn. Bhd., Khoo Ping Sen, Siew Mun Lout, Ang Cheng Siong and Ang Wei Zhen (“the Defendants”).

On 13 April 2020, IJSB had been served a Writ of Summons (“Writ”) and Statement of Claim (“SoC”) dated 17 March 2020 by the solicitors of the Plaintiff.

IJSB is the registered employer as defined under Section 2 of the Employees Provident Fund Act 1991 and is responsible for making monthly contribution of its employees to the Plaintiff.

The circumstances leading to the filing of the Writ and SoC against IJSB was due to the fact that IJSB had failed to pay the unpaid contributions for the period from January 2019 to March 2019 and May 2019 to July 2019 amounting to RM2,082,298 together with the dividend and late payment charges as detailed below:

• A sum of RM2,082,298 for unpaid contributions for the period from January 2019 to March 2019 and May 2019 to July 2019 together with the following: -

(i) Dividends on the Employees Provident Fund (“EPF”) monthly contribution in arrears for the period January 2019 to March 2019 and May 2019 to July 2019 at the following rates: - a. 5.00% per annum calculated from 01 February 2019 until 31 December 2019; and b. the next dividend to be declared by the Plaintiff for each subsequent year until the

date of full settlement;

(ii) Late payment of EPF monthly contribution in arrears for the period January 2019 to March 2019 and May 2019 to July 2019 at the following rates: - a. 7.40% per annum calculated from 16 January 2019 until 15 February 2019; b. 6.90% per annum calculated from 16 February 2019 until 21 February 2020; c. 6.00% per annum calculated from 22 February 2020 onwards; and d. the next late payment charge to be declared by the Plaintiff for each subsequent year

until the date of full settlement.

• The cost of this action; and

• Other relief the Court deems fits and proper.

As at the date of these financial statements, IJSB is negotiating with the Plaintiff for settlement via instalments.

The case has been fixed for case management on 18 August 2020.


(h) Ilham Metro Construction Sdn. Bhd. vs Ikhmas Jaya Sdn. Bhd. (“IJSB”), Ikhmas Jaya Group Berhad (“IJGB”), Ang Cheng Siong and Khoo Ping Sen

Shah Alam High Court Civil Suit between Ilham Metro Construction Sdn. Bhd. (“the Plaintiff”), Ikhmas Jaya Sdn. Bhd., Ikhmas Jaya Group Berhad, Ang Cheng Siong (“3rd Defendant”) and Khoo Ping Sen (“4th Defendant”).

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(h) Ilham Metro Construction Sdn. Bhd. vs Ikhmas Jaya Sdn. Bhd. (“IJSB”), Ikhmas Jaya Group Berhad (“IJGB”), Ang Cheng Siong and Khoo Ping Sen (cont’d)

On 14 May 2020, IJGB had been served a Writ of Summons (“Writ”) and Statement of Claim (“SoC”) both dated 8 May 2020 by the solicitors of the Plaintiff.

The Plaintiff, IJGB and IJSB had entered into a Memorandum of Understanding wherein the Plaintiff and IJSB have been invited to participate in a proposed project known as Rancangan Tebatan Banjir Sungai Pendang, Kedah Darul Aman: Menaiktaraf Sungai Choras/Sungai Sala dan Struktur-struktur Serta Kerja-kerja Berkaitan (“the Project”), as a subcontractor by forming a joint venture to carry out the works under the Project in the event that IJGB is awarded the Project.

Jabatan Pengairan dan Saliran Malaysia had via the Letter of Acceptance of Tender dated 9 April 2018 awarded the Project to IJGB as the main contractor.

The Plaintiff and IJSB had formed an unincorporated joint venture for the sole purpose of undertaking the execution and completion of the Project. For the purposes of preparing and submitting its tender for the Project, the Plaintiff had agreed to grant a friendly loan of RM1,500,000 to IJGB (“the Loan”).

IJGB had made part payment totalling RM150,000 towards the repayment of the Loan. The balance of Loan totalling RM1,350,000 remains outstanding and payable to the Plaintiff (“the Balance Loan Sum”). The Plaintiff commenced an action against IJGB vide Civil Suit No. BA22NCvC-431-10/2019 for the recovery of the Balance Loan Sum together with cost and interest on the judgement sum.

The Plaintiff, IJGB and IJSB reached an amicable out-of-court settlement and entered into a Settlement Agreement. To this end, IJGB had deposited six post-dated cheques drawn by IJSB in favour of the Plaintiff and the said cheques are signed by the 3rd Defendant and 4th Defendant. However, the first, second, third, fourth and fifth cheques were dishonoured as IJGB had countermanded all the cheques.

The Plaintiff had further through its solicitor issued a letter of demand to IJGB for the Balance Loan Sum. However, IJGB has failed, neglected and/or refused to pay all sums due and owing to the Plaintiff.

The Plaintiff claims interest pursuant to Section 57(a) of the Bills of Exchange Act 1949 against IJSB, as drawer and against the 3rd Defendant and 4th Defendant, as indorsers at the rate of 5% per annum on RM1,125,000 being the amount on the first, second, third, fourth and fifth cheques.

The case has been fixed for case management on 16 July 2020.


(i) Star Effort Sdn. Bhd. vs Ikhmas Jaya Group Berhad (“IJGB”)

Shah Alam High Court Writ between Star Effort Sdn. Bhd. (“the Plaintiff”) and Ikhmas Jaya Group Berhad (“the Defendant”).

On 20 May 2020, IJGB had been served a Writ of Summons (“Writ”) and Statement of Claim (“SoC”) both dated 13 May 2020 by the solicitors of the Plaintiff.


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(i) Star Effort Sdn. Bhd. vs Ikhmas Jaya Group Berhad (“IJGB”) (cont’d)

Pursuant to a Letter of Award dated 18 December 2015 and PAM Contract 2006 (with quantities) dated 4 August 2016, the Plaintiff appointed Ikhmas Jaya Sdn. Bhd. (“IJSB”), a wholly owned subsidiary of IJGB to perform, construct and complete the services and works for the building project known as “Cadangan Pembangunan Kediaman 2 Blok 9-15 Tingkat (357 unit) Pangsapuri Servis di atas Lot 358, 360, 361 dan sebahagian Tanah Kerajaan, Jalan Talalla, Seksyen 69, Bandar Kuala Lumpur (“Contract Works”)”.

At the request of IJSB, the Plaintiff paid IJSB’s nominated sub-contractor or their sub-contractors directly and had advanced a total sum of RM9,832,398.84 (“Advanced Payments”). IJSB agreed to repay the Advance Payments with interest at the rate of 8.5% per annum. However, only partial repayment of the Advance Payments and interests was effected by deductions from certified payments due to IJSB.

IJSB had failed to complete the Contact Works within the completion date and accordingly, there were delay in the completion of the section of works (Phase 1) and the remaining parts of works (Phase 2) by IJSB. IJSB is therefore obliged to pay Liquidated and Ascertained Damages (“LAD”) and the total LAD payable is RM18,340,319 and interest at the rate of Maybank Base Lending Rate plus 1% is payable on this outstanding debts which is calculated from the date of practical completion until date of settlement.

The Defendant executed corporate guarantees in favour of the Plaintiff and guaranteed the repayment of the Advance Payments as well as guaranteed IJSB’s due and punctual performance of the contract. The Defendant further agreed to indemnify the Plaintiff in full on demand against all losses, damages, costs and expenses suffered or incurred by the Plaintiff by reason of any act, omission, default or breach on the part of the Contractor in performing and observing their obligation under the contract.

In the said Writ and SoC, the Plaintiff is claiming for:-

(i) RM8,705,656 being the balance outstanding Advance Payments; (ii) Interest/administrative fee on the outstanding Advance Payments which as at 31 January

2020 is RM966,769 and continuing thereafter at a rate of 8.5% per annum on RM8,705,656 from 1 February 2020 until date of full payment;

(iii) RM279,491 being the interest/administrative charges for the early payments/release of certified sums;

(iv) RM14,415,791 being the balance LAD for the delay in the completion of the Contract Works; (v) Interest on RM14,415,791 at the rate of Maybank Base Lending Rate plus 1% calculated from the

date of practical completion (3 July 2019) until date of settlement; (vi) RM1,668,612 being the costs of remedial works as at 20 February 2020; (vii) Interest on RM1,668,612 at the rate of Maybank Base Lending Rate plus 1% calculated from 20

February 2020 until date of settlement; (viii) Costs; and (ix) Any other such relief and other relief as the Honourable Court deems fit and proper.

As at the date of these financial statements, the Group has appointed solicitors and the matter has been fixed for case management on 6 July 2020.

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(j) Ipmuda Berhad vs Ikhmas Jaya Sdn. Bhd. (“IJSB”) and Ikhmas Jaya Group Berhad (“IJGB”)

Shah Alam High Court Civil Suit between lpmuda Berhad (“The Plaintiff”), lkhmas Jaya Sdn. Bhd. (“The 1st Defendant”) and lkhmas Jaya Group Berhad (“The 2nd Defendant”) (Collectively “The Defendants”).

The Plaintiff had sold and delivered goods to IJSB. IJSB had failed to settle the principal sum of RM2,346,942 and agreed interest of RM627,153 totalling RM2,974,095.

IJGB has provided a guarantee to the Plaintiff and is liable to pay all monies payable by IJSB,

including interest and costs incurred by the Plaintiff in acquiring judgment for the remaining monies owed by IJSB, on condition that it does not exceed RM5 million and is subject to annual renewal.

On 4 December 2018, IJSB and IJGB had been served a Writ of Summons (“Writ”) and Statement of Claim (“SoC”) dated 30 November 2018 by the solicitors of the Plaintiff. The Plaintiff is claiming the following:

(i) An order that the Defendants pay the Plaintiff immediate cash amounting to RM2,974,095 or alternative forms;

(ii) The principal sum of RM2,346,942 and agreed interest of RM627,153;(iii) Interest rate of 5% per annum from the Judgment date and the Court Order until full settlement;(iv) Legal costs of RM150,000 or other court costs; and(v) All orders as may be determined by the Court.

In 2019, the Defendants have made arrangement for the settlement sum of RM2,982,095 to the Plaintiff. Thus, the Plaintiff has withdrawn the Winding up Petition against Defendants with liberty to file afresh on 24 October 2019.

On 3 June 2020, the Defendants received a Statutory Notice of Demand pursuant to Section 466(1)(a) and/or (b) of the Companies Act, 2016 served by the solicitors of the Plaintiff.

The Notice requires the Defendants to pay the balance owing judgment sum and cost of RM2,582,095 from the judgment sum and cost of RM2,982,095 due to the Plaintiff pursuant to the High Court Judgment dated 19 July 2019 within 21 days from the date of service, failing which appropriate action will be taken for the winding up of the Defendants.


(k) Sunway Geotechnics (M) Sdn. Bhd. vs Ikhmas Jaya Sdn. Bhd. (“IJSB”)

On 1 March 2019, IJSB (“the Defendant”) had been served a sealed copy of the Originating Summons (filed in Shah Alam High Court) by the solicitors of Sunway Geotechnics (M) Sdn. Bhd. (“the Plaintiff”). The Plaintiff is claiming the following:

(i) Payment of principal sum for balance work done for RM8,202,206 and RM492,132 for service tax under the subcontract;

(ii) Pre-decision interest of RM104,494;(iii) Party and party costs of this claim of RM45,000; and(iv) Full cost of Adjudicator’s fee and expense as well as Asian International Arbitration Centre’s

administrative cost taxed at RM61,289.

The matter is fixed for case management on 26 March 2019. Both Plaintiff and Defendant requested for the case management to be deferred to 7 May 2019 as both parties are in the midst of working for an out of court settlement with the Deed of Settlement to be finalised soon.


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(k) Sunway Geotechnics (M) Sdn. Bhd. vs Ikhmas Jaya Sdn. Bhd. (“IJSB”) (cont’d)

On 19 August 2019, both parties entered into a Deed of Settlement and the legal suit was withdrawn by the Plaintiff.

IJSB had on 5 June 2020 received a Notice of Demand (“the Notice”) pursuant to Section 465(1)(e) and Section 466 (1)(a) of the Companies Act, 2016 served by the solicitors of the Plaintiff.

The Notice requires IJSB to pay the balance amount of RM4,620,785 pursuant to the Settlement Agreement dated 17 July 2019 and cost for repair of RM237,221 due to the Plaintiff within six months from the date of receipt of the Notice, failing which appropriate action will be taken for the winding up of IJSB.


(l) Ikhmas Jaya Sdn. Bhd. (“IJSB”) vs MRCB Builders Sdn. Bhd. (“MRCB”) and Ambank (M) Berhad

MRCB (“the 1st Defendant”) has awarded to IJSB (“the Plaintiff”) a contract known as “Proposed Mixed Development of Phase 1A, Phase 1C & Phase 1F consisting of 1 block 27 storey office tower (Tower 3) , 1 block office tower (Tower 5) , 1 block 25 storey office tower (Tower 6), 1 block office tower (Tower 2), 1 block office tower (Tower 1), 1 storey service level, 4 storey of basement car park and central utility building (CUB) on Lot 12, Persiaran Barat, Section 52, Bandar Petaling Jaya, Petaling District, Selangor Darul Ehsan for Messrs PJ Sentral Development Sdn. Bhd. (“the Project”)”. IJSB provided performance bond to the 1st Defendant in the form of Bank Guarantee.

On 23 May 2019, the 1st Defendant had informed IJSB that the Claims certified vide the Interim Payment Certificate No. 34 amounted to RM3,295,344 as the 1st Defendant had deducted RM28,530,000 being the Liquidated and Ascertained Damages (“LAD”) imposed on IJSB. IJSB did not agree and objected to the LAD.

On 13 May 2020, the 1st Defendant had informed IJSB that the claims made under the certified interim payment No. 35 amounted to RM8,752,678 as the 1st Defendant had deducted RM13,800,000 as LAD imposed on IJSB. IJSB did not agree and objected to the LAD.

On 14 May 2020, the 1st Defendant wrote a letter to Ambank (M) Berhad (“the 2nd Defendant”) demanding the release of the Bank Guarantee to them alleging that IJSB had breached its obligations under the Letter of Award. IJSB strictly denies the allegation of the 1st Defendant.

On 19 May 2020, IJSB received a Notice of Claim from the 2nd Defendant for the Bank Guarantee pursuant to a written demand received from MRCB for an amount of RM7,600,000 claiming that IJSB is in breach of its obligations under the Letter of Award vide Ref No. MBSB/IJSB/86/1.2/444 dated 17 November 2015 for the Project.

IJSB through its solicitors has on 21 May 2020 filed a suit against the Defendants at the Kuala Lumpur High Court (“the Court”). IJSB was claiming against the 1st Defendant the sum of RM40,474,608 being the balance of payment for construction works done by IJSB. In the Suit, IJSB also sought for injunctions to restrain the 1st Defendant from receiving from the 2nd Defendant and to restrain the 2nd Defendant from releasing to the 1st Defendant, the Bank Guarantee No. T01718IBG1037911 dated 13 August 2018 which was made by IJSB pursuant to the Letter of Award until the final disposal of the Suit.

The Court fixed the hearing date for the inter-parte injunction application on 21 August 2020.

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(l) Ikhmas Jaya Sdn. Bhd. (“IJSB”) vs MRCB Builders Sdn. Bhd. (“MRCB”) and Ambank (M) Berhad (cont’d)

IJSB had performed the works under the Project and the Certificate of Practical Completion for the works was issued on 13 May 2020. The balance of payment for works done by IJSB under the Project to be paid by the 1st Defendant amounted to RM40,474,608.

On 20 May 2020, IJSB wrote a letter to the 1st Defendant demanding the outstanding amount of RM40,474,608 for the works carried out by IJSB.

In the Suit, IJSB was claiming for:-

(i) The 1st Defendant shall pay IJSB the sum of RM40,474,608;(ii) The 1st Defendant shall pay IJSB interest at the rate of 5 per centum per annum over the sum

of RM40,474,608 from the date of judgement until final settlement;(iii) A declaration that the 1st Defendant’s demand to the 2nd Defendant vide a letter dated 14

May 2020 for the release of the Bank Guarantee No. 01718IBG1037911 dated 3 August 2018 was illegal and maliciously made and/or unjust and/or unreasonable;

(iv) An injunction against the 1st Defendant and/or its directors, officers, assists, agents or others to restrain them from receiving, procuring or attempt to receive or attempt to procure any money or sum of money from the 2nd Defendant in accordance with or under the Bank Guarantee No: T01718IBG1037911 dated 13 August 2018 for the sum of RM7,600,000.00 issued by the 2nd Defendant in favour of the 1st Defendant until the final disposal of the Suit;

(v) An injunction against the 2nd Defendant and/or directors, officers, assists, agents or others to restrain them from paying to the 1st Defendant any money or sum of money in accordance with or under the Bank Guarantee No: T01718IBG1037911 dated 13 August 2018 for the sum of RM7,600,000 until the final disposal of the Suit;

(vi) Alternatively, if payment has been made by the 2nd Defendant to the 1st Defendant, an injunction against the 1st Defendant and/or directors, officers, assists, agents or others to return such payment to the 2nd Defendant within 7 days from the date of this order;

(vii) Costs shall be borne by the 1st Defendant in all circumstances; and(viii) Any other reliefs that this Honourable Court deem fit and proper to grant.

The Claim is not anticipated to have any significant financial and operational impact on the Group’s results for the financial year ending 31 December 2019.

25. RELATED PARTIES

Identity of related parties

For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control. Related parties may be individuals or other entities.

Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group, and certain members of senior management of the Group.


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25. RELATED PARTIES (CONT’D)

Identity of related parties (cont’d)

The Group has related party relationship with its ultimate holding company, subsidiaries, related companies and key management personnel.

Significant related party transactions

Related party transactions have been entered into in the normal course of business under negotiated terms. The significant related party transactions of the Group and the Company are shown below. The balances related to the below transactions are shown in Notes 11 and 15.

Group Company2019 2018 2019 2018

RM’000 RM’000 RM’000 RM’000A. Ultimate holding company

Advances received (3,361) (11,638) - -

B. SubsidiaryContract cost - - 285 12,116

C. Related companiesSales of goods - 708 - -

D. Key management personnelDirectors- Fees 164 174 164 174

- Remuneration 2,412 2,412 480 480

- Other short-term employee benefits 441 398 114 132

3,017 2,984 758 786

26. CAPITAL MANAGEMENT

The Group’s objective when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investors and creditors confidence and to sustain future development of the business. The Directors monitor and are determined to maintain an optimal debt-to-equity ratio that complies with debt covenants and regulatory requirement.

The debt-to-equity ratios at 31 December 2019 and 31 December 2018 were as follows:

GroupNote 2019 2018

RM’000 RM’000Loans and borrowings 14 32,152 90,730

Lease liabilities 16,807 -

Less: Cash and cash equivalents 12 (28,531) (37,852)

Net debt 20,428 52,878

Total equity 27,651 175,552

Net debt-to-equity ratio 0.74 0.30

There was no change in the Group’s approach to capital management during the financial year.

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27. INTEREST IN A JOINT OPERATION The Group has a 50% ownership interest in a joint operation, IJSB-IMC JV with Ilham Metro Construction

Sdn. Bhd. (“IMC”) for the purpose of undertaking a new project. IJSB-IMC JV’s principal place of business is in Malaysia.

On 10 October 2019, the joint operation has been mutually terminated by both parties.

28. SIGNIFICANT EVENTS

28.1 Private placement

On 30 April 2019, the Company announced to Bursa Malaysia Securities Berhad (“Bursa Malaysia”) that the Company proposed to undertake a private placement of up to 54,535,000 new ordinary shares in the Company, representing up to 10.0% of the total number of issued shares of the Company and this proposal was approved by Bursa Malaysia on 14 May 2019.

On 18 July 2019 and 1 August 2019, the first and second tranche of Private Placements were completed following the listing of and quotation for 20,000,000 and 23,000,000 new ordinary shares at RM0.21 and RM0.215 per share respectively on Main Market of Bursa Malaysia and the private placements had raised RM9,145,000 for working capital purposes. As at 31 December 2019, the Group has fully utilised the amount raised.

28.2 Waiver of debts by ultimate holding company

On 31 December 2019, a deed of waiver was executed between the ultimate holding company, Ikhmas Jaya Holdings Sdn. Bhd. (“IJHSB”) and Ikhmas Jaya Sdn. Bhd. (“IJSB”), a wholly owned subsidiary of the Company. IJHSB has agreed to:

i. waive RM2,500,000 out of total amount owing by IJSB to IJHSB of RM14,515,000;

ii. undertake not to claim from IJSB for the said amount; and

iii. discharge and release IJSB from all liabilities, obligations and undertakings pursuant to and from all claims and demands whatsoever under or arising from the said amount.

29. SUBSEQUENT EVENTS

29.1 Disposal of a subsidiary

On 16 January 2020, Ikhmas Jaya Sdn. Bhd., a wholly-owned subsidiary of the Company, completed the disposal of its investment in Rekavista Sdn. Bhd., comprising 2,000,000 ordinary shares of RM1 each for a consideration of RM20,000.

29.2 Sale and leaseback of office buildings

On 6 January 2020, the Group sold its office buildings for a consideration amounting to RM4,700,000 and leased the office buildings back for 5.5 years. The Group is granted a free rental period of 18 months which take effect upon completion of disposal and the Group shall lease back the office buildings for a full period of 4 years after the rental-free period. This sale and lease back transaction enabled the Group to access more capital while continuing to use the office buildings.


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29. SUBSEQUENT EVENTS (CONT’D)

29.3 Implication of Covid-19 to the Group’s and the Company’s business

The coronavirus (Covid-19) pandemic was announced by the World Health Organisation in March 2020 given the outbreak of the virus in countries across the world including Malaysia. The Covid-19 pandemic has resulted in disruptions to businesses and various macro-economic impacts.

The Group and the Company consider that the effects related to this outbreak to be a non-adjusting event as it was not a condition that existed as at 31 December 2019, the end of the reporting period. Accordingly, the current conditions arising from this outbreak do not have an impact on the carrying amounts reported for the financial year ended 31 December 2019.

As at the date of the financial statements are authorised for issuance, the Covid-19 situation is still evolving and unpredictable. As a result, it is not practicable for the Group and the Company to estimate the financial effect of Covid-19 at this juncture. The Group and the Company are actively monitoring and managing the Group’s and the Company’s operations to minimise any impacts that may arise from Covid-19.

29.4 Triggering criteria as an Affected Listed Issuer pursuant to Paragraph 2.1 (a) and (e) of Practice Note 17 (“PN17”) under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) and PN17 Relief Measures

On 16 April 2020, Bursa Malaysia has announced that PN17 Relief Measures will be available to Affected Listed Issuer that triggers any of the following criteria under PN17 of the Main Market Listing Requirements (“Suspended Criteria”) from 17 April 2020 to 30 June 2021 (“Relief Period”):

a) its shareholders’ equity on a consolidated basis is 25% or less of its share capital (excluding

treasury shares) and such shareholders’ equity is less than RM40 million;b) auditors have highlighted a material uncertainty related to going concern or expressed a

qualification on the listed issuer’s ability to continue as a going concern in its latest audited financial statements and its shareholders’ equity on a consolidated basis is 50% or less of its share capital (excluding treasury shares); and

c) default in payment by the listed issuer, its major subsidiary or major associated company, as the case may be, as announced pursuant to paragraph 9.19A of the Main Listing Requirements and the listed issuer is unable to provide a solvency declaration to the Exchange.

On 30 June 2020, the Group announced that it had triggered the Suspended Criteria during the Relief period. The PN17 criteria was triggered as a result of:

(i) the shareholders’ equity of the Group on a consolidated basis was less than 25% of its issued and paid-up capital (excluding treasury shares) and was less than RM40,000,000; and

(ii) the auditors have on its report dated 30 June 2020 highlighted a material uncertainty related to going concern on the Group’s and the Company’s ability to continue as going concern in the financial statements and the shareholders’ equity of the Group on a consolidated basis is 50% or less of the issued and paid-up capital (excluding treasury shares).

Under the PN17 Relief Measures:

a) The Group will not be classified as a PN17 listed issuer and will not be required to comply with the obligations pursuant to paragraph 8.04 and PN17 of the Main Market Listing Requirements for a period of 12 months from the date of triggering the criteria;

b) Upon the expiry of the 12 months from the Relief Announcement, the Group will re-assess its condition and announce whether it continues to trigger any of the criteria in PN17 of the Main Market Listing Requirements (“said Announcement”); and

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29. SUBSEQUENT EVENTS (CONT’D)

29.4 Triggering criteria as an Affected Listed Issuer pursuant to Paragraph 2.1 (a) and (e) of Practice Note 17 (“PN17”) under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) and PN17 Relief Measures (cont’d)

Under the PN17 Relief Measures (cont’d):

c) If the Group continues to trigger any of the criteria in PN17 of the Main Market Listing Requirement, it will then be classified as a PN17 listed issuer and must comply with all the obligations under paragraph 8.04 and PN17 of the Main Market Listing Requirements, including the obligation to submit a regularisation plan to the relevant authorities within 12 months from the said Announcement.

29.5 Subscription agreement

On 25 June 2020, subscription agreements were signed between the Company and its subscribers at the issue price of RM0.056 for each subscription share to be issued, derived based on the 5-day volume weighted average price of the ordinary shares of the Company prior to the date of the subscription agreements. The aggregate issue price payable by the subscribers to the Company for the subscription shares shall be RM13 million in cash. The obligations of the Company to issue the subscription shares and the subscribers to subscribe for the same is conditional upon the following conditions being satisfied or fulfilled within six (6) months from the date of the subscription agreements or such extended period as the parties may mutually agree in writing:

a) The Company obtaining the approval of its shareholders at a general meeting for the allotment and issue of the subscription shares to the subscriber at an issue price only in the manner contemplated under the subscription agreements;

b) Bursa Malaysia Securities Berhad having granted approval for the listing and quotation of the subscription shares on the Main Market of Bursa Securities; and

c) If required, the approvals, consents, authorisations, permits or waivers of any other relevant authorities and/or any other third parties necessary or appropriate to carry out the allotment and issue of the subscription shares pursuant to the terms of the subscription agreements having been obtained.

As at date of the financial statements are authorised for issuance, RM 6.8 million was received and placed in the escrow account pursuant to the subscription agreements.

30. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES

During the year, the Group and the Company adopted MFRS 16, Leases.

Definition of a lease

On transition to MFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied MFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under MFRS 117 and IC Interpretation 4, Determining whether an Arrangement contains a Lease were not reassessed. Therefore, the definition of a lease under MFRS 16 has been applied only to contracts entered into or changed on or after 1 January 2019.


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30. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES (CONT’D)

As a lessee

Where the Group and the Company are a lessee, the Group and the Company applied the requirements of MFRS 16 using modified retrospective approach with the effect of initial application recognised at 1 January 2019. Accordingly, the comparative information presented for 2018 has not been restated.

At 1 January 2019, for leases that were classified as operating lease under MFRS 117, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group entities’ incremental borrowing rate as at 1 January 2019. The weighted-average rate applied is 5%. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

The Group used the following practical expedients when applying MFRS 16 to leases previously classified as operating lease under MFRS 117:• applied a single discount rate to a portfolio of leases with similar characteristics;• applied the exemption not to recognise right-of-use assets and liabilities for leases with less than

12 months of lease term as at 1 January 2019;• excluded initial direct costs from measuring the right-of-use asset at the date of initial application;

and• used hindsight when determining the lease term if the contract contains options to extend or

terminate the lease.

For leases that were classified as finance lease under MFRS 117, the carrying amounts of the right-of-use asset and the lease liability at 1 January 2019 are determined to be the same as the carrying amount of the leased asset and lease liability under MFRS 117 immediately before that date.

30.1 Impacts on financial statements

Since the Group and the Company applied the requirements of MFRS 16 using modified retrospective approach with the effect of initial application at 1 January 2019, there are no adjustments made to the prior period presented.

The following table explains the difference between operating lease commitments disclosed applying MFRS 117 at 31 December 2018, and lease liabilities recognised in the statement of financial position at 1 January 2019.

RM’000Operating lease commitments at 31 December 2018 as

disclosed in the Group’s consolidated financial statements -

Discounted using the incremental borrowing rate at 1 January 2019 -

Finance lease liabilities recognised at 31 December 2018 30,665

Recognition exemption for short-term leases -

Recognition exemption for leases of low-value assets -

Extension and termination options reasonably certain to be exercised 323

Lease liabilities previously classified as cancellable operating lease at 31 December 2018 123

Lease liabilities recognised at 1 January 2019 31,111

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31. COMPARATIVE FIGURES

Certain comparative figures have been restated to conform with the current year’s presentation. These reclassifications do not have any impact on the earnings of the Group and the Company.

Statement of financial position

As previously stated

Effect of reclassification As restated

As at 31 December 2018 RM’000 RM’000 RM’000

Group

Contract assets 43,735 (15,000) 28,735

Trade and other payables (215,118) 29,959 (185,159)

Contract liabilities - (14,959) (14,959)

Company

Trade and other payables (13,297) 10,039 (3,258)

Contract liabilities - (10,039) (10,039)

Statement of cash flows

For the year endedAs previously

statedEffect of

reclassification As restated

31 December 2018 RM’000 RM’000 RM’000

Group

Changes in contract assets (25,654) 15,000 (10,654)

Changes in trade and other payables 13,383 (29,959) (16,576)

Changes in contract liabilities - 14,959 14,959

Company

Changes in trade and other payables (4,041) (10,039) (14,080)

Changes in contract liabilities - 10,039 10,039


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Utilization of Proceeds from Private Placement

During the financial year under review, the Company completed 2 tranches of private placement as follows:-

(i) 20,000,000 ordinary shares at an issue price of RM0.2100 per share on 19 July 2019, raising RM4,200,000.00 for working capital.

(ii) 23,000,000 ordinary shares at an issue price of RM0.2150 per share on 2 August 2019, raising RM4,945,000.00 for working capital.

As at 31 December 2019, the proceeds from the above private placements had been fully utilised.

Audit and Non-Audit Fees

The fee payables to the External Auditors, KPMG PLT in relation to the audit and non-audit services rendered to the Company and its subsidiaries for the financial year ended 31 December 2019 are as follows:-

The Company RM’000

The Group RM’000

Audit fees 40 220

Non-audit fees 184 248*

* Mainly consist of fees for the limited review for four quarterly reports and engagement in relation to the impact assessment from the implementation of MFRS 16 framework of the Group, as well as the review of the Statement on Risk Management and Internal Control.

Material Contracts

There were no material contracts entered into by the Company and its subsidiaries involving directors’ and major shareholders’ interest either subsisting at the end of the financial year ended 31 December 2019 or entered into since the end of the previous financial year.

Recurrent Related Party Transactions

There were no recurrent related party transactions of a revenue or trading nature, which requires Shareholders’ Mandate during the financial year.

ADDITIONAL COMPLIANCEINFORMATION

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“DO

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16

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ted

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ne 2

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app

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Land

Sur

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r, ha

s co

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eted

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and

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are

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ng th

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cess

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surr

ende

r of

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t of

the

land

to P

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at w

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MD

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hen

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ovin

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r D

O. U

pon

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plet

ion

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e su

rren

der,

we

shal

l pro

ceed

with

the

appl

icat

ion

for C

ertifi

cate

of

Com

plet

ion

and

Com

plia

nce

(“C

CC

”). A

new

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nnin

g co

nsul

tant

“M

esra

Con

sult”

has

bee

n ap

poin

ted

to a

pply

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LIST OFPROPERTIES

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Class of shares : Ordinary sharesVoting Rights : One vote per shareIssued share capital : 588,350,000 ordinary shares

CategoryNo. of

Holders % No. of

Holdings %

1 - 99 4 0.10 122 0.00

100 – 1,000 307 7.42 163,578 0.03

1,001 – 10,000 1,331 32.17 8,781,000 1.49

10,001 – 100,000 1,927 46.58 77,911,300 13.24

100,001 to 29,417,499 (*) 567 13.71 326,994,000 55.58

29,417,500 and Above (**) 1 0.02 174,500,000 29.66

Total 4,137 100.00 588,350,000 100.00

Remark: * Less than 5% of Issued Holdings ** 5% and Above of Issued Holdings

SUBSTANTIAL SHAREHOLDERS’ SHAREHOLDINGS(According to the Register of Substantial Shareholders as at 2 June 2020)

No. Name of Substantial Shareholder

Direct Indirect

No. of Shares

% of issued share capital

No. of Shares


1. Ikhmas Jaya Holdings Sdn Bhd 174,500,000 29.66 - -

2. Dato Ang Cheng Siong 163,000 0.03 174,500,000 (a) 29.66

3. Datin Kun Haw Choy - - 174,500,000 (b) 29.66

4. Aura Perdana (Malaysia) Sdn Bhd - - 174,500,000 (c) 29.66

5. Dato’ Ir. Dr. Khoo Ping Sen - - 174,500,000 (c) 29.66

ANALYSIS OF SHAREHOLDINGSAS AT 2 JUNE 2020

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DIRECTORS’ SHAREHOLDINGS(According to the Register of Directors’ Shareholdings as at 2 June 2020)

No. Name of Directors

Direct Indirect

No. of Shares


No. of Shares


1. Dato’ Ang Cheng Siong 163,000 0.03 174,500,000 (a) 29.66

2. Dato’ Ir. Dr. Khoo Ping Sen - - 174,500,000 (c) 29.66

3. Ang Wei Zhen - - - -

4. Siew Mun Lout - - - -

5. Yong Kok Yee - - - -

6. Leong Kah Mun - - - -

7. Lim Kean Lam - - - -

(a) Deemed interested by virtue of his shareholdings in Ikhmas Jaya Holdings Sdn Bhd and Aura Perdana (Malaysia) Sdn Bhd pursuant to Section 8 of the Companies Act, 2016 (the Act).

(b) Deemed interested by virtue of her shareholding in Aura Perdana (Malaysia) Sdn Bhd pursuant to Section 8 of the Act.

(c) Deemed interested by virtue of its/his shareholdings in Ikhmas Jaya Holdings Sdn Bhd pursuant to Section 8 of the Act.

In the subsidiaries

By virtue of their substantial interests in the shares of the Company, Dato’ Ang Cheng Siong and Dato’ Ir. Dr. Khoo Ping Sen are also deemed interested in the shares of the subsidiaries to the extent the Company has an interest.

LIST OF 30 LARGEST SHAREHOLDERS AS AT 2 JUNE 2020

No. Name of Shareholders Holdings %

1 AMSEC NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT - AMBANK (M) BERHAD FOR IKHMAS JAYA HOLDINGS SDN BHD (SMART)

174,500,000 29.66

2 WONG KOK LEONG 25,000,000 4.25

3 LEE CHOON HOOI 19,500,000 3.31

4 ONG TAO CHIEN 18,000,000 3.06

5 DATIN SRI WONG PUI YOONG 15,796,300 2.68

6 KENANGA NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR CHOI AH LOY

10,000,000 1.70

7 KHOO YOK KEE 7,386,200 1.26

8 DATO’ SRI NG TECK LONG 7,187,100 1.22

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No. Name of Shareholders Holdings %

9 RHB CAPITAL NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR CHOI AH LOY

7,000,000 1.19

10 SEAH CHIN LENG 6,867,100 1.17

11 MAYBANK NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR DINERSTY GROUP SDN BHD

6,500,000 1.10

12 PUBLIC NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR TEE KIM HEW

4,894,500 0.83

13 DINERSTY GROUP SDN BHD 4,000,000 0.68

14 TONG THIAN TIONG 3,665,000 0.62

15 KANG TEE YONG @ KANG KOK TEE 3,500.000 0.59

16 AMSEC NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR FOO TIANG HOW

2,810,000 0.48

17 HLIB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR ABU SAHID BIN MOHAMED

2,153,400 0.37

18 FOO TIAN LEE 2,128,600 0.36

19 TAN SWEE HUANG 2,045,000 0.35

20 CIMSEC NOMINEES (TEMPATAN) SDN BHDCIMB BANK FOR SAM MUN LOONG

2,000,000 0.34

21 NG CHOON KIAT 2,000,000 0.34

22 CHAN POH CHENG 1,907,300 0.32

23 KHAW TOAY HEE @ KHO SHEUE HEE 1,900,000 0.32

24 PINTARAS BINA SDN BHD 1,800,000 0.31

25 KHOO PING KAW 1,794,500 0.31

26 NG CHEE HAO 1,600.000 0.27

27 H’NG SWEE LENG 1,500,000 0.25

28 LEE ENG KEONG 1,450,000 0.25

29 AFFIN HWANG INVESTMENT BANK BERHAD 1,390,500 0.24

30 PUBLIC NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR ENG CHEW ONG

1,363,000 0.23

LIST OF 30 LARGEST SHAREHOLDERS AS AT 2 JUNE 2020 (CONT’D)

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