scgm profile - latest announcement thermoforming machines and as at 30 april 2017, scgm ... as part...

SCGM PROFILE SCGM Bhd is one of the largest food packaging producer in Malaysia.

The Group is located at Kulai, Johor, Malaysia and it offers a one-stop solution for all consumers and industrial packaging needs. The Group has invested in advance thermoforming machines and as at 30 April 2017, SCGM Bhd has the capabilities to produce more than 32.5 million kg of extrusion sheets.

Providing in house mould capabilities with 5 Computer Numerical Control Machines, SCGM Bhd is able to provide faster turnaround time to our customers for those who wish to customise their products and to cater to their packaging needs.

SCGM Bhd has been listed on the main market of Bursa Malaysia since 2008 and with a market capitalisation of RM588 million as at 30 April 2017.

VISION AND MISSIONOUR VALUESSCGM PROFILE

OVERVIEW

TABLE OFCONTENTS

2017 Highlights

Five Years Group Financial Highlights

Quarterly Financial Highlights

Financial Calendar 2017

Investor Relations

Corporate Milestones

Commitment to Service Quality and Excellence

23568

1012

MANAGEMENT INSIGHTS 2017

Message from the Chairman

Management Discussion and Analysis

1518

FINANCIAL STATEMENTS 2017

Share Information

Directors’ Report

Statement by Directors and Statutory Declaration

Independent Auditors’ Report

Statements of Financial Position

Statements of Profit or Loss and Other

Comprehensive Income

Statements of Changes in Equity

Statements of Cash Flows

Notes to the Financial Statements

222329303536

373941

OUR GROUP STRUCTURE

Corporate Structure

Corporate Information

Profile of Directors

Business Process

Research & Development

969798

106115

CORPORATE GOVERNANCE

Statement on Corporate Governance

Statement on Risk Management and Internal Control

Audit Committee Report

118136144

OUR PEOPLE

Corporate Social Responsibility

Biodiversity and Cultural Report

151154

HIGHLIGHTS & ACHIEVEMENTS 2017

Notable Achievements

Corporate Event Highlights

Media Highlights

155157160

ADDITIONAL INFORMATION

2017HIGHLIGHTS

Leadership Transition

Dato’ Sri Lee Hock Guan was promoted asDeputy Managing Director.

Expansion Plans

Extrusion capacity will be increased to62.6 million kg per annum.

Tenders awarded totalling RM 80 million forthe construction of new plant located atSengkang, Kulai.

Environment

To preserve the environment by adoptingdegradable addictives used in theproduction process.

Promoting exclusively degradable lunch boxes/food trays for SEA Games in August 2017.

Innovation

First in Asean to deploy 2-color extrusionmachine

Awards

Recipient for the Best Under Billion Awards- Best Return on Assets- Best Enterprise Value Growth- Best in Transparency- Golden Eagle Award

Analysis of Shareholdings

Notice of Tenth Annual General Meeting

Share Buy-Back Statement

List of Properties

Proxy Form

162165170178

3

SCGM BHD | Annual Report 2017

FIVE YEARS GROUPFINANCIAL HIGHLIGHTS

SCGM Bhd

Revenue Segmentation Geographical

Revenue

Profit After Tax

Total Assets

Total Equity

Return on Total Assets

Return on Equity

Dividend Per Share (sen)

Dividend Paid (RM million)

Payout Ratio

Local

Export

TOTAL

Local

Export

Food

Electronic, Extrusion, Medicaland Others

Total

Food

Electronic, Extrusion, Medicaland Others

Customer

74.64

22.25

96.89

75.60

24.70

100.30

78.71

27.92

106.63

79.39

54.12

133.51

95.70

83.08

178.78

56.96

39.93

96.89

58.8%

41.2%

56.52

43.78

100.30

56.4%

43.6%

57.42

49.21

106.63

53.8%

46.2%

70.61

62.90

133.51

52.9%

47.1%

110.39

68.39

178.78

61.7%

38.3%

96.89

7.84

78.90

65.90

10.2%

12.4%

3.0

4.0

51.0%

100.30

11.49

84.78

73.39

14.0%

16.5%

6.1

8.0

69.6%

106.63

15.46

90.63

73.64

17.6%

21.0%

7.9

10.4

67.3%

133.51

20.19

130.52

110.97

18.3%

21.9%

10.0

13.2

65.4%

178.78

23.00

228.11

164.80

12.8%

16.7%

8.0

11.1

48.3%

FY2013 FY2014 FY2015 FY2016 FY2017

77.0%

23.0%

75.4%

24.6%

73.8%

26.2%

59.5%

40.5%

53.5%

46.5%

4


FIVE YEARS GROUPFINANCIAL HIGHLIGHTS

Revenue (RM’mil) Profit After Tax (RM’mil) Dividend Per Share (sen)

Total Assets (RM’mil)Dividend Payout

Dividend Paid (RM’mil) Payout Ratio

Minumum 40%dividend policy

Total Equity (RM’mil)

Geographical Segmentation Customer Segmentation Earning Per Share(sen)#

FY2013 FY2014 FY2015 FY2016 FY2017

96

.9

100

.3

106

.6

133

.5

178

.8

FY2013 FY2014 FY2015 FY2016 FY2017

7.8

11.5

15.5

20

.2

23

.0

FY2013 FY2014 FY2015 FY2016 FY2017

3.0

6.1

7.9

10.0

8.0

5.4

0

7.9

1

10.6

5

13.9

1

15.8

4FY2013 FY2014 FY2015 FY2016 FY2017

4.0

8.0

10.4

13.2

11.1

51.0%

69.6%67.3%

65.4%

48.3%

FY2013 FY2014 FY2015 FY2016 FY2017

78

.9

84

.8

90

.6

130

.5

22

8.1

FY2013 FY2014 FY2015 FY2016 FY2017

65.9 73.4 73.6 111.0 164.8

FY2013 FY2014 FY2015 FY2016 FY2017FY2013 FY2014 FY2015 FY2016 FY2017

41.

2%

43

.6%

46

.2%

47

.1%

38

.3%

58

.8%

56

.4%

53

.8%

52

.9%

61.

7%

Food Electronic Extrusion, Medicaland Others

FY2013 FY2014 FY2015 FY2016 FY2017

77

.0%

75

.4%

73

.8%

59

.5%

17.4

%

16.9

%

20

.4%

36

.8%

5.6% 7.7%5.8%

3.7%

53

.5%

43

.3%

3.2%

#based on 145.2 million shares

Local Export

5


FY2017 Quarterly Revenue (RM’mil)

1Q17 2Q17 3Q17 4Q17

37

.9

42

.0

46

.0

52

.9

FY2017 Quarterly PBT (RM’mil)

FY2017 Earning Per Share (sen)#

6.4

6.5

7.1

6.6

FY2017 Quarterly PATMI (RM’mil)

5.5

5.4

7.0

5.1

FY2017 Geographical Segmentation5

7.2

%

59

.5%

60

.0%

68

.3%

42

.8%

40

.5%

40

.0%

31.

7%

Local Export

FY2017 Customer Segmentation

56.9%

39.2%

3.9%

53.9% 54.0%

3.9% 3.6%

42.2% 42.4%

50.4%

1.7%

47.9%

Food Electronic Extrusion, Medical and Others

QUARTERLYFINANCIAL HIGHLIGHTS

1Q17 2Q17 3Q17 4Q17

3.8

0

3.7

4

4.8

1

3.5

0

1Q17 2Q17 3Q17 4Q17

1Q17 2Q17 3Q17 4Q17

1Q17 2Q17 3Q17 4Q17

1Q17 2Q17 3Q17 4Q17

#based on 145.2 million shares

7


6


FINANCIALCALENDAR 2017

23 June

June

2016

Announced 4Q16unaudited financial results

Declared Fourth interimdividend of 2 sen

per share in respectof FY2016

Proposed renewal ofshareholders’ approval

for Share Buy-Backby the Company.

11Issued Share Buy-Back

Statement andAnnual Report 2016

282016

August AugustIssued Notice of Ninth AnnualGeneral Meeting (“9th AGM”)

Revision to utilisationof proceeds from

the Private Placement I

Proposed PrivatePlacement II

102016

September2

2016

2016

7Convened EGM

- Shareholders approvedthe Proposed Private

Placement II

October2016 8

Press release - SCGM Bhdsets to commence

constructionof new factory

February2017

24Completed the Private

Placement of upto 13.2 million newordinary shares.

February 2017

8Announced 2Q17

unaudited financial results

Declared second interimdividend of 2 sen per share

in respect of FY2017

December2016

28Proposed Bonus Issue of

Share and ProposedBonus Issue of

Warrants

April2017

Convened 9th AGM

Announced 1Q17 unauditedfinancial results

Declared first interimdividend of 2 sen


March15 2017Announced 3Q17

unaudited financial results

Redesignated Dato’ Sri Lee Hock Guan asDeputy Managing Director.

Declared third interimdividend of 2 sen


20Issued Notice of Extraordinary

General Meeting (“EGM”)

September 2016

September201621

Issued Circular andNotice of EGMto shareholders

8


INVESTORRELATIONS

The various global developments and a slew of internal updates, from 1 May 2016 to 30 April 2017

necessitated constant and timely Investor Relations activities to facilitate accurate information

flow.

As part of its fund-raising exercises to finance its expansion plans, SCGM successfully undertook

a private placement involving the issuance of 13.2 million placement shares at RM3.20 apiece,

which raised RM42.2 million in proceeds for the Group’s growth initiatives.

On 8 February 2017, SCGM announced that it had awarded contracts totalling RM54 million to

commence construction of its new manufacturing facility in Kulai, Johor. The new plant, which is

slated for completion in end 2018, would bump up the Group’s extrusion capacity to 62.6 million

kilogrammes per year (kg/year) from 36.0 million kg/year at the time of announcement, hence

enabling SCGM to meet current and future demand.

SCGM also proposed on 28 April 2017 to undertake a 1-for-3 Bonus Issue entailing the issuance of

48.4 million new SCGM shares, together with free warrants on a 2-for-15 basis involving 19.4

million warrants. Both exercises, to be implemented concurrently, are meant to encourage trading

liquidity of SCGM shares, enable greater participation by investors and potentially broaden the

shareholder base. Assuming the theoretical exercise price of Warrants of RM4.05 and full

conversion within the three years, the Warrants exercise would potentially raise up to RM78.4

million in proceeds for the Group.

These exercises clearly demonstrate SCGM’s growth path in terms of increasing its production

capacity and enlarging its footprint in the local and international markets, so as to become the

premier provider of thermo-form food and beverage packaging products in the region.

Corporate Announcements

Date

10 Aug 2016

8 Feb 2017

24 Feb 2017

28 Apr 2017

Bursa Announcement

Bursa Announcement

and Press Release

Bursa Announcement

Bursa Announcement

Announcement of Private Placement

Contracts awarded for commencement of construction

of new manufacturing facility in Kulai

Listing of Private Placement shares

Announcement of 1-for-3 Bonus Issue and 2-for-15

Warrant Issue

Events

9


As part of SCGM’s initiatives to provide timely and up-to-date reports on the Group’s operational

and financial performance, the key management conducted four group investor briefings for

institutional fund managers and analysts in FY2017. These were complemented by a series of

one-on-one investor meetings and conference calls for those who could not attend in person. We

met with approximately 280 analysts and fund managers throughout FY2017.

We also ensured that the financial results, investor presentations and press releases were sent to

interested parties and made available immediately on the Group’s Investor Relations website.

Furthermore we continued to update both the buy and sell-side during pre-closed-period via site

visits and/or one-on-one meetings, to ensure that the investment community is kept abreast of

latest developments. SCGM welcomed more than 10 fund managers and analysts to our premises in

Kulai, during the financial year.

AGM/EGM

SCGM held its Ninth Annual General Meeting (“9th AGM”) on 2 September 2016. The Chairman

presented the 2016 financial performance and outlined the Group’s priorities for 2017. Senior

management and the Board of Directors took note of shareholders’ feedback and addressed

queries on both the financial performance and operational strategies.

Investor briefings, meetings and site visits

Investor briefings:

Date

5 Sep 2016

13 Dec 2016

16 Mar 2017

23 June 2017

Events

Investor Briefing and Conference Call




In respect of Financial Results Announcement

1st Quarter Unaudited Financial Results

2nd Quarter Unaudited Financial Results

3rd Quarter Unaudited Financial Results

4th Quarter Unaudited Financial Results

10 CORPORATEMILESTONES


Lee Soon Seng Plastic Industries Sdn Bhd started the business on

4th May 1984 with 2 semi auto vacuum forming machines and 8 employees.

1984

Lee Soon Seng Plastic Industries

1992 1996Expanded facilities to

40,000 sq feet

2001Sijil Anugerah

ISO 9002

2004

Our FirstHIPS and PPExtrusion machine.

2008Listed in

Kuala LumpurStock Exchange(KLSE) on 28th February.

LSSPI is fully owned by SCGM Bhd.

built up area.

Built-up area : 15,000 sq ftLand Area : 30,000 sq ft

Construction of a new factory

11


2009

2013

2009 11

Expanded facilities to

170,000 sq feetbuilt up area.

2015

2016

2017

To save the only planet we live - Earth.

We produce Polylactic Acid PLAplastic sheet which is 100% from plant.

Our "Hygienic" PP disposable cups fully automation machine is born. Single line process from resin to packaging.

Our latest arrival

3 station“press forming” machine.

*All illustrations are artist's impressions only

to be ready in December 2018.758,638 sq ft*

Our latest manufacturing plant witha total build-up area of

*PHASE I : 603,637 sq ft / PHASE II : 155,001 sq ft

12


Since SCGM Group’s early days, customers

have been core to everything we do. The first

of our five SCGM Group Values is that we are

customer-centric. We exist for our customers

and we sell products that our customers

understand and value. We exist to serve the

needs of our discerning customer needs as

well as to cater to their wants.

The second of our SCGM Group values is high

performance. We work hard and we work

strategically for customers, staff and other

stakeholders. Internally, we measure,

differentiate and recognise our people

according to their individual contributions

while aligning everyone to the performance of

the company as a whole. Customers can

therefore expect our people to always strive to

excel in their service levels.

In placing the needs of our customers, we have

segmented our response to ensure that we can

serve them in the manner to which they are

accustomed. We are responsible for ensuring

that customer are delivered with the right

customised packaging solutions, often by

understanding what does the customers wants

and how to add value to their products.

For smaller companies we have different teams

leading customer relationship management

depending on the customer’s primary

requirements, and then cross-selling other

suitable products of the Group.

CUSTOMER DRIVEN

COMMITMENT TO SERVICE QUALITYAND EXCELLENCE

Anticipating customers’ needsEffectively fulfilling customers’ wants

13


14


DATO’ SRI LEE HOCK SENGExecutive Chairman

DATO’ SRI LEE HOCK CHAIManaging Director

MESSAGE FROM THE CHAIRMANDATO’ SRI LEE HOCK SENG

ECONOMIC AND SECTOR REVIEW

Gross Development Product (GDP) growth in

South East Asia increased marginally to 4.7%

in 2016 according to the Asian Development

Bank (ADB), compared to 4.4% previously.

The expansion was led by high growth in

Philippines and Vietnam, which overshadowed

the impact of slower growth from Thailand.

Even so, the Malaysian economy was muted in

2016, with global crude oil prices remaining

low on lack of demand by major economies as

well as the oversupply due to the Organization

of Petroleum Exporting Countries removing

restrictions on crude oil production. These

factors cast a pall on domestic consumption

as well as corporate and public sector

spending, leading Malaysia to post slower GDP

growth of 4.2% in 2016, versus 5.0% in 2015.

Despite the dampened outlook overall,

demand for thermo-form packaging

continued its strong uptrend during the year.

The biggest jump in demand for our products

was from the local market, where an increasing

number of states began enforcing the ban on

polystyrene packaging products for food and

beverage (F&B) items. Our food packaging

products are viable replacements for the

polystyrene, as they meet the required

environmental and health safety standards.

Against this backdrop, SCGM achieved yet

another successful year, charting record

breaking financial results for FY2017.

MANAGEMENTINSIGHTS 2017

15


Dear Shareholders,

I am very pleased to report that SCGM Bhd

(SCGM or the Group) achieved a remarkable

financial year ended 30 April 2017 (FY2017),

reaching new heights as we captured the

tremendous opportunities in the food packaging

sector.

16



FUTURE PROSPECTS

Bank Negara Malaysia has forecasted an

improved GDP growth of between 4.3% to

4.8% for 2017, spurred by strong exports

across major sectors of manufacturing, mining

and construction. This is expected to also

positively enhance domestic private consumer

spending and spur further investments by the

public and private sector entities.

For the South East Asia region, ADB predicts

that GDP growth is expected to remain at a

similar level of 4.8% in 2017 in comparison to

2016, with all economies expected to show a

stable growth level.

With the uptrend in the local economy and

stable regional expansion, coupled with

increasing awareness of environmental care,

we believe that the prospects for the F&B

sector and thermo-form packaging industry

are bright. We will push forward by using our

expertise to serve our existing customers as

well as enter new markets to sustain our

growth pace for the long-term.

CORPORATE EXERCISES

• Private placement

On 24 February 2017, SCGM completed a 10%

private placement exercise with the issuance

and listing of 13.2 million new ordinary shares

on the Main Market of Bursa Malaysia

Securities Berhad.

With the issue price of new shares of RM3.20

apiece, the Group raised RM42.2 million in

proceeds, of which RM41.6 million would be

allocated as capital expenditure for the

construction of our new factory, and the

balance RM0.6 million to defray expenses

related to the corporate exercise.

The private placement increased SCGM’s

share base to 142.5 million shares, from 132.0

million shares previously.

• Bonus Issue and Warrant Issue

On 28 April 2017, the Group proposed a 1-for-3

bonus issue of 48.4 million shares and 2-for-15

issue of 19.4 million free warrants. At an

indicative exercise price of RM4.05 per

warrant, the exercise is expected to raise

RM78.4 million in gross proceeds to finance

the Group’s daily operations.

The bonus issue of shares and warrants

(assuming fully exercised) would increase

SCGM’s share base from 142.5 million shares

to 213.0 million shares. The increase in share

base is aimed at improving the market trading

liquidity of the company and enabling

shareholders participate in the Group’s

growth story.

The exercises are subject to shareholders’

approval at the extraordinary general meeting

on 7 July 2017.


CORPORATE SOCIAL RESPONSIBILITY

SCGM has always held in high regard its

responsibility in looking after the welfare of

the larger community, encompassing our

employees, the general public and the

environment. This is a basic tenet of our

operations and part of our contribution to

enhance the wellbeing of society.

The various initiatives undertaken by the

Group to accomplish this objective are

detailed in the Sustainability Report in this

Annual Report.

APPRECIATION

I would like to sincerely extend my gratitude to

the Board of Directors, management team and

valued employees of SCGM for giving their all

in achieving another record breaking year.

Despite the economic issues faced during the

year, all of your sweat and blood that was put

in has paid off, and I look forward to another

great year ahead with all of you.

I would also like to thank all our customers,

business associates and shareholders for

continuing to believe in us and look forward to

your continuous support in the coming year.

Thank you.

Dato’ Sri Lee Hock Seng

Executive Chairman of SCGM Bhd

MANAGEMENT INSIGHTS 2017 17

MANAGEMENT DISCUSSIONAND ANALYSIS

MANAGEMENTINSIGHTS 2017

18

OPERATIONS HIGHLIGHTS

One of the Group’s key successes in FY2017

was the significant increase in our customer

base in both the local and regional arenas. This

was helped by a fundamental shift in the

external environment, as well as SCGM’s ability

to adapt its products to suit the market.

For one thing, environmental and health safety

concerns led to various states in Malaysia

banning the usage of polystyrene packaging

for food, including Selangor, Federal Territory

of Kuala Lumpur, Perak, Melaka, Penang and

Johor. Resulting from this, thermo-form food

packaging, being an eco-friendly alternative,

became highly sought-after by vendors,

manufacturers and retailers in the affected

areas.

SCGM, being a trusted name in the industry for

many decades, was thereby able to meet this

escalated demand in the domestic market, by

producing more thermo-form lunchboxes and

extending our distribution channel to include

distributors in urban and suburban areas.

SCGM secured 131 new customers throughout

Malaysia during the year.

SCGM also expanded its reach in other

countries with increased exports of our

thermo-form products. The Group added 17

new foreign customers in the year under

review, from countries such as Australia, India,

Indonesia, Philippines, Singapore, China, Chile

and Hong Kong.


Indeed, FY2017 has proven to be yet another

year of accomplishments for SCGM, as we made

swift progress in our expansion plans, in our

quest towards becoming a leading provider of

thermo-form F&B packaging products for the

region. SCGM continued to go from strength to

strength in the year under review.

19


In order to meet the higher demand, SCGM

commissioned additional machinery of two

extruders and four thermoforming machines

in rented premises in Kulai in December 2016.

The additional facility increased the Group’s

production capacity by 11.0 million

kilogrammes (kg) per year, adding to the 25.0

million kg per year in the existing factory.

These milestones pushed SCGM into achieving

its best-ever financial performance in FY2017.

FINANCIAL REVIEW

I am pleased to report that SCGM attained

record-breaking revenue for the ninth

consecutive year in FY2017. Group sales rose

33.9% to RM178.8 million in FY2017, compared

to RM133.5 million previously.

The unabated demand in the local market

prompted a strong 56.4% jump in sales to

RM110.4 million in FY2017, compared to

RM70.6 million a year ago. Export sales also

recorded a gain of 8.7% to RM68.4 million,

versus RM62.9 previously.

Group profit before tax stood at RM26.6

million in FY2017, increasing by a marginal 3.1%

from RM25.8 million a year ago.

During FY2017, the Group incurred higher

operating costs of utilities, staff and raw

materials. It was noted that resin prices were

on an upward trend in the second half of

FY2017, which resulted in a time lag in cost

pass-throughs.

Even so, SCGM still achieved its highest net

profit in its corporate history, with bottom line

increasing 13.9% to RM23.0 million, versus

RM20.2 million in a year ago. Correspondingly,

basic EPS also rose to 17.1 sen from 16.2 sen a

year ago. This excellent net profit was helped

by the Group’s enjoyment of Reinvestment

Allowance, in recognition of qualifying capital

expenditure.

The Group continued to maintain a healthy

balance sheet as at 30 April 2017, with cash

and bank balances and other financial asset

amounting to RM56.8 million and total

borrowings equalling RM29.7 million. Against

shareholders’ funds of RM164.8 million, this

places SCGM in a net cash position, and thus

adequately able to fund its growth plans.

However, the Group’s Return on Equity (ROE)

dipped during the year to 16.7% from 21.9%

previously, due to the larger base of

shareholders’ funds resulting from the

corporate exercises. Return on Assets (ROA)

had also decreased to 12.8% in FY2017 from

18.3% previously, attributable to a higher total

asset value from acquisition of new machinery

and three parcels of land which are earmarked

for the Group’s near-term expansion.


20


DIVIDEND

In respect of FY2017, the Group paid four

interim dividends of 2.0 sen, 2.0 sen, 2.0 sen

and 2.0 sen in the first, second, third and

fourth quarters respectively, amounting to a

total dividend of 8.0 sen per share. This

translates to a total dividend payout of RM11.1

million representing 48.3% of total FY2017 net

profit.

The dividend payout is in line with the Group’s

dividend policy instituted since FY2015, to pay

no less than 40% of annual net profit as

dividend to our shareholders.

We are immensely appreciative to our

shareholders for the vote of confidence over

the past year and hope to count on your

continued support going forward.

GROWTH PROSPECTS

We are mindful of the vast potential in the

thermo-form food packaging, in light of

greater environmental consciousness and

health safety, as well as constant changes in

lifestyles. Therefore, we are aligning our

strategies to continue our upward trajectory in

the coming years.

i. Increasing customer base to improve

market share

With certain states already banning the use

of polystyrene packaging, it is widely

anticipated that other states would follow

suit within the next few years. This is

expected to open a pathway for us to

obtain new customers nationwide.

Besides gaining new customers locally, we

are aiming to increase our market share in

existing export markets, especially

countries in the South East Asian region

and Australia.

We will continue to enhance our product

quality to provide high-standard and

innovative products to both our current

and potential customers.

ii. Introduce new line of eco-friendly food

packaging

In support of global efforts to reduce

carbon footprint, the Group is proud to

introduce into the market degradable

thermo-form packaging, developed in

collaboration with Sugianto Tanto - the

founder and world - renowned innovator

of eco - tech plastic solutions.

SCGM would commercially produce this

range of degradeable thermo-form plastic

packaging in the financial year ending 30

April 2018 (FY2018). Notably, our

‘Benxon’-brand Degradable Plastic

Packaging has been awarded the license

by SIRIM to use the Eco-Label Mark from

June 2017 onwards.

As a further testament to the Group’s

support for the national environmental -

friendly agenda, SCGM is the exclusive

provider of degradable food lunchboxes

and trays for the 29th South East Asian

Games and 9th ASEAN Para Games

(KL2017) in August and September 2017

respectively.


21


Additionally, we are aware of that

constantly-changing lifestyles of end-users

necessitates the Group’s continued

research and development (R&D) to

generate innovative and high quality

products that meet evolving requirements.

iii. Increasing production capacity

In view of the continuous uptrend in

thermos-form packaging from the local and

regional markets, the Group has put in

motion plans to expand our production

capacity to meet the demand.

Thus far, the Group is making good

progress in the construction of a second

factory in Kulai, which is expected to be

completed in December 2018. The capital

expenditure (CAPEX) for the second

factory is estimated to be approximately

RM125.0 million, financed by proceeds from

the completed private placement as well as

internal funds. Upon completion, the

Group’s extrusion capacity is expected to

increase to 62.6 million kg per year,

compared to 36.0 million kg per year

currently.

In addition, the Group also intends to set up

presence in the Klang Valley in the second

half of FY2018 to cater to lunchbox demand

in the Central Peninsular region. To this end,

SCGM plans to rent a factory in Telok

Panglima Garang, Klang to house four

thermo-form machines and two extrusion

machines, with total extrusion capacity of 5

million kg per year. The planned CAPEX of

RM20.0 million would be financed by

internal funds and/or borrowings.


In conclusion, SCGM is entering a very

promising time. We look forward to reaching

the next level and further cementing our

position as one of the leading thermo-form

plastic packaging manufacturers in the region.

Dato’ Sri Lee Hock Chai

Managing Director of SCGM Bhd

SHAREINFORMATION

22


FINANCIALSTATEMENTS 2017

Company Name

SCGM Bhd

Stock Name

SCGM

Stock Code

7247(Bursa Malaysia)

Ticket Code

Bloomberg : SCGM.MKReuters : SCGB.KL

SCGM BHD (Company No: 779028 H)

(Incorporated in Malaysia)

The Directors of SCGM Bhd have pleasure in submitting their report together with the audited

financial statements of the Group and of the Company for the financial year ended 30 April 2017.

PRINCIPAL ACTIVITIES

The Company is principally engaged in investment holding.

The principal activities of the subsidiary are disclosed in Note 7 to the Financial Statements.

There have been no significant changes in the nature of these activities of the Company and its

subsidiary during the financial year.

RESULTS

RESERVES AND PROVISIONS

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

DIVIDENDS

The amount of dividends paid and declared since the end of the last financial year were as follows:-

23


DIRECTORS’ REPORT

GroupRM

CompanyRM

Profit for the financial year

Attributable to:-

Owners of the Company

23,000,585

23,000,585

11,309,642

11,309,642

RM

2,640,000

In respect of financial year ended 30 April 2016:-

Final single tier dividend of 2 sen per ordinary share and paid on 27 July

2016

DIRECTORS’ REPORT24


DIVIDENDS (CONT’D)

The amount of dividends paid and declared since the end of the last financial year were as follows

(cont’d):-

RM

Cont’d

2,640,000

2,640,000

2,904,000

10,824,000

In respect of financial year ended 30 April 2017:-

First interim single tier dividend of 2 sen per ordinary share and paid on 7

October 2016

Second interim single tier dividend of 2 sen per ordinary share and paid on 13

January 2017

Third interim single tier dividend of 2 sen per ordinary share and paid on 14

April 2017

The Directors declared fourth interim single tier dividend in respect of the financial year ended 30

April 2017 of 2 sen per ordinary share on 21 June 2017 and payable on 25 July 2017. The financial

statements for the current financial year do not reflect this dividend. Such dividend will be

accounted for in equity as appropriation of unappropriated profit in the financial year ending 30

April 2018.

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

DIRECTORS

The Directors who held office during the financial year and up to the date of this report are as

follows:-

Dato’ Sri Lee Hock Seng (Executive Chairman)*

Dato’ Sri Lee Hock Chai (Managing Director)*

Dato’ Sri Lee Hock Guan (Deputy Managing Director)*

Lee Hock Meng (Executive Director)*

Amrik Singh Harcharan Singh (Independent Non-Executive Director)

Tang Nai Soon (Independent Non-Executive Director)

Wong Tun Boon (Independent Non-Executive Director)

*Directors of the Company and its subsidiary.

25


DIRECTORS’ INTERESTS

By virtue of Dato’ Sri Lee Hock Seng, Dato’ Sri Lee Hock Chai, Dato’ Sri Lee Hock Guan and Mr. Lee

Hock Meng’s direct and indirect interest in the Company, they are also deemed to have interest in

shares of the subsidiary to the extent that the Company has an interest under Section 8 of the

Companies Act, 2016.

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangement subsisted to which the Company is a

party, with the object or objects of enabling the Directors of the Company to acquire any benefits

by means of the acquisition of shares in or debentures of the Company or any other body

corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive

any benefit (other than as disclosed in Note 27 to the Financial Statements) by reason of a contract

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

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

According to the Register of Directors’ Shareholdings, the beneficial interests of those who were Directors at the end of the financial year in shares of the Company are as follows:-

Number of ordinary shares

Dato’ Sri Lee Hock Seng - direct interest - indirect interest

Dato’ Sri Lee Hock Chai - direct interest - indirect interest

Dato’ Sri Lee Hock Guan - direct interest - indirect interest

Lee Hock Meng - direct interest - indirect interest

Amrik Singh Harcharan Singh- direct interest- indirect interest

Tang Nai Soon

Wong Tun Boon

As at

1.5.2016 Bought Sold

As at

30.4.2017

13,054,71122,961,500

9,283,42922,961,500

9,283,43322,961,500

8,893,42922,961,500

63,00024,000

90,000

180,000

59,600-

70,000-

70,000-

--

--

20,000

-

--

--

--

--

--

-

-

13,114,31122,961,500

9,353,42922,961,500

9,353,43322,961,500

8,893,42922,961,500

63,00024,000

110,000

180,000

DIRECTORS’ REPORT

26


DIRECTORS’ REMUNERATION

The Directors’ remuneration is disclosed in Notes 23 and 26 to the Financial Statements.

There was no indemnity given to or insurance effected for the Directors and Officers of the

Company.

ISSUE OF SHARES AND DEBENTURES

During the current financial year, the Company had increased its issued and fully paid-up ordinary

share capital from RM66,000,000 to RM132,586,423 by:-

(a) issuance of 13,200,000 new ordinary shares at RM3.20 each through a private placement; and

(b)

All the new ordinary shares issued during the financial year ranked pari passu in all respects with

the existing ordinary shares of the Company.

There were no issuance of debentures 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:-

(a)

(b)

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

(a)

(b)

(c)

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

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

been written off and adequate provision had been made for doubtful debts; and

the transfer of share premium pursuant to Section 618(2) of the Companies Act, 2016

amounting to RM24,346,423 and became part of the Company’s share capital. There is no

impact in the numbers of ordinary shares in issue as a result of this transfer.

which would render the amounts written off for bad debts or the amount of the provision for

doubtful debts in the financial statements of the Group and of the Company inadequate to any

substantial extent; or

which would render the values attributed to current assets in the financial statements of the

Group and of the Company misleading; or

which have arisen which would render adherence to the existing method of valuation of assets

or liabilities of the Group and of the Company misleading or inappropriate; or

to ensure that any current assets which were unlikely to be realised in the ordinary course of

business including the value of current assets as shown in the accounting records of the Group

and of the Company have been written down to an amount which the current assets might be

expected so to realise.

DIRECTORS’ REPORT

27


OTHER STATUTORY INFORMATION (CONT’D)

At the date of this report, the Directors are not aware of any circumstances:- (cont’d)

(d) not otherwise dealt with in this report or the financial statements which would render any

amount stated in the financial statements misleading.

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

(a)

(b)

In the opinion of the Directors:-

(a)

(b)

(c)

SIGNIFICANT EVENTS

The significant events are disclosed in Note 30 to the Financial Statements.

AUDITORS’ REMUNERATION

The Auditors’ Remuneration is disclosed in Note 23 to the Financial Statements.

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

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

no contingent liability or other liability has become enforceable or is likely to become

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

opinion of the Directors, will or may affect the ability of the Group and of the Company to meet

their obligations as and when they fall due;

any contingent liability of the Group and of the Company which has arisen since the end of the

financial year.

the results of operations of the Group and of the Company during the financial year were not

substantially affected by any item, transaction or event of a material and unusual nature; and

there has not arisen in the interval between the end of the financial year and the date of this

report any item, transaction or event of a material and unusual nature likely to affect

substantially the results of operations of the Group and of the Company for the current

financial year in which this report is made.

DIRECTORS’ REPORT

28


AUDITORS

The Auditors, Messrs SJ Grant Thornton have expressed their willingness to continue in office.

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

Directors.

............................................................... DATO’ SRI LEE HOCK SENG DIRECTORS ............................................................... DATO’ SRI LEE HOCK CHAI

Johor Bahru

28 June 2017

)))))))))))))))

DIRECTORS’ REPORT

29


STATEMENT BY DIRECTORS

STATUTORY DECLARATION



In the opinion of the Directors, the financial statements set out on pages 35 to 93 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 30 April 2017 and of their

financial performance and cash flows for the financial year then ended.

In the opinion of the Directors, the information set out on page 94 has been compiled in

accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised

Profits or Losses in the Context of Disclosures pursuant to Bursa Malaysia Securities Berhad Listing

Requirements, issued by the Malaysian Institute of Accountants, and presented based on the

format prescribed by Bursa Malaysia Securities Berhad.

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

Directors.

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

DATO’ SRI LEE HOCK SENG DATO’ SRI LEE HOCK CHAI

Johor Bahru

28 June 2017

I, Ng Chye Huat, being the Officer primarily responsible for the financial management of SCGM Bhd,

do solemnly and sincerely declare that to the best of my knowledge and belief, the financial

statements set out on pages 35 to 93 and the supplementary information set out on page 94 are

correct and I make this solemn declaration conscientiously believing the same to be true and by

virtue of the Statutory Declarations Act 1960.

Subscribed and solemnly declared by

the abovenamed at Johor Bahru in the

State of Johor this day of

28 June 2017 ..............................................................................

NG CHYE HUAT

Before me:

Commissioner for Oaths

)

)

)

)

30


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SCGM BHD

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of SCGM Bhd., (“the Company”), which comprise the

statements of financial position as at 30 April 2017, and the statements of profit or loss and other

comprehensive income, statements of changes in equity and statements of cash flows for the

financial year then ended, and notes to the financial statements, including a summary of significant

accounting policies, as set out on pages 35 to 93.

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 30 April 2017, and of their financial performance

and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting

Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) 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 (“ISAs”). Our responsibilities under those standards are further

described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our

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.

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.

SCGM BHD(Incorporated in Malaysia)

Company No: 779028 H

Key Audit Matters (cont’d) 31


Allowance for impairment of trade receivables

The riskRefer to Note 32(c) to the Financial Statements. We focused on this area because the Group has

material amount of trade receivables that are past due but not impaired. The key associate risk was

the recoverability of billed trade receivables as management judgement is required in determining

the completeness of the trade receivables provision and in assessing its adequacy through

considering the expected recoverability of the year-end trade receivables.

Our responseWe have obtained an understanding of the Group’s policy on impairment of trade receivables and

evaluated management’s judgement in calculating the allowance for impairment of trade

receivables. This includes reviewing the ageing of receivables and testing the integrity of ageing by

calculating the due date for a sample of invoices. We also checked the recoverability of outstanding

receivables through examination of subsequent cash receipts and tested the operating

effectiveness of the relevant control procedures that management has in place.

Inventory valuation

The riskThe Group holds significant amount of inventories as detailed in Note 8 to the Financial Statements.

It is subject to a risk that the inventories become slow-moving or obsolete and rendering it not

saleable or can only be sold for selling prices that are less than the carrying value. There is inherent

subjectivity and estimation involved in determining the accuracy of inventory obsolescence

provision and in making an assessment of its adequacy due to risks of inventory prices not valid and

inventory not stated at the lower of cost or net realisable value.

Our responseWe have obtained an understanding on the Group’s accounting policy in making the accounting

estimates for inventories write-down which is in line with its business environment. We have also

attended the year-end physical inventories count to validate counts performed by the Group.

Besides that, we also tested a sample of inventories to ensure that they were held at the lower of

cost and net realisable value. We have also evaluated management judgement and Group’s

accounting policy with regards to the application of provision to the inventories.

Capitalisation of property, plant and equipment and capital work-in-progress

The riskThe Group holds a significant amount of property, plant and equipment and capital work-in-progress

as at 30 April 2017 as detailed in Notes 4 and 5 to the Financial Statements respectively.

The significant level of capital expenditure requires consideration of the nature of costs incurred to

ensure that capitalisation of property, plant and equipment and capital work-in-progress meets the

specific recognition criteria as set out in MFRS 116 – property, plant and equipment, specifically in

relation to assets constructed by the Group and the application and management judgement in

assigning appropriate useful economic lives.

Key Audit Matters (cont’d)32


Capitalisation of property, plant and equipment and capital work-in-progress (cont’d)

Our responseWe have assessed the nature of property, plant and equipment and capital work-in-progress

capitalised by the Group in order to test the validity of amounts capitalised and evaluating whether

assets capitalised meet the recognition criteria as set out in MFRS 116.

We also considered whether capitalisation of assets ceased when the asset is in the location and

condition necessary for it to be capable of operating in the manner intended by the Group and that

a consistent approach was applied by the Group across all operations.

Furthermore, we challenged the useful economic lives assigned with reference to the Group’s

historical experience, our understanding of the future utilisation of assets by the Group and by

reference to the depreciation policies applied by third parties operating similar assets.

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 annual report, but does not include the financial

statements of the Group and of the Company and our auditors’ report thereon, which is expected

to be made available to us after the date of this auditors’ report.

Our opinion on the financial statements of the Group and of the Company does not cover the other

information and we do 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 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, 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.

Responsibilities of 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 MFRSs, IFRSs 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.

In preparing the financial statements of the Group and of the Company, the Directors are

responsible for assessing the Group’s and the Company’s ability 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 33


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 ISAs 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 ISAs, 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 the Group’s and of the Company’s internal control.

- 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 Directors’ 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 Group’s and the Company’s ability 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.

34


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

We communicated with the 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 provided 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 Directors, we determined those matters that were of most

significance in the audit of the financial statements of the Group and of the Company for the

current financial year and are therefore the key audit matters. We described 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

report because the adverse consequences of doing so would reasonably be expected to outweigh

the public interest benefits of such communication.

Other Reporting Responsibilities

The supplementary information set out on page 94 is disclosed to meet the requirement of Bursa

Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible

for the preparation of the supplementary information in accordance with Guidance on Special

Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of

Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the

Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities

Berhad. In our opinion, the supplementary information is prepared, in all material respects, in

accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Other Matters

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.

Johor Bahru28 June 2017

SJ GRANT THORNTON(NO. AF: 0737)

CHARTERED ACCOUNTANTS

KISHAN NARENDRA JASANI(NO: 3223/12/17(J))

CHARTERED ACCOUNTANT

35


STATEMENTS OF FINANCIAL POSITION AS AT 30 APRIL 2017

Note 2017

RM

2016

RM

2017

RM

2016

RM

Group Company

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

ASSETSNon-current assets Property, plant and equipment 4

Capital work-in-progress 5

Prepaid land lease payments 6

Investment in a subsidiary 7

Total non-current assets

Current assets Inventories 8

Trade receivables 9

Other receivables 10

Other financial asset 11

Tax recoverable

Fixed deposit with a licensed bank 12

Cash and bank balances 13

Total current assets

Total assets

EQUITY AND LIABILITIESEQUITY Share capital 14

Share premium 14

Reverse acquisition reserve 15

Unappropriated profit 16

Total equity

LIABILITIESNon-current liabilities Deferred tax liabilities 17

Finance lease creditors 18

Borrowings 19

Total non-current liabilities

Current liabilities Trade payables 20

Other payables 21

Finance lease creditors 18

Borrowings 19

Tax payable

Total current liabilities

Total liabilities

Total equity and liabilities

-

-

-

-

90,076,2367,676,292

164,247

97,916,775

25,160,710 41,191,859

4,339,63844,086,312 2,658,332

12,753,896

130,190,747

228,107,522

134,886,423

(28,227,000) 58,141,904

164,801,327

5,540,0001,545,0357,414,822

14,499,857

9,938,13218,105,579

2,279,43618,483,191

48,806,338

63,306,195

228,107,522

-

-

-

50,091,9891,228,755

166,441

51,487,185

17,105,37132,800,436

4,220,38016,764,469

59,595126,981

7,954,805

79,032,037

130,519,222

66,000,00027,227,367

(28,227,000)45,965,319

110,965,686

3,400,0003,824,471

7,224,471

5,967,1123,433,7772,296,176

632,000

12,329,065

19,553,536

130,519,222

-

-

-

134,693,256

134,693,256

-

-

-

-

-

-

151,850

151,850

134,845,106

132,586,423-

-

2,221,405

134,807,828

-

-

-

-

-

37,278 -

-

-

37,278

37,278

134,845,106

-

-

-

92,901,000

92,901,000

-

-

2,226 -

59,595 -

88,882

150,703

93,051,703

66,000,00024,927,367

-

1,735,763

92,663,130

-

-

-

-

-

388,573 -

-

-

388,573

388,573

93,051,703

36


STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 30 APRIL 2017

Note

Revenue 22

Cost of sales

Gross profit

Other income

Selling and distribution expenses

Administration expenses

Other expenses

Finance costs

Profit before tax 23

Tax (expense)/income 24

Profit for the financial year

Other comprehensive income, net of tax Items that will be/will not be reclassified subsequently to profit or loss

Other comprehensive income for the financial year, net of tax

Total comprehensive income for the financial year

Profit attributable to:- Owners of the Company

Total comprehensive income attributable to:- Owners of the Company

Earnings per share attributable to owners of the Company

Earnings per ordinary share - Basic (sen) 25

- Diluted (sen) 25

Company

Group

178,784,555

(137,833,041)

40,951,514

2,584,226

(7,851,086)

(8,001,587)

(353,174)

(726,462)

26,603,431

(3,602,846)

23,000,585

-

-

23,000,585

23,000,585

23,000,585

17.12

-

11,480,000

-

11,480,000

-

-

(170,358)

-

-

11,309,642

-

11,309,642

-

-

11,309,642

11,309,642

11,309,642

2017

RM

2016

RM

30,600,000

-

30,600,000

-

-

(896,781)

-

-

29,703,219

59,840

29,763,059

-

-

29,763,059

29,763,059

29,763,059

2017

RM

2016

RM

133,505,495

(94,455,515)

39,049,980

1,633,001

(5,849,837)

(7,805,673)

(787,240)

(482,830)

25,757,401

(5,563,172)

20,194,229

-

-

20,194,229

20,194,229

20,194,229

16.16

-


37


STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 APRIL 2017

Group

Balance at 1 May 2015 40,000,000 3,937,345 (28,227,000) 57,933,745 73,644,090

Transactions with owners:

For the financial year ended 30 April 2015

- Final single tier dividend of 4 sen

per share and paid on 18 September 2015 - - - (3,200,000) (3,200,000)


- First interim single tier dividend of 5 sen per share and paid on 15 July 2015 - - - (4,000,000) (4,000,000)

- Second interim single tier dividend of

3 sen per share and paid on 13 January 2016 - - - (3,960,000) (3,960,000)

- Third interim single tier dividend of 2 sen

per share and paid on 12 April 2016 - - - (2,640,000) (2,640,000)

- Issuance of shares from bonus issue (Note 14) 20,000,000 (1,637,345) - (18,362,655) -

- Issuance of shares from private placement (net) (Note 14) 6,000,000 24,927,367 - -

30,927,367

Total transactions with owners 26,000,000 23,290,022 - (32,162,655) 17,127,367

Profit for the financial year - - - 20,194,229 20,194,229Other comprehensive income for the

financial year - - - - -

Total comprehensive income for the

financial year - - - 20,194,229 20,194,229

Balance at 30 April 2016 66,000,000 27,227,367 (28,227,000) 45,965,319 110,965,686



- Fourth interim single tier dividend of 2 sen

per share and paid on 27 July 2016 - - - (2,640,000) (2,640,000)


- First interim single tier dividend of 2 sen

per share and paid on 7 October 2016 - - - (2,640,000) (2,640,000)

- Second interim single tier dividend of

2 sen per share and paid on 13 January 2017 - - - (2,640,000) (2,640,000)

- Third interim single tier dividend of 2 sen

per share and paid on 14 April 2017 - - - (2,904,000) (2,904,000)

- Issuance of shares from private placement (net) (Note 14) 42,240,000 (580,944) -

- 41,659,056

Total transactions with owners 42,240,000 (580,944) - (10,824,000) 30,835,056

Profit for the financial year - - - 23,000,585 23,000,585Other comprehensive income for the

financial year - - - - -

Total comprehensive income for the

financial year - - - 23,000,585 23,000,585

Transfer pursuant to Section 618(2) of Companies Act, 2016 (Note 14) 26,646,423 (26,646,423) - - -

Balance at 30 April 2017 134,886,423 - (28,227,000) 58,141,904 164,801,327

Non-distributable DistributableReverse

Share Share acquisition Unappropriated Totalcapital premium reserve profit equityRM RM RM RM RM

Attributable to equity holders of the Company

38


STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 APRIL 2017 (CONT’D)


Distributable

Share Share Unappropriated

capital premium profit Total

RM RM RM RM

Company

Balance at 1 May 2015 40,000,000 1,637,345 4,135,359 45,772,704



- Final single tier dividend of 4 sen per share and paid on 18 September 2015 - - (3,200,000) (3,200,000)


- First interim single tier dividend of 5 sen per share and paid on 15 July 2015 - - (4,000,000) (4,000,000)

- Second interim single tier dividend of 3 sen per share and paid on 13 January 2016 - - (3,960,000) (3,960,000)

- Third interim single tier dividend of 2 sen per share and paid on 12 April 2016 - - (2,640,000) (2,640,000)

- Issuance of shares from bonus issue (Note 14) 20,000,000 (1,637,345) (18,362,655) -

- Issuance of shares from private placement (net) (Note 14) 6,000,000 24,927,367 - 30,927,367

Total transactions with owners 26,000,000 23,290,022 (32,162,655) 17,127,367

Profit for the financial year - - 29,763,059 29,763,059

Other comprehensive income for the financial year - - - -

Total comprehensive income for the financial year - - 29,763,059 29,763,059

Balance at 30 April 2016 66,000,000 24,927,367 1,735,763 92,663,130



- Fourth interim single tier dividend of 2 sen per share and paid on 27 July 2016 - - (2,640,000) (2,640,000)


- First interim single tier dividend of 2 sen per share and paid on 7 October 2016 - - (2,640,000) (2,640,000)

- Second interim single tier dividend of 2 sen per share and paid on 13 January 2017 - - (2,640,000) (2,640,000)

- Third interim single tier dividend of 2 sen per share and paid on 14 April 2017 - - (2,904,000) (2,904,000)

- Issuance of shares from private placement (net) (Note 14) 42,240,000 (580,944) - 41,659,056

Total transactions with owners 42,240,000 (580,944) (10,824,000) 30,835,056

Profit for the financial year - - 11,309,642 11,309,642

Other comprehensive income for the financial year - - - -

Total comprehensive income for the financial year - - 11,309,642 11,309,642

Transfer pursuant to Section 618(2) of Companies Act, 2016 (Note 14)

Non-distributable

24,346,423 (24,346,423) - -

Balance at 30 April 2017 132,586,423 - 2,221,405 134,807,828

Attributable to equity holders of the Company

39


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 APRIL 2017

Note 2017 2016 2017 2016RM RM RM RM

OPERATING ACTIVITIES

Profit before tax 26,603,431 25,757,401 11,309,642 29,703,219

Adjustments for:- Allowance for impairment of receivables 201,882 53,588 - - Allowance for impairment of receivables no longer required (7,400) - - -

Amortisation of prepaid land lease payments 2,194 2,194 - - Bad debts written off - 56 - - Depreciation of property, plant and equipment 8,403,119 6,113,573 - - Distribution reinvestment income (442,613) (300,771) - - Dividend income - - (11,480,000) (30,600,000) Fair value loss on financial asset carried at fair value through profit and loss 75,129 46,270 - - Gain on disposal of property, plant and equipment (137,053) (15,377) - - Interest expense 726,462 482,830 -

--

Interest income (54,418) (26,022) - Inventories written down 1,645,996 1,025,402 - - Loss/(Gain) on redemption on financial asset carried at fair value through profit and loss 8,897 (9,967) - - Property, plant and equipment written off - 53,403 - - Reversal of inventories written down (1,025,402) (1,070,821) - - Unrealised (gain)/loss on foreign exchange (123,793) 564,768 - -

Operating profit/(loss) before working capital changes 35,876,431 32,676,527 (170,358) (896,781)

Changes in working capital:- Inventories (8,675,933) (2,228,846) - - Receivables (8,802,791) (11,151,484) 2,226 (2,226) Payables 779,601 (1,467,893) (351,295) 296,749

Cash flows generated from/(used in) operations 19,177,308 17,828,304 (519,427) (602,258)

Tax paid (4,753,178) (5,093,152) - (6,070) Tax refunded 59,595 - 59,595 -

Net cash flows from/(used in) operating activities 14,483,725 12,735,152 (459,832) (608,328)

INVESTING ACTIVITIES

Dividend received - - 11,480,000 30,600,000 Increase in investment in a subsidiary - - (41,792,256) (30,664,668) Interest received 54,418 26,022 - - Payment to acquire financial asset (46,792,256) (24,000,000) - - Proceeds from disposal of property, plant and equipment 151,800 15,377 - - Proceeds from redemption of financial asset 19,829,000 7,499,999 - - Purchase of property, plant and equipment A (36,614,918) (13,095,275) - -

Net cash flows used in investing activities (63,371,956) (29,553,877) (30,312,256) (64,668)

FINANCING ACTIVITIES

Dividend paid (10,824,000) (13,800,000) (10,824,000) (13,800,000) Drawdown of short term borrowings 30,375,000 - - - Drawdown of term loan 9,000,000 - - - Interest paid (726,462) (482,830) - - Issuance of share capital 14 41,659,056 30,927,367 41,659,056 30,927,367 Proceeds from finance lease creditors - 4,860,145 - - Repayment of finance lease creditors (2,296,176) (2,612,516) - - Repayment of short term borrowings (13,026,000) - - - Repayment of term loan (450,987) - -

--

Repayment to subsidiary - - (16,426,865)

Net cash flows from financing activities 53,710,431 18,892,166 30,835,056 700,502

CASH AND CASH EQUIVALENTS

Net change 4,822,200 2,073,441 62,968 27,506 Effect of exchange rate changes (150,090) 5,160 - - At beginning of financial year 8,081,786 6,003,185 88,882 61,376

At end of financial year B 12,753,896 8,081,786 151,850 88,882

CompanyGroup

40


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 APRIL 2017 (CONT’D)


NOTES TO THE STATEMENTS OF CASH FLOWS

A. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

During the financial year, property, plant and equipment were acquired by the following means:-

Cash payments Outstanding in payables Total purchase of property, plant and equipment

B. CASH AND CASH EQUIVALENTS

Cash and cash equivalents included in the statements of cash flows comprise the following

statements of financial position amounts:-

Cash and bank balances Fixed deposit with a licensed bank

Group

2017RM

36,614,91810,420,331

47,035,249

2016RM

13,095,27526,200

13,121,475

Group

2017RM

12,753,896

-

12,753,896

2016RM

7,954,805

126,981

8,081,786

Company

2017RM

151,850

-

151,850

2016RM

88,882

-

88,882

41


NOTES TO THE FINANCIAL STATEMENTS - 30 APRIL 2017

1. GENERAL INFORMATION

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The Company is principally engaged in investment holding.

The principal activities of the subsidiary are disclosed in Note 7 to the Financial Statements.

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

year.

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

listed on the Main Market of the Bursa Malaysia Securities Berhad. The registered office of the

Company is located at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250

Kuala Lumpur. The principal place of business of the Company is located at Lot 3304, Batu 24 ½,

Jalan Kulai-Air Hitam, 81000 Kulai, Johor Darul Takzim.

The financial statements were authorised for issue by the Board of Directors in accordance

with a resolution of the Directors on 28 June 2017.

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 (“IFRSs”) and the requirements of the Companies Act,

2016 in Malaysia.

Basis of measurement

The financial statements of the Group and of the Company are prepared under

historical cost convention, unless otherwise indicated in the summary of significant

accounting policies.

Historical cost is generally based on the fair value of the consideration given in

exchange for goods and services.

Fair value is 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 and its measurement assumes that the transaction to sell the asset or transfer the

liability takes place either in the principal market for the asset or liability, or in the

absence of a principal market, in the most advantageous market for the asset or

liability. The principal or the most advantageous market must be accessible to by the

Group and the Company.

The fair value of an asset or a liability is measured using the assumptions that market

participants would use when pricing the asset or liability, assuming that market

participants act in their economic best interest.

2 . 1

2 . 2



2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D)42


Basis of measurement (cont’d)

A fair value measurement of a non-financial market 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.

The Group and the Company use valuation techniques that are appropriate in the

circumstances and for which sufficient data are available to measure fair value,

maximising the use of relevant observable inputs and minimising the use of

unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial

statements are categorised within the fair value hierarchy, described as follows, based

on the lowest level input that is significant to their fair value measurement as a whole:-

Level 1

Level 2

Level 3

For assets and liabilities that are recognised in the financial statements on a recurring

basis, the Group and the Company determine whether transfers have occurred

between levels in the hierarchy by re-assessing categorisation (based on the lowest

level input that is significant to their fair value measurement as a whole) at the end of

each reporting period.

The Group and the Company have established control framework in respect of

measurement of fair values of financial instruments. The Board of Directors have overall

responsibility for overseeing all significant fair value measurements. The Board of

Directors regularly reviews significant unobservable inputs and valuation adjustments.

For the purpose of fair value disclosures, the Group and the Company have determined

classes of assets and liabilities on the basis of the nature, characteristics and risks of the

asset or liability and the level of fair value hierarchy as explained above.

Functional and presentation currency

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

Company’s functional currency and all values are rounded to the nearest RM except

when otherwise stated.

2 . 2

2 . 3

- Quoted (unadjusted) market prices in active markets for identical assets or

liabilities.

- Valuation techniques for which the lowest level input that is significant to their

fair value measurement is directly or indirectly observable.

- Valuation techniques for which the lowest level input that is significant to their

fair value measurement is unobservable.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) 43


MFRSs

Adoption of new or revised MFRSs

The Group and the Company have consistently applied the accounting policies set out in

Note 3 to the Financial Statements to all periods presented in these financial statements.

At the beginning of the current financial year, the Group and the Company adopted

amendments to MFRSs and IC Interpretations which are mandatory for the financial

periods beginning on or after 1 January 2016.

Initial application of all the relevant new and revised MFRSs and amendments/

improvements to MFRSs and IC Interpretations that are effective did not have material

impact to the financial statements of the Group and of the Company.

Standards issued but not yet effective

At the date of authorisation of these financial statements, the Malaysian Accounting

Standards Board (“MASB”) has approved certain new standards, amendments and

interpretations to existing standards which are not yet effective, and have not been early

adopted by the Group and the Company.

The management anticipates that all of the relevant pronouncements will be adopted in

the Group’s and the Company’s accounting policies for the first period beginning after

the effective date of the pronouncement. The initial application of the new standards,

amendments and interpretations are not expected to have any material impacts to the

financial statements of the Group and the Company except as mentioned below:-

Amendment to MFRS 107 Disclosure initiative

The amendment to MFRS 107 requires entity to provide disclosures on changes in

liabilities arising from financing activities, including changes from cash flows and

non-cash changes. The adoption of this amendment is not expected to have any financial

impact on the Group and on the Company.

This amendment is effective for annual periods beginning on or after 1 January 2017, with

early application permitted. Application of this amendment will result in additional

disclosure to be provided by the Group and the Company.

Amendment to MFRS 112 Recognition of deferred tax assets for unrealised losses

The amendment to MFRS 112 clarified the accounting treatment of deferred tax assets for

unrealised losses on fixed-rate debt instruments measured at fair value. The adoption of

the amendment is not expected to have any financial impact on the Group and the

Company.

This amendment is effective for annual periods beginning on or after 1 January 2017, with

early application permitted. If an entity applies this amendment for an earlier period, it

must disclose that fact. This amendment is not expected to have any impact on the

Group and on the Company.

2 . 4

2. 4. 1

2. 4. 2

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D)44


MFRSs (cont’d)

Standards issued but not yet effective (cont’d)

MFRS 9 Financial instruments

MFRS 9 replaces MFRS 139 Financial Instruments: Recognition and Measurement and

all previous version of MFRS 9. The new standard introduces extensive requirements

and guidance for classification and measurement of financial assets and financial

liabilities which fall under the scope of MFRS 9, new “expected credit loss model”

under the impairment of financial assets and greater flexibility has been allowed in

hedge accounting transactions. Upon adoption of MFRS 9, financial assets will be

measured at either fair value or amortised cost. It is also expected that the investment

in unquoted shares will be measured at fair value through other comprehensive

income.

This standard will come into effect on or after 1 January 2018 with early adoption

permitted. Retrospective application is required, but comparative information is not

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

Group and the Company are currently assessing the financial impact of adopting

MFRS 9.

MFRS 15 Revenue from contracts with customers

MFRS 15 replaces the guidance in MFRS 111, Construction Contracts, MFRS 118,

Revenue, IC Interpretation 13, Customer Loyalty Programmes, IC Interpretation 15,

Agreements for Construction of Real Estate, IC Interpretation 18, Transfers of Assets

from Customers and IC Interpretation 131, Revenue – Barter Transactions Involving

Advertising Services. Upon adoption of MFRS 15, it is expected that the timing of

revenue recognition might be different as compared with current practices.


permitted. The adoption of MFRS 15 will result in a change in accounting policy. The

Group and the Company are currently assessing the financial impact of adopting

MFRS 15.

MFRS 16 Leases

MFRS 16 replaces MFRS 117 Leases, IC Interpretation 4 Determining whether an

Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27

Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

MFRS 16 sets out the principles for the recognition, measurement, presentation and

disclosure of leases and requires lessees to account for all leases under a single

on-balance sheet model similar to the accounting for finance leases under MFRS 117.

The standard includes two recognition exemptions for lessees – leases of ’low-value’

assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term

of 12 months or less).

2 . 4

2. 4. 2

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) 45


MFRSs (cont’d)

Standards issued but not yet effective (cont’d)

MFRS 16 Leases (cont’d)

At the commencement date of a lease, a lessee will recognise a liability to make lease

payments (i.e., the lease liability) and an asset representing the right to use the

underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be

required to separately recognise the interest expense on the lease liability and the

depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of

certain events (e.g., a change in the lease term, a change in future lease payments

resulting from a change in an index or rate used to determine those payments). The

lessee will generally recognise the amount of the remeasurement of the lease liability

as an adjustment to the right-of-use asset.

Lessor accounting under MFRS 16 is substantially unchanged from today’s accounting

under MFRS 117. Lessors will continue to classify all leases using the same classification

principle as in MFRS 117 and distinguish between two types of leases: operating and

finance leases.

MFRS 16 also requires lessees and lessors to make more extensive disclosures than

under MFRS 117.

MFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early

application is permitted, but not before an entity applies MFRS 15. A lessee can choose

to apply the standard using either a full retrospective or a modified retrospective

approach. The standard’s transition provisions permit certain reliefs.

The Group and the Company are currently assessing the financial impact of adopting

MFRS 16.

IC Interpretation 22 Foreign currency transactions and advance consideration

This interpretation addresses how to determine the date of the transaction for the

purpose of determining the exchange rate to use on initial recognition of the related

asset, expense or income (or part of it) on the derecognition of a non-monetary asset

or non-monetary liability arising from the payment or receipt of advance consideration

in a foreign currency.

If there are multiple payments or receipts in advance, the entity shall determine a date

of the transaction for each payment or receipt of advance consideration.


permitted. The adoption of this amendment is not expected to have any financial

impact on the Group.

2 . 4

2. 4. 2

46


2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D)

Significant Accounting Estimates and Judgements

Estimates, assumptions concerning the future and judgements are made in the

preparation of the financial statements. They affect the application of the Group’s

accounting policies and reported amounts of assets, liabilities, income and expenses,

and disclosures made. Estimates and underlying assumptions are assessed on an

on-going basis and are based on experience and relevant factors, including

expectations of future events that are believed to be reasonable under the

circumstances. The actual results may differ from the judgements, estimates, and

assumptions made by management, and will seldom equal the estimated results.

Estimation uncertainty

Information about significant estimates and assumptions that have the most

significant effect on recognition and measurement of assets, liabilities, income and

expenses are discussed below.

Useful lives of depreciable assets

The management estimates the useful lives of the property, plant and equipment to be

within 5 to 50 years and reviews the useful lives of depreciable assets at each

reporting date. At 30 April 2017, the management assesses that the useful lives

represent the expected utility of the assets to the Group. The carrying amounts are

analysed in Note 4 to the Financial Statements. Actual results, however, may vary due

to change in the expected level of usage and technological developments, which result

in adjustment to the Group’s assets.

Impairment of loans and receivables

The Group and the Company assess at end of each reporting date whether there is any

objective evidence that a financial asset is impaired. Factors such as probability of

insolvency or significant financial difficulties of the receivables and default or

significant delay in payments are considered in determining whether there is objective

evidence of impairment.

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

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

credit risk characteristics.

Impairment of property, plant and equipment and prepaid land lease payments

The Group carries out impairment tests based on a variety of estimation including

value-in-use of cash-generating unit to which the property, plant and equipment and

prepaid land lease payments are allocated. Estimating the value-in-use requires the

Group to make an estimate of the expected future cash flows from cash-generating

unit and also to choose a suitable discount rate in order to calculate present value of

those cash flows.

2 . 5

2. 5. 1

47


2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D)

Significant Accounting Estimates and Judgements (cont’d)

Estimation uncertainty (cont’d)

Impairment of inventories

The management reviews inventories to identify damaged, obsolete and slow-moving inventories which require judgement and changes in such estimates could result in revision to valuation of inventories.

The carrying amount of the Group’s inventories at the end of the reporting period is disclosed in Note 8 to the Financial Statements.

Income taxes/Deferred tax liabilities

Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business.

The Group and the Company recognise tax liabilities based on estimates of whether additional taxes will be due. Where the final tax outcome is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made.

Fair value of financial instruments

Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial assets and liabilities. In applying the valuation techniques, management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arms’ length transaction at the end of the reporting period.

Significant management judgement

The following is significant management judgement in applying the accounting policies of the Group that has the most significant effect on the financial statements.

Classification of leasehold land

The classification of leasehold land as a financial lease or an operating lease requires the use of judgement in determining the extent to which risks and rewards incidental to its ownership lie. Despite the fact that there will be no transfer of ownership by the end of the lease term and that the lease term does not constitute the major part of the indefinite economic life of the land, management considered that the present value of the minimum lease payments approximated to the fair value of the land at the inception of the lease.

As management has determined that the Group has not obtained substantially all the risks and rewards of ownership of the leasehold land, the leases have been classified as operating leases and accounted for accordingly.

2 . 5

2. 5. 1

2. 5. 2

48


3. SIGNIFICANT ACCOUNTING POLICIES

Consolidation

Subsidiary

Subsidiary is entity, including structured entities, controlled by the Group or the

Company. Control exists when the Group or the Company 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. Besides, the Group 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.

Investment in a subsidiary is stated at cost in the Company’s statement of financial

position. Where an indication of impairment exists, the carrying amount of the

subsidiary is assessed and written down immediately to its recoverable amount.

Upon the disposal of investment in a subsidiary, the difference between the net

disposal proceeds and its carrying amount is included in profit or loss.

Basis of consolidation

The Group’s financial statements consolidate the audited financial statements of the

Company and its subsidiary, which have been prepared in accordance with the Group’s

accounting policies. Amounts reported in the financial statements of subsidiary have

been adjusted where necessary to ensure consistency with the accounting policies

adopted by the Group. The financial statements of the Company and its subsidiary are

all drawn up to the same reporting period.

All intra-group balances, income and expenses and unrealised gains and losses

resulting from intra-group transactions are eliminated in full.

The subsidiary is consolidated from the date on which control is transferred to the

Group and is no longer consolidated from the date that control ceases.

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

in a loss of control are accounted for as equity transactions. In such circumstances, the

carrying amounts of the controlling and non-controlling interests are adjusted to

reflect the changes in their relative interests in the subsidiary company. Any difference

between the amount by which the non-controlling interest is adjusted and the fair

value of the consideration paid or received is recognised directly in equity and

attributed to owners of the Company.

3 . 1

3. 1. 1

3. 1. 2

The Group and the Company apply the significant accounting policies, as summarised below,

consistently throughout all periods presented in the financial statements.

49


3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Consolidation (cont’d)

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an

acquisition is measured as the aggregate of the consideration transferred, measured

at acquisition date fair value and the amount of any non-controlling interest in the

acquiree. For each business combination, the Group elects whether it measures the

non-controlling interest in the acquiree either at fair value or at the proportionate

share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed

and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities

assumed for appropriate classification and designation in accordance with the

contractual terms, economic circumstances and pertinent conditions as at the

acquisition date. This includes the separation of embedded derivatives in host

contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the

acquirer’s previously held equity interest in the acquiree is remeasured to fair value at

the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at

fair value at the acquisition date. Subsequent changes in the fair value of the

contingent consideration which is deemed to be an asset or liability will be recognised

in accordance with MFRS 139 either in profit or loss or as a change to other

comprehensive income. If the contingent consideration is classified as equity, it will not

be remeasured. Subsequent settlement is accounted for within equity. In instances

where the contingent consideration does not fall within the scope of MFRS 139, it is

measured in accordance with the appropriate MFRS.

Goodwill is initially measured at cost, being the excess of the aggregate of the

consideration transferred and the amount recognised for non-controlling interest over

the net identifiable assets acquired and liabilities assumed. If this consideration is lower

than the fair value of the net assets of the subsidiary acquired, the difference is

recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment

losses. For the purpose of impairment testing, goodwill acquired in a business

combination is, from the acquisition date, allocated to each of the Group’s

cash-generating units that are expected to benefit from the combination, irrespective

of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within

that unit is disposed of, the goodwill associated with the operation disposed of is

included in the carrying amount of the operation when determining the gain or loss on

disposal of the operation. Goodwill disposed of in this circumstance is measured

based on the relative values of the operation disposed of and the portion of the

cash-generating unit retained.

3 . 1

3. 1. 3

50



Consolidation (cont’d)

Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and

liabilities of the subsidiary, any non-controlling interests and the other components of

the equity related to the subsidiary. Any surplus or deficit arising on the loss of control

is recognised in profit or loss.

If the Group retains any interest in the previous 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 an available-for-sale financial asset depending

on the level of influence retained.

Property, plant and equipment

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

depreciation and any impairment losses.

Depreciation is provided on the straight-line method in order to write-off the cost of

each asset over its estimated useful life. Capital work-in-progress is not depreciated

until it is completed and ready for commercial utilisation. No depreciation is provided

on freehold land.

The principal annual depreciation rates used are as follows:-

Included in equipment, plant and machinery is plant and machinery, factory

equipment, electrical installation and fire extinguisher.

Included in furniture, fittings and others is renovation and electrical installation,

signboard, mobile phone, furniture and fittings, office equipment, air conditioner and

computer.

Restoration cost relating to an item of property, plant and equipment is capitalised

only if such expenditure is expected to increase the future benefits from the existing

property, plant and equipment beyond its previously assessed standard of

performance.

Property, plant and equipment are written down to recoverable amount if, in the

opinion of the Directors, it is less than their carrying value. Recoverable amount is the

net selling price of the property, plant and equipment i.e. the amount obtainable from

the sale of an asset in an arm’s length transaction between knowledgeable, willing

parties, less the costs of disposal.

3 . 1

3. 1. 4

3 . 2

Buildings 50 years

5 – 10 years

5 years

5 – 10 years

Equipment, plant and machinery

Motor vehicles

Furniture, fittings and others

51


Property, plant and equipment (cont’d)

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

year end to ensure that the amount, method and period of depreciation are consistent

with previous estimates and the expected pattern of consumption of the future

economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no

future economic benefits are expected from its use or disposal. Any gain or loss arising

on derecognition of the asset is included in profit or loss in the financial year in which

the asset is derecognised.

Capital work-in-progress

Capital work-in-progress consists of factory building and electrical installation for

intended use as production facilities. The amount is stated at cost and not depreciated

until it is completed and ready for their intended use.

Asset acquired under lease agreements

Accounting by lessees

Finance leases

Lease of property, plant and equipment acquired under hire purchase and finance

lease arrangements which transfer substantially all the risks and rewards of ownership

to the Group are capitalised. The depreciation policy on these assets is similar to that

of the Group’s property, plant and equipment depreciation policy.

Outstanding obligation due under hire purchase and finance lease arrangements after

deducting finance expenses are included as liabilities in the financial statements.

Finance charges on hire purchase and finance lease arrangements are allocated to

profit or loss over the period of the respective agreements.

Leased assets

Leasehold land that normally has an indefinite economic life and title is not expected

to pass to the Group by the end of the lease term is treated as operating lease. The

payment made on entering into or acquiring a leasehold land is accounted for as

prepaid land lease payment and is amortised over the lease term of 99 years (2016: 99

years).

3 . 2

3 . 3

3 . 4


52


Inventories

Inventories consist of raw materials, work-in-progress and finished goods and are

stated at the lower of cost and net realisable value.

Cost of raw materials is determined on the first-in-first-out method which includes the

original cost of purchase plus the incidental cost incurred in bringing the inventories to

their present location and condition. Cost of work-in-progress and finished goods

include cost of materials, direct labour and an appropriate proportion of production

overheads.

Net realisable value represents the estimated selling price in the ordinary course of

business less selling and distribution costs and all other estimated costs to completion.

Income tax

Income tax on profit or loss for the year comprises current tax expense and deferred

tax.

Current tax expense is the expected amount of income taxes payable in respect of the

taxable profit for the financial year and is measured using the tax rates that have been

enacted or substantively enacted by the reporting date.

Deferred tax liabilities and assets are provided for under the liability method at the

current tax rate in respect of all temporary differences at the reporting date between

the carrying amount of an asset or liability in the statements of financial position and

its tax base including unused tax losses and capital allowances.

Deferred tax asset are recognised only to the extent that it is probable that taxable

profit will be available against which the deductible temporary differences can be

utilised. The carrying amount of a deferred tax asset is reviewed at each reporting

date. If it is no longer probable that sufficient taxable profit will be available to allow

the benefit of part or the entire deferred tax asset to be utilised, the carrying amount

of the deferred tax asset will be reduced accordingly. When it becomes probable that

sufficient taxable profit will be available, such reductions will be reversed to the extent

of the taxable profit.

Current tax expense and deferred tax are recognised in profit or loss, except when it

arises from a transaction which is recognised directly in equity, in which case the

deferred tax is also charged or credited directly in equity, or when it arises from a

business combination that is an acquisition, in which case the deferred tax is included

in the resulting goodwill.

3 . 5

3 . 6


53


Income tax (cont’d)

Deferred tax is measured at the tax rates that are expected to apply in the period

when the asset is realised or the liability is settled, based on tax rates that have been

enacted or substantively enacted by the reporting date.

Foreign currency transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rates

prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at

the functional currency spot rate of exchange ruling at the reporting date.

All differences are taken to the profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency

are translated using the exchange rates as at the dates of the initial transactions.

Non-monetary items measured at fair value in a foreign currency are translated using

the exchange rates at the date when the fair value is determined. The gain or loss

arising in translation of non-monetary items is recognised in line with the gain or loss

of the item that gave rise to the translation difference (translation differences on items

whose gain or loss is recognised in other comprehensive income or profit or loss is also

recognised in other comprehensive income or profit or loss respectively).

Dividends

Interim dividends are simultaneously proposed and declared, because the articles of

association of the Company grant the Directors the authority to declare interim

dividends. Consequently, interim dividends are recognised directly as a liability when

they are proposed and declared.

Final dividends proposed by the Directors are not accounted for in shareholders’

equity as an appropriation of unappropriated profit, until they have been approved by

the shareholders in a general meeting. When these dividends have been approved by

the shareholders and declared, they are recognised as a liability.

Revenue recognition

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

flow to the Group and the Company and the revenue can be reliably measured.

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

from sale of goods is recognised upon the transfer of significant risk and rewards of

ownership of the goods to the customer. Revenue is not recognised to the extent

where there are significant uncertainties regarding recovery of the consideration due,

associated cost or the possible return of goods.

3 . 6

3 . 7

3 . 8

3.9


54



Revenue recognition (cont’d)

Other revenues are recognised on the following bases:-

Interest income from a financial asset is recognised when it is probable that the

economic benefits will flow to the Group and the amount of income can be measured

reliably. Interest income is accounted for on accrual basis.

Dividend income is recognised when the Group’s right to receive payment is

established.

Sales and inter-company transactions between companies of the Group are excluded

from revenue of the Group.

Financial assets

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

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

the financial instrument and they are derecognised when the contractual rights to the

cash flows from the financial asset expire, or when the financial asset and all

substantial risks and rewards are transferred.

Financial assets are measured initially at fair value plus transactions costs, except for

financial assets carried at fair value through profit or loss, which are measured initially

at fair value. Financial assets are subsequently measured as described below.

For the purpose of subsequent measurement, financial assets other than those

designated and effective as hedging instruments are classified into the following

categories upon initial recognition:-

a) Loans and receivables

b) Financial assets at fair value through profit or loss

c) Held-to-maturity investments

d) Available-for-sale financial assets

The category mentioned above determines subsequent measurement of a financial

asset and whether any resulting income and expense is recognised in profit or loss or

in statement of comprehensive income. All financial assets except for those at fair

value through profit or loss are subject to review for impairment at least once at each

reporting date. Financial assets are impaired when there is any objective evidence that

a financial asset or a group of financial assets is impaired. Different criteria are applied

to determine impairment for each category of financial assets, as described in Note

3.12.

All income and expenses relating to financial assets are recognised in profit or loss.

3 . 9

3 . 10

55



Financial assets (cont’d)

Other than loan and receivables and financial assets at fair value through profit or loss,

the Group and the Company do not have available-for-sale financial assets and

held-to-maturity investments.

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 the financial asset is

transferred to another party without retaining control or substantially all risks and

rewards of the asset. On derecognition of a financial asset, the difference between the

carrying amount and the sum of the consideration received (including any new asset

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

been recognised in equity is recognised in the profit or loss.

Financial assets at fair value through profit or loss

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

either classified as held for trading or that meet certain conditions and are designated

at fair value through profit or loss upon initial recognition. All derivative financial

instruments (including separated embedded derivatives) which are acquired

principally for the purpose of selling in the near term and contingent consideration in

a business combination fall into this category, except for those that are financial

guarantee contracts or those designated and effective as hedging instruments.

Subsequent to initial recognition, assets in this category are measured at fair value

with gains or losses recognised in profit or loss. The fair values of derivative financial

instruments are determined by reference to active market transactions or using a

valuation technique where no active market exists. Net gains or net losses on financial

assets at fair value through profit or loss do not include exchange differences, interest

and dividend income. Exchange differences, interest and dividend income on financial

assets at fair value through profit or loss are recognised separately in profit or loss as

part of other expenses or other income.

Financial assets at fair value through profit or loss could be presented as current or

non-current. Financial assets that are held primarily for trading purposes are

presented as current whereas financial assets that are not held primarily for trading

purposes are presented as current or non-current based on the settlement date.

Loans and receivables

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

payments that are not quoted in an active market and they are measured at amortised

cost using effective interest method, less provision for impairment subsequently.

Discounting is omitted where the effect of discounting is immaterial in subsequent

measurement. Cash and cash equivalents, trade and most other receivables of the

Group and of the Company fall into this category of financial instruments.

3 . 10

56



Financial assets (cont’d)

Loans and receivables (cont’d)

Loans and receivables are classified as current assets and those that mature 12 months

after the reporting date are classified as non-current.

Financial liabilities

Financial liabilities are recognised when the Group and the Company become a party

to the contractual provisions of the financial instrument. Financial liability is

derecognised when it is extinguished, discharged, cancelled or expires.

Financial liabilities are measured initially at fair value plus transactions costs, except

for financial liabilities carried at fair value through profit or loss, which are measured

initially at fair value. Subsequently, they are measured at amortised cost using the

effective interest method except for financial liabilities held for trading or designated

at fair value through profit or loss, that are carried subsequently at fair value with gains

or losses recognised in profit or loss.

All derivative financial instruments which are not designated and effective as hedging

instruments are accounted for at fair value through profit or loss.

The Group’s and the Company’s financial liabilities include trade payables, other

payables and finance lease creditors and borrowings.

A financial liability or a part of it is derecognised when, and only when, the obligation

specified in the contract is discharged or cancelled or expires. 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.

Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence

indicating that a financial asset, other than financial asset at ‘fair value through profit

or loss’, might be impaired.

Trade and other receivables and other financial assets carried at amortised cost

The Group considers factors such as the probability of insolvency or significant

financial difficulties of the debtor and default or significant delay in payments to

determine whether there is objective evidence that an impairment loss has occurred.

For certain categories of financial assets, such as trade receivables, assets that are

assessed not to be impaired individually are subsequently assessed for impairment on

a collective basis based on similar risk characteristics. Objective evidence of

impairment for a portfolio of receivables could include the Group’s past experience

with industry group, increase in cases of delayed payments and observable changes

in economic conditions.

3 . 10

3 . 11

3 . 12

57



Impairment of financial assets (cont’d)

Trade and other receivables and other financial assets carried at amortised cost

(cont’d)

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

between the asset’s carrying amount and the present value of estimated future cash

flows discounted at the financial asset’s original effective interest rate and the loss is

recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly

for all financial assets with the exception of receivables, where the carrying amount is

reduced through the use of an allowance account. When a receivable becomes

uncollectible, it is written off against the allowance account.

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

decrease related objectively to an event occurring after the impairment was

recognised, the previously recognised impairment loss is reversed to the extent that

the carrying amount of the asset does not exceed its amortised cost at the reversal

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

Offsetting of financial instruments

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

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

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

to realise the assets and settle the liabilities simultaneously.

Impairment of non-financial assets

At each reporting date, the Group reviews the carrying amounts of non-financial

assets to determine whether there is any indication of impairment.

If any such indication exists, or when annual impairment testing for an asset is

required, the recoverable amount is estimated and an impairment loss is recognised

whenever the recoverable amount of the asset or a cash-generating unit is less than its

carrying amount. Recoverable amount of an asset or a cash-generating unit is the

higher of its fair value less costs to sell and its value in use.

IIn assessing value in use, estimated future cash flows are discounted to 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. Impairment losses of continuing

operations are recognised in profit or loss in those expense categories consistent with

the function of the impaired asset.

An impairment loss is recognised as an expense in profit or loss immediately.

3 . 12

3 . 13

3 . 14

58



Impairment of non-financial assets (cont’d)

An assessment is made at each reporting date as to whether there is any indication

that previously recognised impairment losses for an asset other than goodwill may no

longer exist or may have decreased. If such indication exists, the recoverable amount

is estimated. A previously recognised impairment loss is reversed only if there has

been a change in the estimates used to determine the asset’s recoverable amount.

That increased amount cannot exceed the carrying amount that would have been

determined, net of depreciation, had no impairment loss been recognised for the asset

in prior years.

All reversals of impairment losses are recognised as income immediately in profit or

loss. After such a reversal, depreciation charge is adjusted in future periods to allocate

the revised carrying amount of the asset, less any residual value, on a systematic basis

over its remaining useful life.

Interest-bearing borrowings

Interest-bearing borrowings are recorded at the amount of proceeds received, net of

transaction costs incurred. Borrowing costs are recognised as an expense in profit or

loss in the period in which they are incurred. However, borrowing costs incurred to

finance the construction of property, plant and equipment are capitalised as part of

the cost of those assets during the period of time that is required to complete and

prepare the assets for its intended use.

Employee benefits

(i)

(ii)

3 . 14

3 . 15

3. 16

Short term benefits

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

expense in the financial year in which the associated services are rendered by

employees of the Group. Short term accumulating compensated absences such

as paid annual leave are recognised when services are rendered by employees

that increase their entitlement to future compensated absences, and short term

non-accumulating compensated absences such as sick leave are recognised

when the absences occur.

Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the

Group pays fixed contributions into separate entities or funds and will have no

legal or constructive obligation to pay further contribution if any of the funds do

not hold sufficient assets to pay all employee benefits relating to employee

services in the current and preceding financial years.

Such contributions are recognised as an expense in profit or loss as incurred. As

required by law, the Group makes such contributions to the Employees Provident

Fund (“EPF”).

59



Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, bank balances and short term

demand deposits which are readily convertible to known amount of cash and which

are subject to an insignificant risk of changes in value.

For the purpose of the statements of financial position, cash and cash equivalents

restricted to be used to settle a liability of 12 months or more after the reporting date

are classified as non-current asset.

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 revenue and expenses

that relate to transactions with any of the Group’s other components. All operating

segments’ operating results are reviewed regularly by the chief operating decision

maker to make decisions about resources to be allocated to the segment and to

assess its performance, and for which discrete financial information is available.

Inter-segment transfers

Segment revenues, expenses and result include transfers between segments. The

prices charged on inter-segment transactions are based on negotiation basis. These

transfers are eliminated on consolidation.

Equity

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

the Company after deducting all of its liabilities. Ordinary shares are equity

instruments.

Prior to Companies Act, 2016 which came into operation on 31 January 2017, share

premium includes any premiums received on issue of share capital. Any transaction

costs associated with the issuing of shares are deducted from share premium, net of

any related income tax benefits. Effective on 31 January 2017 and subsequent period,

transaction costs associated with the issuing of shares are deducted against equity.

Unappropriated profit includes all current and prior period profit.

All transactions with shareholders are recorded separately within equity.

Provision

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

can be estimated reliably, as a result of a past event, when it is probable that an

outflow of resources embodying economic benefits will be required to settle the

obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are not recognised for future operating losses.

3 . 17

3 . 18

3 . 19

3. 20

3. 21

60



Provision (cont’d)

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

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

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

Provisions are reviewed at each reporting date and adjusted to reflect the current best

estimate. If it is no longer probable that an outflow of economic resources will be

required to settle the obligation, the provision is reversed. Where the effect of the time

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

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

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

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.

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

transaction costs. Subsequent to initial recognition, financial guarantee contracts are

recognised as income in profit or loss over the period of the guarantee. If the debtor

fails to make payment relating to financial guarantee contract when it is due and the

Group, as the issuer, is required to reimburse the holder for the associated loss, the

liability is measured at the higher of the best estimate of the expenditure required to

settle the present obligation at the reporting date and the amount initially recognised

less cumulative amortisation.

Contingent liabilities

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

existence will only be confirmed by the occurrence or non-occurrence of one or more

uncertain future events not wholly within the control of the Group. It can also be a

present obligation arising from past events that is not recognised because it is not

probable that outflow of economic resources will be required or the amount of

obligation cannot be measured reliably.

Earnings per share

The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary

shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary

shareholders of the Company over the weighted average number of ordinary shares

outstanding during the financial period. Diluted EPS is determined by adjusting the

profit or loss attributable to ordinary shareholders and the weighted average number

of ordinary shares outstanding for the effects of all dilutive potential ordinary shares,

which comprise of convertible notes and share options granted to employees.

3 . 21

3 . 22

3 . 23

3 . 24

61



Related parties

A related party is a person or entity that is related to the entity that is preparing its

financial statements (“the reporting entity”).

(a)

(b)

A related party transaction is a transfer of resources, services or obligations between

the reporting entity and its related party, regardless of whether a price is charged.

Goods and services tax (“GST”)

GST is a consumption tax based on value-added concept. GST is imposed on goods

and services at every production and distribution stage in the supply chain including

importation of goods and services, at the applicable tax rate of 6%. Input GST that the

Group and the Company paid on purchases of business inputs can be deducted from

output GST.

Revenue, expenses and assets are recognised net of the amount of GST except:-

(i) where the GST incurred in a purchase of assets or services is not recoverable

from the authority, in which case the GST is recognised as part of the cost of

acquisition of the assets or as part of the expense item as applicable; and

(ii) receivables and payables that are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is

included as part of receivables or payables in the statements of financial position.

3 . 25

3 . 26

A person or a close member of that person’s family is related to the reporting

entity if that person:-

(i)

(ii)

(iii)

Has control or joint control over the reporting entity;

Has significant influence over the reporting entity; or

Is a member of the key management personnel of the reporting entity.

An entity is related to the reporting entity if any of the following conditions

applies:

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

The entity and the reporting entity are members of the same group;

One entity is an associate or joint venture of the reporting entity;

Both entities are joint ventures of the same third party;

One entity is a joint venture of a third entity and the other entity is an

associate of the same third entity;

The entity is a post-employment benefit plan for the benefits of employees

of the reporting entity or an entity related to the reporting entity;

The entity is controlled or jointly-controlled by a person identified in (a)

above;

A person identified in (a)(i) above has significant influence over the entity

or is a member of the key management personnel of the reporting entity; or

The entity or any member of a group of which it is a party, provides key

management personnel services to the reporting entity.

62


4. PROPERTY, PLANT AND EQUIPMENT

Group

Land and buildings

Equipment, plant and machinery

Motorvehicles

Furniture,fittings and

others TotalRM RM RM RM RM

Cost

At 1 May 2015 19,768,046 54,081,535 5,221,537 2,473,438 81,544,556Additions 155,700 11,698,304 1,020,942 246,529 13,121,475Disposal - - (175,093) - (175,093)Written off - (3,813,758) - (315,189) (4,128,947)

At 30 April 2016 19,923,746 61,966,081 6,067,386 2,404,778 90,361,991Additions 12,801,904 33,216,956 888,294 128,095 47,035,249Disposal - (15,800) (1,243,014) - (1,258,814)Transfer from capital work-in-

progress 1,008,109 358,755 - - 1,366,864

At 30 April 2017 33,733,759 95,525,992 5,712,666 2,532,873 137,505,290

Accumulated depreciation

At 1 May 2015 2,558,913 29,908,125 4,074,813 1,865,215 38,407,066Charge for the financial year 339,437 5,170,463 442,288 161,385 6,113,573Disposal - - (175,093) - (175,093)Written off - (3,769,378) - (306,166) (4,075,544)

At 30 April 2016 2,898,350 31,309,210 4,342,008 1,720,434 40,270,002Charge for the financial year 357,049 7,251,139 620,170 174,761 8,403,119Disposal - (1,053) (1,243,014) - (1,244,067)

At 30 April 2017 3,255,399 38,559,296 3,719,164 1,895,195 47,429,054

Net carrying amount

30 April 2016 17,025,396 30,656,871 1,725,378 684,344 50,091,989

30 April 2017 30,478,360 56,966,696 1,993,502 637,678 90,076,236

Analysis of land and buildings as at 30 April: -

Group Freehold

land Buildings Total

Cost

RM RM RM

At 1 May 2015 2,880,308 16,887,738 19,768,046Additions - 155,700 155,700

At 30 April 2016 2,880,308 17,043,438 19,923,746Additions 12,789,354 12,550 12,801,904Transfer from capital work-in-progress 138,109 870,000 1,008,109

At 30 April 2017 15,807,771 17,925,988 33,733,759

63


4. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Group (cont’d) Freehold

land Buildings Total

Accumulated depreciation

RM RM RM

At 1 May 2015 - 2,558,913 2,558,913

Charge for the financial year - 339,437 339,437

At 30 April 2016 - 2,898,350 2,898,350

Charge for the financial year - 357,049 357,049

- 3,255,399 3,255,399

Net carrying amount

At 30 April 2016

At 30 April 2017

2,880,308 14,145,088 17,025,396

At 30 April 2017 15,807,771 14,670,589 30,478,360

The net carrying amount of property, plant and equipment which are acquired under finance

lease arrangements amounted to RM7,377,756 (2016: RM8,914,654).

During the previous financial year, the net carrying amount of property, plant and equipment

pledged to the bank amounted to RM7,009,294. These property, plant and equipment have been

discharged during the current financial year.

Included in the property, plant and equipment of the Group are fully depreciated property, plant

and equipment with a total cost of RM19,203,837 (2016: RM14,805,028) but still in use.

5. CAPITAL WORK-IN-PROGRESS

Group Land andbuildings

Electrical installation Total

RM RM RM

Additions/At 30 April 2016

and 1 May 2016 870,000 358,755 1,228,755

Additions 7,814,401 - 7,814,401

Transferred to property,

plant and equipment (1,008,109) (358,755) (1,366,864)

At 30 April 2017 7,676,292 - 7,676,292

64


6. PREPAID LAND LEASE PAYMENTS

Group

7. SUBSIDIARY

2017 2016

Leasehold land:-

RM RM

Cost

At 1 May and 30 April 216,425 216,425

Accumulated amortisation

At 1 May 49,984 47,790

Charge for the financial year 2,194 2,194

At 30 April 52,178 49,984

Net carrying amount 164,247 166,441

Amounts to be amortised:- Not later than one year 2,194 2,194

- Later than one year but not later than five years 8,776 8,776

- Later than five years 153,277 155,471

164,247 166,441

The leasehold land is amortised over the leasehold period of 99 years.

Investment in a subsidiary

Company

2017 2016

RM RM

Unquoted shares - At cost:-

At 1 May 92,901,000 43,927,000

Addition during the financial year

- Cash 41,792,256 30,664,668

- Non-cash - 18,309,332

At 30 April 134,693,256 92,901,000

65


7. SUBSIDIARY (CONT’D)

8. INVENTORIES

Investment in a subsidiary (cont’d)

The particulars of the subsidiary are as follows:-

Name of company

Place of

incorporation Principal activities

Lee Soon Seng

Plastic Industries Sdn. Bhd.

(“LSSPI”)

Malaysia

Effective equity

interest

2017 2016

% %

100 100 Manufacturing and

trading of plastic

products.

During the current financial year, the Company increased its equity interest in LSSPI by way of cash

payment amounted to RM41,792,256 with additional issuance of ordinary shares to the Company.

The reversal of inventories written down was made when the related inventories were subsequently

sold above their carrying amounts and increased in net realisable value because of changed

economic circumstances.

Group2017 2016

RM RM

Raw materials 18,709,428 11,760,615Work-in-progress 211,726 612,627Finished goods 6,239,556 4,732,129

Total inventories 25,160,710 17,105,371

Recognised in profit or loss

Inventories recognised in cost of sales 96,851,296 63,776,738Inventories written down 1,645,995 1,025,402Reversal of inventories written down (1,025,402) (1,070,821)

66


9. TRADE RECEIVABLES

Group

2017RM

2016RM

Amount due from a company connected with

certain Directors

Trade receivables

1,220,63640,331,605

482,65632,483,680

41,552,241 32,966,336

Less: Allowance for impairment of trade

receivables (360,382) (165,900)

41,191,859 32,800,436

Movement in allowance for impairment of trade receivables:-

Group 2017

RM 2016 RM

At 1 May (165,900) (112,312)Charge for the financial year (201,882) (53,588) Reversal of impairment - payment received 7,400 - At 30 April (360,382) (165,900)

are unhedged): -

Group 2017

RM 2016

RM

Malaysian Ringgit 28,372,244 19,075,296Australian Dollar 141,545 500,350 Singapore Dollar 9,139,022 7,335,251US Dollar 3,937,065 6,055,439Euro (37,635) - 41,552,241 32,966,336

Trade receivables comprise amounts receivable from sales of goods. The credit terms granted on

sales of goods ranged from 30 days to 90 days (2016: 30 days to 90 days). Allowance has been

made for estimated irrecoverable trade receivables based on the default experience of the

Group.

The currency exposure profile of the trade receivables is as follows (foreign currency balances

67


10. OTHER RECEIVABLES

11. OTHER FINANCIAL ASSET

Group Company2017 2016 2017 2016

RM RM RM RM

Advance payment to

suppliers 1,870,308 813,562 - -

Non-trade receivables 450 9,845 - -

Deposits for purchase

of property, plant

and equipment 791,012 2,782,595 - -

Sundry deposits 52,206 44,935 - -

GST receivable 1,343,088 299,690 - -

Prepayments 282,574 269,753 - 2,226

4,339,638 4,220,380 - 2,226

Group Company2017 2016 2017 2016

RM RM RM RM

Malaysian Ringgit 1,867,201 1,808,466 - 2,226Euro 357,610 665,393 - -

US Dollar 2,114,827 1,746,521 - -

4,339,638 4,220,380 -

2,226

Group

2017 2016

RM RM

Financial asset carried at fair value through profit or loss (“ FVTPL”) Non-derivative financial asset designated at FVTPL 44,086,312 16,764,469

Quoted market value in Malaysia 44,086,312 16,764,469

The other financial asset refers to investment in quoted islamic money market funds.

During the financial year, the Group recognised fair value adjustment loss of RM75,129

(2016: RM46,270) for the other financial asset as there were decline in the fair value of this

investment below its cost.

are unhedged):

The currency exposure profile of the trade receivables is as follows (foreign currency balances

68


12. FIXED DEPOSIT WITH A LICENSED BANK

13. CASH AND BANK BALANCES

14. SHARE CAPITAL AND SHARE PREMIUM

Group

Group Company 2017 2016 2017 2016 RM RM RM RM

Malaysian Ringgit 4,020,042 4,596,754 151,850 88,882

Australian Dollar 96,123 9,117 - -

Euro 727,350 866 - -

Japanese Yen 63 26 - -

Singapore Dollar 4,142,560 2,403,533 - -

US Dollar 3,767,416 944,065 - -

New Zealand Dollar 342 444 - -

12,753,896 7,954,805 151,850 88,882

Share capital 2017 2016 2017 2016

Unit Unit RM RM

Group

Issued and fully paid-up:-

Ordinary shares

At 1 May 132,000,000 80,000,000 66,000,000 40,000,000

Issued during the

financial year

– Bonus issue - 40,000,000 - 20,000,000

– Private placement 13,200,000 12,000,000 42,240,000 6,000,000

Transfer pursuant to

Section 618(2) of the

Companies Act, 2016 - - 26,646,423 -

At 30 April 145,200,000 132,000,000 134,886,423 66,000,000

During the previous financial year, the fixed deposit with a licensed bank is on fixed rate basis

and matures within 1 month to 12 months period.

The effective interest rate on fixed deposit with a licensed bank is at 3.45% (2016: ranged from

2.95% to 3.45%) per annum.

The entire fixed deposit with a licensed bank is denominated in Malaysian Ringgit.

The currency exposure profile of the cash and bank balances is as follows (foreign

currency balances are unhedged):-

69


14. SHARE CAPITAL AND SHARE PREMIUM (CONT’D)

Share capital (cont’d) 2017 2016 2017 2016 Unit Unit RM RM

Company Issued and fully paid-up:-

Ordinary shares

At 1 May 132,000,000 80,000,000 66,000,000 40,000,000

Issued during the

financial year

– Bonus issue - 40,000,000 - 20,000,000

– Private placement 13,200,000 12,000,000 42,240,000 6,000,000

Transfer pursuant to

Section 618(2) of the

Companies Act, 2016 - - 24,346,423 -

At 30 April 145,200,000 132,000,000 132,586,423 66,000,000

Share premium Group Company

2017 2016 2017 2016 RM RM RM RM

At 1 May 27,227,367 3,937,345 24,927,367 1,637,345

Movement during

the financial year:- Issuance of shares

from bonus issue - (1,637,345) - (1,637,345)

Issuance of shares

from private

placement - 25,320,000 - 25,320,000

Private placement

expenses (580,944) (392,633) (580,944) (392,633)

Transfer pursuant

to Section 618(2)

of the Companies

Act, 2016 (26,646,423) - (24,346,423) -

At 30 April - 27,227,367 - 24,927,367

New ordinary shares issued during the financial year ranked pari passu in all respect with the

existing ordinary shares of the Company.

The new Companies Act, 2016 (“the Act”), which came into operation on 31 January 2017,

abolished the concept of authorised share capital and par value of share capital.

70


14. SHARE CAPITAL AND SHARE PREMIUM (CONT’D)

15. REVERSE ACQUISITION RESERVE

16. UNAPPROPRIATED PROFIT

17. DEFERRED TAX LIABILITIES

Share premium (cont’d)

The amount standing to the credit of the share premium account of the Group and of the Company

of RM26,646,423 and RM24,346,423 respectively became part of the Group’s and the Company’s

share capital pursuant to the transitional provisions set out in Section 618(2) of the Act.

Notwithstanding this provision, the Group and the Company may within 24 months from the

commencement of the Act, use the amount standing to the credit of their share premium account for

purposes as set out in Section 618(3) of the Act. There is no impact in the numbers of ordinary shares

in issue or the relative entitlement of any of the members as a result of this transition.

Reverse acquisition reserve arising from the reverse acquisition of the Company by LSSPI is as

follows:-

Group 2017 2016 RM RM

Group 2017 2016 RM RM

Paid-up share capital of the Company immediately

prior to the reverse acquisition 1,000 1,000Shares issued by the Company to acquire LSSPI 30,427,000 30,427,000Reversal of LSSPI’s paid-up share capital

pursuant to reverse acquisition (2,200,000) (2,200,000)Equity instruments deemed issued to the owner of

the legal parent (1,000) (1,000)

28,227,000 28,227,000

Effective from 1 January 2014, the Company is required by the Income Tax Act 1967 to pay

dividend under single tier income tax system. As such, the Company may frank the payment of

dividends out of its entire unappropriated profit.

3,400,000 2,527,0002,140,000 873,000

At 1 May

Transferred from profit or loss (Note 24)

At 30 April 5,540,000 3,400,000

71


17. DEFERRED TAX LIABILITIES (CONT’D)

18. FINANCE LEASE CREDITORS

The deferred tax liabilities are made up of temporary differences arising from:-

Group 2017 2016

RM RM

Carrying amount of qualifying property, plant and

equipment in excess of their tax base 5,991,000 3,819,000Inventories written down (395,000) (246,000)Allowance for impairment of receivables (86,000) (40,000)Unrealised foreign exchange 30,000 (133,000)

5,540,000 3,400,000

Group 2017 2016

RM RM

Minimum lease payment

- within 1 year 2,439,204 2,590,871- after 1 year but not later than 5 years 1,588,627 4,027,831

4,027,831 6,618,702Less: Interest-in-suspense (203,360) (498,055)

3,824,471 6,120,647

Total principal sum payable

- within 1 year 2,279,436 2,296,176- after 1 year but not later than 5 years 1,545,035 3,824,471

3,824,471 6,120,647

The interest rates on the finance lease ranged from 2.28% to 3.20% (2016: 2.28% to 3.20%) per

annum.

The limit of corporate guarantee given to a finance lease creditor for finance lease facility

granted to the subsidiary is RMNil (2016: RM852,000).

72


19. BORROWINGS

Group2017 2016

RM RM

Current

Unsecured:-

Term loan 1,134,191 -

Bankers’ acceptance 2,349,000 -

Revolving credit 15,000,000 -

Total current 18,483,191 -

Non-current

Unsecured:-

Term loan 7,414,822 -

Total non-current 7,414,822 -

Total borrowings 25,898,013 -

Term loan

The term loan of the Group is obtained by way of corporate guarantee from the Company and

negative pledge on the subsidiary’s assets.

The term loan of the Group bears interest at the rate of 4.65% (2016: Nil) per annum.

The term loan of the Group is repayable by monthly installments.

Bankers’ acceptance

The bankers’ acceptance of the Group is obtained by way of corporate guarantee from the

Company and negative pledge on the subsidiary’s assets.

The bankers’ acceptance bears interest at rates ranging from 4.33% to 4.39% (2016: 4.04% to

4.51%) per annum.

Revolving credit

The revolving credit of the Group is obtained by way of corporate guarantee from the Company

and negative pledge on the subsidiary’s assets.

The revolving credit bears interest at rates ranging from 4.55% to 5.51% (2016: 4.80% to 5.80%) per

annum.

The entire borrowings are denominated in Malaysian Ringgit.

73


20. TRADE PAYABLES

21. OTHER PAYABLES

22. REVENUE

Group

Trade payables comprise amounts outstanding for trade purchases. The credit terms granted to

the Group ranged from 30 days to 90 days (2016: 30 days to 90 days).

The currency exposure profile of the trade payables is as follows (foreign currency balances are

unhedged):-

Group2017 2016

RM RM

Malaysian Ringgit 8,837,016 5,678,354US Dollar 940,527 236,530Singapore Dollar 22,266 52,228Euro 138,323 -

9,938,132 5,967,112

Group Company 2017 2016 2017 2016

RM RM RM RM

Non-trade payables 14,843,352 665,160 4,178 -

Accrual of payroll 1,775,324 1,322,420 17,100 16,500Accrual of expenses 1,486,903 1,446,197 16,000 372,073

18,105,579 3,433,777 37,278 388,573

Group Company2017 2016 2017 2016

RM RM RM RM

Malaysian Ringgit 7,925,934 3,231,411 37,278 388,573Singapore Dollar 747 3,541 - -

US Dollar 9,464,752 198,825 - -

Euro 714,146 - - -

18,105,579 3,433,777 37,278 388,573

The currency exposure profile of the other payables is as follows (foreign currency balances are

unhedged):-

Revenue of the Group represents sale of plastic products, net of discounts and returns.

Revenue of the Company represents dividend income from the subsidiary.

74


23. PROFIT BEFORE TAX

Profit before tax has been determined after charging/(crediting), amongst others, the following

items:-

Group Company2017 2016 2017 2016 RM RM RM RM

Auditors’

remuneration - statutory 61,500 59,000 9,000 9,000- non-statutory 34,000 18,000 7,000 7,000Directors’

remuneration

- fees 66,000 72,000 66,000 72,000- other emoluments 3,903,603 3,640,225 2,800 3,000Rental of car 3,800 - - -

Rental of hostel 101,026 96,622 - -

Rental of warehouse 237,200 23,500 - -

Realised gain on

foreign exchange (1,818,432) (1,280,864) - -

The estimated monetary value of benefits provided to the Directors of the Company during the

financial year by way of usage of the subsidiary’s assets and other benefits amounted to

RM126,395 (2016: RM129,497).

The remuneration paid (Company and Group basis) to the Directors of the Company is

categorised as follows:-

Other Fees emoluments Total RM RM RM

Group 2017

Executive Directors - 3,900,803 3,900,803 Non-Executive Directors 66,000 2,800 68,800

Total 66,000 3,903,603 3,969,603

2016

Executive Directors - 3,637,225 3,637,225Non-Executive Directors 72,000 3,000 75,000

Total 72,000 3,640,225 3,712,225

Company

2017

Non-Executive Directors 66,000 2,800 68,800

2016

Non-Executive Directors 72,000 3,000 75,000

75


23. PROFIT BEFORE TAX (CONT’D)

24. TAX EXPENSE/(INCOME)

The remuneration paid to the Directors of the Company analysed into bands are as follows:-

Number of Directors

RM100,000 to

<RM100,000 RM900,000

2017 Executive Directors - 4

Non-Executive Directors 3 -

2016 Executive Directors - 4

Non-Executive Directors 3 -

Group Company

2017 2016 2017 2016

RM RM RM RM

Current tax expense/(income):

Current year’s tax expense 1,400,000 4,482,000 - -

Under/(Over)provision in prior

financial years 62,846 208,172 - (59,840)

1,462,846 4,690,172 - (59,840)

Deferred tax (Note 17): Relating to originating and

reversal of temporary

differences 2,140,000 873,000 - -

3,602,846 5,563,172 - (59,840)

Malaysian income tax is calculated at the statutory tax rate of 24% (2016: 24%) of the estimated

taxable profits for the financial year.

76


24. TAX EXPENSE/(INCOME) (CONT’D)

25. EARNINGS PER ORDINARY SHARE

The reconciliations of income tax expense/(income) applicable to profit before tax at the

statutory tax rate to the income tax expense/(income) at the effective tax rate of the Group and

of the Company are as follows:-

Group Company2017 2016 2017 2016

RM RM RM RM

Profit before tax 26,603,431 25,757,401 11,309,642 29,703,219

Tax expense at

Malaysian statutory tax

rate of 24% (2016 :

24%) 6,384,823 6,181,776 2,714,314 7,128,773

Tax effects in respect of:- Income not subject to tax (170,606) (72,219) (2,755,200) (7,344,000)Expenses not deductible

for tax purpose 727,010 911,279 40,886 215,227Utilisation of

reinvestment allowance (3,401,227) (1,665,836) - -

Under/(Over) provision

of income tax in prior

financial years 62,846 208,172 - (59,840)

Total tax expense/

(income) 3,602,846 5,563,172 - (59,840)

(a) Basic earnings per ordinary share

(b) Diluted earnings per ordinary share

The calculation of basic earnings per ordinary share was based on Group’s profit for the

financial year attributable to owners of the Company over the weighted average number of

ordinary shares calculated as follows:-

There is no diluted earnings per ordinary share as there is no potential dilutive ordinary

share.

Group2017 2016

Profit after tax for the financial year attributable

to owners of the Company (RM) 23,000,585 20,194,229

Weighted average number of ordinary shares in

issue 134,386,849 124,934,426

Basic earnings per ordinary share (sen) 17.12 16.16

77


26. EMPLOYEE BENEFITS EXPENSE

27. RELATED PARTY DISCLOSURES

Group Company2017 2016 2017 2016

RM RM RM RM

Staff costs 20,370,886 16,650,565 - 44,351

Employee benefits expense of the Group and of the Company consist of, amongst others, the

following items:-

Group Company 2017 2016 2017 2016

RM RM RM RM

Directors’

remuneration

- Salary 2,845,160 2,688,000 - -

- Allowance 2,800 3,000 2,800 3,000- EPF 604,860 572,100 - -

- Bonus 448,000 375,000 - -

- SOCSO 2,783 2,125 - -

Defined

contribution plan –Staff EPF 653,146 465,615 - 5,031

(a) The related party transactions of the Group and of the Company during the financial year were

as follows:-

(b) The outstanding balance arising from related party transactions as at the reporting date is

disclosed in Note 9 to the Financial Statements.

(c) The remuneration of key management personnel is same with the Directors’ remunerations as

disclosed in Notes 23 and 26 to the Financial Statements. Key management personnel

comprise of persons having authority and responsibility for planning, directing and controlling

the activities of the Company either directly or indirectly and entity that provides key

management personnel services to the Company. The Company has no other members of key

management personnel apart from the Board of Directors.

Group Company2017 2016 2017 2016RM RM RM RM

Sales to a company

connected with

certain Directors 2,444,347 1,290,593 - -

Dividend income

from the

subsidiary - - 11,480,000 30,600,000

78


28. CAPITAL COMMITMENTS

29. CONTINGENT LIABILITIES

30. SIGNIFICANT EVENTS

(a) The Companies Act, 2016 (“New Act”) was enacted to replace the Companies Act, 1965 and

was passed by Parliament on 4 April 2016. The New Act was subsequently gazetted on

15 September 2016. On 26 January 2017, the Minister of Domestic Trade, Co-operatives and

Consumerism announced that the effective date of the New Act, except for section 241 and

Division 8 or Part III of the New Act, to be 31 January 2017.

Group2017 2016

RM RM

Authorised but not contracted for:-

- Equipment, plant and machinery - 3,736,500- Building - 5,697,500

- 9,434,000

Authorised and contracted for:-

- Land - 10,658,193- Building 62,161,246

2,580,264-

- Equipment, plant and machinery 5,176,906

64,741,510 15,835,099

Company2017 2016

RM RM

Unsecured:-

Corporate guarantees given to licensed

financial institutions for credit facilities granted

to the subsidiary - Limit 114,108,000 27,908,000Corporate guarantees given to a finance lease

creditor for finance lease facility granted to

the subsidiary - Limit - 852,000

The corporate guarantees do not have determinable effect on the terms of the credit facilities

due to the banks requiring guarantee as a pre-condition for approving the credit facilities

granted to the subsidiary. The actual terms of the credit facilities are likely to be the best

indicator of “at market” terms and hence the fair value of the credit facilities are equal to the

credit facilities and contract bond amount received by the subsidiary. As such, there is no value

on the corporate guarantee to be recognised in the financial statements.

Significant events during the financial year

79


30. SIGNIFICANT EVENTS (CONT’D)

31. OPERATING SEGMENTS - GROUP

(a) Business segments

The Group is organised on two major operating segments. These operating segments are

monitored separately for the purpose of making decisions about resource allocation and

performance assessment. Segment performance is evaluated based on operating profit or loss

which, in certain respects as explained in the table below, is measured differently from

operating profit in the consolidated financial statements.

The following summary describes the operations in each of the Group’s reportable segments:-

Transfer prices between operating segments are on negotiated basis.

(b) On 10 August 2016, the Company announced a proposal to carry out a Private Placement

Exercise (“Private Placement”) involving the issuance of up to 13,200,000 new ordinary shares

in the Company’s shares (“Placement Shares”). On 16 February 2017, the issue price of

13,200,000 Placement Shares, being the first and only tranche of the Private Placement, was

fixed at RM3.20 per Placement Share. The Private Placement was completed on 24 February

2017.

(c) On 28 April 2017, the Company announced that it proposed to undertake a bonus issue of

48,400,000 new ordinary shares in the Company (“SCGM Share(s)”) (“Bonus Share(s)”) on

the basis of one (1) Bonus Share for every three (3) existing SCGM Shares held on an

entitlement date to be determined later.

On the same day itself, the Company announced that it also proposed to undertake a bonus

issue of 19,360,000 new warrants in the Company (“Warrant(s)”) on the basis of two (2)

Warrants for every fifteen (15) existing SCGM Shares held on the same entitlement date as the

above bonus issue.

On 13 June 2017, Bursa Malaysia Securities Berhad has resolved to approve the above bonus

issue.

Significant events during the financial year (cont’d)

Significant event after the financial year

The Directors declared fourth interim single tier dividend in respect of the financial year ended 30

April 2017 of 2 sen per ordinary share on 21 June 2017 and payable on 25 July 2017. The financial

statements for the current financial year do not reflect this dividend. Such dividend will be

accounted for in equity as an appropriation of unappropriated profit in the financial year ending 30

April 2018.

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

Operating segments Business activities

Manufacturing Manufacturing and trading of plastic products.

Investment holding Investment holding.

80


31. OPERATING SEGMENTS – GROUP (CONT’D)

(a) Business segments (cont’d)

Manufacturing Investment

holding Eliminations Notes ConsolidatedRM RM RM RM

2017 Revenue External revenue 178,784,555 - - 178,784,555 Inter-segment revenue

Inter-segment revenue

- 11,480,000 (11,480,000) A - Total revenue 178,784,555 11,480,000 (11,480,000) 178,784,555 Results Segment profit/(loss) 27,445,833 (170,358) - B 27,275,475 Interest income 54,418 - - 54,418 Finance costs (726,462) - - (726,462) Depreciation and

amortisation (8,405,313) - - (8,405,313) Tax expense (3,602,846) - - (3,602,846) Other non-cash

expenses (638,256) - - C (638,256) 2016 Revenue External revenue 133,505,495 - - 133,505,495

- 30,600,000 (30,600,000) A -

Total revenue 133,505,495 30,600,000 (30,600,000) 133,505,495 Results Segment profit/(loss) 27,110,990 (896,781) - B 26,214,209 Interest income 26,022 - - 26,022 Finance costs (482,830) - - (482,830) Depreciation and

amortisation (6,115,767) - - (6,115,767) Tax expense (5,623,012) 59,840 - (5,563,172) Other non-cash

expenses (647,322) - - C (647,322)

81




Manufacturing Investment

holding Eliminations Notes ConsolidatedRM RM RM RM

2017

Assets

Segment assets

Segment assets

225,297,340 134,845,106 (134,693,256) D 225,449,190

Additions to non-current

Additions to non-current

assets other than financial instruments 54,849,650 - - E 54,849,650

Liabilities

Segment liabilities 28,006,433 37,278 - F 28,043,711

2016

Assets

130,368,519 92,992,108 (92,901,000) D 130,459,627

assets other than financial instruments 14,350,230 - - E 14,350,230

Liabilities

Segment liabilities 9,012,316 388,573 - F 9,400,889

Notes to the nature of adjustments and eliminations to arrive at amounts reported in the

consolidated financial statements:-

A. Inter-segment revenues are eliminated on consolidation.

B. The following items are added to/(deducted from) segment profit to arrive at “profit

before tax” presented in the consolidated income statement:-

2017 2016

RM RM

Segment profit 27,275,475 26,214,209Interest income 54,418 26,022Finance costs (726,462) (482,830)

Profit before tax 26,603,431 25,757,401

82





consolidated financial statements (cont’d):-

C. Other non-cash income/(expenses) consist of the following items as presented in the

respective notes to the financial statements:-

D. The following items are added to segment assets to arrive at total assets reported in the

consolidated statement of financial position:-

2017 2016

RM RM

Allowance for impairment of receivables (201,882) (53,588)Bad debts written off - (56)

Property, plant and equipment written off - (53,403)Inventories written down (1,645,996) (1,025,402)Allowance for impairment of receivables

no longer required 7,400 -

Gain on disposal of property, plant and

equipment 137,053 15,377Reversal of inventories written down 1,025,402 1,070,821Unrealised gain/(loss) on foreign exchange 123,793 (564,768)(Loss)/Gain on redemption on financial

asset carried at fair value through profit

or loss (8,897) 9,967 Fair value loss on financial asset carried at

fair value through profit or loss (75,129) (46,270)

(638,256) (647,322)

2017

RM 2016

RM

Segment assets 225,449,190 130,459,627Tax recoverable 2,658,332 59,595

Total assets 228,107,522 130,519,222

83




(b) Geographical information

There is no geographical information presented as the Group is predominantly operating in

Malaysia.

(c) Major customers

The Group does not have any revenue from a single external customer which represent 10%

or more of the Group’s revenue.


consolidated financial statements (cont’d):-

E. Additions to non-current assets other than financial instruments consist of :-

F. The following items are added to segment liabilities to arrive at total liabilities reported

in the consolidated statement of financial position:-

2017

RM2016

RM

47,035,249 13,121,475Property, plant and equipment

Capital work-in-progress 7,814,401 1,228,755

54,849,650 14,350,230

2017

RM2016

RM

28,043,711 9,400,8893,824,471 6,120,647

25,898,013 -

- 632,0005,540,000 3,400,000

Segment liabilities

Finance lease creditors

Borrowings

Tax payable

Deferred tax liabilities

Total liabilities 63,306,195 19,553,536

84


32. FINANCIAL INSTRUMENTS

(a) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in foreign exchange rates.

The Group is exposed to foreign currency risk mostly on its sales and purchases that are

denominated in a currency other than the functional currency of the Group. The currencies

giving rise to this risk are primarily US Dollar (“USD”), Singapore Dollar (“SGD”), EURO,

Australian Dollar (“AUD”), Japanese Yen (“JPY”) and New Zealand Dollar (“NZD”).

Based on carrying amounts as at the reporting date, foreign currency denominated financial

assets and liabilities which expose the Group to currency risk are disclosed below:-

Risk management objectives and policies

The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets

and liabilities by category are summarised in Notes 3.10 and 3.11 respectively. The main types of risks

are foreign currency risk, interest rate risk, credit risk and liquidity risk.

Financial risk management policy is established to ensure that adequate resources are available for the

development of the Group’s business whilst managing its foreign currency risk, interest rate risk, credit

risk and liquidity risk. The Group operates within clearly defined policies and procedures that are

approved by the Board of Directors to ensure the effectiveness of the risk management process.

USD SGD EURO AUD JPY NZD RM RM RM RM RM RM

3,937,065 9,139,022 (37,635) 141,545 - -2,114,827 - 357,610 - - -

3,767,416 4,142,560 727,350 96,123

237,668

63 342

9,819,308 13,281,582 1,047,325 63 342

(940,527) (22,266) (138,323) - - -

(9,464,752) (747) (714,146) - - -

(10,405,279) (23,013) (852,469) - - -

2017 Financial assets Trade receivables Other receivables Cash and cash

equivalents

Financial liabilitiesTrade payables Other payables

Net exposure (585,971) 13,258,569 194,856 237,668 63 342

85


32. FINANCIAL INSTRUMENTS (CONT’D)

(a) Foreign currency risk (cont’d)

Risk management objectives and policies (cont’d)

Foreign currency sensitivity analysis

The following table illustrates the sensitivity of profit in regards to the Group’s financial assets and

financial liabilities and the RM/USD, RM/SGD, RM/EURO, RM/AUD, RM/JPY and RM/NZD with ‘all

other things being equal’.

It assumes a 8% (2016: 5%) change of the RM/USD, RM/SGD, RM/EURO, RM/AUD, RM/JPY and

RM/NZD exchange rates respectively. The percentage has been determined based on the average

market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on

the Group’s foreign currency denominated financial instruments held at each reporting date.

If the RM had strengthened against the USD, SGD, EURO, AUD, JPY and NZD by 8% (2016: 5%)

respectively, this would have the following impact:-

USD SGD EURO AUD JPY NZDRM RM RM RM RM RM

2016 Financial assetsTrade receivables 6,055,439 7,335,251 - 500,350 - -Other receivables 1,746,521 - 665,393 - - -Cash and cash

equivalents 944,065 2,403,533 866 9,117 26 444

8,746,025 9,738,784 666,259 509,467 26 444

Financial liabilities Trade payables (236,530) (52,228) - - - -Other payables (198,825) (3,541) - - - -

(435,355) (55,769) - - - -

Net exposure 8,310,670 9,683,015 666,259 509,467 26 444

Increase/(Decrease) on profit for the financial year

USD SGD EURO AUD JPY NZD TotalRM RM RM RM RM RM RM

2017 46,878 (1,060,686) (15,588) (19,013) (5) (27) (1,048,441)

2016 (415,534) (484,151) (33,313) (25,473) (1) (22) (958,494)

86



Foreign currency risk (cont’d)

Foreign currency sensitivity analysis (cont’d)

If the RM had weakened against the USD, SGD, EURO, AUD, JPY and NZD by 8% (2016: 5%)

respectively, then the impact to profit for the financial year would be the opposite effect.

Exposures to foreign exchange rates vary during the financial year depending on the volume

of overseas transactions. Nonetheless, the analysis above is considered to be representative of

the Group's exposures to foreign currency risk.


(a)

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial

instruments will fluctuate because of changes in market interest rates.

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 the risk of

change in cash flows due to changes in interest rates. Short term receivables and payables are

not significantly exposed to interest rate risk.

The Group’s interest rate management objective is to manage interest expenses consistent

with maintaining an acceptable level of exposure to interest rate fluctuation.

Interest rate sensitivity

The Group and the Company are exposed to changes in market interest rates through bank

borrowings at variable interest rates. Other borrowings are at fixed interest rates. The

exposure to interest rates for the Group’s and the Company’s short term placement is

considered immaterial.

The interest rate profile of the Group’s and of the Company’s significant interest-bearing

financial instruments, based on carrying amounts as at the end of the reporting period is as

follows:-

(b)

Group CompanyRM RM

(3,824,471) -

(2,349,000) -

(15,000,000) -

(21,173,471) -

(8,549,013) -

2017 Fixed rate instruments Financial liabilities

Finance lease creditors

Bankers’ acceptance

Revolving credit

Net financial liabilities

Floating rate instrumentFinancial liability

Term loan

Net financial liability (8,549,013) -

87



Interest rate risk (cont’d)

Interest rate sensitivity (cont’d)

The interest rate profile of the Group’s and of the Company’s significant interest-bearing

financial instruments, based on carrying amounts as at the end of the reporting period is as

follows (cont’d):-

The following table illustrates the sensitivity of profit to a reasonably possible change in

interest rates of +/- 25 (2016: 25) basis points (“bp”). These changes are considered to be

reasonably possible based on observation of current market conditions. The calculations are

based on a change in the average market interest rates for each period, and the financial

instruments held at each reporting date that are sensitive to changes in interest rates. All other

variables are held constant.


(b)

Group Company

2016

RM RM

Fixed rate instruments Financial asset Fixed depositwith a licensed bank 126,981 -

Financial liability

Finance lease creditors (6,120,647) - Net financial liability (5,993,666) -

(Decrease)/Increase on

profit for the financial year

+ 25 bp - 25 bp

Group

RM RM

30 April 2017 (21,373) 21,373

30 April 2016 - -

88


The Group continuously monitors defaults of customers and other counterparties, identified

either individually or by group, and incorporate this information into its credit risk controls.

Where available at reasonable cost, external credit ratings and/or reports on customers and

other counterparties are obtained and used. The Groups’ policy is to deal only with

creditworthy counterparties.

The Groups’ management considers that all the above financial assets that are not impaired or

past due for each of the reporting dates under review are of good credit quality.

The ageing analysis of trade receivables of the Group is as follows:-


Credit risk

Credit risk is the risk that counterparty fails to discharge an obligation to the Group and the

Company. The Group’s and the Company’s maximum exposure to credit risk is limited to the

carrying amount of financial assets recognised at the reporting date, as summarised below:-


(c)

Group Company2017 2016 2017 2016RM RM RM RM

12,753,896 8,081,786 151,850 88,88241,191,859 32,800,436 - -2,713,976 3,650,937 - -

Classes of financial

assets – carrying

amounts:-Cash and cash

equivalents Trade receivables Other receivables Other financial asset 44,086,312 16,764,469 - -

100,746,043 61,297,628 151,850 88,882

Allowance for impairment loss Individually Collectively

Gross impaired impaired Total Net RM RM RM RM RM

21,825,551 - - - 21,825,551 12,709,037 - - - 12,709,037

3,973,138 - - - 3,973,138 1,205,693 - - - 1,205,693

1,315,094 - - - 1,315,094

2017 Within terms Past due 1 to 30 days Past due 31 to 60 days Past due 61 to 90 days Past due 91 to 120

days Past due more than

120 days 523,728 (360,382) - (360,382) 163,346

41,552,241 (360,382) - (360,382) 41,191,859

89


None of the Groups’ financial assets are secured by collateral or other credit enhancements

and none of the carrying amount of financial assets whose terms have been renegotiated that

would otherwise be past due or impaired.

In respect of trade and other receivables, the Group is not exposed to any significant credit

risk exposure to any single counterparty or any group of counterparties having similar

characteristics. Trade receivables consist of a large number of customers in various industries

and geographical areas. Based on historical information about customer default rates, the

management consider the credit quality of trade receivables that are not past due or impaired

to be good.

The credit risk for cash and cash equivalents and short term placements is considered

negligible, since the counterparties are reputable banks with high quality external credit

ratings.


Credit risk(cont’d)

The ageing analysis of trade receivables of the Group is as follows (cont’d):-


(c)

Allowance for impairment loss Individually Collectively

Gross impaired impaired Total Net RM RM RM RM RM

2016 Within terms 12,408,205 - - - 12,408,205Past due 1 to 30 days 8,624,995 - - - 8,624,995Past due 31 to 60 days 5,595,105 - - - 5,595,105Past due 61 to 90 days 2,125,459 - - - 2,125,459Past due 91 to 120

days 1,337,098 - - - 1,337,098Past due more than

120 days 2,875,474 (165,900) - (165,900) 2,709,574

32,966,336 (165,900) - (165,900) 32,800,436

90


32

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92


33. CAPITAL MANAGEMENT OBJECTIVE

34. FAIR VALUE OF FINANCIAL INSTRUMENTS

The primary capital management objective of the Group is to maintain a strong capital base and

safeguard the Group’s ability to continue as a going concern, so as to sustain future development

of the business. There is no change to the objectives in financial years ended 2017 and 2016.

The Group manages its capital by regularly monitoring its current and expected liquidity

requirement and modifies the combination of equity and borrowings from time to time to meet

the needs. Shareholders’ equity and gearing ratio of the Group are as follows:-

The Group has complied with Practice Note No. 17 (Revision on 3 August 2009, 22 September

2011 and 25 March 2013) of Main Market Listing Requirements of Bursa Malaysia Securities

Berhad which requires the Group to maintain a consolidated shareholders’ equity not less than

25% of the issued and paid-up capital of the Company and such shareholders’ equity is not less

than RM40 million.

The carrying amounts of financial assets and liabilities of the Group and of the Company as at the

reporting date are approximately at their fair values due to their short term nature or they are

floating rate instruments that are re-priced to market interest rates on or near the reporting

date.

Fair value hierarchy

The following table provides an analysis of financial instruments that are measured subsequent

to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair

value is observable.

2017 2016

RM RM

Total equity 164,801,327 110,965,686Borrowings 29,722,484 6,120,647

Debt-to-equity ratio 0.18 0.06

93


There were no transfers between Level 1 and 2 during the reporting period.

34. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT’D)

Fair value hierarchy (cont’d)

Group Quoted in

active markets for

identical instruments

Significant other

observable inputs

Significant unobservable

inputs Total Level 1 Level 2 Level 3

RM RM RM RM

2017 Financial asset : Financial asset carried

at fair value through

profit or loss

( “FVTPL” )

- Non-derivative

financial asset

designated at

FVTPL 44,086,312 - - 44,086,312

2016 Financial asset : Financial asset carried

at fair value through

profit or loss

( “FVTPL” )

- Non-derivative

financial asset

designated at

FVTPL 16,764,469 - - 16,764,469

94


Bursa Malaysia Securities Berhad has, on 25 March 2010 and 20 December 2010, issued directives

requiring all listed corporations to disclose the breakdown of unappropriated profits or

accumulated losses into realised and unrealised on group and company basis, as the case may

be, in quarterly reports and annual audited financial statements.

The breakdown of unappropriated profit as at the reporting date that has been prepared by the

Directors in accordance with the directives from Bursa Malaysia Securities Berhad stated above

and Guidance on Special Matter No. 1 issued on 20 December 2010 by the Malaysian Institute of

Accountants are as follows:-

The above disclosures were reviewed and approved by the Board of Directors in accordance

with a resolution of the Directors on 28 June 2017.

DISCLOSURE OF REALISED AND UNREALISED PROFITS/(LOSSES)

Group Company 2017 2016 2017 2016

RM RM RM RM

Total unappropriated profit

of the Company and its

subsidiary:

- Realised 75,038,111 80,530,087 2,221,405 1,735,763

- Unrealised (5,416,207) (3,964,768) - -

69,621,904 76,565,319 2,221,405 1,735,763

Consolidation adjustments (11,480,000) (30,600,000) - -

58,141,904 45,965,319 2,221,405 1,735,763

OUR GROUPSTRUCTURE

95


96


OUR GROUPSTRUCTURE

From left to right : Wong Tun Boon, Amrik Singh Harcharan Singh, Dato’ Sri Lee Hock Guan, Dato’ Sri Lee Hock Seng, Dato’ Sri Lee Hock Chai, Lee Hock Meng, Tang Nai Soon.

CORPORATE STRUCTURE

SCGM BHD

LSSPI

100%

Our Company was incorporated in Malaysia

on 29 June 2007 under the Companies Act

1965 as a public limited company. Our

Company is an investment holding company

while our subsidiary, namely, Lee Soon Seng

Plastic Industries Sdn. Bhd. (“LSSPI”) is

principally involved in the manufacturing and

trading of plastic products. The structure of

our Group is as follows:

97


CORPORATE INFORMATION

REGISTERED OFFICECOMPANY SECRETARIES

Lim Seck Wah

(MAICSA No. 0799845)

M. Chandrasegaran A/L S. Murugasu

(MAICSA No. 0781031)

Ng Chye Huat (MIA 14186)

(Appointed with effect from 21 June 2017)

PRINCIPAL PLACE OF BUSINESS

Lot 3304, Batu 24 ½Jalan Kulai-Air Hitam, 81000 Kulai, Johor

Tel : 07-652 2288

E-mail : [email protected]

Website : www.scgmbhd.com

www.plastictray.com

STOCK EXCHANGE LISTING

Level 15-2,

Bangunan Faber Imperial Court

Jalan Sultan Ismail, 50250 Kuala Lumpur

Tel : 03-2692 4271

Fax : 03-2732 5388

SHARE REGISTRAR

Mega Corporate Services Sdn Bhd (187984-H)

Level 15-2, Bangunan Faber Imperial Court

Jalan Sultan Ismail, 50250 Kuala Lumpur

Tel : 03-2692 4271

Fax : 03-2732 5388

Bursa Malaysia Securities Berhad

Main Market Stock Name : SCGM

Stock Code: 7247

SOLICITORSAmrik Singh & Co Advocates & Solicitors

No. 37, Jalan Seruling 2,

Taman Sri Kulai Baru 2,

81000 Kulai, Johor

Tel : 07-662 6730

PRINCIPAL BANKERSAlliance Bank Malaysia Berhad

AmBank Islamic Berhad

AmBank (M) Berhad

CIMB Islamic Bank Berhad

Hong Leong Bank Berhad

Malayan Banking Berhad

Public Bank Berhad

RHB Bank Berhad

DATO’ SRI LEE HOCK SENGExecutive Chairman

DATO’ SRI LEE HOCK CHAIManaging Director

DATO’ SRI LEE HOCK GUANDeputy Managing Director

LEE HOCK MENGExecutive Director

BOARD OF DIRECTORS

AMRIK SINGH HARCHARAN SINGHIndependent Non-Executive Director Independent Non-Executive Director

Independent Non-Executive Director

WONG TUN BOON

TANG NAI SOON

AUDITORSSJ Grant Thornton (AF:0737)

Unit 29-08, Level 29, Menara Landmark

12, Jalan Ngee Heng, 80000 Johor Bahru

Tel : 07-223 1848

Fax : 07-224 9848

98


PROFILEOF DIRECTORS

DATO’ SRILEE HOCK SENGExecutive Chairman

Dato’ Sri Lee Hock Seng, Malaysian, aged 67,

was appointed as the Executive Chairman /

Managing Director of SCGM Bhd on 19

December 2007. He was redesignated as

Executive Chairman on 9 December 2015. He

is one of the founders of Lee Soon Seng

Plastic Industries Sdn. Bhd. (LSSPI) and has

been the Managing Director of LSSPI since its

incorporation on 4 May 1984. In 1995, he

completed an external training programme,

namely the 7th Asian Factory Management

Course 1995 in Taipei, Taiwan. Subsequently, in

1997, he completed a course in Middle

Management Leadership Training Programme

in Johor Bahru, Johor.

Dato’ Sri Lee started his career in 1969 as a

Marketing and Distribution personnel with Lee

Soon Seng, a distributor and wholesaler for

F&N (M) Sdn Bhd. In 1984, he left Lee Soon

Seng to set up LSSPI.

Presently, he is responsible for the strategic

business development and future directions

of our Group. He frequently travels abroad to

keep abreast with the latest developments in

the packaging industry and to explore new

market prospects for our Group.

Furthermore, his responsibilities also include

the development and implementation of

marketing strategies and product distribution.

He was awarded the DIMP which carries the

title of Dato’ and the SSAP which carries the

title of Dato’ Sri by the Sultan of Pahang in

2010 and 2012 respectively. He is a member of

the Remuneration Committee of the

Company.

He does not hold any directorships in other

public companies.

Malaysian

67/Male

19 December 2007

Nationality

Age/Gender

Date Joined

99


PROFILE OF DIRECTORS

Dato’ Sri Lee Hock Chai, Malaysian, aged 55,

was appointed as the Executive Director of

SCGM on 19 December 2007. He is the

Executive Director of Lee Soon Seng Plastic

Industries Sdn. Bhd. since 4 May 1984. He is one

of the founders of Lee Soon Seng Plastic

Industries Sdn. Bhd.. He began his career as a

Factory Manager with LSSPI in 1984.

In 1998, he was promoted to the position as an

Operations Manager. His responsibilities

include developing new products and provides

engineering support, machinery and factory

facility maintenance.

Managing Director

DATO’ SRILEE HOCK CHAI

Malaysian

55/Male

19 December 2007

Nationality

Age/Gender

Date Joined

Dato‘ Sri Lee Hock Chai was promoted to the

position of Managing Director since 9

December 2015. He is to implement and

execute the strategic business development

and the growth of the company.

He has more than thirty two (32) years of

experience in the field of research and

development. He was awarded the SSAP which

carries the title of Dato’ Sri by the Sultan of

Pahang in 2012.


public companies.

100


DATO’ SRILEE HOCK GUANDeputy Managing Director

Malaysian

57/Male

19 December 2007

Dato’ Sri Lee Hock Guan, Malaysian, aged 57,

was appointed as the Executive Director of

SCGM on 19 December 2007 and was

redesignated as Deputy Managing Director on

15 March 2017. He has been the Executive

Director of LSSPI since 4 May 1984. In 1997, he

completed a course on Middle Management

Leadership Training Programme in Johor

Bahru, Johor.

Mr. Lee began his career in 1979 as a Sales

Executive in Lee Soon Seng, a distributor and

wholesaler for F&N (M) Sdn Bhd.

His assists the Managing Director which

include planning for material requirements,

manpower and production capacity, providing

general machinery maintenance and ensuring

overall safety in production.

He frequently travels abroad to enhance his

knowledge in new technology and automation

for production. He has more than than thirty

two (32) years of experience in the field of

production. He was awarded the SSAP which

carries the title of Dato’ Sri by the Sultan of

Pahang in 2012.


public companies.

Deputy Managing Director

Malaysian

57/Male

19 December 2007

Nationality

Age/Gender

Date Joined


101


LEEHOCK MENGExecutive Director

Lee Hock Meng, Malaysian, aged 64, was

appointed as the Executive Director of SCGM

on 19 December 2007. He was the Executive

Director of LSSPI since 4 May 1984. In 1997, he

participated in the 9th seminar on Factory

Management and Marketing for Overseas

Chinese Businessman.

In 1979, he began his career with Lee Soon

Seng, a distributor and wholesaler for F&N (M)

Sdn Bhd, as a Sales Executive.

He was attached to Lee Soon Seng for

approximately eleven (11) years before joining

LSSPI in 1990 as a Logistics Manager. He is

presently the Executive Director, responsible

for overseeing shipping and logistic

arrangements for the Group.


public companies.

LEELEEHOCK MENGHOCK MENGExecutive Director

Malaysian

64/Male

19 December 2007

Nationality

Age/Gender

Date Joined


102


AMRIK SINGHHARCHARANSINGHIndependentNon-Executive Director

Amrik Singh Harcharan Singh, Malaysian, aged

48, was appointed as the Independent

Non-Executive Director of SCGM on 19

December 2007. He graduated with an

Honours Degree from the University of

London in 1994. He is an Advocate and

Solicitor since 1996. He has more than

seventeen (17) years experience in handling

civil litigation matters, as well as Industrial

Court cases.

He has been appointed as the legal adviser

and counsel for the Food Industry Employees

Union for the state of Johor, Malaysia which is

recognised by the United Nations.

He is currently acting as counsel for more

than five (5) legal firms throughout the

country. He is also running his own legal

advisory firm under the name of Messrs.

Amrik Singh and Co. since 2003. He is a

member of the Audit Committee and the

Nomination Committee of the Company.


public companies.

Malaysian

48/Male

19 December 2007

Nationality

Age/Gender

Date Joined


103


Wong Tun Boon, Malaysian, aged 41, was

appointed as the Independent Non-Executive

Director of SCGM on 19 December 2007. He

holds a Bachelor of Commerce (Honours)

degree from the University of Windsor, Canada,

which he obtained in 1998. After graduation up

to 2001, he worked in two (2) audit firms,

namely Syarikat Y.S. Tay and Azman, Wong,

Salleh & Co. He also completed his post

graduate studies and was conferred the

Masters Degree of Business by the Victoria

University of Technology, Australia in 2001.

He joined M. S. Wong & Co. in Johor as an audit

& tax senior executive from 2001 till 2005. In

2004, Mr. Wong fulfilled all required practical

requirements and was successfully admitted as

the member of the Certified Practicing

Accountant (CPA), Australia and also the

Malaysia Institute of Accountants (“MIA”).

Mr Wong had set up his own firm in Johor and

has been practicing as a Chartered

Accountant and Company Secretary since

then. His firm, Thomas Wong & Co., which is

registered with MIA, provides a range of

complementary professional services such as

accountancy, secretarial and taxation services.

He is also a Government Licensed Tax

Consultant approved by the Ministry of

Finance.

He is the Chairman of the Audit Committee

and the Remuneration Committee, and a

member of the Nomination Committee of the

Company.


public companies.

IndependentNon-Executive Director

WONG TUN BOON

Malaysian

41/Male

19 December 2007

Nationality

Age/Gender

Date of Appointment


104


Tang Nai Soon, Malaysian, aged 48, was

appointed as the Independent Non -

Executive Director of SCGM on 19 December

2007. He graduated with a degree in

Computer Science (Hons) from Universiti

Teknologi Malaysia (UTM) in 1993. Up to 1994,

he worked as a marketing executive in CTE

Computer (M) Sdn Bhd, Johor Bahru.

Subsequently, he was the Personal Assistant

for YB Datuk Lim Si Cheng, Member of

Parliament for Senai/ Kulai since June 1995.

He was the Kulai District Councillor from

1996 to 2006.

He was also appointed as the Advisor for the

Juvenile Court in Johor Bahru as well as the

Village Chief of the Ayer Bemban New

Village in 2006 and 2007, respectively.

Mr. Tang was the Pekan Nanas state

assemblyman (2008-2013) and he is currently

the Special Assistant to Minister in The Prime

Minister's Department.

He is a member of the Audit Committee and

the Remuneration Committee, and the

Chairman of the Nomination Committee of the

Company. Mr. Tang is also an Independent

Non-Executive Director of Spring Gallery

Berhad.

TANGNAI SOONIndependentNon-Executive Director

Malaysian

48/Male

19 December 2007

Nationality

Age/Gender

Date Joined


105


Save as disclosed above, Dato’ Sri Lee Hock Seng,

Dato’ Sri Lee Hock Chai, Dato’ Sri Lee Hock Guan and

Mr Lee Hock Meng are siblings. The other Directors

do not have any family relationship with any Director

and/or major shareholder of the Company.

None of the Directors have any conflict of interest

with the Company.

None of the Directors has been convicted of any

offences within the past five (5) years.

OTHER INFORMATIONOF DIRECTORS


106


BUSINESSPROCESS

BUSINESSPROCESS

Sheet Extrusion

Vacuum Forming

Die-cutting

Packing

Storage

Delivery

MANUFACTURING PROCESS FLOW

BUSINESS PROCESS


One Stop Solution from resin to raw material and plastic packaging material.

107

Storage Facilities

Output up to 800kg/hour

Fully Automatic Forming-Punching

Fully Automatic Forming-Punching

Oversea & Local TransportationOversea & Local Transportation

Our core business products can be classified into the following categories:

THERMO-VACUUM FORMED PLASTIC PACKAGING

We have more than 5,000 different moulds in current use to form thermo-vacuum formed plastic

packaging products, We have the capabilities to thermo-vacuum form single-layer and multilayer

extrusion sheets into plastic packaging, with thickness ranging from less than 0.11mm to 2mm, the

extrusion sheets we use in our thermo-vacuum forming process are APET, PET-G, GAG, PVC,

HIPS, PP and OPS sheets.

Our packaging is used to pack a variety of food products, including sandwiches, cakes,

chocolates, biscuits, salads and moon cakes. Meanwhile, we are able to produce antistatic and

black conductive trays to hold semi-finished electronic products, such as liquid crystal display

and hard disk drive parts, as well as packaging to store end-products, such as computer software.

Thermo-vacuum formed plastic packaging for food products should not contain any components

that could migrate into the food, including harmful chemicals, contaminants and other relevant

ingredients. They should also adequately protect the quality, freshness and safety of the food

products, and ideally add to the appeal of the product by having attractive designs.

Similarly, thermo-vacuum formed plastic packaging for electronic products should adequately

protect the products, for example from theft and/or damage, and at the same time provide total

product visibility to showcase the products, if it is displayed in retail outlets.

Our thermo-vacuum formed plastic packaging is capable of both providing protection to our

customers’ products as well as adding an aesthetic value to these products, which enhances their

value and presentation.

EXTRUSION SHEETS

We produce extrusion sheets, namely, APET, PET-G, GAG, HIPS and PP sheets. These extrusion

sheets are semi-raw materials used in the production of thermo-vacuum formed plastic

packaging.

We began producing HIPS and PP sheets back in September 2004. Subsequently in March 2007,

we started producing APET, PET-G and GAG sheets. Our HIPS, PP, APET, PET-G and GAG sheets

are either used as semi-raw materials in our production of thermo-vacuum formed plastic

packaging or sold to our customers.

Back in FY 2006, our sales of extrusion sheets to external customers contributed only

approximately 5.0% to our total revenue but has since increased significantly but will vary

according to demand. Currently, the sales of extrusion sheets contributed approximately 14.8% to

total revenue.

BUSINESS PROCESS108


An overview of our production process is shown below :

Once orders are received from our Sales Department, the Production Department would check our

internal schedule and plan the production timeline as well as request for the required materials

and/or moulds. Depending on the production process, materials required are plastic resins, colour

masterbatches and additives, or extrusion sheets.

Plastic resins, colour masterbatches and additives are purchased from our suppliers. Meanwhile,

extrusion sheets are either internally produced or sourced from our suppliers. On the other hand,

moulds used in our thermo-vacuum forming process are designed and prepared internally by our

Moulding Department, based on customers’ requirements.

Once we have all the required materials and/or moulds, we would conduct the extrusion process

and/or thermo-vacuum forming process, depending on the customer requirements.

Receive order from

Sales Department

Check schedule and plan

for production

Material and/or mould

requisition

Mould

preparation

Extrusion processThermo-vacuum

forming process

MOULD PREPARATION AND PRODUCTION PROCESS

109


BUSINESS PROCESS

BUSINESS PROCESS110


MOULD PREPARATION

QC

QC

Receive sample

product / drawing

from customer

Design mould/redraw dimension

Produce prototype mould

and forming sample

Sample

confirmed?

No

Yes

Fabrication of mould

Production/store

Our customers normally provide us with either a sample of the product that needs to be

packaged, or a drawing of the packaging they require. If we receive a product sample, we would

proceed with mould design. Moulds determine the shape and dimension of the thermo-vacuum

formed plastic packaging produced. On the other hand, if we receive a rough sketch of the

packaging required and the dimensions are inaccurate, we would redraw the dimensions for the

mould.

A prototype mould is produced based on the mould design. This prototype mould is fixed onto our

forming machine to form a sample packaging, which is sent for QC checks to ensure that the mould

and the sample packaging formed are as per specifications. The sample packaging is also sent to

customers for their approval. The prototype mould is modified, if necessary, until it meets specified

requirements.

The prototype mould is then used as a master mould, to form a set of identical moulds for the

thermo-vacuum forming process. Each thermo-vacuum formed plastic packaging has one (1)

mould design. However, a set of identical moulds with the same design is usually made to maximise

the number of moulds assembled on a base plate. This allows more thermo-vacuum formed plastic

packaging to be produced at one time and reduce the wastage of extrusion sheets.

Once the moulds are formed, we conduct parts work. Parts work involves drilling small air passages

in the moulds, thereby allowing vacuum to remove air from the area between the sheet and the

mould shape as well as hold the sheet against the mould’s surface during the thermo-vacuum

forming process. All the moulds are then assembled on a base plate, and finishing is conducted to

polish and clean the moulds’ surface.

A final QC check is conducted before the moulds are sent to the production line or to the store. The

moulds are visually checked to see if there are any differences in size. If there are differences, the

moulds are modified or new moulds are fabricated. Once the mould passes the QC check, they are

sent either to the production line or to produce thermo-vacuum formed plastic packaging for our

customers or to the store to be kept until such production process is required.

We have the capabilities to produce four (4) different types of moulds, the details of which are as

follows:

(i) Aluminium

Aluminium moulds are mainly used to form packaging with more precise dimensions, such as

packaging for electronic products. Our aluminium moulds are designed using CAD/CAM software

and formed using CNC milling machine.

The CAD software produces the mould design, while the CAM software controls the CNC milling

machine to ensure that moulds are made as per requirements. Meanwhile, the CNC milling machine

conducts turning and machining processes, to change the shape and surface finishing of the

aluminium into the required mould design.

111


BUSINESS PROCESS

BUSINESS PROCESS112


Our aluminium moulds are durable and can normally last for approximately ten (10) years,

depending on the usage. We do not currently produce all of our aluminium moulds so we have

been to purchasing additional new CNC milling machines to allow us to produce more aluminium

moulds in a shorter time frame.

(ii) Epoxy

Epoxy moulds are produced when aluminium powder is mixed with two (2) types of resins to

harden it, and then cast using a plastic tray. The plastic tray is a duplicate from a master mould.

Although epoxy is softer than aluminium, it is more economical. Furthermore, our epoxy moulds

are durable and can also last for approximately ten (10) years, depending on the usage. We

presently produce our own epoxy moulds.

(iii) Plaster stone

Plaster stone is normally used to make prototype/master moulds. It is cast out by mixing plaster

powder with water, and then left to harden. Moulds made of plaster stone are not as durable as

aluminium or epoxy moulds, but they are more economical and can be easily modified should

customers require changes to be made. We presently produce our own plaster stone moulds.

(iv) Wood

Wood moulds are shaped into the design/pattern as required. Similar to plaster stone, wood

moulds are not as durable as aluminium or epoxy moulds, and are used to make

prototype/master moulds only. We presently produce our own wood moulds.

Plastic resinsColour

masterbatches

Feed materials into

plastic sheet extruder

Set T-die based on width

and thickness required

Extrusion process

Inform supervisor

to rectify problem

Not acceptable

Not acceptable

Acceptable

Acceptable

Inform supervisor

to rectify problem

Roll-up sheet

Pack and label

Store or deliver to customers

Additives

QC

QC

EXTRUSION SHEETS PRODUCTION PROCESS FLOW

113


BUSINESS PROCESS

114


Materials are fed through a top-mounted hopper into the barrel of the extruder. A barrel is a

hollow cylindrical container positioned horizontally in an extruder. Materials fed into the barrel are

as follows:

Besides the barrel, the main components within the extruder are the screw, screen pack, T-die and

cooling rolls. The T-die, which provides the final product with its profile, is adjusted according to

product specifications. The extrusion process commences once the T-die is set.

The materials enter through the feed throat (i.e. an opening near the rear of the barrel) and come

in contact with the screw, which is located within the barrel. The rotating screw forces the

materials forward into the barrel, which is heated to the desired melt temperature of the molten

plastic. The plastic resins melt gradually as they are pushed through the barrel. At the front of the

barrel, the molten plastic leaves the screw and travels through a screen pack to remove any

contaminants in the melt. After passing through the screen pack, the molten plastic enters the

T-die and plastic sheeting is formed. The extrusion sheets are then cooled by pulling them

through a set of cooling rolls.

A QC check is conducted on the thickness of the extrusion sheets. The ideal thickness depends

on customers’ orders and we set a 2% tolerance on thickness variations. If the thickness is not

acceptable, the supervisors would be informed to rectify the problem. If it is acceptable, the

sheets would be rolled-up. Another QC check would be conducted to check on the weight of

each roll of extrusion sheets. The ideal weight depends on customers’ orders and we set a 0.1

kilogram tolerance on weight variations for each roll of extrusion sheets. If it is not acceptable, the

supervisors would be informed to rectify the problem. On the other hand, if it is acceptable, each

roll of extrusion sheets would be packed and properly labelled.

The extrusion sheet rolls are stored until they are required for the thermo-vacuum forming

process, or delivered to customers. The extrusion sheet rolls must be stored in a spacious, dry

area with room temperature of ±30ºC, to prevent damage from heat, humidity and contamination.

Our warehouse meets this requirement.

01ResinsRaw thermoplastic material in the form of small beads

02Colour masterbatchesTo add specific colour to the end-product

03

AdditivesAn anti-blocking additive is added to prevent self-adhesionof plastic film or sheet, making it easier to handle

BUSINESS PROCESS

The Group over the past several years has been researching on the different methods in producing

the trays by providing new and innovation products to meet the new discerning lifestyle of todays’

consumer market. Among them are as follows:

IMPROVEMENT IN CYCLE TIMES

Enhancement of the cycle times have greatly reduce our cost and our production team has gone to

great lengths to study the use of automation in improving our efficiencies, reducing downtime and

increasing our output. The diagram below shows our thermoforming since our inception.

2 COLOR EXTRUSION MACHINE

The group has recently acquired a 2 color extrusion machine whereby a single tray will comprise

two different colors shown in the picture below. The advancement in using this technology was

acquired through several months of testing and enhancing the learning curves of our machinist.

RESEARCH &DEVELOPMENT

115


GOING GREEN

The calls for concerns by NGOS, Consumers and

Governments in going green has also prompted

SCGM Bhd in meeting this new requirements.

Therefore to further boost its presence as

environment friendly company, SCGM Bhd has

been working with international experts namely

Greenhope from Indonesia in developing

addictive to comply with the new green

ECO-LABEL requirements. After several months

of testing, SCGM Bhd is proud to announce its

new range of products which are environment

friendly. See attached pictures of our new range

of products. The SIRIM certification and our

Certification from OXIUM.

MOULD IMPROVEMENT

In view of the complexity of the moulds

for our businesses, Scgm Bhd is proud to

announce that we have successfully

develop air-cooling moulds which will

greatly improve our efficiency during our

production process.

116


RESEARCH & DEVELOPMENT

BENXON Environmentally Friendly Products


CORPORATEGOVERNANCE

CORPORATEGOVERNANCE

117


STATEMENT ONCORPORATE GOVERNANCE

118


The Board of SCGM Bhd (“the Group”) will endeavour to comply with all the key Principles and

Best Practices of the Malaysian Code on Corporate Governance 2012 (“the Code”) in its effort to

observe high standards of transparency, accountability and integrity. SCGM is committed to

practice high standard of corporate governance to ensure effective self-regulatory corporate

practices exist to protect the stakeholders’ interests.

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

the Board has complied with the Recommendations set out in the Code for the financial year

ended 30 April 2017.

A. THE BOARD OF DIRECTORS

1. The Board and its Responsibilities

The Board is responsible for the overall corporate governance, strategic direction, formulation of

policies and overseeing the businesses of the Group. The Board leads and supervises the

management of the business and affairs of the Group in enhancing long term shareholders’ value

and sustaining the stakeholders’ interests.

a) Board Composition

The Board consists of seven (7) members comprising the Executive Chairman, Managing Director,

Deputy Managing Director, one (1) Executive Director and three (3) Independent Non-Executive

Directors. The present Board composition complies with the Listing Requirements of the Bursa

Malaysia.

The profiles of the Directors are set out on pages 98 to 105 in this Annual Report.

The Board comprises of business entrepreneurs and professionals drawn from various

backgrounds, with a diverse range of know-how, experiences and knowledge; provides the

relevant skills, expertise and experience for making sound investment decisions and manage the

Group's business operations. With the diversified and vast experiences of the board members, the

Board is competent to discharge its duties and responsibilities and safeguard shareholders’ value.

The Group does not have a policy on gender diversity, ethnicity and age but the Board

composition is based on merits, experience and their commitment and contribution to the Group.

The Board will continue to provide equal opportunity to competent candidates.

119


STATEMENT ON CORPORATE GOVERNANCE

b) Goals and Responsibilities

The roles of the Chairman and Managing Director are separate with clear division of responsibilities

between them to ensure balance of power and authority.

The Board recognises the key role it plays in charting the strategic direction of the Company and

has assumed the following principal responsibilities in discharging its fiduciary and leadership

functions:

• reviewing and adopting a strategic plan for the Company, addressing the sustainability of the

Group’s business;

• overseeing the conduct of the Group’s business and to lead its direction.

• identify principal business risks faced by the Group and ensuring the implementation of

appropriate internal controls and mitigating measures to address such risks;

• ensuring that all candidates appointed to senior management positions are of sufficient calibre,

including the orderly succession of senior management personnel;

• overseeing the development and implementation of a shareholder communications policy,

including an investor relations programme for the Group; and

• reviewing the adequacy and integrity of the Group’s internal control and management

information systems.

To assist in the discharge of its stewardship role, the Board has established Board Committees,

namely the Audit Committee, Nomination Committee and Remuneration Committee, to examine

specific issues within their respective terms of reference as approved by the Board and report to

the Board with their recommendations. The ultimate responsibility for decision making, however,

lies with the Board.

The Chairman is responsible for the Group’s future business and strategy plan, setting goal to

achieve the mission and vision. He provides leadership and governance of the Board, ensuring its

effectiveness and assumes the formal role as the leader in chairing all Board meetings and

shareholders’ meetings. He leads the Board in overseeing Management and principally ensures that

the Board fulfills its obligations and as required under the relevant legislations.

120


Some of the specific responsibilities of the Chairman include to:-

i) Manage Board meetings and boardroom dynamics by promoting a culture of openness and

debate where Directors are encouraged to provide their views;

ii) Work closely with the Managing Director to ensure provision of accurate, timely and clear

information to facilitate the Board to perform effectively, able to make informed decisions

and to monitor the effective implementation of the Board’s decisions;

iii) To provide his view and decision objectively; and

iv) Ensure meetings of the shareholders are conducted in an open and proper manner with

appropriate opportunity for them to ask questions.

v) As Group’s official spokesperson.

The Managing Director is responsible for the management of the Group’s business and marketing

strategy to meet the Group’s budget and target sales, organisational effectiveness and

implementation of Board strategies, policies and decisions.

The Board has also appointed the Independent Non-Executive Director, Wong Tun Boon, as the

Senior Independent Director to whom concerns may be conveyed.

The duties of Executive Directors include implementation of decisions and policies approved by

Board, overseeing and running the Group's day to day business, and also coordinating business

and strategic decisions. Each Executive Director is responsible for the respective business unit

that there is no overlapping of each role and duty.

The Non-Executive Directors are independent from management and are free from any business

or other relationships that could materially interfere with the exercise of independent judgment.

They scrutinize the decision taken by the Board, and provide constructive opinions and objectively

challenge the management’s proposal and decision. While the Board is responsible for creating

the framework and policies within which the Group should be operating, the management is

accountable for the execution of the expressed policies and attainment of the Group’s expressed

corporate objectives. This demarcation reinforces the supervisory role of the Board.

The Board also assumes various functions and responsibilities that are required of them by

regulatory authorities, as specified in guidelines and directives issued from time to time.


121


c) Board Charter

The Board has formalized and uploaded its Board Charter in the Group’s corporate website at

https//www.scgmbhd.com. The Board Charter was last reviewed on 28 June 2017. The Board

Charter sets outs the roles and responsibilities of the Board.

d) Independence

The Group measures the independence of its Directors based on the criteria prescribed under the

Main Market Listing Requirement (“Main LR”) in which a Director should be independent and free

from any business or other relationship that could interfere with the exercise of independent

judgement or the ability to act in the best interests of the Company. Objective assessment of the

independence of Directors based on the provisions of the Main LR is carried out before the

appointment of Directors and re-affirmed annually.

One of the recommendations of the Code states that the tenure of an independent director should

not exceed a cumulative term of over 9 years. As of to date, the three independent directors have

served the Board for a cumulative term of ten years. The Company will seek for shareholders’

approval on the retention of the three independent directors at the forthcoming Annual General

Meeting.

The Board considered the current size and composition of the Board a balanced mix of

professionals and entrepreneurs who have a diverse range of know-how and experiences in

relevant fields. The Board is of the view that with the current Board size, there is a balance of power

and authority on the Board between the Non-Independent and Independent Directors. The Board

is assisted by the Nomination Committee to review the Board size and composition annually.

e) Code of Ethics and Whistleblowing Policy

The Code of Ethics and Whistleblowing policy are published on the Group’s corporate website at

https://www.scgmbhd.com.

f) Schedule of Matters Reserved for Board

Append below is a list of matters reserved for Board Committee, where there is doubt regarding a

matter/an issue, it shall be referred to the Chairman:

i. Business plan and changes thereon;

ii. Introduction of new business or termination of existing business;

iii. Budget and significant capital expenditure;

iv. Quarterly, annual unaudited and audited financial statements;

v. Proposed dividend/Dividend policy;


122


vi. Approval of significant changes in accounting policies and practices;

vii. Remuneration of auditors;

viii. Recommendations for appointment, reappointment and dismissal of auditors;

ix. External and internal audit plans;

x. Report and findings of auditors;

xi. Property, plant and equipment written off and/or disposals;

xii. Bank borrowings;

xiii. Changes in the mode of operations of bank accounts;

xiv. Debt, loan agreements and working capital facilities for the Group;

xv. Financial instruments and derivatives;

xvi. Increase in authorised, issued and paid up share capital, including share buy-back,

capitalisation of reserves;

xvii. Related party transactions;

xviii. Directors’ remunerations and fees;

xix. Changes in organisational and management structure;

xx. Misconduct and disciplinary matters;

xxi. Changes in key positions;

xxii. Appointment of power of attorney;

xxiii. Risk management framework;

xxiv. Internal control systems;

xxv. Board committees’ terms of reference and changes thereto;

xxvi. Convening Annual General Meeting/Extraordinary General Meeting;

xxvii. Key statements of Annual Report;

xxviii. Changes to the Memorandum and Articles of Associations;

xxix. Appointment and termination of Company Secretary and/or Share Registrars;

xxx. Change of registered office;

xxxi. Change of Company’s name.

2. Board Meetings

Board meetings are scheduled in advance at the beginning of the new financial year to enable

Directors to plan ahead and fix the scheduled meetings. The Board meets at least four times a

year. Special Board meetings to deliberate on corporate proposals or urgent issues which require

the Board’s consideration and decision will be held as and when necessary. Financial and

operation plan will be reviewed and discussed at each regular scheduled meeting. Other items

reviewed would include business performance of the Group, against plan previously approved by

the Board, review and approve quarterly and annual financial statements, corporate exercises and

other proposals that require the approval of the Board. Senior management and advisers may be

invited to attend Board meetings, where necessary, to provide additional information and insights

on the relevant agenda items tabled at Board meetings.


123


The Board is satisfied with the level of time commitment given by the Directors towards fulfilling

their roles and responsibilities as Directors. In any given circumstances, in accordance with the

provision of the Main LR, members of the SCGM Board are expected to serve in no more than five

public listed companies.

The Board met four (4) times during the financial year ended 30 April 2017. Details of each

director’s attendance for the financial year ended 30 April 2017 are as follows:-.

3. Supply of Information

The Board meeting agenda and meeting papers are distributed 5 days prior to the meetings of the

Board to ensure that Directors have sufficient time to deliberate the matters and effective

discussion at the meetings. The Board members are supplied with full and timely information to

enable them to discharge their duties.

Presentations to the Board are prepared and delivered in a manner that ensures clear and adequate

presentation of the subject matter. For accessibility and more effective administration of the board

papers, it is made accessible electronically through secured means. All issues raised, discussions,

deliberations, decisions and conclusions including dissenting views made at Board meetings with

clear actions to be taken by responsible parties are recorded in the minutes.

All Directors have unrestricted and complete access to the information and are entitled to obtain

full disclosure from the management. Directors may also interact directly with, or request further

explanation, information or update on any aspects of the Group’s operations from the

management.

In addition, the Board also has access to the advice and services of the Company Secretary who is

responsible for ensuring that Board Meeting procedures are followed and that applicable rules and

regulations are complied with. The proceedings and resolutions reached at each Board meeting are

recorded in the Minutes Book kept at the registered office by Company Secretary. Besides Board

meetings, the Board also exercises control on matters that requires its approval through the

circulation of Directors’ resolutions.

Name



Dato’ Sri Lee Hock Guan

Lee Hock Meng

Amrik Singh Harcharan Singh

Tang Nai Soon

Wong Tun Boon

Attendance

4/4

4/4

3/4

4/4

4/4

3/4

4/4


124


As the Group’s quarterly results is one of the regular annual schedule of matters which is tabled to

the Board for approval at the quarterly Board meetings, notices on the closed period for trading

in SCGM’s securities are also circulated to remind Directors, key management personnel and

principal officers who are privy to any sensitive information and knowledge in advance of

whenever the closed period is applicable based on the targeted date of announcement of the

Group’s quarterly results. This is to comply with the Main LR and the Capital Markets & Services

Act 2007 requirements where key management personnel and principal officers of the Group are

prohibited from trading in securities or any kind of property based on price sensitive information

which has not been publicly announced within 30 calendar days before the targeted date of

announcement of the quarterly results up to the date of announcement. During the financial year

ended 30 April 2017, none of the Directors and principal officers dealt in SCGM’s securities during

the closed period.

The Board will seek for independent professional advice, if necessary, at the Company's expense

from time to time to enable the Board to discharge its duties in relation to matters being

deliberated.

4. Nomination Committee

The present members of the Nomination Committee are as follows:

a. Mr. Tang Nai Soon (Chairman)

b. Mr. Amrik Singh Harcharan Singh

c. Mr. Wong Tun Boon

The Nomination Committee comprise exclusively of Independent Non-Executive Directors. The

terms of reference of Nomination Committee are as follows:

i) Nomination and recommendation for appointment of the Board members;

ii) Consider and recommend Board candidates for directorship;

iii) To develop, maintain and review the criteria to be used in the recruitment process and

annual assessment of directors;

iv) Recommend to the board, candidates for re-election of directors by shareholders under the

annual re-election provisions or retirement;

v) Periodically report to the board on succession planning for the board chairman, directors and

key management personnel;

vi) Annually review the time required of non-executive and independent directors; and

vii) Annually review the required mix of skills, experience, diversity and other qualities, including

core competencies and effectiveness of the board, as a whole, the board committees and the

contribution of each individual director.


125


The process for Board appointment is as follows:

i) Identify the vacancy;

ii) Identify the candidates;

iii) Evaluate the suitability of candidates;

iv) Meet shortlisted candidates;

v) Find deliberation by the Nomination Committee; and

vi) Recommend to the Board.

The Nomination Committee will hold a meeting at least once a year, additional meetings can be

scheduled if necessary or upon request by any of its members. The minutes of the meeting of the

Nomination Committee are circulated to all the members and it is properly kept at the registered

office by Company Secretary.

Activities of the Nomination Committee for the financial year

The members of the Committee reviewed the composition, mix of skills and independence of the

Board. There is a process in place on the yearly review on the balance Board composition and

Directors’ evaluation. The Board composition comprises of professional such as laws, accountant

and business entrepreneur.

The Nomination Committee assess the individual Directors through the Director Evaluation Form

under the criteria of integrity and ethics, governance, strategic perspective, adding value, judgment

and decision-making, teamwork, communication and commitment. The assessment of the Board is

based on specific criteria, covering areas such as the Board structure, Board operations, roles and

responsibilities of the Board, the Board Committee and the Chairman’s role and responsibilities.

The respective Director will abstain from evaluating their own Board performance. The Nomination

Committee will rate the Board performance evaluation based on the consensus amongst the

Nomination Committee. The Nomination Committee Chairman will make the appropriate

recommendation to the Board. The final decision is with the Board.

5. Directors' Training

The Board members shall appraise and keep abreast with the developments in the regulations and

statutes relevant to the industry and to further enhance their skills and knowledge by attending the

relevant seminars, training programmes, conferences, etc, from time to time.


126


Description of the type of training attended by the Director for financial year ended 30 April 2017

is as follows:-


Date

Board Chairman Series Part 2: Leadership Excellence

From The Chair” by The Iclif Leadership and Governance

Centre

ISO 9001:2015 Awareness Training & Assessment by

EmreST Training & Consultancy

FSSC22000 Awareness Training & Assessment by


Drafting The Statement on Corporate Governance, Audit

Committee Report & On Risk Management and Internal

Audit, Management Discussion & Analysis Statement:

What & How To Disclose” by Malaysian Institute of

Corporate Governance

Updates on Companies Act 2016 and Its Implications to

Directors by Malaysian Directors Academy

Seminar/Training Programme

18 August 2016

23 November 2016

24 November 2016

14 March 2017

18 April 2017

Dato’ Sri Lee Hock Chai Board Chairman Series Part 2: Leadership Excellence

From The Chair” by The Iclif Leadership and Governance

Centre

Tax Seminar on Malaysia Budget 2017 by SJ Grant

Thornton





Sustainability Reporting – How To Go About The

Intricacies of Reporting? by Malaysian Institute of









18 August 2016

18 November 2016

23 November 2016

24 November 2016

7 December 2016

14 March 2017

18 April 2017

Dato’ Sri Lee Hock Guan ISO 9001:2015 Awareness Training & Assessment by











23 November 2016

24 November 2016

14 March 2017

18 April 2017

Name of Director


127


The Board of Directors will continue to evaluate and determine the training needs that will assist

the Directors in discharging their duties.

6. Qualified and competent Company Secretary

The Directors have unrestricted access to the advice and services of the Company Secretary to

enable them to discharge their duties effectively. The Board is regularly updated and advised by the

Company Secretary who is qualified, experienced and competent on statutory and regulatory

requirements, and the resultant implications of any changes therein to the Company and Directors

in relation to their duties and responsibilities. The Company Secretary advises the Board on matters

relating to corporate governance, compliance with the Main LR, Capital Markets and Services Act

2007 and Companies Act 2016, preparation and conduct of the Board, Committee and General

Meetings.

Lee Hock Meng


Date







Seminar/Training Programme

Evaluation of Manual & Non Manual Workers by

Kesatuan Pekerja-perkerja Perkilangan Makanan

Perusahaan Malaysia.

23 November 2016

24 November 2016

18 April 2017

20 June 2016

Wong Tun Boon National GST Conference 2016 by Chartered Tax Institute

of Malaysia

National Tax Conference 2016 by Chartered Tax Institute

of Malaysia

Seminar Percukaian Kebangsaan 2016 by Lembaga Hasil

Dalam Negeri Malaysia

GST Updates and Customs Audit Findings by Malaysian

Institute of Accountants

National GST Conference 2017 by Chartered Tax Institute

of Malaysia

Companies Regulations 2017 and Companies Act 2016 –

Related Issues by Institute of Approved Company

Secretaries

31 May & 1 June 2016

9 & 10 August 2016

15 November 2016

5 January 2017

28 February &

1 March 2017

26 March 2017

Tang Nai Soon Seminar Konsep Johor Berkemampuan by Pejabat

Menteri Besar Johor

Taklimat Muafakat Johor: Pelan Pertumbuhan Strategik

Johor (Johor Strategic Growth Plan) by House of Trust

Johor (Bait Al-Amanah, Johor)

22 November 2016

8 February 2017

Name of Director


128


B. DIRECTORS' REMUNERATION

1. The Level and Make-up

The remuneration policy of the Group for the Executive Chairman and the Executive Directors are

structured to link rewards to corporate and individual performance in order to retain staff with the

relevant skills and experience to meet the challenges of the Group. For Non-Executive Directors,

the level of remuneration shall reflect the experience and level of responsibilities undertaken by

the particular Non-Executive Director concerned.

2. Remuneration Committee

The Remuneration Committee is authorised by Board to establish formal and transparent

remuneration policies and procedures to attract and retain directors.

The present members of the Remuneration Committee are as follows:

a. Mr. Wong Tun Boon (Chairman)

b. Dato’ Sri Lee Hock Seng

c. Mr. Tang Nai Soon

The terms of reference of Remuneration Committee are as follows:

i) Set, review, recommend and advise the policy framework on all elements of the

remuneration such as reward structure, fringe benefits and other terms of employment of

Executive Chairman, Managing Director and Executive Directors having regard to the overall

Group policy guidelines/framework.

ii) Advise the Board on the performance of the Executive Chairman, Managing Director and

Executive Directors and an assessment of his/her entitlement to performance related pay.

iii) Review and propose the remuneration package of the Executive Directors and senior

management staff.

The remuneration policy of the Group for all Executive Directors and senior management shall be

recommended by the Remuneration Committee for the Board’s approval with the Directors

concerned abstaining from deliberations and voting on decisions in respect of their individual

remuneration. The fees payable to the Independent Non-Executive Directors shall be

recommended by the Board subject to the approval of shareholders at Annual General Meeting.

The Committee meets at least once a year, additional meetings can be scheduled if necessary. No

Director shall take part in decisions pertaining to his own remuneration.


129


3. Disclosure

The details of the Directors' remuneration for the financial year ended 30 April 2017 in respective

bands of RM50,000 are as follows: -

# None of the Directors’ remuneration falls within the bands of RM50,001 to RM700,000 and RM750,001 to RM800,000

The following table outlines the remuneration of the Directors and is categorised below:


Range of Remuneration Executive Non-Executive

RM50,000 & below

RM700,001 to RM750,000

RM800,001 to RM850,000

RM850,001 to RM900,000

-

1

2

1

3

-

-

-

NO. NAME OF DIRECTORS

SALARY (RM) BONUS (RM)FEE (RM)

SCGM SUBSIDIARY SCGM SUBSIDIARY SCGM SUBSIDIARY SCGM SUBSIDIARY

ALLOWANCE (RM) TOTAL AMOUNT

(RM)

EXECUTIVE DIRECTORS




Lee Hock Meng

INDEPENDENTNON-EXECUTIVE DIRECTORS


22,000.00

22,000.00

22,000.00

1,000.00

800.00

1,000.00

23,000.00

22,800.00

23,000.00

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

1

2

3

4

5

6

7

-

-

-

-

-

-

-

-

-

-

-

-

762,000.00

723,900.00

723,900.00

635,000.00

112,000.00

112,000.00

112,000.00

112,000.00

874,000.00

835,900.00

835,900.00

747,360.00

-

-

-

-

-

-

-

-

-

-

-

360

Tang Nai Soon

Wong Tun Boon

130



C. RELATIONSHIP WITH SHAREHOLDERS

The Board maintains an effective communications policy that enables both the Board and the

management to communicate effectively with its shareholders and the public. The policy

effectively interprets the operations of the Group to the shareholders and accommodates

feedback from shareholders, which are factored into the Group's business decision.

The Chairman is officially appointed as the authorised person to speak and release the public

information for and on behalf of the Group.

The Board communicates information on the operations, activities and performance of the Group

to the shareholders, stakeholders and the public through the following:

i) The Annual Report, which contains the financial and operational review of the Company

and the Group's business, corporate information, financial statements and information on

Audit Committee and Board of Directors;

ii) Announcements made to the Bursa Malaysia, which includes announcements on quarterly

financial results, circular and various announcements made via Bursa Link in full compliance

with regulatory authorities’ disclosure requirements;

iii) Annual General Meeting, the primary engagement platform between the Board and

shareholders of the Group;

iv) Quarterly results and Investors’ Briefing, SCGM holds the investors’ briefing which is

chaired by the Chairman immediately after the release of quarterly results to Bursa

Securities to facilitate timely publication and/or dissemination of analysts’ reports to the

investing community;

v) The Corporate’s website - https://www.scgmbhd.com/; and

vi) Media release.

The General Meeting serves as an important means for shareholders' communication. Notice of

the Annual General Meeting and Annual Reports are sent to shareholders twenty one (21) days

prior to the meeting. At each Annual General Meeting, the Board presents the performance and

progress of the Group and provides shareholders with the opportunity to raise questions and seek

clarification on the business activities pertaining to the Group, agenda of the meetings and its

proposed resolutions. The Chairman and the Board will respond to the questions raised by the

shareholders during the Annual General Meeting. The Board ensures each item of special business

included in the notice will be accompanied by an explanatory statement on the effects of the

proposed resolution.

In line with good corporate governance and amendments to the Main LR, all resolutions tabled at

general meetings held on or after 1 July 2016 will be voted by way of poll.

131



Matters reserved for shareholders’ approval at Annual General Meeting include the following:-

i) Distribution of final dividends; if any;

ii) Re-election of Directors;

iii) Payment of Directors’ fees; and

iv) Appointment/re-appointment of external auditors.

D. ACCOUNTABILITY AND AUDIT

The Board aims to present a balanced and understandable assessment of the Company and the

Group's position and prospect through the annual financial statements and quarterly

announcements of results to the Bursa Malaysia. The Directors are responsible in ensuring that the

annual financial statements are prepared in accordance with the provisions of the Companies Act

2016 and applicable approved accounting standards in Malaysia.

1. Audit Committee

The Board is assisted by the Audit Committee in supporting oversight functions of the Board on the

Group’s financial reporting, risk management and internal control systems and ensuring high

corporate governance practices.

The members of the Audit Committee are as follows:

a. Mr. Wong Tun Boon (Chairman)

b. Mr. Tang Nai Soon

c. Mr. Amrik Singh Harcharan Singh

The terms of reference is published on the Group’s corporate website, https://www.scgmbhd.com

Details of the composition and the summary of work of the Audit Committee during the financial

year are set out in the Audit Committee Report included in this Annual Report.

2. Financial Reporting

The Directors are committed to ensure the Group has adopted appropriate accounting policies,

consistently applied and supported by reasonable and prudent judgments and estimates and all

applicable approved accounting standards for the preparation of the audited financial statements

and quarterly announcement of results. In this respect, the Board through the Audit Committee

oversees the process and the integrity and quality of financial reporting, annually and quarterly. The

Audit Committee, in this respect, assists the Board by reviewing the financial statements and

quarterly announcements of results to ensure completeness, accuracy and adequacy before

recommending the same for the Board’s approval.

The Directors, in preparation of the financial statements, have requested the Auditors to take

whatever steps and to undertake whatever inspections they consider to be appropriate to enable

them to render their audit report. The Directors are responsible to ensure the annual financial

statements are prepared in accordance with the provision of the Companies Act 2016 and

applicable approved accounting standards in Malaysia, so as to give a true and fair view of the state

of affairs of the Group and the Company.

132



A statement by the Directors of their responsibilities in preparing the financial statements is set out separately on page 135 of this Annual Report. The details of the Company’s and Group’s financial statements for the financial year ended 30 April 2017 can be found on pages 23 to 93 of the Annual Report.

3. Relationship with Auditors

The Audit Committee manages and maintains a transparent and professional relationship with its external auditors and internal auditors on behalf of the Board. The Audit Committee considers the re-appointment, remuneration and terms of engagement of the external auditors and internal auditors annually.

The Audit Committee meets with the external and internal auditors to discuss their audit plans, audit findings and other special matters that require the Board’s attention and the financial statements. The external auditors and internal auditors attend Audit Committee Meetings of the Company whenever requested to do so.

Assessment of Suitability and Independence of External Auditors

The Audit Committee reviews and monitors the suitability and independence of the external auditors. The external auditors have confirmed that they were, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.

The external auditors can be engaged to perform non-audit services if there are clear efficiencies and value-added benefits to the Group and a detailed review of non-audit fees paid to the external auditors is undertaken by the Audit Committee. These procedures are in place to ensure that neither their independence nor their objectivity is put at risk, and steps are taken to ensure that this does not impede the external auditors audit works. The Audit Committee remains confident that the objectivity and independence of the external auditors are not in any way impaired by reason of the non-audit services provided to the Group.

The Audit Committee would meet the external auditors to review the scope of audit process, the audit findings and the audited financial statements, without any presence of the Executive Director and the Management. The external auditors are invited to attend the AGM of the Group and are available to the shareholders’ questions on the conduct of the statutory audit and the preparation and contents of their audit report.

Details of statutory audit, audit-related and non-audit fees paid/payable in the financial year ended 30 April 2017 to the external auditors are set out below:-

Fees paid/payable to SJ Grant Thornton

Audit Fees

Audit Related Fees1

Tax and tax related services2

Corporate Exercise3

61.5

7.0

12.0

15.0

RM’000

1 Fees incurred in connection with performance of review of consolidation accounts and review of Statement of Risk Management and Internal Control.2 Fees incurred for assisting the Group in connection with tax compliance and advisory services.3 Fees incurred in connection with Proposed Bonus Issue of Share and Proposed Bonus Issue of Warrants.

133



4. Internal Control

The Board recognises the importance of sound internal control for good corporate governance. As

such, an internal audit function is continuously reviewed and strengthened. The internal audit

function was outsourced to an independent professional firm to assist the Audit Committee in

reviewing the state of internal control of the Group and to highlight areas for management and

operational improvement.

The state of internal control of the Group is explained in greater detail on pages 136 to 143 of this

Annual Report.

E. ADDITIONAL INFORMATION

1. Material Contracts involving Directors’ and Major Shareholders’ Interest

There were no material contracts entered into by the Company and its subsidiary involving the

Directors’ and major shareholders’ interest during the financial year.

2. Status of Corporate Proposals

i. Private Placement I

Status of revised utilisation of proceeds raised from Private Placement I as at 30 April 2017:

As disclosed in the Proposal in relation to the Private Placement dated 12 November 2015, any

differences between the illustrated proceeds stated in the Proposal and the actual proceeds raised

from the Proposed Private Placement (which is dependent on the final issue price of the Placement

Shares and the final number of Placement Shares issued) as well as any differences in the actual

expenses in relation to the Proposed Private Placement shall be adjusted to the allocation for

working capital requirements of the Group.

On 10 August 2016, Kenanga Investment Bank Berhad (“Kenanga IB”) announced that the

Company proposed to revise the utilisation of unutilised balance of proceeds raised from the

Private Placement, which was completed on 11 December 2015.

Purposes of proceeds

Proposed Utilisation

AmountRM’000

Actual UtilisedAmountRM’000

Expected timeframe for utilisation from the

date of completion11 December 2015

Balance

RM’000 %

Capital expenditure

Working capital

Estimated expenses

relating to the

Private Placement

22,000

8,920

31,320

20,000

8,920

29,320

Within 12 months

Within 1 month

2,000

-

2,000

9.09%

0%

6.39%

Within 24 months

400400 - 0%

134



ii. Private Placement II

Status of utilisation of proceeds raised from Private Placement II as at 30 April 2017:

iii. Proposed Bonus Issue of Shares and Proposed Bonus Issue of Warrants

On 28 April 2017, M&A Securities Sdn Bhd (“M&A Securities”) announced that the Company

proposed to undertake the following:-

1. Proposed bonus issue of 48,400,000 new SCGM Shares on the basis of 1 Bonus Share for every

3 existing SCGM Shares held on an entitlement date to be determined later (”Entitlement

Date”); and

2. Proposed bonus issue of 19,360,000 Warrants on the basis of 2 free Warrants for every 15

existing SCGM Shares held on the same Entitlement Date as the Proposed Bonus Issue of

Shares. The new SCGM Shares to be issued arising from the exercise of the 19,360,000

Warrants represent 10% of the enlarged number of issued shares of the Company after the

Proposed Bonus Issue of Shares.

On 23 May 2017, M&A Securities announced that the additional listing application and the draft

circular in relation to the Proposals have been submitted to Bursa Securities.

On 13 June 2017, M&A Securities announced that Bursa Securities had, vide its letter dated 13 June

2017, resolved to approve the following:-

(i) Listing of up to 48,400,000 Bonus Shares to be issued pursuant to the Proposed Bonus Issue

of Shares;

(ii) Admission to the Official List and listing of 19,360,000 Warrants to be issued pursuant to the

Proposed Bonus Issue of Warrants; and

(iii) Listing of up to 19,360,000 new SCGM Shares to be issued arising from the exercise of

Warrants.

The Bonus Shares and Warrants must be listed and quoted simultaneously.

Purposes of proceeds

Proposed Utilisation

AmountRM’000

Actual UtilisedAmountRM’000

Expected timeframefor utilisation from the

date of completion24 February 2017

Balance

RM’000 %

Construction ofnew plant

Estimated expensesrelating to thePrivate Placement

41,792

448

42,240

-

448

448

41,792

41,792

100%

98.94%

Immediate - 0%

Within 24 months

135



Statement of Compliance with Malaysian Code on Corporate Governance 2012 (“the Code”)

The Company is committed to achieving high standards of corporate governance throughout the

Group and to the highest level of integrity and ethical standards in all its business dealings. The

Board considers that it has complied with all of the main principles and recommendations of the

Code that are applicable to the Company throughout the financial year.

This statement has been made in accordance with the resolution and authority of the Board dated

28 June 2017.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In accordance with the requirements in Paragraph 15.26 (a) of the Bursa Malaysia Securities Berhad

Main Market Listing Requirements, the Board of Directors are required to issue a statement

explaining their responsibility for preparing the annual audited financial statements.

The Directors of the Company are responsible for the preparation of financial statements so as to

give a true and fair view in accordance with Malaysian Financial Reporting Standards, International

Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

In ensuring the preparation of these financial statements, the Directors have:

• Selected and applied the appropriate and relevant accounting policies on a consistent basis;

• Made judgments and accounting estimates that are reasonable and prudent in the

circumstances; and

• Prepared the annual audited financial statements on a going concern basis.

The Directors are accountable to keep all the accounting and other statutory records for a requisite

statutory period of time. The Directors have also a general responsibility to safeguard the assets of

the Group and establishment of system of internal control for the prevention and detection of fraud

and other irregularities which is necessary to enable the preparation of financial statements that are

free from material misstatement, whether due to fraud or error.

STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTROL

136


The Board of Directors is pleased to provide the following Statement on Risk Management and

Internal Control, which is made pursuant to paragraph 15.26(b) and Practice Note 9 of the Bursa

Malaysia Securities Berhad Main Market Listing Requirements, Principle 6 of the Code and guided

by the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed

Issuers.

RESPONSIBILITY

The Board of Directors recognises the importance of a sound system of internal control and

effective risk management practices to good corporate governance. During the financial year, the

Board continues to enhance the system of internal control and risk management to safeguard

shareholders’ investments and the assets of the Group.

The Board affirms its overall responsibility for maintaining sound systems of internal control within

the Group covering financial control, operational control, compliance control and risk

management, and reviewing the adequacy and effectiveness of such systems within the Group

regularly. The Board, in the discharge of its stewardship responsibilities, is committed to identify

key risks in which companies within the Group are exposed and will introduce appropriate systems

progressively to manage such risks.

Notwithstanding that, there are, however, limitations inherent in any system of internal control, and

such system is designed to manage rather than eliminate the risk that may impede the

achievement of business objectives. The system of risk management and internal control can only

provide reasonable but not absolute assurance against material misstatement of management or

financial information or financial losses or frauds.

The internal audit adopts a risk-based approach in developing its audit plan which addresses the

core auditable areas of the Group. Scheduled internal audits shall be carried out by the internal

auditors based on the audit plan presented to and approved by the Audit Committee to provide

independent and objective reports on the state of internal control of the operating units. The audit

focuses on areas with risk as well as areas identified with inadequate controls to ensure the

effectiveness of the controls in mitigating those risks. The internal auditors will follow up with the

management in the implementation of action plans recommended to improve areas where control

deficiencies identified during the internal audits.

The Board affirms that it is ultimately responsible for the adequacy and integrity of the Group’s

systems of risk management and internal control, which includes the establishment of an

appropriate control environment and reporting framework.

137


STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

INTERNAL CONTROL STRUCTURE

a) Control Environment

The control environment sets the tones for the Group by providing fundamental discipline and

structure. Key elements of the Group include:

• Integrity and ethical values

The Board and Senior Management set the tone at the top corporate behaviour and corporate

governance. All employees of the Group shall adhere to the policies and guidelines which set

out the principles to guide employees in carrying out their duties and responsibilities when

dealing with external parties.

• Board Committees (ie. Audit Committee, Remuneration Committee and Nominating Committee)

Clear roles of the Board are stated under the Statement of Corporate Governance section of

this Annual Report.

The “hands on” management style by the Executive Directors contributed to timely

identification and rectification of risks and issues arising from business operations and other

related issues. Meetings of Board of Directors and respective Board Committees are scheduled

on timely basis to review the performance of the Group, from financial and operational

perspective.

• Organisation structure

An organisational structure with defined line of responsibilities, proper segregation of duties

and delegation of authority limits are in place.

A process of hierarchical reporting has been established, which provides for a documented

and auditable trail of accountability. The procedures include the establishment of limits of

authority and are relevant across the Group’s operations and provide for continuous assurance

to be given at increasingly higher levels of management, and finally to the Board.

Management is committed to employ suitable qualified staff to ensure operation efficiency.

Operation meetings are formal platforms for Management to set its tone on control culture and

emphasise on Group’s strategic directions as agreed upon by the Board.

• Training and development

Trainings are conducted at all levels in order all employees would be able to perform well in

their present jobs and also to develop employees who are potential to perform duties with

wider responsibilities. Management ensure that employees receive continuous training in

various areas of work such as knowledge, compliances of rules and regulations, health and

safety, technical training, leadership and new product development.

b) Risk Assessment

The Board and management are aware of its overall responsibility in managing the Group’s risk

management policy. The risk identification process is done on an ongoing-basis and entails all key

factors within the Group’s business operations.

Identifying, evaluating and managing any significant risks faced by the Group is undertaken by

various parties such as management, internal and external auditors and Audit Committee, which

assesses and analyses any findings of the internal and external audit and reports to the Board.

The Board’s function within the risk management policy is exercised and managed primarily by

Executive Directors through their participation in the operations and regular meetings with

managerial levels to ensure the efficiency of the system of internal control and risk management.

The process of identifying and evaluating the significant risks affecting the business is carried out

by all heads of departments on a continuous basis, and the controls and procedures by which

these risks are managed accordingly.

The Group’s financial risk management policy seeks to ensure that adequate resources are

available to mitigate risks including foreign currency risk, interest rate risk, credit risk and liquidity

risk. The Board assumes overall responsibility for the Group’s risk management policy and

formulates policies and procedures for the management of these risks.

c) Control Activities

Processes are continuously reviewed for relevance to the business processes and activities as well

as for uniformity and standardisation of practices across the Group.

Periodic and annual audit reviews by internal and external quality auditors were conducted to

ensure compliance with and continuous improvement of the ISO Quality Standards certification as

assurance to the quality standards of products and services provided by the Group.

138



Budgets are prepared to evaluate the feasibility and viability of the Group’s business and to ensure

that the Group’s business plan is in line.

The Group’s performance is also reported to the Board on quarterly basis to highlight significant

variances. The results are reviewed by the Board to enable them to gauge the Group’s overall

performance and compared to the prior periods.

d) Information and Communication

Management promotes good working relationship at all levels of employees by ensuring

information and communication channels are open and sinuous. Relevant information are shared

both downwards (from Management to employees) and upwards (from employees to

Management) for proper attention and further action.

Regular management meetings are conducted at the Group by all heads of departments to discuss

and resolve issues or challenges faced with regard to operational and administrative matters. The

proceedings of these meetings are minuted for further action and reference.

Board recognises the needs of communication across the Group and investors. Going forward,

more dialogues with investors and analysts as well as with the media will be held. Investor relations

activities are held at least on a quarterly basis.

e) Monitoring

Management maintains close monitoring of the Group’s operations through submission of monthly

reports and constant communication or regular meetings with the heads of department.

Management also constantly monitors the highlighted issues through the conduct of follow-up

audits which show its commitment to improve on current processes and internal controls.

During the financial year, the Board and Audit Committee have diligently continued in its role as

external overseers of internal controls and monitors performances of the Group’s quarterly financial

results.

Internal audit function acts as an ongoing monitoring process, which provides a degree of

assurance as to validity of the system of internal control. Planned corrective actions are

independently monitored for timely completion.

• Training and development

Trainings are conducted at all levels in order all employees would be able to perform well in

their present jobs and also to develop employees who are potential to perform duties with

wider responsibilities. Management ensure that employees receive continuous training in

various areas of work such as knowledge, compliances of rules and regulations, health and

safety, technical training, leadership and new product development.

b) Risk Assessment

The Board and management are aware of its overall responsibility in managing the Group’s risk

management policy. The risk identification process is done on an ongoing-basis and entails all key

factors within the Group’s business operations.

Identifying, evaluating and managing any significant risks faced by the Group is undertaken by

various parties such as management, internal and external auditors and Audit Committee, which

assesses and analyses any findings of the internal and external audit and reports to the Board.

The Board’s function within the risk management policy is exercised and managed primarily by

Executive Directors through their participation in the operations and regular meetings with

managerial levels to ensure the efficiency of the system of internal control and risk management.

The process of identifying and evaluating the significant risks affecting the business is carried out

by all heads of departments on a continuous basis, and the controls and procedures by which

these risks are managed accordingly.

The Group’s financial risk management policy seeks to ensure that adequate resources are

available to mitigate risks including foreign currency risk, interest rate risk, credit risk and liquidity

risk. The Board assumes overall responsibility for the Group’s risk management policy and

formulates policies and procedures for the management of these risks.

c) Control Activities

Processes are continuously reviewed for relevance to the business processes and activities as well

as for uniformity and standardisation of practices across the Group.

Periodic and annual audit reviews by internal and external quality auditors were conducted to

ensure compliance with and continuous improvement of the ISO Quality Standards certification as

assurance to the quality standards of products and services provided by the Group.

139



Budgets are prepared to evaluate the feasibility and viability of the Group’s business and to ensure

that the Group’s business plan is in line.

The Group’s performance is also reported to the Board on quarterly basis to highlight significant

variances. The results are reviewed by the Board to enable them to gauge the Group’s overall

performance and compared to the prior periods.

d) Information and Communication

Management promotes good working relationship at all levels of employees by ensuring

information and communication channels are open and sinuous. Relevant information are shared

both downwards (from Management to employees) and upwards (from employees to

Management) for proper attention and further action.

Regular management meetings are conducted at the Group by all heads of departments to discuss

and resolve issues or challenges faced with regard to operational and administrative matters. The

proceedings of these meetings are minuted for further action and reference.

Board recognises the needs of communication across the Group and investors. Going forward,

more dialogues with investors and analysts as well as with the media will be held. Investor relations

activities are held at least on a quarterly basis.

e) Monitoring

Management maintains close monitoring of the Group’s operations through submission of monthly

reports and constant communication or regular meetings with the heads of department.

Management also constantly monitors the highlighted issues through the conduct of follow-up

audits which show its commitment to improve on current processes and internal controls.

During the financial year, the Board and Audit Committee have diligently continued in its role as

external overseers of internal controls and monitors performances of the Group’s quarterly financial

results.

Internal audit function acts as an ongoing monitoring process, which provides a degree of

assurance as to validity of the system of internal control. Planned corrective actions are

independently monitored for timely completion.

140



RISK MANAGEMENT POLICY

The Board recognises the need for an effective risk management practice and to maintain a sound

system of internal control as all areas of the business activities of the Group involve certain risks.

Hence, the Board has formalised and established the risk management policy, as an approach to

identifying, assessing, reporting and monitoring risks faced by the Group.

The objectives of the risk management policy are:

• To systemise a continuous process for identifying, evaluating and managing the significant risks

faced by the Group;

• To provide a platform for communication, of risk and control profiles and the management

action plans to manage the risks, between Senior Management and the Board;

• To nominate key management personnel to prepare action plans to address any risk and control

issues;

• To inculcate an organisation-wide culture of risk awareness and management and embed

internal controls and risk management further into the operations of the Group’s business; and

• To establish a documented process of control monitoring and improvement plans.

The Board has assigned the Group’s risk oversight function to Risk Management Committee

(“RMC”), which comprises of Senior Management and Head of Departments of the Group. RMC is

primarily responsible to identify, evaluate, and manage significant risks faced by the Group as well

as report to the Board on a regular basis.

The following depicts the key parties and their principal risk management roles and

responsibilities:

a) Board of Directors

• Maintains a sound system of risk management and internal control;

• Evaluate the adequacy of the system of risk management and internal control; and

• Approve risk management policy and governance structure.

141



b) Risk Management Committee

• RMC discuss and meet regularly to identify and manage risks to a manageable level;

• Identify and evaluate the significant risks faced by the Group;

• Assist the Board in implementing the objectives outlined in the risk management policy;

• Establish, formulate, recommend and manage sound and best practice risk management

programs for the Group;

• Continuously monitor and execute appropriate actions to address any change in existing risks

or new risks identified as part of an on-going proactive control measure;

• Report to the Board on any major changes to the identified risk requiring immediate attention/

notification;

• Inculcates risk awareness within the Group.

c) Head of Departments

• Primarily responsible for managing risk on a day-to-day basis; and

• Promote risk awareness within their operations and introduce risk management objectives into

the business and operations.

The Board recognise that risk management can become a strategic competitive advantage if it is

used to identify specific actions that enhance performance and optimise risk. It can also influence

business strategy by identifying potential adjustments related to previously unidentified

opportunities and risks. As much as risks give rise to the need for controls, we consciously look out

for opportunities for improvement arising from risks and uncertainties. Risk management has been

adopted also as a strategic tool in strategy formulation, investment and resource allocation.

During the financial year under review, the Board has identified, evaluated and managed the

significant risks faced by the Group through monitoring of the Group’s operational efficiency and

performance at its Board Meeting. The Board has assigned to the Audit Committee the duty of

reviewing and monitoring the effectiveness of the Group’s risk management processes. At

operation levels, risks were discussed on ad hoc basis during the periodic management operations

meetings.

INTERNAL AUDIT FUNCTION

The Board recognises the need for an internal audit function, and has engaged the services of an

independent professional firm, Messrs Needsbridge Advisory Sdn Bhd (“NASB”) to review the

efficiency and effectiveness as well as the adequacy and integrity of the Group’s internal control

and risk management processes implemented by the management to manage key business risks

and internal control system.

142



The internal audit firm adopts a risk-based approach to the implementation and monitoring of

internal controls. The monitoring process will also form the basis for continually improving the risk

management process in the context of the Group's overall goals. Internal audit is performed based

on the internal audit plans approved by the Audit Committee or any amendments thereof

approved by the Audit Committee deemed necessary.

The internal audit firm will provide the Audit Committee with an independent assessment of the

effectiveness, efficiency and adequacy of the internal control systems of the Group. This will be

done by reviewing and reporting on any material deviations and non-compliances of policies and

control procedures implemented by management and the Board. The internal audit plan is

developed based on management’s assessment of business processes and risks, which is

approved by Audit Committee or any amendments thereof approved by the Audit Committee

deemed necessary.

In particular, internal audit firm appraises and contributes towards improving the Group’s risk

management and control systems and reports directly to the Audit Committee. Upon completion

of the internal audit review based on detailed audit program, the internal audit report is presented

to Audit Committee for review and consideration. The internal audit report includes the audit

findings and internal auditors’ recommendations as well as management responses and actions

plans for improvement and to resolve any issue arises. In assessing the adequacy and

effectiveness of the system of internal controls and risk management processes of the Group, the

Audit Committee reports to the Board on its activities, significant audit results or findings and the

necessary recommendations or actions needed to be taken by management to rectify those

issues.

The internal audit work plan, which reflects the risk profile of the Group’s major business sectors

is routinely reviewed and approved by the Audit Committee. The scope of internal audit function

covers the audit and review of governance, risk assessment, compliance, operational and financial

control across all business units.

Internal auditors assist the Audit Committee in discharging its duties and responsibilities. They

continue to monitor the compliance with policies and procedures and the effectiveness of the

internal control systems independently and highlight significant findings and corrective measures

in respect of any non-compliance. They review the controls in the key activities of the Group’s

business based on the annual internal audit plan and report audit findings to the Audit Committee

for review annually. The management is responsible for ensuring that corrective actions on

reported weaknesses are addressed within a specific time frame. The reported findings thus far

were not material in nature and improvements are being carried out.

143



REVIEW OF THE STATEMENT BY THE EXTERNAL AUDITORS

As required by paragraph 15.23 of the Bursa Malaysia Securities Berhad Main Market Listing

Requirements, the external auditors have reviewed this Statement on Risk Management and Internal

Control pursuant to the scope set out in Recommended Practice Guide (“RPG”) 5 (Revised):

Guidance for Auditors on Engagements to Report on the Statement on Risk Management and

Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants

(“MIA”) for inclusion in the annual report of the Group for the financial year ended 30 April 2017.

Based on their review, the external auditors have reported to the Board that nothing had come to

their attention that causes them to believe that this statement is inconsistent with their

understanding of the risk management and internal control process implemented by the Group.

CONCLUSION

During the year under review and up to the date of approval of this statement for inclusion in the

annual report, the Board is of the view that the systems of risk management and internal controls is

operating adequately and effectively, in all material aspects and have not resulted in material losses,

contingencies or uncertainties that would require separate disclosure in the annual report. The

monitoring, review and reporting arrangements are in place to give reasonable assurance that the

structure and operation of controls are appropriate for the Group. The Board is of the view that the

process of risk management and internal control system is sound and sufficient to safeguard the

interest of shareholders and the Group’s assets.

This statement has been approved by the Board of SCGM Bhd on 28 June 2017.

144


AUDITCOMMITTEE REPORT

Name of CommitteeMembers

Wong Tun Boon

Tang Nai Soon


Numbers OfCommittee Meeting

Attended Held

4

3

4

4

4

4

Status

Chairman, Independent Non-Executive Director



OVERVIEW

The Audit Committee of SCGM Bhd is committed to its role of supporting oversight functions of

the Board on the Group’s financial reporting, risk management and internal control systems and

ensuring high corporate governance practices.

1. COMPOSITION AND ATTENDANCE OF MEETINGS

The details of the Audit Committee members and meetings held in financial year ended 30 April

2017 are as follows:

1.1 Quorum And Frequency For Meetings

a) Meetings shall be held at least four (4) times a year with a minimum quorum of two (2)

members of whom majority shall be independent Directors.

b) Additional meetings may be called at any time at the discretion of the Committee.

1.2 Attendance Of Meetings

a) Corporate Affairs Manager and Group Financial Controller shall normally be invited to

attend meetings. The Executive Chairman, Managing Director, Deputy Managing Director

and Executive Directors, the Internal Auditors / External Auditors may be invited to

attend the meeting; and

b) The External Auditors shall attend the meeting to deliberate the audited financial

statements and such other meetings determined by the Committee.

145


AUDIT COMMITTEE REPORT

1.3 Reporting Procedures

a) The Chairman of the Audit Committee reports to the Board on matters deliberated during

the Audit Committee meetings. Minutes of each meeting are circulated to each member of

the Board;

b) The books containing the minutes of the proceedings of meetings of the committee are

kept in the registered office of the Company and are available for inspection.

2. MEMBERSHIP

a) The Committee shall be appointed by the Board from amongst its members and shall

comprise not less than three (3) members.

b) All the audit committee members must be non-executive directors, with a majority of them

being independent directors.

c) The Chairman of the Committee shall be an Independent Director appointed by the Board.

d) No alternate director shall be appointed as a member of the Committee.

e) At least one member of the Committee:-

i) shall be a member of the Malaysian Institute of Accountants (“MIA”); or

ii) if he is not a member of the MIA, he shall have at least three (3) years’ working

experience and:-

a. he must have passed the examinations specified in Part 1 of the 1st Schedule of

the Accountants Act 1967; or

b. he must be a member of one of the associations of accountants specified in Part

II of the 1st Schedule of the Accountants Acts 1967; or

iii) fulfils such other requirement as prescribed or approved by the Exchange.

f) The term of office and performance of the Committee and each of its members must be

reviewed by the Board annually; and

g) If a member of the Committee resigns or for any other reason ceases to be a member with

the result that the number of members is reduced to below three (3), the Board shall within

three (3) months of that event, appoint such number of new members as may be required

to make up a minimum number of three (3) members.


3. SUMMARY OF TERMS OF REFERENCE

3.1 Authority

The Audit Committee is authorised by the Board, in accordance with the procedures to be

determined by the Board (if any) to carry out the following:

a) Investigate any matter within its terms of reference;

b) Have full and unrestricted access to information and documents, to the external auditors

and to all employees of the Company and the Group;

c) Have direct communication channels with the external auditors and internal auditors;

d) Convene meetings with external auditors, internal auditors or both, excluding the

attendance of the other directors and employees, whenever deemed necessary;

e) Obtain independent professional or other advice at the Company’s expense and to invite

outsiders with relevant experience and expertise to attend meetings if it considers this

necessary; and

f) Where the Committee is of the view that a matter reported by it to the Board has not

been satisfactorily resolved resulting in a breach of the Listing Requirements of the Bursa

Malaysia Securities Berhad, the Committee shall promptly report such matter to the

Exchange.

3.2 Duties and Responsibilities

The duties and responsibilities of the Audit Committee are as follows:-

Internal controls / risk management / governance

a) To review inspection and examination reports issued by any regulatory authority and to

ensure prompt and appropriate actions are taken in respect of any findings.

Internal Audit

a) To review the adequacy of the competency of the internal auditors,

b) To review the adequacy and relevance of the scope, functions and resources of the

internal audit function and that it has the necessary authority to carry out its work.

c) To review the internal audit plan and processes, where necessary, ensure that appropriate

actions are taken on the recommendations of the internal audit function.

146


d) To ensure the internal audit function is well placed to undertake review or investigation on

behalf of the Audit Committee; and

e) To consider all proposals by management regarding the appointment, transfer or dismissal

of the internal auditors and recommend to the Board for approval;

External Audit

a) To review the external audit plan, the nature and scope of their audit plan, their evaluation

of the system of internal controls and their management letter and discuss any matter that

the external auditors may wish to raise in the absence of management, where necessary;

b) To recommend to the Board on the appointment and the annual reappointment of the

external auditors and their audit fee, after taking into consideration the independence and

objectivity of the external auditors and the cost effectiveness of their audit;

c) To approve the provision of non-audit services by the external auditors to the Company,

evaluating whether such non-audit services would impair their independence;

d) To discuss problems and reservations arising from audit, and review with the external

auditors if there is any issue of concern that they may encounter during the course of

audit; and

e) To meet with the external auditors without the presence of Management or Executive

Directors to discuss any key concerns and obtain feedback.

Others

a) To review the quarterly results and annual financial statements of the Company and the

Group and recommend to the Board for approval, focusing on the following:

- changes in or implementation of major accounting policy changes;

- significant matters highlighted including financial reporting issues, significant judgments

made by management, significant and unusual events or transactions, and how these

matters are addressed; and

- compliance with accounting standards and other legal requirements.

b) To review any related party transactions that are conducted in the best interest of the

Company or the Group and conflict of interest that may arise within the Company or the

Group;

c) To convene meetings with internal auditors, external auditors or both whenever deemed

necessary; and

d) To perform any other functions as authorised by the Board.

147




4. SUMMARY OF WORK OF THE AUDIT COMMITTEE DURING THE FINANCIAL YEAR

The Audit Committee has carried out the following activities in accordance with the Terms

of Reference during the financial year ended 30 April 2017:

a) Reviewed the Group’s unaudited quarterly financial results before recommending the

same for the Board’s approval and subsequently releasing it to Bursa Securities;

b) Reviewed the related party transactions that were entered into by the Group to ensure

that they are properly conducted as well as the adequate and proper disclosure of these

procedures and items of the related party transactions;

c) In considering the external audit plan for annual audit with the external auditors, the Audit

Committee received written confirmation through their Audit Approach Memorandum

that they are independent and the external auditors had conducted themselves in

accordance with the terms of all relevant professional and regulatory bodies;

d) Reviewed the external audit plan, nature and scope of work, evaluation of the system of

internal controls and audited financial statements with external auditors for the financial

year ended 30 April 2017 before recommending the same to the Board for approval;

e) Discussed and obtained feedback from external auditors without presence of

management and Executive Directors;

f) Assessed the suitability and competency of the outsourced internal audit professional

firm and made recommendations to the Board for their appointment;

g) Reviewed and discussed with the internal auditors on the internal audit plan, its scope of

work and procedures;

h) Reviewed and discussed with the internal auditors, the results of their internal audit and

internal control recommendations in respect of improvements in the internal control

procedures noted in the course of their audit;

i) Ensured that the transactions entered into by the Company and the Group are in

compliance with requirements of Bursa Securities, Securities Commission and other

regulatory bodies; and

j) To review and ensure the Group adopts and adhere to the Malaysian Financial Reporting

Standards.

148


5. INTERNAL AUDIT FUNCTION

The internal audit function is independent of the activities or operations it audits. The principal role

of the internal audit is to undertake regular and systematic reviews of the systems of internal

control in order to provide reasonable assurance that such systems continue to operate

satisfactorily and effectively. It is ultimately the responsibility of the internal audit function to

provide the Audit Committee with independent and objective reports on the state of internal

controls of the various operating units within the Group and the extent of compliance of the units

with the Group’s established policies and procedures as well as relevant statutory requirements.

During the financial year under review, the Group outsourced its internal audit function to an

independent professional firm, Messrs Needsbridge Advisory Sdn Bhd, to undertake the internal

audit functions that would enable the Audit Committee to discharge its duties.

A summary of work of the internal audit function carried out includes:

• Developed internal audit plan based on management’s assessment of business processes

and risks, and proposed the plan to Audit Committee for approval;

• Conducted scheduled internal audit engagement, focusing primarily on the effectiveness of

internal control and recommended improvements where necessary. The main areas being

audited during the financial year ended 30 April 2017 were procurement management and

inventory management; and

• Presentation of the internal audit findings and recommendations to the Audit Committee

for their recommendation to the Board.

The Statement on Risk Management and Internal Control which provides an overview of the state

of internal controls within the Group is set out on pages 136 to 143 of this Annual Report.

The total cost incurred for the internal audit service for the financial year ended 30 April 2017 was

RM18,000.00 (2016 : RM35,000)

149



CORPORATESOCIALRESPONSIBILITY

150


OURPEOPLE

151



1. SCHOOL EDUCATION PROGRAM KL SEA GAMES 2017

Corporate responsibility is a belief that lies at the very

heart of SCGM Bhd. It is not something we pay lip

service to, but rather, something that we encourage our

people to live and breathe. We believe that taking care

of the people and communities we serve is of great

importance. A happy, prosperous community is a good

partner for us.

As part of its on-going program to outreach more

people within the community, this year we have

partnered with the local council Majlis Perbandaraan

Kulai to bring children from the Kiwanis and Kulai

Orphanage homes to bring them to experience in-flight

experience at the Senai airport.

Other notable programs this year would include bringing

awareness to the schools nationwide on educating the

public on awareness on waste separation. This program

is part of our pilot project and we shall be embarking on

more of the concept of 4R WASTE PROGRAM

throughout the country in upcoming years.

SCGM BHD | Annual Report 2017SCGM BHD | Annual Report 2017

Kedah

General Waste

Glass, Fabric,Electronic,Electrical &Aerosol

Paper

Plastic &Aluminium Cans

Kitchen waste, foodwaste, contaminatedmaterials like foodwrapper, disposablediapers

Soft drink bottles, foodcontainers, vitaminbottles, and cosmeticbottles.

Newspapers, magazines,books, catalogue sheets,brochures, calendars,cars, envelopes, and cardboard boxes.

Aluminium and steel tinssuch as soft drink tinsand food tins. Plasticsuch as shoppingbags, bottle drinks,food containers,detergent bottles,and vitamin bottles.

Sek Men Pendidikan Khas (Zone Utara)

SMK Padang Terap

Pulau Pinang

Kolej Vokasional Nibong Tebal

SMK Perempuan Methodist

SMK Mutiara Impian

Perak

SK Toh Tan Dewa Sakti

Majlis Sukan Sekolah Malaysia

(SM Sains Raja Tun Azlan Shah, Taiping Perak)

Selangor

Sek Seri Puteri

SK Seksyen 6, Kota Damansara

SK TTDI (2)

SJK (T) Simpang Lima

SK Tasek Puteri 2

SK Dato' Maharaja Lela

152



1. SCHOOL EDUCATION PROGRAM KL SEA GAMES 2017

Wilayah Persekutuan KL

SMK Convent Jalan Peel

Sekolah Bimbingan Jalinan Kasih

SM Sains Alam Shah

Wilayah Persekutuan Putrajaya

SMK Putrajaya Presint 8(1)

Sek Sultan Alam Shah

Negeri Sembilan

SK Chembung

Terengganu

SMK Bukit Nenas

Terengganu

SJKC Chung Cheng

Sabah

Kolej Vokasional Likas

SJK (C) Chung Hwa Likas

Sarawak

SMK Bandar Samariang

SJK (C) Siong Boon

Melaka

Kolej Vokasional Jasin

Sekolah Rendah Arab (JAIM) Al-Falah

Johor

SK Pendidikan Khas Batu Pahat

SJK (T) Ladang Tebrau

Sek Men Agama Mahat Muar

Pahang

SJK (C) Yoke Shian

SMK Pendidikan Khas Vokasional Kuantan

SK Runchang

153



2. PROGRAM JALINAN MESRA

3. LITTER-FREE CHINGAY 2017

Program Jalinan Mesra is a community project

that brings in-flight experience to Kiwanis and

orphanage children based in Kulai. SCGM Bhd

is a proud partner in conjunction with MPKu

makes this program a successful one. The

children were happy and goodies bag were

given during this program.

SCGM Bhd participated in the Litter-free

Campaign doings in promoting cleanliness

during the Chingay event held in Johor Bahru.

Program Jalinan Mesra

Litter-free Chingay 2017

As part of its on-going process to promote biodiversity and

cultural within the organization, SCGM Bhd will embark on a 3

year transformation plan to transform its employees to be

more results driven and implementing a HOLISTIC REWARDS

SYSTEM for the employees.

TRAINING PROGRAMMES

As part of its transformation programme, SCGM Bhd will

embark on a blueprint to present a HOLISTIC REWARDS

SYSTEM for our employees. Our comprehensive rewards

system ensures that our people are competitively-remunerated

while enjoying opportunities for learning and progression. As

an organisation that places a premium on high performance,

our rewards are performance-based. Variable bonus is paid

based on how well the company, business units and individuals

perform.

We keep SCGM Bhd competitive with regular benchmarking

exercises of our pay and benefits across the region. SCGM Bhd

offers broad-ranging employee benefits that enhance our

people’s personal and professional well-being. These benefits

include, amongst others, hospitalisation, medical and

programme, encouragement for children to enjoy subsidies on

their education through rewarding system.

Staff enjoy sporting and recreational activities regularly

organised by our Sports & Recreation Department will be

enhanced to be provided avenues for staff to play sports such

as futsal, badminton etc.

DIVERSITY IN HUMAN CAPITAL GROWTH

Strength in diversity is one of SCGM Bhd ’s values. We respect

different cultures, value varied perspectives, and recognise

diversity as a source of strength across our network of

employees.

SCGM practises a people policy that harnesses local talents

while treating diversity as an asset. As such, SCGM Bhd strives

for an employee ratio of 70% locals, 30% foreign within the next

few years. We will be embarking in having more skilled workers,

enhancing the roles of our foreign workers by providing the

appropriate trainings for betterment of their skills etc.

154


BIODIVERSITY ANDCULTURAL REPORT

Append below are the diversities of SCGM Bhd ended financial year 2017.

Operator &others workers

Leader/QA/Supervisor

Office Staff

HOD [AssistantManager & above]

Total

Male Female

300

65

12

14

391

70

20

49

6

145

18-25

26-45

46-65

<65

Total

LocalForeignWorkerAge Range

41

79

47

1

168

116

247

5

0

368

ChineseIndianMalayBangladeshIndonesiaMyanmarNepalVietnam

Total

Male Female

274

4229

034

20946

391

250

700100

49

145

Head ofDepartment

Executives

Operators

In HouseTraining

Training Course

1) FSSC understanding

2) FG Handling

3) 5S understanding

4) Safety Awareness

5) HACCP & Personal Hygiene

Policy & Rejection Criteria

6) Routine OJT

ExternalTraining

40

360

4140

64

-

-

NOTABLEACHIEVEMENTS

HIGHLIGHTS &ACHIEVEMENTS 2017

155


BESTUNDERBILLIONAWARDS

2016

SIRIMECO-LABEL

SIRIMECO-LABEL

156


NOTABLEACHIEVEMENTS

BEST UNDER BILLION AWARDS 2016

GOLDEN EAGLE AWARD 2016

BESTRETURN ON

ASSETS

BESTENTERPRISE

VALUE GROWTH

BEST INTRANSPARENCYTRANSPARENCY

GOLDEN EAGLE AWARD 2016


CORPORATE EVENTHIGHLIGHTS

SEA GAMES SPONSORSHIP SIGNING CEREMONY

157

SEA GAMES SPONSORSHIP SIGNING CEREMONY

O F F I C I A L G R E E N P A R T N E R

ENXON

158


CORPORATE EVENT HIGHLIGHTS

BEST UNDER BILLION AWARDS

DELIVERING OF TWO COLOREXTRUSION MACHINE

DELIVERINGOF TWO COLOREXTRUSIONMACHINE

BESTUNDERBILLIONAWARDS

2016

159


PROGRAM JALINAN MESRA

SCHOOL EDUCATIONPROGRAM KL SEA GAMES 2017

OXIUM CERTIFICATE

CORPORATE EVENT HIGHLIGHTS

OXIUMCERTIFICATE

160


MEDIAHIGHLIGHTS

161


162


ADDITIONALINFORMATION

ANALYSIS BY SIZE OF HOLDING

ANALYSIS OF SHAREHOLDINGS AS AT 15 JUNE 2017

Total Number of Issued Shares

Class of Shares

Voting Right

No. ofShareholders

%No. ofShares held

Less than 100 shares

100 to 1,000 shares

1,001 to 10,000 shares

10,001 to 100,000 shares

100,001 to less than 5% of Issued Shares

5% and above of Issued Shares

Total

32

268

872

326

129

5

1,632

0.00

0.12

2.53

7.43

48.90

41.02

100.00

969

179,652

3,668,550

10,793,250

70,995,788

59,561,791

145,200,000

145,200,000

Ordinary shares

One vote per Ordinary share

DIRECTORS’ SHAREHOLDINGS AS AT 15 JUNE 2017

No. Name

No. of Shares Held

Direct % Indirect %

* deemed interested via his direct interest in SCGM Lee Sdn Bhd.@ deemed interested by virtue of the shareholding of his spouse pursuant to Section 59(11)(c) of the Companies Act 2016.

1. Dato’ Sri Lee Hock Seng

2. Dato’ Sri Lee Hock Chai

3. Dato’ Sri Lee Hock Guan

4. Lee Hock Meng

5. Tang Nai Soon

6. Wong Tun Boon

7. Amrik Singh A/L Harcharan Singh

13,114,311

9,353,429

9,353,433

8,893,429

110,000

180,000

63,000

9.03

6.44

6.44

6.12

0.08

0.12

0.04

22,961,500*

22,961,500*

22,961,500*

22,961,500*

-

-

24,000@

15.81

15.81

15.81

15.81

-

-

0.02

163


SUBSTANTIAL SHAREHOLDERS AS AT 15 JUNE 2017

THIRTY LARGEST SHAREHOLDERS AS AT 15 JUNE 2017

No. of Shares Held

Direct % Indirect %Name

* deemed interested via his direct interest in SCGM Lee Sdn Bhd.# deemed interested via KWAP’s Fund Manager

SCGM Lee Sdn Bhd




Lee Hock Meng

Kumpulan Wang Persaraan(Diperbadankan)

22,961,500

13,114,311

9,353,429

9,353,433

8,893,429

6,024,650

15.81

9.03

6.44

6.44

6.12

4.15

-

22,961,500*

22,961,500*

22,961,500*

22,961,500*

1,771,100#

-

15.81

15.81

15.81

15.81

1.22

NO. SHAREHOLDERS NO OF SHARES PERCENTAGE (%)

1. SCGM LEE SDN BHD

2. DATO’ SRI LEE HOCK GUAN

3. DATO’ SRI LEE HOCK CHAI

4. DATO’ SRI LEE HOCK SENG

5. LEE HOCK MENG

6. KUMPULAN WANG PERSARAAN (DIPERBADANKAN)

7. DATO’ SRI LEE HOCK SENG

8. CITIGROUP NOMINEES (ASING) SDN BHD -EXEMPT AN FOR CITIBANK NEW YORK

9. HSBC NOMINEES (TEMPATAN) SDN BHD -HSBC (M) TRUSTEE BHD FOR MANULIFE INVESTMENT PROGRESS FUND

10. CIMB GROUP NOMINEES (TEMPATAN) SDN BHD -CIMB COMMERCE TRUSTEE BERHAD -KENANGA GROWTH FUND

11. ALLIANCE GROUP NOMINEES (TEMPATAN) SDN BHD - PLEDGED SECURITIES ACCOUNT FOR TING SIEW PIN

12. HSBC NOMINEES (TEMPATAN) SDN BHD -HSBC (M) TRUSTEE BHD FOR RHB KIDSAVE TRUST

22,961,500

9,353,433

9,353,429

9,000,000

8,893,429

6,024,650

4,114,311

3,247,100

2,654,150

2,606,800

2,542,250

1,980,000

15.81

6.44

6.44

6.20

6.12

4.15

2.83

2.24

1.83

1.80

1.75

1.36

164


THIRTY LARGEST SHAREHOLDERS AS AT 15 JUNE 2017

NO. SHAREHOLDERS NO OF SHARES OF PERCENTAGE (%)

13. CHAI SIEW MOOI

14. HSBC NOMINEES (TEMPATAN) SDN BHD -HSBC (M) TRUSTEE BHD FOR RHB SMART TREASURE FUND

15. CITIGROUP NOMINEES (TEMPATAN) SDN BHD – EMPLOYEES PROVIDENT FUND BOARD

16. CITIGROUP NOMINEES (TEMPATAN) SDN BHD – EMPLOYEES PROVIDENDT FUND BOARD

17. HSBC NOMINEES (TEMPATAN) SDN BHD -HSBC (M) TRUSTEE BHD FOR RHB GROWTH AND INCOME FOCUS TRUST

18. MALACCA EQUITY NOMINEES (TEMPATAN) SDN BHD – EXEMPT AN FOR PHILLIP CAPITAL MANAGEMENT SDN BHD

19. CITIGROUP NOMINEES (TEMPATAN) SDN BHD – KUMPULAN WANG PERSARAAN (DIPERBADANKAN)

20. CITIGROUP NOMINEES (ASING) SDN BHD – CEP FOR PHIEM SICAV-SIF

21. AMANAH RAYA BERHAD – KUMPULAN WANG BERSAMA

22. CITIGROUP NOMINEES (TEMPATAN) SDN BHD –UNIVERSAL TRUSTEE (MALAYSIA) BERHAD FOR CIMB ISLAMIC SMALL CAP FUND

23. MAYBANK NOMINEES (TEMPATAN) SDN BHD - NATIONAL TRUST FUND

24. RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD – PLEDGED SECURITIES ACCOUNT FOR TING SIEW PIN

25. LOH HON ANN

26. MAYBANK NOMINEES (TEMPATAN) SDN BHD – MAYBANK TRUSTEES BERHAD FOR CIMB-PRINCIPAL SMALL CAP FUND

27. HSBC NOMINEES (TEMPATAN) SDN BHD – HSBC (M) TRUSTEE BHD FOR RHB SMALL CAP OPPORTUNITY UNIT TRUST

28. CITIGROUP NOMINEES (TEMPATAN) SDN BHD – UNIVERSAL TRUSTEE (MALAYSIA) BERHAD FOR CIMB ISLAMIC DALI EQUITY FUND

29. CHEN JIA YI

30. CIMSEC NOMINEES (TEMPATAN) SDN BHD – CIMB BANK FOR MAK TIAN MENG

1,598,750

1,556,300

1,403,700

1,399,700

1,373,850

1,303,727

1,234,600

1,230,000

1,200,000

1,099,900

1,043,800

944,550

923,000

832,000

803,800

751,800

748,000

697,050

1.10

1.07

0.97

0.96

0.95

0.90

0.85

0.85

0.83

0.76

0.72

0.65

0.64

0.57

0.55

0.52

0.52

0.48

NOTICE OF TENTH ANNUALGENERAL MEETING

165


NOTICE IS HEREBY GIVEN THAT the Tenth Annual General Meeting (“AGM”) of the Company will

be held at the Creator Hotel, Ballroom, 3rd Floor, Kulai Centre Point, Lot. 1566, Batu 20, Jalan

Kulai-Air Hitam, 81000, Kulai, Johor Darul Takzim on Thursday, 10 August 2017 at 2.00 p.m for the

purpose of transacting the following businesses: -

AGENDA

1. To receive the Audited Financial Statements of the Company for the financial year ended 30

April 2017 together with the Directors’ and Auditors’ Reports thereon.

2. To approve the payment of Directors’ fees for the financial year ended 30 April 2017.

Ordinary Resolution 13. To re-elect the following Directors retiring pursuant to Article 85 of the Company’s Articles

of Association and being eligible, have offered themselves for re-election: -

(i) Lee Hock Meng Ordinary Resolution 2(ii) Tang Nai Soon Ordinary Resolution 3

4. To re-appoint Messrs SJ Grant Thornton as Auditors of the Company to hold office until the

conclusion of the next AGM and to authorise the Directors to fix their remuneration.

Ordinary Resolution 4AS SPECIAL BUSINESS

To consider, and if thought fit, to pass the following resolutions: -

5. RETENTION OF INDEPENDENT DIRECTORS

To retain the following Directors who have served as Independent Non-Executive Directors for a

cumulative period of more than 9 years:-

(i) Amrik Singh Harcharan Singh Ordinary Resolution 5(ii) Tang Nai Soon Ordinary Resolution 6(iii) Wong Tun Boon Ordinary Resolution 7

Ordinary Resolution 8

“THAT pursuant to Section 75 and 76 of the Companies Act 2016 and subject to the approvals

from the relevant governmental and/or regulatory authorities, the Directors be and are hereby

empowered to issue shares in the Company from time to time and upon such terms and

conditions and for such purposes as the Directors may in their absolute discretion deem fit,

provided that the aggregate number of shares issued pursuant to this resolution does not

exceed ten (10) per cent of the total number of issued shares of the Company at the time of

submission to the authority AND THAT the Directors be and are also hereby empowered to

obtain the approval from the Bursa Malaysia Securities Berhad for the listing of and quotation for

the additional shares so issued AND THAT such authority shall continue in force until the

conclusion of the next AGM of the Company.”

6. AUTHORITY TO ISSUE SHARES

166


NOTICE OF TENTH ANNUAL GENERAL MEETING

Ordinary Resolution 9

“THAT subject to compliance with all applicable rules, regulations and orders made pursuant

to the Companies Act 2016 (“Act”), provisions in the Company’s Memorandum and Articles of

Association, the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”)

and any other relevant authorities, the Company be and is hereby authorised to purchase such

number of ordinary shares of the Company (“Proposed Renewal of Share Buy-Back”) as may

be determined by the Directors of the Company from time to time through Bursa Securities

upon such terms and conditions as the Directors may deem fit and expedient in the interest of

the Company PROVIDED THAT:-

(i) the aggregate number of shares purchased or held does not exceed ten per centum (10%)

of the total number of issued shares of the Company as quoted on Bursa Securities as at

the point of purchase;

(ii) the maximum fund to be allocated by the Company for the purpose of purchasing such

number of ordinary shares shall not exceed the unappropriated profit of the Company. As

at the latest financial year ended 30 April 2017, the audited unappropriated profit of the

Company stood at RM2,221,405;

(iii) the authority conferred by this resolution will commence immediately upon passing of this

resolution and will continue to be in force until:-

(a) at the conclusion of the next Annual General Meeting (“AGM”) of the Company following

the general meeting in which the authorisation is obtained, at which time it shall lapse

unless by ordinary resolution passed at that meeting, the authority is renewed either

unconditionally or subject to conditions; or

(b) the expiration of the period within which the next AGM of the Company is required by law

to be held; or

(c) revoked or varied by ordinary resolution passed by the shareholders of the Company in a

general meeting.

whichever occurs first;

AND THAT upon completion of the purchase(s) of the ordinary shares of the Company, the

Directors of the Company be and are hereby authorised to deal with the ordinary shares so

purchased in the following manners:-

(a) to cancel the ordinary shares so purchased; or

(b) to retain the ordinary shares so purchased as treasury shares for distribution as dividend

to shareholders and/or resell on Bursa Securities or subsequently cancelled; or

(c) to retain part of the ordinary shares so purchased as treasury shares and cancel the

remainder; or

7. PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY

167


(d) in any other manner prescribed by the Act, rules, regulations and orders made to the Act,

the Listing Requirements of Bursa Securities and any other relevant authorities for the

time being in force.

AND THAT the Board of the Company be and are hereby authorised to take all such steps as are

necessary or expedient to implement, finalise or to effect the aforesaid share buy-back with full

powers to assent to any conditions, modifications, variations, and/or amendments as may be

required or imposed by the relevant authorities and to do all such acts and things (including

executing all documents) as the Board may deem fit and expedient in the best interest of the

Company.”

8. To transact any other business which may properly be transacted at an AGM for which due

Notice shall have been given.

By Order of the Board

LIM SECK WAH (MAICSA 0799845)

M. CHANDRASEGARAN A/L S. MURUGASU (MAICSA 0781031)

NG CHYE HUAT (MIA 14186)

Company Secretaries

Kuala Lumpur

19 July 2017

NOTES:-

1. For the purpose of determining a member who shall be entitled to attend, speak and vote at the

Tenth AGM, the Company shall be requesting the Record of Depositors as at 4 August 2017. Only

a depositor whose name appears on the Record of Depositors as at 4 August 2017 shall be

entitled to attend the said meeting or appoint proxies to attend, speak and vote on his/her

behalf.

2. A member entitled to attend and vote at the meeting is entitled to appoint up to two proxies to

attend and vote in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointment shall be invalid unless he/she specifies

the proportions of his/her holdings to be represented by each proxy.

4. If the appointer is a corporation, this form must be executed under its Common Seal or under

the hand of its attorney duly authorized.

5. Where a member of the Company is an authorized nominee as defined in accordance with the

Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy but not

more than two proxies for each securities account which it holds and the shares of the Company

standing to the credit of the said securities account.


168


6. Where a member of the Company is an exempt authorised nominee which holds ordinary

shares in the Company for multiple beneficial owners in one securities account (“omnibus

account”), there is no limit to the number of proxies which the exempt authorized nominee

may appoint in respect of each omnibus account it holds.

7. The Form of Proxy must be deposited at the Registered Office of the Company at Level 15-2,

Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur not less than 48

hours before the time appointed for holding the meeting or any adjournment thereof.

Explanatory Notes on Special Business

Ordinary Resolution 5 to 7 - Retention of Independent Directors

The Board of Directors has vide the Nomination Committee conducted an assessment of

independence of the following directors who have served as Independent Non-Executive

Directors for a cumulative term of more than nine years and recommended them to continue

to act as Independent Non-Executive Directors based on the following justification:

i) Amrik Singh Harcharan Singh

ii) Tang Nai Soon

iii) Wong Tun Boon

Justifications:-

The Board holds the view that the Independent Directors remain objective and independent in

carrying out his roles and responsibilities as members of the Board and Board Committees.

The length of service does not impair their ability and exercise of independent judgment as

Independent Directors. Therefore, the Board has recommended and supported that the

approval of the shareholders be sought for them to continue to act as the Independent

Non-Executive Director of the Company.

Ordinary Resolution 8 – Authority to issue shares

The Company wishes to renew the mandate on the authority to issue shares pursuant to

Section 75 and 76 of the Companies Act 2016 at the Tenth AGM of the Company.

The Company continues to consider opportunities to broaden its earnings potential. If any of

the expansion/diversification proposals involves the issue of new shares, the Directors,

under certain circumstance when the opportunity arises, would have to convene a general

meeting to approve the issue of new shares even though the number involved may be less

than 10% of the issued share capital.

In order to avoid any delay and costs involved in convening a general meeting to approve such

issue of shares, it is thus considered appropriate that the Directors be empowered to issue and

allot shares at any time to such persons/corporations in their absolute discretion for the

purpose of funding future investment(s), working capital and/or acquisitions.


169


During the financial year ended 30 April 2017, 13,200,000 ordinary shares were issued by way

of private placement at an issue price of RM3.20 per share (“Private Placement”) pursuant to

the mandate granted to the Directors at the Extraordinary General Meeting held on 7 October

2016. The total proceeds of RM42,240,000.00 raised from the Private Placement is mainly to

part finance the cost of construction of new plant for the Group.

Ordinary Resolution 9 - Proposed Renewal of Share Buy-Back

The Company has at the Ninth AGM on 2 September 2016, seek for shareholders’ mandate

but has never exercised the power to buy-back shares during the financial year. The mandate

will be expired at the conclusion of the Tenth AGM.

The Board would like to seek for shareholders’ mandate at the Tenth AGM.

This resolution will empower the Directors of the Company to purchase the Company’s shares

up to ten per centum (10%) of the total number of issued shares of the Company by utilising

the funds allocated which shall not exceed the total unappropriated profits of the Company.

This authority, unless revoked or varied at a general meeting, will expire at the conclusion of

the next AGM of the Company.

Further information on the Proposed Renewal of Share Buy-Back are set out in the Share

Buy-Back Statement on pages 170 to 177 in the Annual Report 2017.


170 SHAREBUY-BACK STATEMENT


1. DISCLAIMER STATEMENT

Bursa Malaysia Securities Berhad (“Bursa Securities”) has not perused this Share Buy-Back

Statement (“Statement”) prior to its issuance as it is an exempt statement. Bursa Securities

takes no responsibility for the contents of this Statement, makes no representation as to its

accuracy or completeness and expressly disclaims any liability whatsoever for any loss

howsoever arising from or in reliance upon the whole or any part of the contents of this

Statement.

2. INTRODUCTION

On 3 July 2017, SCGM Bhd (“SCGM” or “the Company”) announced that the Company

proposes to seek shareholders’ approval for the Proposed Renewal of Share Buy-Back at the

forthcoming Tenth Annual General Meeting (“10th AGM”) of the Company.

The purpose of this Statement is to provide you with the relevant information on the Proposed

Renewal of Share Buy-Back and to seek your approval for the Ordinary Resolution to be tabled

at the forthcoming 10th AGM of the Company to be held at Creator Hotel, Ballroom, 3rd Floor,

Kulai Centre Point, Lot 1566, Batu 20, Jalan Kulai – Air Hitam, 81000 Kulai, Johor Darul Takzim

on Thursday, 10 August 2017 at 2.00 p.m..

SHAREHOLDERS OF SCGM ARE ADVISED TO READ THE CONTENTS OF THIS STATEMENT

CAREFULLY BEFORE VOTING ON THE RESOLUTION TO GIVE EFFECT TO THE PROPOSED

RENEWAL OF SHARE BUY-BACK.

3. DETAILS OF THE PROPOSED RENEWAL OF SHARE BUY-BACK

3.1 At the Ninth Annual General Meeting (“9th AGM”) of the Company held on 2 September

2016, the Company had obtained shareholders’ approval for the authority to purchase

up to ten per centum (10%) of the total number of issued shares of the Company as

quoted on Bursa Securities at any point in time and it is subject to Section 127 of the

Companies Act 2016, the Listing Requirements and any prevailing laws, guidelines, rules

and regulations issued by the relevant authorities at the time of purchase (“the Mandate”).

3.2 The Board proposes to seek approval from the shareholders for renewal of the Mandate at

the forthcoming 10th AGM of the Company.

3.3 The Proposed Renewal of Share Buy-Back will allow the Board to exercise the power of

the Company to purchase its own shares not exceeding 10% of the issued and paid-up

share capital of the Company at any time and it would be effective immediately upon the

passing of the Ordinary Resolution for the Proposed Renewal of Share Buy-Back at the

forthcoming 10th AGM and shall be valid until:-


171SHARE BUY-BACK STATEMENT

(a) the conclusion of the next annual general meeting (“AGM”) of the Company

following the general meeting in which the authorisation is obtained, at which time

it shall lapse unless by ordinary resolution passed at the meeting, the authority is

renewed either unconditionally or subject to conditions; or

(b) the expiration of the period within which the next AGM of the Company is required

by law to be held; or

(c) revoked or varied by ordinary resolution passed by the shareholders in a general

meeting;

whichever occurs first.

3.4 As at 15 June 2017, being the latest practicable date, the issued share capital of the

Company is RM108,240,000 comprising 145,200,000 ordinary shares (“SCGM Shares” or

“Shares”). As an illustration, the maximum number of Shares which may be purchased by

the Company will be no more than 14,520,000 Shares based on the issued share capital of

SCGM. There are no treasury shares held as at 15 June 2017.

3.5 Pursuant to the provisions of Paragraph 12.17 of the Main Market Listing Requirements of

Bursa Securities (“Listing Requirements”), the Company may only purchase its own

Shares at a price which is not more than fifteen per centum (15%) above the weighted

average market price of SCGM Shares for the five (5) market days immediately preceding

the date of the purchase.

3.6 Pursuant to the provisions of Paragraph 12.18 of the Listing Requirements, the Company

may only resell the purchased Shares held as treasury shares on the Bursa Securities at:-

(a) a price which is not less than the weighted average market price of SCGM Shares

for the five (5) market days immediately prior to the date of resale; or

(b) a discounted price of not more than five per centum (5%) to the weighted average

market price of SCGM Shares for the five (5) market days immediately prior to the

resale provided that:-

(i) the resale takes place not earlier than thirty (30) days from the date of

purchase; and

(ii) the resale price is not less than the cost of purchase of the shares being

resold.

172


SHARE BUY-BACK STATEMENT

4. RATIONALE, POTENTIAL ADVANTAGES AND DISADVANTAGES

The Proposed Renewal of Share Buy-Back will enable the Company to utilise any of its surplus

financial resources to purchase its own Shares from the market.

(1) Potential advantages of the Proposed Renewal of Share Buy-Back are:-

(a) The Company may able to stabilise the supply and demand, as well as the price of

the Shares, thereby support the fundamental value of SCGM Shares.

(b) The purchased Shares could be retained as treasury shares or resold on Bursa

Securities at a higher price with the intention of realising potential capital gain for

the Company without affecting the total issued and paid-up share capital of the

Company. In the event that the treasury shares are distributed as share dividends,

it will serve to reward the shareholders of the Company.

(c) The Proposed Renewal of Share Buy-Back would effectively reduce the number of

Shares carrying voting and participation rights and such, the Earnings Per Share

(“EPS”) of the Company would be increased.

If the Shares so purchased are subsequently cancelled, the Company expects to strengthen

the EPS of the Company and benefit the shareholders of the Company. Shareholders may

enjoy an increase in the value of their investment in the Company arising from the consequent

increase in EPS; and

(2) Potential disadvantages of the Proposed Renewal of Share Buy-Back are:-

(a) It will reduce the financial resources of the Company and its subsidiary (“SCGM

Group” or “the Group”), and hereby may result in the Company foregoing future

investment opportunities that may emerge in the future or deprive the Company

of interest income that can be derived from funds utilised for the Proposed

Renewal of Share Buy-Back; and

(b) The Proposed Renewal of Share Buy-Back if implemented may result in a lower

amount of cash reserves available for distribution in the form of cash dividends to

shareholders.

Nevertheless, the Board will be mindful of the interest of the Company and its shareholders in

undertaking the Proposed Renewal of Share Buy-Back and the subsequent resale of treasury

shares on Bursa Securities.



5. FUNDING

(1) Paragraph 12.10(1) of the Listing Requirements stipulates that purchase by the Company

of its own Shares is restricted to the amount of its unappropriated profit.

The unappropriated profit of the Company was RM2,221,405 based on the latest audited

financial statements as at 30 April 2017 and RM2,185,792 based on the Company’s latest

unaudited management account made up to 31 May 2017. The Board will ensure that the

unappropriated profit of the Company will be sufficient to effect the Proposed Renewal of

Share Buy-Back.

(2) The Proposed Renewal of Share Buy-Back will be funded from internally generated funds

and/or external borrowings, the proportion of which will depend on the quantum of SCGM

Shares to be purchased, the purchase consideration as well as the availability of funds of

SCGM Group at the time of purchase(s).

In the event that the Proposed Renewal of Share Buy-Back is to be financed by external

borrowings, the Company shall ensure that it has sufficient financial capability to repay the

bank borrowings and that the bank borrowings will not have any material impact on the

cash flow of SCGM Group.

(3) The actual number of Shares to be purchased, the aggregate funds to be utilised, impact

on cash flow and the timing of the purchase(s) will depend on amongst others, the

prevailing equity market conditions, sentiments of the stock market, the available financial

resources of the Company and other relevant cost factors at the time of the purchase(s).

6. FINANCIAL EFFECTS OF THE PROPOSED RENEWAL OF SHARE BUY-BACK

Based on the assumption that the Proposed Renewal of Share Buy-Back is carried out in full,

the effect of the Proposed Renewal of Share Buy-Back on the share capital, net assets per

share, working capital, earnings and dividends are set out below:-

6.1 Share Capital

The Proposed Renewal of Share Buy-Back will not have any effect on share capital of the

Company if all the Shares purchased are retained as treasury shares.

In the event that the maximum number of shares authorised under the Proposed Renewal

of Share Buy-Back are purchased and cancelled, the effects on the share capital are

illustrated as follows:-

174



However, if all the SCGM Shares so purchased are retained as treasury shares, issued share

capital of SCGM will not be reduced but the rights attached to the treasury shares as to voting,

dividends, and participation in other distributions or otherwise will be suspended.

The said treasury shares shall not be taken into account in calculating the number or

percentage of shares in the Company for any purpose nor for substantial shareholdings or

takeovers, notice of general meeting and the right to requisite meetings, to be counted for

quorum purposes and the result of a vote on a resolution at a general meeting.

6.2 Net Assets (“NA”)

The effects of Proposed Renewal of Share Buy-Back on the consolidated NA per share of the

Group will depend on the purchase price in comparison to the NA per share of the Group at

the time that the purchase is made.

In the event that the SCGM Shares purchased under the Proposed Renewal of Share Buy-Back

are cancelled by the Company, the consolidated NA per share of SCGM would improve if the

purchase price of such SCGM Shares is below the NA per share of the Company and

vice-versa.

If the treasury shares are resold in the open market, the consolidated NA per share of SCGM

may increase if the Company realises a gain from the resale, and vice-versa. If the treasury

shares are distributed as share dividends, the NA of SCGM Group would be accordingly

decreased by the cost of acquisition of the treasury shares.

6.3 Working Capital

The Proposed Renewal of Share Buy-Back, if exercised, will result in an outflow of cash and

thereby reduce the working capital of SCGM Group, the quantum of which is dependent on the

purchase price of SCGM Shares and the number of SCGM Shares to be purchased and the

funding cost, if any. However, the working capital and cash flow of the Company will increase

upon reselling the Purchased Shares which are retained as treasury shares. Again, the quantum

of the increase in the working capital and cash flow will depend on the actual selling price of

the treasury shares and the number of treasury shares resold.

No. of ordinary shares

Existing as at 15 June 2017

Less: Treasury Shares as at 15 June 2017

Less: Proposed Share Buy-Back

Resultant issued share capital afterthe Proposed Share Buy-Back

145,200,000

-

(14,520,000)

130,680,000


6.4 Earnings

The effect of the Proposed Renewal of Share Buy-Back on the earnings of the SCGM Group will

depend on the purchase price and the number of Shares purchased. If the Shares so purchased

are treated as treasury shares, the extent of the effect on the earnings of the SCGM Group will

depend on the actual selling price, the number of treasury shares resold and the effective gain

or interest savings arising therefrom.

6.5 Dividends

The Proposed Renewal of Share Buy-Back is not expected to have any effect on the policy for

the Board in recommending dividends for the year ending 30 April 2018. The decision to declare

and pay dividends in the future would depend on, amongst others, the profitability and cash

flow position of the Company.

7. SHAREHOLDINGS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

Based on the Records of Depositors as at 15 June 2017 and assuming that the Company acquires

the full amount of SCGM Shares authorised under the Proposed Renewal of Share Buy-Back and

there is no change in the number of shares held by the Directors and/or substantial shareholders

of SCGM as at 15 June 2017 and with the assumption that the Company does not purchase the

Directors’ and/or major shareholders’ shares, for the purpose of illustration only, the effect will

be as follows:-


Name ofSubstantialShareholders

SCGM Lee Sdn Bhd

Kumpulan Wang

Persaraan

(Diperbadankan)

Dato' Sri

Lee Hock Seng

Dato' Sri

Lee Hock Chai

Dato' Sri

Lee Hock Guan

Lee Hock Meng

22,961,500

6,024,650

13,114,311

9,353,429

9,353,433

8,893,429

22,961,500

6,024,650

13,114,311

9,353,429

9,353,433

8,893,429

-

1,771,100(2)

22,961,500(1)

22,961,500(1)

22,961,500(1)

22,961,500(1)

-

1,771,100(2)

22,961,500(1)

22,961,500(1)

22,961,500(1)

22,961,500(1)

15.81

4.15

9.03

6.44

6.44

6.12

17.57

4.61

10.04

7.16

7.16

6.81

-

1.22

15.81

15.81

15.81

15.81

-

1.36

17.57

17.57

17.57

17.57

Before the Proposed Renewal ofShare Buy-Back Authority

Direct Interest

No. ofShares

No. ofShares% %

Deemed Interest Direct Interest

No. ofShares

No. ofShares% %

Deemed Interest

After the Proposed Renewal of ShareBuy-Back Authority assuming 10%of the share capital was bought backand cancelled


176



8. PUBLIC SHAREHOLDINGS SPREAD

As at 15 June 2017, the public shareholdings spread of the Company has 55.89% in the hand of

1,622 shareholders. Assuming that the proposed Share Buy-Back is carried out in full and

SCGM Shares so purchased were all cancelled, the public shareholdings of the Company would

be reduced to approximately 50.98%. The Board is mindful and will endeavour to ensure that

it will not purchase its own Shares which will result in SCGM’s public shareholdings spread

falling below the minimum requirement of twenty five per centum (25%) of its total listed

Shares.

9. PURCHASE OR RESALE OR CANCELLATION OF TREASURY SHARES DURING THE

FINANCIAL YEAR ENDED 30 APRIL 2017

During the financial year, the Company did not purchase its own Shares from the open market.

The Company has not exercised the power to buy-back shares since the mandate from the last

year AGM.

Note:

(1) Deemed interested via his direct interest in SCGM Lee Sdn Bhd. (2) Deemed interested via KWAP’s Fund Manager (3) Deemed interested by virtue of the shareholding of his spouse pursuant to Section 59(11)(c) of the Companies Act 2016. (4) Sat Bir Kaur Ginder Singh is the spouse of Amrik Singh Harcharan Singh.


Name of Directors Dato' Sri

Lee Hock Seng

Dato' Sri

Lee Hock Chai

Dato' Sri

Lee Hock Guan

Lee Hock Meng

Amrik Singh

Harcharan Singh

Tang Nai Soon

Wong Tun Boon

Name of personconnected

Sat Bir Kaur GinderSingh

13,114,311

9,353,429

9,353,433

8,893,42963,000

110,000180,000

24,000(4) 24,000(4)0.02 0.02

13,114,311

9,353,429

9,353,433

8,893,42963,000

110,000180,000

22,961,500(1)

22,961,500(1)

22,961,500(1)

22,961,500(1)

24,000(3)

- -

22,961,500(1)

22,961,500(1)

22,961,500(1)

22,961,500(1)

24,000(3)

- -

9.03

6.44

6.44

6.120.04

0.080.12

10.04

7.16

7.16

6.810.05

0.080.14

15.81

15.81

15.81

15.81 0.02

--

17.57

17.57

17.57

17.57 0.02

- -

Before the Proposed Renewal ofShare Buy-Back Authority

Direct Interest

No. ofShares

No. ofShares% %

Deemed Interest Direct Interest

No. ofShares

No. ofShares% %

Deemed Interest

After the Proposed Renewal of ShareBuy-Back Authority assuming 10%of the share capital was bought backand cancelled

- - - -



10. IMPLICATIONS RELATING TO THE CODE

The Malaysian Code on Take-Over and Mergers, 2016, as amended from time to time including

any re-enactment thereof (“Code”) requires a person, together with persons acting in concert

with him, holding more than 33% but less than 50% of the voting shares of a company and who

as a result of a purchase by the company of its own shares, increase his holding in any period of

6 months by an additional 2% or more of the voting shares of the company to undertake a

mandatory offer on the balance of the shares not already owned.

SCGM does not intend to undertake the Proposed Renewal of Share Buy-Back such that it will

trigger any obligation to undertake a mandatory offer pursuant to the Code, assuming the

Proposed Renewal of Share Buy-Back is implemented in full within a period of 6 months.

11. APPROVALS REQUIRED FOR THE PROPOSED RENEWAL OF SHARE BUY-BACK

The Proposed Renewal of Share Buy-Back is subject to the approval of the shareholders of

SCGM at the forthcoming 10th AGM.

12. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS

Save for the inadvertent increase in percentage of shareholdings and/or voting rights of

shareholders of the Company as a result of the Proposed Renewal of Share Buy-Back, none of

the Directors, substantial shareholders of SCGM and/or persons connected to them have any

interest, direct or indirect, in the Proposed Renewal of Share Buy-Back or the resale of treasury

shares, if any.

13. DIRECTORS’ RECOMMENDATION

The Board, having considered all aspects of the Proposed Renewal of Share Buy-Back, are of the

opinion that the Proposed Renewal of Share Buy-Back is fair, reasonable and in the best interest

of the Company and its shareholders. Therefore, the Board recommends that you vote in favour

of the Ordinary Resolution pertaining to the Proposed Renewal of Share Buy-Back at the

forthcoming 10th AGM of the Company.

14. DIRECTORS’ RESPONSIBILITY STATEMENT

This Statement has been seen and approved by the Board and they collectively and individually

accept full responsibility for the accuracy of the information given and confirm that after having

made all reasonable enquiries and to the best of their knowledge and belief, there are no other

facts, the omission of which would make any information, data or statement herein misleading.

This Share Buy-Back Statement is dated 19 July 2017.

178

SCGM BHD | Annual Report 2017SCGM BHD | Annual Report 2017

LIST OFPROPERTIES

LSSPI

LSSPI

LSSPI

LSSPI

LSSPI

LSSPI

02-09-1991

16-01-2004

06-08-2009

18-04-2016

18-04-2016

18-04-2016

3,096

4,365

10,254

3,760

4,473

4,695

136,397/

70,000

138,026/

94,613

132,041

227,334

270,616

337,050

Leasehold

(99 years

expiring on

9.8.2090)

Freehold

Freehold

Freehold

Freehold

Freehold

14 years/

Certificate of

Fitness for

Occupation

dated

10.7.2002

9 year/

Certificate of

Fitness for

Occupation

dated

28.03.2007

6 years

Not applicable

Not applicable

Not applicable

Manufacturing /

Industrial Land /

Factory

Manufacturing /

Industrial Land /

Single Storey

Factory & Double

Storey Office, Store

& TNB substation

Freehold

agricultural land

(Conversion to

Industrial land) /

Factory, Office &

TNB substation

Freehold agricultural

land (Conversion to

Industrial land) /

Proposed New

Factory


land (Conversion to

Industrial land) /

Proposed New

Factory


land (Conversion to

Industrial land) /

Proposed New

Factory

Registered

Owners

Title/Location/

Postal Address

Date of

Acquisition

Land area /

Built up area

(sq ft)

Description /

Existing Use

Tenure

(years)

Approximate

age of buildings /

Date of Issuance

of Certificate

of Fitness

Audited net

book value

as at 30

April 2017

RM’000

LANDED PROPERTIES OWNED BY OUR GROUP

H.S. (M) 2452, Lot

3304, Batu 24, Jalan

Air Hitam-Johor Bahru,

Mukim Senai-Kulai,

Daerah Kulai, Negeri

Johor Darul Takzim

Geran 694, Lot 3316,

Batu 24, Jalan Johor

Bahru-Ayer Hitam,

Mukim Senai-Kulai,


Johor Darul Takzim

Geran Mukim 795,

Lot 3303, Mukim Senai,


Johor Darul Takzim

Geran Mukim 487



Johor Darul Takzim

Geran Mukim 497



Johor Darul Takzim

Geran Mukim 486



Johor Darul Takzim

The summary of the information on landed properties owned by our Group as at 30 April 2017 are set

out below:

SCGM BHD(Company No. 779028 H)


I/We I.C No./Co.No./CDS No.:(Full name in block letters)

Of (Full address)being a member/members of SCGM BHD hereby appoint the following person(s):-

1.

2.

FORM OF PROXY

(please refer to the notes below)

No. of ordinary shares held

Name of proxy, NRIC No. & Address

FIRST PROXY SECOND PROXY

For AgainstFor Against

% of shares to berepresented by proxy

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Tenth

Annual General Meeting of the Company to be held at Creator Hotel, Ballroom, 3rd Floor, Kulai Centre Point, Lot.1566,

Batu 20, Jalan Kulai-Air Hitam, 81000, Kulai, Johor on Thursday, 10 August 2017 at 2.00 p.m. My/our proxy is to vote as

indicated below:-

(Please indicate with a “ ” or “ ” in the space provided how you wish your vote to be cast. If no instruction as to

voting is given, the proxy will vote or abstain from voting at his/her discretion. All votings will be conducted by way of

poll.

NOTES:-

1. For the purpose of determining a member who shall be entitled to attend, speak and vote at the Tenth AGM, the Company shall be requesting the Record of Depositors as at 4 August 2017. Only a depositor whose name appears on the Record of Depositors as at 4 August 2017 shall be entitled to attend the said meeting or appoint proxies to attend, speak and vote on his/her behalf.

2. A member entitled to attend and vote at the meeting is entitled to appoint up to two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointment shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy.

4. If the appointer is a corporation, this form must be executed under its Common Seal or under the hand of its attorney duly authorized.

5. Where a member of the Company is an authorized nominee as defined in accordance with the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

6. Where a member of the company is an exempt authorised nominee which holds ordinary shares in the company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorized nominee may appoint in respect of each omnibus account it holds.

7. The Form of Proxy must be deposited at the Registered Office of the Company at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

Dated this ……………....….........….. day of ……………....….........….. 2017 ………....….…………………..………………………….......Signature/Common Seal

Ordinary Resolution 1 – Directors’ fees

Ordinary Resolution 2 – Re-election of Lee Hock Meng

Ordinary Resolution 3 – Re-election of Tang Nai Soon

Ordinary Resolution 4 – Re-appointment of Messrs SJ GrantThornton as Auditors

Ordinary Resolution 5 – To retain Amrik Singh HarcharanSingh as Independent Non-Executive Director

Ordinary Resolution 6 – To retain Tang Nai Soon asIndependent Non-Executive Director

Ordinary Resolution 7 – To retain Wong Tun Boon asIndependent Non-Executive Director

Ordinary Resolution 8 – Authority to issue shares

Ordinary Resolution 9 – Proposed Renewal of Share Buy-Back

1st fold here

2nd Fold here

AffixStamp

Fold this flap for sealing

Level 15-2, Bangunan Faber Imperial Court,Jalan Sultan Ismail,50250 Kuala Lumpur.

THE COMPANY SECRETARY

SCGM BHD (779028-H)

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