Pjbumi Berhad - Annual Report 2017

Transcription

1. PJBUMI BERHAD (141537-M) Towards New Horizons ANNUAL REPORT 2017
2. Contents 02 03 04 06 08 10 18 21 28 Corporate Information Corporate Structure Profile of the Board of Directors Profile of Key Senior Management Message to Shareholders Management Discussion and Analysis Sustainability Statement Corporate Governance Overview Statement Audit Committee Report 30 33 35 105 106 109 112 Statement on Risk Management and Internal Control Other Additional Compliance Information Financial Statements Properties held by the Group Shareholdings Analysis Warrantholdings Analysis Notice of Annual General Meeting Proxy Form PJ BUM I BER HAD • ANN UAL R EPORT 201 7 1
3. Corporate Information BOARD OF DIRECTORS Adlin bin Shaharudin Chairman / Group Managing Director Ahmad bin Md Daud Independent Non-Executive Director Nik Md Nor Suhaimi bin Nik Ibrahim Independent Non-Executive Director Abd Rahim Bin Embi Independent Non-Executive Director (Appointed on 18 September 2017) Abdul Rahman bin Haji Siraj Independent Non-Executive Director (Resigned on 22 June 2017) AUDIT COMMITTEE PRINCIPAL BANKERS REMUNERATION COMMITTEE AUDITORS Chairman Abd Rahim Bin Embi Members Ahmad bin Md Daud Nik Md Nor Suhaimi bin Nik Ibrahim Chairman Ahmad bin Md Daud Members Nik Md Nor Suhaimi bin Nik Ibrahim Adlin Bin Shaharudin NOMINATION COMMITTEE Chairman Nik Md Nor Suhaimi bin Nik Ibrahim Members Ahmad bin Md Daud Abd Rahim Bin Embi COMPANY SECRETARIES Lim Seck Wah (MAICSA NO.: 0799845) M. Chandrasegaran A/L S. Murugasu (MAICSA NO.: 0781031) REGISTERED OFFICE Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur Tel: 03-2692 4271 Fax: 03-2732 5388 2 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 CIMB Bank Berhad (13491 P) Malayan Banking Berhad (3813 K) Muamalat Malaysia Bank Berhad (6175 W) Ambank (M) Berhad (8515 D) Am Islamic Bank Berhad (295576 U) Messrs Afrizan Tarmili Khairul Azhar (“AFTAAS”) Chartered Accountants AFTAAS, 2, Jalan Rampai Niaga 2, Rampai Business Park, 53300 Kuala Lumpur Tel: 03-4143 9330 Fax: 03-4142 9330 STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad STOCK CODE: PJBUMI STOCK NUMBER: 7163 SHARE REGISTRAR MEGA CORPORATE SERVICES SDN. BHD. (Company No.: 187984-H) Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail , 50250 Kuala Lumpur Tel No. : 03-2692 4271 Fax No. : 03-2732 5388
4. Corporate structure PJBUMI BERHAD INDUSTRIAL SERVICES 100 % 100% 100% PJBUMI WASTE MANAGEMENT SDN BHD PJBUMI SERVICES SDN BHD PJBUMI RESOURCES SDN BHD 100% KEMUDI MAJUJAYA SDN BHD DEVELOPMENT ENGINEERING & CONSTRUCTION COMPOSITE MANUFACTURING 70% 100% 100% GOLDIX RESOURCES SDN BHD PJBUMI CONSTRUCTION SDN BHD PJBUMI COMPOSITES SDN BHD PJ BUM I BER HAD • ANN UAL R EPORT 201 7 3
5. PROFILE OF THE BOARD OF DIRECTORS ADLIN BIN SHAHARUDIN 45 , Malaysian Managing Director Chairman of Board of Directors Member of the Remuneration Committee He joined the Board on 18 November 2014 as the Group Managing Director. He graduated with a Bachelor of Accountancy from University of Malaya in 1997. He started his career with KPMG Peat Marwick (Malaysia) in 1997 and later joined K&N Kenanga Berhad (presently known as Kenanga Investment Bank Berhad) in 2003. He left for Singapore in 2005 to join an asset management company based in Singapore where he was exposed to Mergers & Acquisitions and international fund raising transactions. On 30 May 2008, he was appointed to the Board of CMA I Capital Sdn Bhd, a position he holds until today. He does not belong to any Board Committee. He does not hold any directorship in other public companies. He has deemed interest of 15,169,000 shares and 1,516,900 warrants in the Company. He has no family relationship with other directors or major shareholders of PJBumi. He has no conflict of interest with PJBumi and has no convictions of offences within the past five (5) years except for traffic offences, if any. He had attended all the 5 Board Meetings held during the financial year. ABD RAHIM BIN EMBI 61, Malaysian Independent Non-Executive Director Chairman of the Audit Committee Member of the Nomination Committee He joined the Board on 18 September 2017 as an Independent NonExecutive Director.He graduated with a Master of Business Administration from University Kebangsaan Malaysia in 1995 and Bachelor of Accounting Degree in 1982. He has served almost thirteen years in various government agencies including Jabatan Akauntan Negara and Lembaga Kemajuan Terengganu Tengah (“KETENGAH”) as an Accountant and Internal Auditor at Kementerian Pertahanan Malaysia. After leaving the government agencies, he was involved in many areas which among others was his appointment as a Board member of Indasia Security Services Sdn Bhd on 11 April 2005. Presently, he holds the position as Director / General Manager of Service in Indasia Security Services Sdn Bhd. He does not hold any directorship in other public companies. He does not hold any shares or warrants in PJBumi Berhad and does not have any family relationship with its directors or major shareholders. He has no conflict of interest with PJBumi and has no convictions of offences within the past five (5) years except for traffic offences, if any. He had attended 1 out of 5 Board Meetings held during the financial year as he was only appointed to the Board on 18 September 2017. 4 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
6. PROFILE OF THE BOARD OF DIRECTORS (CONT’D) AHMAD BIN MD DAUD 64, Malaysian Independent Non-Executive Director Chairman of the Remuneration Committee Member of the Audit Committee Member of the Nomination Committee He joined the Board on 8 February 2013 as an Independent Non-Executive Director. He graduated with a Master in Business Administration in 2000 and Diploma in Electrical and Electronics Engineering in 1976, both from University Technology Mara (UiTM). He started his career as Process Engineer with National Semiconductor Sdn Bhd and later joined Texas Instruments Malaysia Sdn Bhd as Process Control Engineer involved in semiconductor assembly. In January 1983, he joined Bank Pembangunan Malaysia Berhad and was posted into various positions carrying out various duties from technical evaluation, project rehabilitation, project appraisal, entrepreneurial development, branch operation to risk management. Presently, he is involved in agro based industry company. In 2004, he was bestowed with Pingat Khidmat Cemerlang Masyarakat by Yang DiPertuan Negeri Sembilan. He does not hold any directorship in other public companies. He does not hold any shares or warrants in PJBumi Berhad and does not have any family relationship with its directors or major shareholders. He has no conflict of interest with PJBumi and has no convictions of offences within the past five (5) years except for traffic offences, if any. He had attended all the 5 Board Meetings held during the financial year. NIK MD NOR SUHAIMI BIN NIK IBRAHIM 61, Malaysian Independent Non-Executive Director Chairman of the Nomination Committee Member of Audit Committee Member of the Remuneration Committee He joined the Board on 26 April 2013 as an Independent Non-Executive Director. He graduated with a Bachelor of Science majoring in Finance from Northern Illinois University Dekalb, Illinois, USA in 1982 and Diploma in Banking Studies from University Technology Mara (UiTM) in 1978. He started his career in 1978 with Malayan Banking Berhad and later joined Maybank Investment Bank in 1991 holding various positions and thereafter moved back to Malayan Banking Berhad in 2003 and remained with the Bank until August 2012. He does not hold any directorship in other public companies. He does not hold any shares or warrants in PJBumi Berhad and does not have any family relationship with its directors or major shareholders. He has no conflict of interest with PJBumi and has no convictions of offences within the past five (5) years except for traffic offences, if any. He had attended all the 5 Board Meetings held during the financial year. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 5
7. PROFILE OF KEY SENIOR MANAGEMENT AMIR BIN AWANG HAMAD 58 , Malaysian Group Chief Operation Officer He joined as the Board member of all PJBumi’s wholly-owned subsidiaries since 18 November 2014. He holds a Bachelor Degree (Hons) in Business Administration from University Technology Mara, Malaysia. In January 2016, he was appointed as the Group Chief Operation Officer of PJBumi Berhad. He has more than 25 years of experience in setting up sales operation, production operation and project management covering from retail products to construction and property development. He is responsible to manage the daily operational activities of PJBumi Group of Companies ARYATI BT AHMAD 43, Malaysian General Manager Finance Aryati serves as General Manager Finance, responsible to lead PJBumi Berhad’s finance, audit, investor relations, compliance & ethics, Human Resources and administration and mergers & acquisitions functions. Her academic background includes HND in Business & Finance and a degree in Business Administration & Commerce from De Montfort University, England. She joined the Company in March 2013. She started her career in 1999 as Account Executive at Securiforce Sdn Bhd and later joined Percetakan Nasional Malaysia Berhad (“PNMB”) since May 2000 for 15 years. She was posted into various positions carrying out various duties in Finance & Account division including Account Receivables, Account Payables, Treasury and costing. Her last position in PNMB was as a Corporate Planning & Finance Manager. 6 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
8. PROFILE OF THE key senior management (CONT’D) AZRUL BIN SHAHARUDIN 43, Malaysian Senior Manager Project Management Azrul serves as Senior Manager Project Management, responsible to provide overall Project Management of the PMC team to ensure that services are provided and performed in accordance with the defined requirements by the end client. He joined the Company in February 2017 and has more than 15 years of experience in diverse project management background, encompassing industries from Construction of infrastructure and residential, Oil & Gas Assets, Shipbuilding and Manufacturing Facilities. HJ. JAMANHURI BIN SAARANI 54, Malaysian Senior Project Manager Hj.Jamanhuri serves as Senior Project Manager, manage all projects and/or tasks to exceed the expectations of the clients, both external and internal. He is responsible to oversee and direct construction projects from conception to completion. He graduated with a Degree (Hons) in Civil Engineering from University of Malaya, Kuala Lumpur in 1988. He joined the Company in August 2017 and has more than 25 years of experience in Civil Engineering works primarily involving buildings and infrastructure development. MASIRAH BT MOHD ISA 51, Malaysian Senior Operation Manager – Waste Management Services Masirah serves as Senior Operation Manager – Waste Management Services, responsible to oversee overall management of the site. She joined PJBumi Berhad in 1994. She has more than 20 years of experience in the domestic, industrial and commercial solid waste industry. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 7
9. MESSAGE TO SHAREHOLDERS Dear Valued Shareholders , Given the uncertainties in the global economic and financial environment, the Malaysian economy is projected to expand at a moderate pace of 4.3% - 4.8% in 2017, driven primarily by domestic demand from the private sector. Despite that positive forecast, a feeling of uncertainty continues to loom over the industry. The year 2017 has indeed been another challenging one, as we were buffeted by both domestic and external headwinds that impacted the Group’s overall performance. The Group faced some major challenges included intense competition within a limited number of tenders in the market due to unfavourable market and economic conditions in Malaysia, unsecured clients and stiff competition from local engineering and construction 8 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 industry players, the fluctuating price of raw materials resulting from the performance of a volatile Malaysian Ringgit and other fluctuating costs. The Group however continued to remain focus on strengthening our fundamentals, building up our capabilities, leveraging on its core competencies and smart partnership and stepping up our marketing efforts. On this note, on behalf of the Board of Directors, it gives me great pleasure to present the Annual Report of PJBumi Berhad (‘PJBUMI’ or ‘the Group’) on behalf of the Board of Directors (‘Board’) for the financial year ended 31 December 2017 (‘FY2017’).
10. message to shareholders (CONT’D) REVIEW OF BUSINESS PERFORMANCE APPRECIATION As a reflection of volatile market conditions, the Group’s generated a total turnover of RM4.78 million during the financial year ended 2017. The Group loss before tax during the year widen to RM4.96 million against the previous year loss before tax of RM1.15 million. On behalf of the Board of Directors, we would like to take this opportunity to convey our deepest gratitude towards our valued shareholders for their long-standing support, confidence, cooperation and trust in us. We will continue to strive towards achieving sustainable growth to further enhance shareholders’ value. As at 31 December 2017, PJBUMI net assets per share stood at RM26.92. Moving forward the Group expects the operating environment to be challenging with the balance of its order book at just RM98.3 million. As such, we will continue to seek for infrastructure projects, services job and waste management services in to replenish our order book. BUSINESS OUTLOOK Despite the prevalent micro and macro uncertainties, the Group remains vigilant in monitoring and controlling costs to ensure the profitability of existing projects. Barring any unforeseen circumstances, the Group expects a modest recovery ahead. Moving forward, the Group will realign its core technical competencies to match market demands and invest in strengthening its talent capabilities to maintain high service level. DIVIDEND In view of the current financial situation, the Board has decided not to propose any dividends for the financial year under review (FY2016: nil). I would like to take this opportunity to welcome En. Abd Rahim bin Embi on his appointment as an Independent Non-Executive Director effective 18 September 2017. To our fellow board members, we would like to thank them for their wise counsel and guidance. This combination of experience and skillsets will undoubtedly be beneficial to our shareholders and valuable in helping us to steer through this challenging period. I would like to take this opportunity to express our utmost appreciations to En.Abdul Rahman bin Siraj for his worthy contributions and years of devoted service rendered to the Group during his tenure with us. En.Abdul Rahman bin Siraj resigned as the Chairman of The Board and Independent Non-Executive Director on 22 June 2017. We would also like to record my appreciation for the cooperation extended by our valued clients and customers for their unrelenting support to us. Above all, we would like to commend the praiseworthy efforts and commitment shown by the Management team and Staff of PJBUMI for their outstanding commitment and loyalty, particularly over the course of this challenging period. Adlin Shaharudin Chairman/Group Managing Director PJ BUM I BER HAD • ANN UAL R EPORT 201 7 9
11. MANAGEMENT DISCUSSION AND ANALYSIS Dear Valued Shareholders , This Management Discussion & Analysis will provide the shareholders with an overall overview of the business operation of the Group, the financial review for the financial year ended 31 December 2017 and the Group’s expectation on the business in 2018. Adlin Shaharudin Chairman/Group Managing Director OVERVIEW OF BUSINESS & OPERATIONS PJBumi Berhad (“the Company” or “PJBUMI”) is an integrated multi-disciplinary engineering and construction services provider with a success track record since 1985. PJBumi Berhad is an investment holding company with the following main subsidiaries and their business segments: • • • 10 PJBumi Waste Management Sdn Bhd – Solid waste management and garbage collection, area cleansing, pest control services and other waste related business. PJBumi Services Sdn Bhd – After-sales support services including connecting works of fibre plastic tanks and mechanical and engineering equipment, providing maintenance, upgrading and/or rectification works, desludging works and sludge treatment and other M&E works. PJBumi Composites Sdn Bhd - Manufacturing and sale of Fibre Reinforced plastic (‘FRP’), FRP waste water treatment plant and other FRP products. PJ B U M I B E R H AD • A NNUA L RE PORT 2017 • • PJBumi Construction Sdn Bhd - Undertake works for civil, mechanical, electrical and erection engineering. PJBumi Resources Sdn Bhd – To carry out activities related to natural resources and commodities trading. During the financial year under review, The Group has recorded revenue of RM4.78 million or 41% lower compared to previous year’s corresponding period. The Group recorded a pretax loss of RM4.96 million (2016 : RM1.15 million) mainly due to lesser revenue generated and loss on disposal of land & buildings and related expenses of RM 1.386 million by its subsidiary. Despite the challenges, the Group remain positive on its growth and continued to pursue opportunities for growth in its operating areas of engineering & construction, composites manufacturing and industrial services related activities. The Group at the same time has completed its restructuring exercise and focused more in securing new jobs.
12. MANAGEMENT DISCUSSION AND ANALYSIS (CONT’D) FIVE-YEAR GROUP FINANCIAL HIGHLIGHTS 2017 RM’000 2016 RM’000 2015 RM’000 2014 RM’000 2013 RM’000 4,776 8,037 5,567 16,712 20,098 (Loss)/Profit before tax (4,961) (1,154) (3,552) 1,353 5,399 (Loss)/Profit net of tax for the year (4,960) (1,446) (3,419) 1,851 3,166 (Loss)/Profit net of tax attributable to equity holders of the Company (4,912) - - - - (48) - - - - Revenue Non-controlling interest Total assets 36,885 38,688 40,272 41,926 35,462 Share capital 44,473 25,000 25,000 25,000 25,000 4,775 11,925 12,605 12,605 5,473 (27,416) (22,504) (21,058) (17,639) (19,490) 21,832 14,421 16,547 19,966 10,983 246 - - - - Total equity 22,078 14,421 16,547 19,966 10,983 Total liabilities 14,807 24,267 23,725 21,960 24,479 Total equity and liabilities 36,885 38,688 40,272 41,926 35,462 2017 2016 2015 2014 2013 (5.99) (2.89) (6.84) 3.70 6.33 Net asset per share attributable to ordinary equity holders of the Company (RM) 0.27 0.29 0.33 0.40 0.22 Share prices as at 31 December (RM) 0.27 0.29 0.29 0.27 0.20 Return on shareholders’ equity (%) 1 (0.22) (0.10) (0.21) 0.09 0.29 Return on total assets (%) 2 (0.13) (0.04) (0.08) 0.04 0.09 Reserves Accumulated losses Total equity attributable to owners of the Company Non-controlling interest FIVE-YEAR GROUP FINANCIAL HIGHLIGHTS Basic earning per share (sen) 1 2 B  ased on Profit/(Loss) attributable to equity holders of the Company expressed as a percentageof total equity attributable to owners of the Company. B  ased on Profit/(Loss) attributable to equity holders of the Company expressed as a percentage of Total assets. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 11
13. MANAGEMENT DISCUSSION AND ANALYSIS (CONT’D) quarterly FINANCIAL HIGHLIGHTS 2017 Fourth Third Second first Quarter Quarter Quarter quarter RM’000 RM’000 RM’000 RM’000 RM’000 4,776 Revenue 1,123 1,355 1,137 1,161 Loss before tax (4,961) (646) (1,573) (1,594) (1,148) Net loss, total comprehensive loss for the year (4,960) (627) (1,591) (1,594) (1,148) (4,912 (579) (1,591) (1,594) (1,148) Net loss, total comprehensive loss attributable to: Equity Holders of the Company (48) Non-controlling Interest (48) - - - (5.99) Basic earning per share (sen) GROUP FINANCIAL REVIEW The Group has recorded revenue of RM4.776 million, which is approximately RM3.261 million or 41% lower compared to the financial year ended 31 December 2016 (“FY2016”). The lower revenue mainly attributable by the manufacturing division and construction division which their revenue contributions had declined by RM2.932 million and RM0.433 million respectively. SEGMENT REVENUE (RM’000) 10000 2017 8000 8,307 2016 6000 4,776 4000 3,491 2,302 2,322 2000 559 0 Composites Manufacturing 1,080 956 Operation & Maintenance Services 835 Waste Management Services 1,268 Construction PJBUMI Group The Waste Management Services was the largest revenue contributor to the Group, followed by Operation & Maintenance Services division and Construction division. In 2017, the Group reported a pretax loss of RM4.961 million against pretax loss of RM1.154 million in previous year’s corresponding period. The increase in pretax loss by was mainly due to lesser revenue generated in Composites Manufacturing, construction division and expenses related to disposal of land by one of its subsidiary. 12 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
14. MANAGEMENT DISCUSSION AND ANALYSIS (CONT’D) GROUP FINANCIAL REVIEW (CONTINUED) SEGMENT PROFIT/(LOSS) BEFORE TAX (RM’000) 1000 Operation & Composites Maintenance Manufacturing Services Waste Management Services Construction 511 6 0 (347) (488) -1000 PJBUMI Group 45 (388) (328) (894) (1,394) -2000 -3000 Investment Holdings/ Others (1,154) (2,838) -4000 -5000 2017 2016 (4,961) The Group total assets as at 31 December 2017 stood at RM36.885 million as compared to RM38.688 million as at 31 December 2018. The reduction of the Group total assets is due to disposal of land by a subsidiary. During the financial year under review, the Group has completed its corporate exercise and increased its issued share capital by way of issuance of 32,000,000 ordinary shares. The Group total share capital as at 31 December 2017 stood at RM44.473 million. Composites Manufacturing For the current financial year, the composites manufacturing segment contributed 12% from the total Group revenue compared to 43% contribution in previous year. The revenue has reduced significantly due to lesser demand in septic tanks, tighter budget from the customers and delay in product certifications for bigger tanks. This segment is developing its composite capabilities to build telecommunication towers, decorative light poles and other composites product to replace the revenue lost. This division has recorded a pretax loss of RM2.838 million in FY2017 compared to a profit before tax of RM0.511 million in FY2016. The pretax loss was higher in FY2017 mainly due to loss on disposal of land and building by RM1.386 million. Operation & Maintenance Services The Operation & Maintenance services contributed RM1.08 million or 23% from the total Group revenue in FY2017. The revenue has increased 13% from the previous corresponding period mainly due to new service contract from Petronas in the East Coast region. This segment has a potential growth in its revenue contribution from new additional services provided to the customers such as sewer line maintenance, plant shut down maintenance, water treatment facility, grease trap systems and industrialised pest control services. This division has recorded a pretax loss of RM0.347 million, a reduction in loss by 29% compared to previous year. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 13
15. MANAGEMENT DISCUSSION AND ANALYSIS (CONT’D) GROUP FINANCIAL REVIEW (CONTINUED) Waste Management Services For FY2017, the Waste Management division was the largest revenue contributor for the Group revenue with 48% contribution. The steady revenue is mainly from solid waste collection contract from Alam Flora Sdn Bhd and Vale Malaysia Minerals Sdn.Bhd. This division however needs to secure more waste related projects to reach profitability. In November 2017, this division has introduced a new product, synthetic insect repellent for household and industrial use. This division has recorded a pretax loss of RM0.388 million, a reduction in loss by 12% compared to previous year. Construction & Engineering The Construction & Engineering segment of PJBUMI is an operating segment that is forecasted to be the key contributor to the total revenue of the Group from 2017 onwards. This segment however contributed 17% from the total Group’s revenue in FY2017. There was a reduction of 34% compared to previous corresponding period due to delay in project kick-off for Felda Serting project. This project is however is expected to generate revenue for the Group by 3rd quarter 2018. This division has recorded a pretax loss in FY2017. REVIEW OF OPERATING ACTIVITIES AND INITIATIVES Composites Manufacturing The Composites Manufacturing (“CM”) segment of PJBUMI consist of one subsidiary namely PJBumi Composites Sdn Bhd. The CM segment’s core business activities include manufacturing and the supply 7 types of Fibre Reinforced plastic (‘FRP’) septic tanks and FRP waste water treatment plant. The CM segment of PJBUMI is one of the pioneer in Malaysia in manufacturing composite wastewater treatment tanks technology and composite underground petroleum storage tanks technology. With more than 35 years to its name, the segment is well known in the market for its products and services. The following diagram shows the list of products manufactured and supplied by the segment. Super Sept System • SS2 • SS3 • SS4 • SS5 Design to treat individual household waste water with population equivalent (PE) range from 5 to 10 14 Sept System • MA1127 • MA1127 • MA1126 Design to treat waste water from communal buildings such as schools, factories, institutions and etc with population equivalent (PE) range from 15 to 149 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 Waste Water Treatment Plant • Package plant Design to treat waste water from communal buildings such as schools, factories, institutions, hotels, universities, stadium, public housing, resorts, hospital and etc with population equivalent (PE) range from 150 to 5,000
16. MANAGEMENT DISCUSSION AND ANALYSIS (CONT’D) REVIEW OF OPERATING ACTIVITIES AND INITIATIVES (CONTINUED) COMPOSITES MANUFACTURING (CONTINUED) Operational Finance Performance The CM segment’s revenue has experienced a decrease over the last five years. In FY2017, the segment’s revenue dropped significantly by RM2.932 million, representing 84% decrease from RM3.491 million in FY2016 and 69% decrease from RM1.821 million revenue achieved in FY2015. This was due to lesser demand for composite tanks, tighter budget from customers, stiff competition with plastic tanks and delay in product certifications for bigger tanks. The segment recorded a loss of RM2.838 million in FY2017 from a profit of RM0.511 million in FY2016 due to lower revenue. The profit in FY2016 was achieved through cost savings efforts. CM SEGMENT’S REVENUE AND PROFIT/(LOSS) (RM’000) 6000 5000 4000 3000 2000 1000 0 -1000 -2000 -3000 Revenue Profit/(Loss) before tax 5,146 3,491 2,517 1,821 511 58 (451) 2017 2016 2015 2014 5,146 2013 (1,270) (2,838) In prior financial years, despite several cost savings measures, the segment suffered a loss of RM1.27 million in FY2015 following a slight profit in FY2014. The segment mitigated the impact of these losses by maintaining a prudent stance in relation to cost control and developing its composite capabilities to build telecommunication towers, decorative light poles and other composite products. Planned Strategic Initiatives The Management has drawn up a strategic plan to improve the current situation. The strategic plan focuses on management activities, resource allocation as well as effective marketing strategies and control mechanisms to ensure that all parties work towards achieving common goals. To make improvements in the planning process, monitoring and execution of orders in-hand. To respond in a timely manner to the request for quotations (RFQs) and close any follow-up matters with customers on the order status and other potential orders. To fill-up critical vacancies on the Sales Team to boost sales. To reduce overall production costs. To conduct customer satisfaction surveys every financial year-end which would serve as a feedback mechanism to highlight weaknesses and enable corrective actions to be taken ro restore customer confidence. To analyse customers’ database and build back business relationship by introducing the Company’s current and new business in the market. The small group of employees in the CM segment with support from the headquarters are the driving force that will help it achieves its business objectives. The CM segment, together with the other divisions in the Group, hold various activities such as bowling tournament, annual dinner, birthday celebrations for employees to participate in. This initiative seeks to reward employees for their contributions to the organisation. Outlook and prospects Moving forward, the CM segment has identified its potential customers both old and new customers and to refresh and regain back their trust in our current products and keep them posted on our upcoming new products. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 15
17. MANAGEMENT DISCUSSION AND ANALYSIS (CONT’D) REVIEW OF OPERATING ACTIVITIES AND INITIATIVES (CONTINUED) Operation & Maintenance Services The Operation & Maintenance Services (“OMS”) segment of PJBUMI consist of one subsidiary namely PJBumi Services Sdn Bhd. The OMS segment’s core business activities include after-sales support services in connecting works of fibre tanks and mechanical and engineering equipment, providing maintenance, upgrading and/or rectification works, desludging works and sludge treatment and other M&E works. Operational Finance Performance Over the last five years, the OMS segment’s revenue has experienced quite a stagnant revenue stream. In FY2017, the segment’s revenue increased by 13% from FY2016 and 30% decrease from RM1.55 million revenue achieved in FY2015. The segment recorded a loss from FY 2014 to FY2017 due to lower revenue. The segment mitigated the impact of these losses by maintaining a prudent stance in relation to cost control and provide added value to the services to the existing and new customers. The segment also team up with CM segment to package together the products and services. OMS SEGMENT’S REVENUE AND PROFIT/(LOSS) (RM’000) Revenue Profit/(Loss) before tax 2000 1,553 1500 1,168 1,094 500 0 232 2017 (111) 2016 1,080 956 1000 (432) 2015 (488) 2014 (347) 2013 -500 Outlook and prospects This segment has a potential growth in its revenue contribution from new additional services provided to the customers such as grease trap system and industrialised pest control services. wASTE MANAGEMENT Services Operational Finance Performance The WMS segment’s revenue has experienced a significant decrease in FY2015 due to area cleansing contract had ended. The revenue remain consistent from FY2015 to FY2017 with solid waste collection contract and scheduled waste contract from Alam Flora Sdn Bhd and Vale Malaysia Minerals Sdn Bhd. The segment recorded a loss from FY 2015 to FY2017 due to lower revenue. WMS SEGMENT’S REVENUE AND PROFIT/(LOSS) (RM’000) 15000 Revenue Profit/(Loss) before tax 13,189 9000 6000 6,646 4,192 3000 0 The segment mitigated the impact of these losses by maintaining a prudent stance in relation to cost control and strengthens sales and marketing strategies to secure new customers. 13,289 12000 2,322 1,949 (223) 2017 2016 2015 2,305 (328) 2014 (388) 2013 -3000 Outlook and prospects This segment will focus on new area of growth in waste management services. In November 2017, the segment has introduced a new environmental friendly product, organic insect repellent for household and industrial use. The segment has identified potential customers and currently promoting the product through corporate social responsibility (“CSR”) activities. 16 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
18. MANAGEMENT DISCUSSION AND ANALYSIS (CONT’D) REVIEW OF OPERATING ACTIVITIES AND INITIATIVES (CONTINUED) CONSTRUCTION & ENGINEERING The Construction & Engineering (“CE”) segment of PJBUMI consist of one subsidiary namely PJBumi Construction Sdn Bhd (“PCSB”). The CE segment’s core business activities include works for civil, mechanical and electrical engineering. The CE segment previously was under CM until incorporation of PCSB on 11 June 2013. Operational Finance Performance The CE segment’s revenue has experienced a decrease in FY2017 by 34% compared to FY2016 due to due to delay in project kick-off for Felda Serting project. The segment recorded a profit in FY 2013, however recorded a loss in FY2014 due to no revenue. This segment however gain back its profit on FY2015 to FY2017. SEGMENT’S REVENUE AND PROFIT/(LOSS) (RM’000) 1500 1,268 1200 900 600 Revenue Profit/(Loss) before tax 835 495 The CE segment’s strategy for the upcoming year, 300 245 186 FY2018 is to explore the possibilities of forming strategic 31 45 (29) 6 0 alliances with trustworthy business partners and players 2017 2016 2015 2014 2013 to increase its chances of securing new projects. The -300 segment plans to do this by being more competitive in the market, in terms of pricing and value creation. Despite a lackluster outlook for the Malaysian economy, the CE segment is expected to grow in FY2018 with few project developments in the pipelines. Apart from working towards securing new projects, the segment has to ensure ongoing projects are monitored closely in order to address and resolve problems quickly. The CE segment aims to ensure that the operating expenses (‘OPEX’) at headquarters (‘HQ’) and branches is minimized and that these expenses are monitored by vetting and detailing the needs of each expenditure. By establishing a plan, management has successfully reduced the OPEX at HQ and branches. For the year under review, the segment sought to close almost all ongoing issues and handover the projects to clients. All issues during the financial year were solved and rectified based on the strategy formed by the Project Management Office. Planned Strategic Initiatives The segment continues to look for ways to improve its operational efficiencies including optimizing its existing resources in order to perform better as well as through completing work in a timely manner and with satisfactory quality The Management has drawn up a strategic initiative to improve the current situation in this segment. Closely monitor project expenses against budget Ensure timely completion of current on-going projects and to avoid LAD Form strategic alliances with trustworthy business partners To reduce overall group operational costs Take on business process improvements Secure more sales in various development projects Outlook and prospects The segment has a positive outlook in terms of future business prospects. The nearest project to kick-off is the Felda Serting project and several small development projects. In addition, the CE segment will leverage on its in-house projects from other divisions. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 17
19. sustainability statement At PJBumi Berhad (PJBUMI) Group, we acknowledges that the principles of responsible business and sustainability are key business drivers that will help secure the Group’s future and create long-term value. PJBUMI had been embracing business sustainability for years when we presented our Statement on Group Corporate Social Responsibility (‘CSR’). In that CSR report, we outlined our efforts and initiatives as part of our commitment and responsibility towards serving the community, enhancing workplace practices, guarding our environment and building our sustainability reputation in the marketplace. This year is the first year PJBUMI Group is having a formal sustainability report disclosing our sustainability strategy which is in line with regulatory requirements and best practices. In 2017, we continue to focus our efforts on the four main pillars of sustainability, namely the Marketplace, Environment, Community and Workplace pillars. We are aware that the performance and success of the Group does not solely rest on financial or economic outcomes, as such we are committed to not only strengthening the sustainability of the Group from a financial perspective, but also from the societal and environmental perspectives. THE MARKET PLACE We recognise that the total marketplace ecosystem is important to the success of our business. As such, we continue to engage in activities that are helping us to establish and nurture lasting bonds with our customers, suppliers, industry peers and other stakeholders in the marketplace. In providing our services in maintaining customer’s waste water plant (“WWP”), we educate and train our customers the basic knowledge in handling the WWP system and at the same time create awareness on the importance of maintaining the outflow of treated waste water to the drain. THE ENVIRONMENT Managing the environmental impact is one of our lines of business through waste management services. We adopted throughout the Group in preserving the environment and reducing our environmental footprint by continuously work to prevent harm to the environment at all of our sites. To ensure an environment that is healthier and sustainable, the Group’s waste management division undertakes corporate social responsibility activities in performing solid waste management and public cleansing activities for selected housing areas in the northern region of Kuala Lumpur. We collect solid waste and recyclables and deliver them to the Materials Recovery Facilitiy (MRF) and landfill. For the past 10 years, we have successfully taken over and operated solid waste and public cleansing operations in the central region of Malaysia. As we work to uphold the national agenda of sustainable development, we will continuously implement initiatives to improve the standard and quality of life in a sustainable manner. Towards this end, we are committed to consistently develop and commercialise leading edge technologies in waste management, renewable energy, and human capital development for future sustainability. 18 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
20. sustainability statement (CONT’D) THE COMMUNITY At PJBumi, we understand the importance of coexisting with the community in fulfilling our role as a corporate citizen. Sustainability is about benefitting people in the long term, and in doing so, community engagement must play a central role. It is about addressing the business objectives and building strong, invaluable relationships by being a part of the community in order to ensure sustainable economic advantage. Throughout year 2017, the Group continues to contribute to the betterment of the community by investing in various CSR activities and volunteering support for schools (Sekolah Kebangsaan Bandar Tasik Kesuma, Beranang), housing areas (Pangsapuri Seri Cempaka, Bandar Sri Damansra) and non-profit organisations such as mosques (Masjid An-Najah Padang Serai, Kulim, Surau SsSyakirin, Sg.Petani, Kedah), in cleaning and perform pest control activities in their premises and surroundings. THE WORKPLACE In line with our continuous efforts to uphold responsible social practices, we are committed to carrying out effective practices and initiatives that seek to strengthen our workplace as well as keep our stakeholders and businesses safe. The driving force for the Group’s overall business growth is the employees of PJBumi. As at 31 December 2017, we kept a minimum workforce of 55 employees. Employees aged between 46 and above made up 40% of our workforce, followed by those aged 36-45 (29% of our workforce) and those aged 20-35 (31% of our workforce). Overall, the male to female ratio of employees stood at 75:25. NO OF EMPLOYEE BY AGE AND % 16 29% NO OF EMPLOYEE BY GENDER AND % 14 25% 17 31% 41 75% 22 40% 46 and above 36-45 20-35 Female Male To ensure our workforce is one cohesive family, we continue to leverage on employee engagement activities to communicate with and unite our employees. The financial year under review saw us holding a Hari Raya Open House event for employees at our Head Office with the Group Managing Director and Board of Directors. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 19
21. 20 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
22. CORPORATE GOVERNANCE OVERVIEW STATEMENT The Board of Directors of PJBumi Berhad (“PJBumi” or “the Company”) is committed to cultivating a responsible organisation by instilling corporate conscience through excellence in Corporate Governance (“CG”) standards at all times. This includes accountability and transparency which is observed throughout the Group as a fundamental part of building a sustainable business and discharging its responsibilities to protect and enhance shareholder value and the financial performance of the Group. The Board is pleased to provide an overview of the application of the principles set out in the Malaysian Code on Corporate Governance (“MCCG”). PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS BOARD RESPONSIBILITIES The Board has the overall responsibility to protect and enhance shareholders’ value. The Board is explicitly responsible, amongst others, for establishing and communicating the strategic plan and overseeing the proper conduct of the Group’s businesses, and for supervising its affairs to ensure its success within a framework of acceptable risks and effective control and in compliance with relevant laws, regulations, guidelines and directives in the countries which it operates in. The Board delegates and confers some of its authorities and discretion to the Chairman/Group Managing Director (“GMD”) and Management as well as on properly constituted Board Committees comprising mainly/exclusively NonExecutive Directors. The Board believes that for its current size, it is more expedient for the two (2) roles to be held by the same person as long as there is pertinent check balance to ensure no one person in the Board has unfettered powers to make major decision for the Company. As such the Board is of the view that the significant contribution of Independent Non-Executive Directors which is made up of 75% of the current Board’s size, provides for the relevant checks and balance. 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 fulfils its obligations and as required under the relevant legislations. Some of the specific responsibilities of the Chairman include: 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 Executive Directors 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; iv) Ensure meetings of the shareholders are conducted in an open and proper manner with appropriate opportunity for them to ask questions; and v) As Group’s official spokesperson. The duties of GMD 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. The role of Management is to support the GMD and implement the running of the general operations and financial business of the Company, in accordance with the delegated authority of the Board. The Board Committees include the Audit Committee, Nominating Committee and Remuneration Committee. The Board Committees exercise transparency and full disclosure in their proceedings. Where necessary, issues deliberated by the Board Committees are presented to the Board with appropriate recommendations. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 21
23. CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont’d) The Non-Executive Directors are independent from Management. Their roles are to provide a balance view, to constructively challenge Management and monitor the success of Management in delivering the approved targets and business plans within the risk appetite set by the Board. They have direct access to the Management at all levels, and they engage with the external and internal auditors to address matters concerning Management and oversight of the Company’s business and operations. The Board assumes the following key responsibilities: • • • • • • Reviewing and adopting the Company’s strategic plans Overseeing the conduct of the Company’s business Identifying principal risks and ensuring the implementation of appropriate internal controls and mitigation measures Succession planning Overseeing the development and implementation of a shareholder communications policy for the Company Reviewing the adequacy and the integrity of the management information and internal controls system of the Company. The Board is mindful of the importance of business sustainability and, in conducting the Group’s business, the impact on the environmental, social, health and safety, staff welfare and governance aspects are taken into consideration. The Board takes heed of go green and energy saving by implementing several measures on sustainability. Uphold Integrity in Financial Reporting The Board is responsible for ensuring that financial statements prepared for each financial year give a true and fair view of the Group’s state of affairs. The Directors took due care and reasonable steps to ensure that requirements of accounting standards were fully met. Quarterly financial statements were reviewed by the Audit Committee and approved by the Board of Directors prior to their release to Bursa Securities. The Directors are satisfied that in preparing the financial statements of the Group and of the Company for the financial year ended 31st December 2017, the Group has used appropriate accounting policies and applied them consistently. The Directors are also of the view that relevant approved accounting standards have been followed in the preparation of these financial statements. The Responsibilities Statement by Directors pursuant to the Main LR is set out in this Annual Report. Qualified and competent Company Secretary The Directors have the 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 on new regulatory requirements and directives from time to time. The Company Secretary is a qualified Chartered Secretary, under the prescribed body as permitted by Companies Act 2016. The appointment and removal of the Company Secretary is under the purview of the Board of Directors. Access to information and advice The Directors have full and unrestricted access to all information pertaining to the Company’s business and affairs so as to enable them to discharge their responsibilities. Prior to the Board meetings, the Directors are provided with the agenda together with the Board papers on issues to be discussed. A record of the Board’s deliberation of issues discussed and conclusion reached are recorded in the minutes of the meeting by the company secretary. After the meeting, the minutes are circulated to the Board and Board Committee members in a timely manner. 22 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
24. CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont’d) The Board, whether as a full Board or in their individual capacity, has the right to engage independent professional advice, if necessary, at the Group’s expense. In addition, all Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that the Board meeting procedures and applicable rules and regulations are adhered to. Board Charter The Board has formalised and uploaded its Board Charter in the website of the Company. The Board Charter sets out the Board roles and responsibilities. The Board Charter was last reviewed on 6 April 2018. The Board Charter can be viewed at the Company’s website at http://www.pjbumi.com.my/. Directors’ Code of Ethics and Whistleblowing Policy The Board of Directors has conducted themselves in an ethical manner while executing their duties and functions and complied with the Company Directors’ Code of Ethics recommended by the Companies Commission of Malaysia. The said Code establish a standard of ethical behaviour for the directors to uphold such as the spirit of responsibility and social responsibility in line with the legislation, regulations and guidelines for administrating the Company. The Company has also adopted Whistleblowing policy to safeguard the Company’s interest and also to protect the whistleblower interest. The policy spells out the types of misconduct, malpractice and irregularity, and how the reporting and investigations will be carried out. The Company expects all employees to observe the policy in the conduct of day to day business. The Directors’ Code of Ethics and Whistleblowing Policy can be viewed at the Company’s website at http://www. pjbumi.com.my/. BOARD COMPOSITION The Board comprises of a Chairman/GMD and three (3) Independent Non-Executive Directors. The composition fulfils the requirements set out under the Main Market Listing Requirement of Bursa Malaysia Securities Berhad where at least one third of the Board members are independent Directors. This ensures that minority shareholders’ interest is adequately represented. The Group is led by an effective Board which comprises members with skills from a diverse blend of professional backgrounds ranging from business, engineering, finance and accounting experience. The Board views its current composition encompasses a balance mix of skills and strength in qualities which are relevant to enable the Board to discharge its responsibilities in an effective and competent manner. The Board Committees comprises of Audit Committee, Nominating Committee and Remuneration Committee. The Board Committees exercise transparency and full disclosure in their proceedings. Where necessary, issues deliberated by the Board Committees are presented to the Board with appropriate recommendations. The Nominating Committee (“NC”) is responsible for identifying and recommending new nominees to our Board as well as committees of the Board. For new appointments to the Board, the NC shall consider diversity of skills, expertise, cultural background, age, gender and experience in evaluating the appointment of Directors. The Company believes in providing equal opportunity to all candidates based on merit. In addition, the Nominating Committee assesses the effectiveness of the Board as a whole and the Board Committees, and also the contribution of each Director. 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. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 23
25. CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont’d) The Board, through the Nominating Committee, reviews periodically its required mix of skills and experience and other qualities, including core competencies, which Non-Executive Directors should bring to the Board. All assessments and evaluations carried out by the Nominating Committee in the discharge of all its functions are properly documented. This assessment is done on yearly basis. The Committee is empowered by its terms of reference to carry out duties and responsibilities as follows: a) To examine the size of the Board to ensure its effectiveness in discharging its duties and responsibilities, and ensure every Directors shall be subject to retirement at least once in every 3 years; b) To review annually the Board’s mix of skills and experience and other qualities including core competencies which Non-Executive Director should bring to the Board; c) To recommend suitable continuing educational training to existing and new Directors; d) To ensure an election of directors shall take place each year and that all directors shall retire from office once at least in each 3 years but shall be eligible for re-election; e) To recommend to the Board, suitable candidates to fill the Board, Audit, Nomination, Remuneration and other Board Committees; The Committee is satisfied with the current size of the Board and with the mix of qualifications, skills and experience among the Board members. The members of the Nominating Committee whom are Independent Non-Executive Directors are as follows:Name Position Nik Md Nor Suhaimi bin Nik Ibrahim Ahmad Bin Md Daud Abd Rahim Bin Embi Chairman Member Member The Committee met one time during the financial year. None of the Independent Non-Executive Directors had served the Company for more than 9 years. FOSTER COMMITMENT Time Commitment All Board members are required to notify the Chairman or any new directorships notwithstanding that the Listing Requirements of Bursa Securities allow a Director to sit on the boards of 5 listed issuers. Such notification is expected to include an indication of time that will be spent on the new appointment. During the financial year ended 2017, the Board met 5 times to deliberate on a variety of matters of the Company. Additional meetings may be convened on an ad-hoc basis when urgent and important decisions are required to be made in between scheduled meeting. 24 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
26. CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont’d) The Board meeting attendance record of each director is as follows: Name and Designation Adlin Bin Shaharudin (Chairman/GMD) Ahmad Bin Md Daud (Independent Non-Executive Director) Nik Md Nor Suhaimi Bin Nik Ibrahim (Independent Non-Executive Director) Abd Rahim Bin Embi (Independent Non-Executive Director) (Appointed on 18 September 2017) Encik Abdul Rahman Bin Haji Siraj (Independent Non-Executive Director) (Resigned on 22 June 2017) Attendance 5/5 5/5 5/5 1/1 2/3 The agenda for each Board meeting and papers relating to the agenda items are circulated to all Directors at least 5 days before the meeting so as to provide sufficient time for the Directors to review the Board papers and seek clarification, if any. Directors’ training All the directors have completed the Mandatory Accreditation Programme within the stipulated timeframe required in the Listing Requirements. The Directors are aware of their obligation and will continue to attend suitable training to equip and enhance themselves with the knowledge to facilitate themselves in discharging their duties and responsibilities diligently with integrity. Re-election Under Article 85 of the Company’s Articles of Association, the Directors appointed during the year shall retire at the Annual General Meeting (“AGM”) and be eligible for re-election. According to Article 102 of the Company’s Article of Association of the Company one-third of the Board members shall retire from office at the AGM. Further, all the Directors are required to retire from office at least once in every three (3) years. However, the retiring Directors are eligible for re-election at the meeting at which they retire. REMUNERATION The Remuneration Committee (“RC”) reviews and proposes, subject to the approval of our Board the remuneration policy and terms and conditions of service of each Director for his services as member of the Board as well as Committees of the Board. Nevertheless, the remuneration of Non-Executive Directors is a matter for the Board decision as a whole. Relevant directors are required to abstain from deliberation and voting decisions in respect of his individual remuneration. The remuneration of Directors is generally based on market conditions, responsibilities held and the overall financial performance of the Group. Decisions and recommendations by RC shall be reported to the Board for approval. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 25
27. CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont’d) The members of the Remuneration Committee comprise of Independent Non-Executive Directors as follows:Name Position Ahmad Bin Md Daud Nik Md Nor Suhaimi Bin Nik Ibrahim Adlin Bin Shaharudin Chairman - Independent Non-Executive Member - Independent Non-Executive Member - Group Managing Director The Committee met once during the financial year and was attended by all its members. Remuneration policy and procedures The Directors’ remuneration package is linked to the experience, scope of duty and responsibility, seniority, performance and industrial practices. The remuneration of Executive Directors consists of basic salary, among others bonus, whereas the Non-Executive Directors receive fixed director fees. Details of the Directors’ remuneration in aggregate for financial year ended 2017 are tabulated as below: Company Executive Director Adlin Bin Shaharudin Independent Director Ahmad Bin Md Daud Nik Md Nor Suhaimi Bin Nik Ibrahim Abd Rahim Bin Embi (Appointed on 18 September 2017) Encik Abdul Rahman Bin Haji Siraj (Resigned on 22 June 2017) Fees Salary Bonus Benefitin-kind Total - - - - - 30,000 30,000 - - - 30,000 30,000 8,500 - - - 8,500 19,500 - - - 19,500 88,000 - - - 88,000 Fees Salary Bonus Benefitin-kind Total - - - - - 30,000 30,000 - - - 30,000 30,000 8,500 - - - 8,500 19,500 - - - 19,500 88,000 - - - 88,000 Group Executive Director Adlin Bin Shaharudin Independent Director Ahmad Bin Md Daud Nik Md Nor Suhaimi Bin Nik Ibrahim Abd Rahim Bin Embi (Appointed on 18 September 2017) Encik Abdul Rahman Bin Haji Siraj (Resigned on 22 June 2017) 26 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
28. CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont’d) The Remuneration Committee reviews and recommends the Executive Directors’ remuneration package by assessing their KPI and also refers to market of similar industry and its size as a benchmark. An appropriate remuneration package is designed to retain and attract calibre directors to discharge their duty with integrity, to grow and lead the Company. PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT AUDIT COMMITTEE The Audit Committee (“AC”) is relied upon by the Board to, amongst others, provide advice in the areas of financial reporting, external audit, internal control process, review of related party transactions as well as conflict of interest situations. The AC also undertakes to provide oversight on the risk management processes/ framework of the Group. The AC is chaired by an Independent Director and consists of all Independent Directors. The AC has full access to both the internal and external auditors who, in turn, have access at all times to the Chairman of the AC. The role of the AC and the number of meetings held during the financial year as well as the attendance record of each member are set out in the AC Report in the Annual Report. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK The Board has overall responsibility for maintaining a sound system of internal control and risk management that provide a reasonable assurance of effective and efficient operations, and compliance with the relevant laws and regulations as well as with internal procedures and guidelines. The Statement on Risk Management and Internal Control as disclosed in this Annual Report provides an overview of the risk management and internal control framework adopted by the Company for the current financial year. PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS COMMUNICATION WITH STAKEHOLDERS The Company values dialogues with the investors and is constantly striving to improve the communication with the public. The Board believes that an effective investor relation is essential in enhancing shareholders’ value and therefore ensures that shareholders are kept well informed of major development of the Company. Such information is disseminated via the Company’s Annual Report, various disclosures and announcements to Bursa Securities and the Company’s web site. (http://www.pjbumi.com.my/). The AGM is the principal forum for dialogue between the Company and the shareholders. The Board provides the opportunity for shareholders to raise questions pertaining to issues in the financial performance and business plan of the Group. The Board takes the opportunity to present a comprehensive review of the progress and performance of the Company and provides answers to the questions raised by the shareholders during the general meeting. CONDUCT OF GENERAL MEETINGS The Group is of the view that General Meetings are important platforms to engage with its shareholders as well as to address their concerns. The Group encourage shareholders to attend and participate in the AGM by providing adequate advance notice and holding the AGM at a readily accessible location. The location of the AGM is customarily nestled in one of the hotels in the Klang Valley which is easily assessible through public transportation. The resolution of the General Meetings is conducted via poll voting. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 27
29. AUDIT COMMITTEE REPORT The Board of Directors of PJBumi Berhad (“the Board”) is pleased to present the Audit Committee Report for the financial year ended 31 December 2017. COMPOSITION AND MEETINGS As at the date of this Annual Report, the Audit Committee comprises three (3) Directors as follows: Chairman Abdul Rahim Bin Embi - Independent Non-Executive Director Members Ahmad Bin Md Daud Nik Md Nor Suhaimi bin Nik Ibrahim - Independent Non-Executive Director - Independent Non-Executive Director The present composition and the qualification of its members comply with paragraphs 15.09 and 15.10 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”). The Audit Committee met five (5) times during the financial year ended 31 December 2017 and the details of attendance of the Audit Committee are as follows: Name of Directors Attendance Ahmad bin Md Daud 5/5 Abdul Rahman bin Haji Siraj (Resigned on 22 June 2017) 2/3 Abd Rahim Bin Embi (Appointed on 18 September 2017) 1/1 Nik Md Nor Suhaimi bin Nik Ibrahim 5/5 Details of the members of the Audit Committee are contained in the Profile of Directors set out in this Annual Report. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE In accordance with the terms of reference of the Audit Committee, the following activities were undertaken by the Audit Committee during the financial year ended 31 December 2017, among others deliberated on and reviewed: (a) the unaudited quarterly financial statements of the Group to ensure that they are in compliance with the requirements of relevant authorities, prior to submission to the Board for their approval and release of the Group’s results to Bursa Securities. (b) the annual audited financial statements of the Group and of the Company prior to submission to the Board of Directors for consideration and approval. (c) the External Auditors’ report in relation to audit and accounting issues arising from the audit; matters arising from the audit of the Group in meetings with the External Auditors without the presence of the executive Board members and management. 28 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
30. AUDIT COMMITTEE REPORT (cont’d) (d) And reported to the Board of Directors on the internal audit plan and the results of the internal audit assessments, the internal audit report and the recommendations arising from the reviews conducted by the outsourced internal auditor and the Internal Audit Report which is to be included in the Annual Report . (e) the related party transactions and potential conflict of interest situation that may have arisen within the Company or Group. (f) the re-appointment of External Auditors and their audit fees, before the recommendation to the Board of Directors for approval. (g) the internal audit function of the Group in the following areas:i) ii) iii) iv) v) review the understanding of the internal auditors’ accountability to the AC and their understanding of the Group’s business and risk environment; review the scope of audit work, adequacy of resources and access to information; review the competency of the internal auditors; review the timely communication and handling of the audit findings to AC, recommendations thereof and monitoring of such recommendations; and review the performance of the internal auditors and quality of their internal audit plan. (h) the internal audit plan and internal audit reports of the associated company. INTERNAL AUDIT FUNCTION During the financial year ended 31 December 2017, the Group’s internal audit function was outsourced to an independent professional firm namely, Messrs Ismawadee & Co to review and improve its existing internal control process and to assist in identifying and managing the Group’s risks and the control procedures to manage those risks and to assist the AC in obtaining the assurance quality in relation to the effectiveness of the system of internal control implemented by the Management. During the financial year under review, the Internal Auditors carried out an independent internal audit review on the Group’s Project Management and assessed the adequacy and effectiveness of internal controls within the Group. The total cost incurred for the internal audit service for the financial year was RM28,394.96. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 29
31. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 1 .INTRODUCTION The Board of Directors (“Board”) of PJBumi Berhad is guided by the Statement on Risk Management & Internal Control - Guidelines for Directors of Listed Issuers in making disclosures concerning the main features of the risk management framework and internal controls system of the Group pursuant to the Paragraph 15.26(b) of the Listing Requirements. The Board is pleased to present below its Statement of Risk Management and Internal Control which outlines the nature and scope of the risk management and internal controls of the Group during the financial year ended 31 December 2017. This is in line with the Malaysian Code on Corporate Governance. 2. BOARD RESPONSIBILITY The Board is fully committed to ensure the existence of an effective risk management and internal controls system within the Group, and continuously reviews and evaluates the adequacy and integrity of these systems. However, the Board recognises that such systems are designed to manage and reduce, rather than eliminate, the risks identified to acceptable levels. Therefore, the internal controls implemented can only provide reasonable and not absolute assurance against the occurrence of any material misstatement or loss. Whilst the Board has overall responsibility for the Group’s risk management and internal controls system, it has delegated the implementation of these internal controls system to the Management, who regularly report to the Audit Committee of the Board on risks identified and actions taken to mitigate and/or minimise the risks. The risk management and internal controls system is subject to the Board’s regular review with a view towards appraising the adequacy, effectiveness and efficiency of such system within the Group and also to ensure that these systems are viable and robust. 3. RISK MANAGEMENT FRAMEWORK With the increasingly complex and dynamic business environment, proactive management of the overall business risks is a prerequisite in ensuring that the organisation achieves its strategic objectives. The Group is committed to ensuring that it plans and executes activities to ensure that the risks inherent in its business are identified and e effectively managed. Risk management activities are to be regarded an integral part of the Group’s philosophy and business practices and not in isolation. The management of risks is aimed at achieving an appropriate balance between realising opportunities for gains while minimising losses to the Group. The Group is establishing a risk management framework through an ongoing process of identifying, evaluating and managing significant risks encountered by the Group. The Board regularly reviews this process and applies corrective measures to mitigate and manage the risks. The main features of the Group’s risk management and internal control system are as follows:- 30 i. Board Committee Besides the Audit Committee, the Nomination and Remuneration Committees established have been established in the Group to assist the Board to perform its oversight function. Specific responsibilities have been delegated to these Board Committees. These Committees have the authority to examine all matters within their scope and report to the Board with their recommendations. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
32. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont’d) ii. Audit Committee The Audit Committee was established by the Board with its terms of reference to assist in reviewing management’s financial reports, internal audit reports and external audit reports. Significant issues are brought to the attention of the Board. The Audit Committee also oversees the independence and resources of the internal audit function besides ensuring that the scope of work is adequate and that the audit has been carried out objectively and effectively by a competent team of auditors iii. Board Executive Committee The Board Executive Committee was established by the Board to assist the Group Managing Director (“GMD”) in ensuring that daily operations are conducted effectively and according to the Group’s strategic plan, approved budgets, policies, procedures and relevant laws and regulations. The members of the Committee comprising two (2) Directors and the management representatives. 4. INTERNAL AUDIT FUNCTION In the efforts to strengthen the internal control within the Group, a number of corrective measures have been carried out and implemented throughout the financial year. The Group’s internal audit function is outsourced to a professional services firm to assist the Board and Audit Committee in providing an independent assessment on the adequacy, efficiency and effectiveness of the Group’s internal control system. The scope of review of outsourced internal audit function is determined by Audit Committee with feedback from the Management. During the financial year ended 31 December 2017, the internal audit function carried out an internal audit review on the adequacy of the Group project management. The reviews were carried out in accordance with the approved audit plan and timetable. There are several weaknesses identified during the audit review which mainly related to operational controls. The findings from the internal audit review including the recommended corrective actions were presented to the Audit Committee at one of its scheduled meetings. The follow ups visits and reviews will be conducted to ascertain the status of implementation of agreed management action plans. 5. OTHER KEY ELEMENT OF INTERNAL CONTROL Other key elements of the Group’s internal control system are: (i) The Group maintains a formal organization structure that includes clear lines of accountability, which has a documented delegation of authority that sets out decision that need to be taken and the appropriate authority levels of management, including matters that requires the Board’s approval. (ii) The external auditors provide assurance in the form of their statutory audit for the financial statements. Further areas for improvement during the course of the statutory audit by the external auditors are brought to the attention of the Audit Committee through management letters, or discussed at Audit Committee meetings. (iii) The Managing Director are closely involved in the running of business and operations of the Group and report to the Board on significant changes in business and external environment, which affect operation of the Group at large. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 31
33. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont’d) (iv) The Management has established written polices and procedures which have been approved by the Board and they have been implemented in the core business processes throughout the Group. The Group’s internal control policies and procedures are clearly documented in the Standard Operating Procedures (SOP) and other procedures manuals applicable to the Group’s operations. The Company has in place authority limits and approvals processes at the various levels of operations and business decision-making. The business units’ processes and SOP constitute the Group’s “first line of defense” under its internal control system. They serve to ensure the compliance with the internal control and relevant laws and regulations. Regular reviews and updates are performed in line with changes in business environment, statutory and regulatory requirements to ensure their relevance and effectiveness. (v) One of the Group’s operations is ISO 9001:2000 certified. With such certification, audits are periodically conducted by external ISO auditors to ensure continuous compliance and enhancement of quality management system. 6. ADEQUACY AND EFFECTIVENES OF THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM The Board and Management are firm on implementing continuous measures of improvement to further strengthen the current risk management and internal control systems. The Board has received assurance from the Group Chief Operating Officer (“GCOO”) and the Group Financial Controller that the Group’s risk management and internal controls system is operating adequately and effectively, in all material aspects. Taking into consideration the assurance from the Management Team and input from the relevant assurance providers, the Board is of the view that the risk management and internal controls systems of the Group is satisfactory and adequate to safeguard shareholders’ investment and the assets of the Group during the financial year under review. The Group will continue to take measures to strengthen the risk management and internal controls system of the Group. 7. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS The External Auditors have reviewed the Statement on Risk Management and Internal Control for inclusion in the Annual Report of the Group for the financial year ended 31 December 2017. Their review was conducted pursuant to the scope set out in the Recommended Practice Guide 5 (Revised) issued by the Malaysian Institute of Accountants. Based on their review, the External Auditors have reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and effectiveness of the system of risk management and internal control of the Group. 32 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
34. other additional compliance information 1 . RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE AND TRADING NATURE (“RRPT”) There is no recurrent related party transactions entered into during the financial year ended 31 December 2017. 2. AUDIT AND NON-AUDIT FEES (a) Amount of audit fees paid or payable to the Company’s auditors incurred by the Company and on a group basis are RM45,000.00 and RM99,000.00 respectively. (b) Amount of non-audit fees paid or payable to the Company’s auditors incurred by the Company and on a group basis are RM15,000.00 and RM38,000 respectively. 3. MATERIAL CONTRACTS AND CONTRACTS RELATING TO LOANS There was no material contracts entered into by the Company and its subsidiaries which involved Directors’ or major shareholders’ interest (not being contracts entered into in the ordinary course of business) during the financial year ended 31 December 2017. 4. UTILISATION OF PROCEEDS The Company’s wholly-owned subsidiary, PJBumi Composites Sdn Bhd has disposed a parcel of land for a cash consideration of RM13.0 Million. The said disposal was completed on 13 July 2017. The proceeds from the sale of the land have been fully utilized for repayment of borrowings, working capital requirements and expenses in relation to the said disposal. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 33
35. FINANCIAL Contents 35 40 40 41 45 46 48 50 52 Directors ’ Report Statement by Directors Statutory Declaration Independent Auditors’ Report Statements of Profit or Loss and Other Comprehensive Income Statements of Financial Position Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements
36. directors ’ report DIRECTORS’ REPORT The directors hereby present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2017. PRINCIPAL ACTIVITIES The principal activities of the Company are that of investment holding and the provision of management services to its subsidiaries. The principal activities of the subsidiaries are described in Note 12 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. FINANCIAL RESULTS Loss for the year attributable to : Owners of the company Non controlling interest Group RM’000 Company RM’000 4,912 48 1,162 - 4,960 1,162 RESERVES AND PROVISION There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not been substantially affected by any item, transaction or event of a material and unusual nature. DIVIDENDS No dividends have been paid or declared by the Company since the end of the previous financial year. The Directors do not recommend any dividend in respect of the current financial year. DIRECTORS OF THE COMPANY The Directors in office since the date of the last report are as follows: Adlin bin Shaharudin Ahmad bin Md Daud Nik Md Nor Suhaimi bin Nik Ibrahim Abdul Rahman bin Haji Siraj (Resigned w.e.f 22 June 2017) Abd Rahim bin Embi (Appointed w.e.f 18 September 2017) PJ BUM I BER HAD • ANN UAL R EPORT 201 7 35
37. directors ’ report (cont’d) DIRECTORS OF THE COMPANY (cont’d) The Directors of the Company’s subsidiaries in office since the date of the last report are as follows: Amir bin Awang Hamad Abd Aziz bin Ibrahim Ahmad bin Md Daud Syed Ali Zainal Abidin bin Syed Mudzaffar Idris bin Abas Amir Syarizal bin Amri DIRECTORS’ BENEFIT Neither at the end of the financial year, nor at any time during the year, did there subsist any arrangement to which the Group and the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debenture of the Group and of the Company or any other body corporate. Since the end of the previous financial year, no Director of the Company has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Directors as shown in Note 7 of the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest except for any benefits or deemed benefits which may arise from transactions entered into in the ordinary course of business as disclosed in Note 27 to the financial statements. DIRECTORS’ INTERESTS According to the register of director’s shareholdings, the interest if directors in the office at the end of the financial year in shares of the Company and its related corporation during the financial year were as follows: Number of ordinary shares At 1 January 2017 Acquired Sold At 31 December 2017 15,169,000 - - 15,169,000 EMEF Technology Sdn Bhd CMAi Capital Sdn Bhd * Adlin bin Shaharudin ** * Deemed interested by virtue of holding substantial interest in the shares of EMEF Technology Sdn Bhd ** Deemed interested by virtue of holding substantial interest in the shares of CMA i Capital Sdn Bhd None of the other directors holding office at 31 December 2017 had any interest in shares and options over shares of the Company and of its related corporations during the financial year. 36 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
38. directors ’ report (cont’d) ISSUES OF SHARES AND DEBENTURES During the financial year, the Company increased its issued and paid up share capital from RM 25,000,000 comprising 50,000,000 ordinary shares to RM 44,473,000 comprising 88,946,000 ordinary shares through the following:(a) Issuance of 32,000,000 new ordinary shares at an issue price of RM 0.50 per ordinary shares for RM 16,000,000 as discharge of the purchase of consideration for an acquisition of a subsidiary during the financial year. (b) A transfer of share premium amounted to RM 3,473,000 to share capital account upon the commencement of the Companies Act 2016 (“The Act”) on 31 January 2017. The Act has removed the concept of authorised share capital and par value of share capital. In accordance to the Section 618(2) of the Act, the amount standing to the credit of the share premium account became part of the Company’s share capital upon the commencement of the Act. The change to no par value has no effect on the number of ordinary shares in issue. WARRANTS The salient terms of the warrants are disclosed in Note 20 to the financial statements. DIRECTORS’ REMUNERATIONS The amounts of the remunerations of the directors or past directors of the Company comprising remunerations received/receivable from the Company during the year are as follows : Directors’ remuneration: Directors’ fees Group RM’000 Company RM’000 88 88 INDEMNIFYING DIRECTORS, OFFICERS OR AUDITORS No indemnities have been given or insurance premiums paid, during or since the end of the year, for any person who is or has been the director, officer or auditor of the Company. OTHER STATUTORY INFORMATION (a) Before the statements of profit or loss and other comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps: (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts have been written off and that adequate provision had been made for doubtful debts; and (ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 37
39. directors ’ report (cont’d) OTHER STATUTORY INFORMATION (CONT’D) (b) At the date of this report, the Directors are not aware of any circumstances which would render: (i) the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and (ii) the values attributed to current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, the directors are not aware of any circumstances 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. (d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (e) As at the date of this report, there does not exist: (i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or (ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year. (f) In the opinion of the directors: (i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet its obligations when they fall due; and (ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made. AUDITORS’ REMUNERATION Total amounts paid to or receivable by the auditors as remunerations for their services as auditors are as follows : Statutory audit Others 38 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 Group RM’000 Company RM’000 99 38 45 15 137 60
40. directors ’ report (cont’d) AUDITORS The auditors, Messrs AFRIZAN TARMILI KHAIRUL AZHAR, have indicated their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors, ABD RAHIM BIN EMBI Director ADLIN BIN SHAHARUDIN Managing Director Shah Alam, Selangor Date : 6 April 2018 PJ BUM I BER HAD • ANN UAL R EPORT 201 7 39
41. STATEMENT BY DIRECTORS PURSUANT TO SECTION 251 (2) OF THE COMPANIES ACT 2016 We, ABD RAHIM BIN EMBI and ADLIN BIN SHAHARUDIN, being two of the directors of PJBUMI BERHAD, do hereby state that, in the opinion of the Directors, the accompanying financial statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of 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 of 31 December 2017. Signed on behalf of the Board of Directors in accordance with a resolution of the directors. ABD RAHIM BIN EMBI Director ADLIN BIN SHAHARUDIN Managing Director Shah Alam, Selangor Date: 6 April 2018 STATUTORY DECLARATION PURSUANT TO SECTION 251(1)(b) OF THE COMPANIES ACT 2016 I, ADLIN BIN SHAHARUDIN, being the Director primarily responsible for the financial management of PJBUMI BERHAD, do solemnly and sincerely declare that the accompanying financial statements are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act,1960. Subscribed and solemnly declared by the above named ADLIN BIN SHAHARUDIN at Shah Alam in Selangor Darul Ehsan on 6 April 2018 Before me: Commissioner for Oaths Shah Alam, Selangor 40 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 } } } } ADLIN BIN SHAHARUDIN
42. independent auditor ’s report to the members of pjbumi berhad Opinion We have audited the financial statements of PJBumi Berhad, which comprise the statements of financial position as at 31 December 2017 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory notes, as set out on pages 45 to 104. In our opinion, the accompanying financial financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2017, and of their financial performance and their cashflows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial reporting Standards and the requirements of the Companies Act 2016 in Malaysia. Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our 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 judgment, 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. Recoverability of Receivables As disclosed in note 2.4(g)(i) and note 18.1 to the consolidated financial statements, the Group had receivables of RM 14,054,198 and the impairment of receivables stood at RM 4,853,734. Receivables of the group comprise mainly receivables for manufacturing, sale and installation of Fibre Reinforced Plastic (‘FRP) as well as service rendered on managing solid waste and area cleansing. Based on ageing report as at 31 December 2017, amount due from customers exceeding 121 days was RM 5,589,000. The Group is exposed to a heightened risk of significant financial loss when the customers fail to meet their obligation in accordance with the credit term. We focused on this area because the recognition of impairment requires significant judgment and assumptions from management concerning on the recoverability of the receivables. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 41
43. independent auditor ’s report to the members of pjbumi berhad (cont’d) Our audit approach to address Key Audit Matters Our audit procedures performed in this area included, among others:• Obtaining an understanding of the Group’s: • Control over the receivables approval and collection process; • Process to identify and assess the impairment of receivables; and • Policy to determine the accounting estimate for the impairment of receivables. • Reviewing and testing aging of receivables balances at year end; • Assessing the recoverability of these outstanding receivables who exceeded credit limit via discussion with management and with reference to credit profile of the customers and latest correspondence with customers; • Evaluating management’s assessment to support the collectability of receivables; • Assessing the recoverability of the balances by comparing the outstanding amounts as at year end against subsequent settlements. Impairment assessment of the carrying amounts of goodwill The Group’s goodwill balances at 31 December 2017 stood at RM 15,313,314 in respect of effect of acquisition in new subsidiary. The new subsidiary carrying value as at 31 December 2017 stood at RM820,240. On annual basis, management is required to perform impairment assessment for goodwill. These assessments are significant to our audits as they involve significant management judgement and are based on assumptions that are affected by expected future market and economic conditions. The risk is also described in note 3(g) to the financial statements. Our audit approach to address Key Audit Matters Our audit procedures performed in this area included, among others:• Examining the cash flow forecasts against recent performance and challenged assumptions in projections to external available external industry sources of data, where applicable; • Evaluating the reasonableness of projected profit margins and growth rates by assessing evidence available to support the assumptions and their consistency with findings from other areas of our audit; • Tested the weighted-average cost of capital discount rates assigned to the cash generating units, as well as the long-term growth rates, with reference to our understanding of the business; and • Evaluating the adequacy of the financial statements disclosures about those assumptions to which the outcome of the impairment test is most sensitive. 42 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
44. independent auditor ’s report to the members of pjbumi berhad (cont’d) 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. 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. Responsibilities of the Directors for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, 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 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 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 Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and of the Company’s internal control. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 43
45. independent auditor ’s report to the members of pjbumi berhad (cont’d) Auditors’ Responsibilities for the Audit of the Financial Statements (cont’d) • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the 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 or 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 of 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. We communicate 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 provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 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. AFRIZAN TARMILI KHAIRUL AZHAR AF 1300 Chartered Accountants Shah Alam, Selangor Date: 6 April 2018 44 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 MOHD AFRIZAN BIN HUSAIN Chartered Accountant (M) 1805/11/18 (J) Partner
46. statements of profit or loss and other comprehensive income for the financial year ended 31 december 2017 Note 2017 RM ’000 Group 2016 RM’000 2017 RM’000 Company 2016 RM’000 Revenue 4 4,776 8,037 - - Cost of sales 5 (3,183) (5,017) - - 1,593 3,020 - - 117 2,695 Gross profit Other income 6 Employee benefits expenses 7 1,202 2,219 (2,329) (2,662) (969) (1,371) (30) (340) (10) (31) Administrative expenses (3,517) (3,214) (1,385) (1,487) Loss from operations (4,166) (501) (1,162) (670) Selling and distribution expenses Finance costs 8 (795) (653) Loss before tax 9 (4,961) (1,154) (1,162) Income tax expense/(credit) 10 (292) - 1 - (217) (887) - Net loss, total comprehensive loss for the year (4,960) (1,446) (1,162) (887) Net loss, total comprehensive loss attributable to : Equity holders of the company Non controlling interest (4,912) (48) (1,446) - (1,162) - (887) - (4,960) (1,446) (1,162) (887) (5.99) (2.89) Basic earnings per share attributable to shareholders of the Company (sen) : Basic 11 The accompanying notes form an integral part of the financial statements. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 45
47. statements of financial position as at 31 december 2017 Assets Non-current assets Property , plant and equipment Investment properties Deferred tax assets Goodwill Total non-current assets Current assets Inventories Trade and other receivables Cash and bank balances Assets classified as held for sale Group Note 2017 RM’000 13 14 15 16 249 10,655 50 15,313 26,267 596 10,655 50 11,301 17 18 178 9,802 638 10,618 36,885 352 8,654 425 17,956 27,387 38,688 44,473 4,775 (27,416) 21,832 246 22,078 25,000 11,925 (22,504) 14,421 14,421 19 Total assets 2016 RM’000 Equity and liabilities Share capital Reserves Accumulated losses Equity attributable to the owners of the Company Non controlling interest Non-current liabilities Borrowings Hire Purchase Payables Deferred tax liabilities 20 20 21 21 15 200 200 5,678 60 201 5,939 22 21 21 8,652 59 5,896 14,607 11,435 300 59 6,534 18,328 Total liabilities 14,807 24,267 Total equity and liabilities 36,885 38,688 Current liabilities Trade and other payables Borrowings Hire Purchase Payables Tax liabilities The accompanying notes form an integral part of the financial statements. 46 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
48. statements of financial position as at 31 december 2017 (cont’d) Assets Non-current assets Property, plant and equipment Investment properties Investment in subsidiaries 2017 RM’000 13 14 12 125 10,655 35,685 392 10,655 19,685 46,465 30,732 829 386 764 99 1,215 863 47,680 31,595 44,473 2,775 (23,507) 25,000 6,167 (22,345) 23,741 8,822 21,526 2,413 20,360 2,413 23,939 22,773 47,680 31,595 Total non-current assets Current assets Trade and other receivables Cash and bank balances 18 Total current assets Total assets Equity attributable to owners of the Company Share capital Reserves Accumulated losses Current liabilities Trade and other payables Borrowings Tax liabilities Total equity and liabilities Company Note 20 20 22 21 2016 RM’000 The accompanying notes form an integral part of the financial statements. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 47
49. 48 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 statements of changes in equity (3,473) 3,473 3,473 3,473 16,000 44,473 25,000 25,000 At 31 December 2017 At 1 January 2016 Disposal of land Loss for the year At 31 December 2016 The accompanying notes form an integral part of the financial statements. 3,473 25,000 Share premium RM’000 At 1 January 2017 Adjustments for effects of Companies Act 2016 Disposal of land Loss for the year Issuance of free warrant Issuance of new shares Acquisition of subsidiary with NCI Group Share capital RM’000 8,452 9,132 (680) - 4,694 - (3,758) - 8,452 Revaluation reserve RM’000 - - 81 81 - - Warrant reserve RM’000 (22,504) (21,058) - (1,446) (27,416) (4,912) - (22,504) Accumulated losses RM’000 14,421 16,547 (680) (1,446) 21,832 (3,758) (4,912) 81 16,000 - 14,421 RM’000 Total <---------------------------------- Attributable to owners of the Company ------------------------------------> <-------------------------------------- Distributable/(non-distributable) ---------------------------------------> for the financial year ended 31 december 2017 - - 246 (48) 294 - Non controlling interest RM’000 14,421 16,547 (680) (1,446) 22,078 (3,758) (4,960) 81 16,000 294 14,421 Total equity RM’000
50. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 49 statements of changes in equity 25,000 - At 1 January 2016 Disposal of land Loss for the year The accompanying notes form an integral part of the financial statements. 25,000 44,473 At 31 December 2017 At 31 December 2016 25,000 3,473 16,000 3,473 3,473 - - 3,473 (3,473) - 2,694 3,374 (680) - 2,694 2,694 - - - - 81 81 - (22,345) (21,458) (887) (23,507) (22,345) (1,162) - 8,822 10,389 (680) (887) 23,741 8,822 (1,162) 81 16,000 <--------------------------------------- Distributable/(non-distributable) ---------------------------------------> Share Share Revaluation Warrant Accumulated Total capital premium reserve reserve losses equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2017 Adjustments for effects of Companies Act 2016 Loss for the year Issuance of free warrant Issuance of new shares Company (cont’d) for the financial year ended 31 december 2017
51. statements of cash flows for the financial year ended 31 december 2017 2017 RM ’000 Cash flows from operating activities Loss before tax Adjustments for : Bad debt written off Bad debt recovered Depreciation of property, plant and equipment Loss on disposal of property held for sale Loss/(Gain) on disposal of property, plant, and equipment Interest expense Interest income Operating loss before changes in working capital Working capital changes: Decrease/(Increase) in inventories (Increase)/Decrease in receivables, deposits and prepayments (Decrease)/Increase in payables and accruals (Decrease)/Increase in amount due to director Increase in amount due to shareholder Arising from the issuance of warrants Net change in intercompany balances Cash (used in)/ generated from operations Interest paid Tax paid Net cash used in from operating activities Group 2016 RM’000 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 Company 2016 RM’000 (4,961) (1,154) (1,162) (887) - - 270 (1,379) - - 149 (51) 347 1,302 427 - 44 - 44 - 84 795 (1) (771) 653 - 84 - - (771) 217 - (2,434) (1,954) (1,034) (1,299) (70) - (137) (423) (1,672) 161 81 - 342 944 797 - (37) 306 (1,681) - 81 2,514 (4,250) 59 174 (35) 782 446 (951) 149 (1,057) (795) (638) (653) (190) - (217) (38) (5,683) (784) 149 (1,312) The accompanying notes form an integral part of the financial statements. 50 2017 RM’000
52. statements of cash flows for the financial year ended 31 december 2017 (cont’d) 2017 RM’000 Group 2016 RM’000 2017 RM’000 Company 2016 RM’000 Cash flows generated from investing activities Acquisition of property, plant and equipment Proceed from sale of property, plant and equipment 12,815 3,391 138 3,391 Net cash generated from investing activities 12,812 3,375 138 3,390 (3) (16) - (1) Cash flows used in financing activities Payments of finance lease Interest income Repayments of restructured loans and term loans (60) 1 (59) - - - (6,857) (2,542) - (2,021) Net cash used in financing activities (6,916) (2,601) - (2,021) - Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January 213 425 (10) 435 287 99 57 42 Cash and cash equivalents at 31 December 638 425 386 99 The accompanying notes form an integral part of the financial statements. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 51
53. notes to the financial statements for the year ended 31 december 2017 1 . CORPORATE INFORMATION PJBumi Berhad is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur. The principal activities of the Company are that of investment holding and the provision of management services to its subsidiaries. The principal activities of the subsidiaries are described in Note 12 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. The financial statements was authorised for issue by the Board of Directors in accordance with the resolution of the directors on 6 April 2018. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Statement of Compliance The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (‘MFRS’), International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The financial statements of the Group and of the Company have been prepared under the historical cost convention except as disclosed in the respective significant accounting policies. The financial statements are presented in Ringgit Malaysia. 2.2 Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 2.3 Adoption of new and amendment to MFRS’s and Interpretation During the financial year, the Company has adopted the following amendments to MFRSs issued by the MASB that are mandatory for current financial year. MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2017 • • • 52 Amendments to MFRS 12, Disclosure of Interests in Other Entities (Annual Improvements to MFRS Standards 2014-2016 Cycle) Amendments to MFRS 107, Statement of Cash Flows – Disclosure Initiative Amendments to MFRS 112, Income Taxes – Recognition of Deferred Tax Assets for Unrealised Losses PJ B U M I B E R H AD • A NNUA L RE PORT 2017
54. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.3 Adoption of new and amendment to MFRS’s and Interpretation (cont’d) Adoption of above amendments to MFRSs did not have any significant impact on the financial statements of the Company. The following are accounting standards, amendments and interpretations of the MFRSs that have been issued by the Malaysian Accounting Standards Board (”MASB”) but have not been adopted by the Company: MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018 • • • • • • • • MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2019 • • • • • • • • MFRS 16 Leases Amendments to MFRS 3 Business Combinations (Annual Improvements to MFRS Standards 20152017 Cycle) Amendments to MFRS 9 Financial Instruments – Prepayment Features with Negative Comparison Amendments to MFRS 11 Joint Arrangements (Annual Improvements to MFRS Standards 2015-2017 Cycle) Amendments to MFRS 112 Income Taxes (Annual Improvements to MFRS Standards 2015-2017 Cycle) Amendments to MFRS 123 Borrowing Costs (Annual Improvements to MFRS Standards 2015-2017 Cycle) Amendments to MFRS 128 Investments in Associates and Joint Ventures - Long- term Interests in Associates and Joint Ventures IC Interpretation 23 Uncertainty over Income Tax Treatments MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2021 • MFRS 9, Financial Instruments MFRS 15, Revenue from Contracts with Customers Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements to MFRS Standards 2014-2016) Amendments to MFRS 2, Classification and Measurement of Share-based Payment Transactions Amendments to MFRS 140, Investment Property – Transfers of Investment Property IC Interpretation 22, Foreign Currency Transactions and Advance Consideration Amendments to MFRS 128, Investment in Associates and Joint Ventures (Annual Improvements to MFRS Standards 2014-2016 Cycle) Amendments to MFRS 4, Insurance Contracts – Applying MFRS 9 Financial Instrument with MFRS 4 Insurance Contract MFRS 17, Insurance Contracts Amendments to MFRSs effective for annual periods beginning on or after a date yet to be confirmed • Amendments to MFRS 10 Consolidated Financial Statements and MFRS 128 Investment in Associates and Joint Ventures Sales or Contribution of Assets between an Investor and its Associate and Joint Venture. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 53
55. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.3 Adoption of new and amendment to MFRS’s and Interpretation (cont’d) None of the standards listed above are expected to have a significant effect on the financial statements of the Company upon initial application, except for the following: • MFRS 9 “Financial Instruments” (effective 1 January 2018) will replace MFRS 139 “Financial Instruments: Recognition and Measurement”. MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income (“OCI”). The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in OCI rather than the profit or loss, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit losses model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Group and the Company are currently still in process of assessing the impact of the new standards upon initial application of these standards. • MFRS 15 “Revenue from Contracts with Customers” replaces MFRS 118 “Revenue” and MFRS 111 “Construction Contracts“ and related interpretations. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services t the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognised when a customer obtains control of goods or services, i.e., when the customer has the ability to direct the use of and obtain the benefits from the goods or services A new five-step process is applied before revenue can be recognised: • • • • • 54 Identify contracts with customers; Identify the separate performance obligations; Determine the transaction price of the contract; Allocate the transaction price to each of the separate performance obligations; and Recognise the revenue as each performance obligation is satisfied. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
56. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.3 Adoption of new and amendment to MFRS’s and Interpretation (cont’d) None of the standards listed above are expected to have a significant effect on the financial statements of the Company upon initial application, except for the following: (cont’d) • MFRS 15 “Revenue from Contracts with Customers” replaces MFRS 118 “Revenue” and MFRS 111 “Construction Contracts“ and related interpretations. (cont’d) The provisions of the new standard are as follows: • • • • • Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. If the consideration varies (such as for incentives, rebates, performance fees, royalties, success of an outcome etc.), minimum amounts of revenue must be recognised if they are not at significant risk of reversal. The point at which revenue is able to be recognised may shift: some revenue which is currently recognised at a point in time at the end of a contract may have to be recognised over the contract term and vice versa. There are new specific rules on licenses, warranties, non-refundable upfront fees, and consignment arrangements, to name a few. As with any new standards, there are also increased disclosures. The Group and the Company are in the process of finalising the financial implication arising from the adoption of this new standard and expects no significant impact to the revenues and other income for the Group and the Company. 2.4 Summary of Significant accounting policies (a) Basis of consolidation Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. • The Group controls exists when the Group 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. In the previous financial years, control exists when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. • Potential voting rights are considered when assessing control only when such rights are substantive. In the previous financial years, potential voting rights are considered when assessing control when such rights are presently exercisable. • 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. In the previous financial years, the Group did not consider de facto power in its assessment of control. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 55
57. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (a) Basis of consolidation (cont’d) (i)Subsidiaries Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs. (ii) Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. For new acquisitions, the Group measures the cost of goodwill at the acquisition date as: • the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquire; plus • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When excess is negative, a bargain purchase gain is recognised immediately in profit or loss. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. (iii) Loss of control Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained. (iv) Non-controlling interests The Group accounts for all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves. (v) Transaction eliminated on consolidation 56 Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
58. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (a) Basis of consolidation (cont’d) (v) Transaction eliminated on consolidation (cont’d) Unrealised gains arising from transactions with equity-accounted associates and joint ventures are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (vi)Goodwill Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment loss. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cashgenerating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairement loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. (b) Property, plant and equipment (i) Recognition and measurements Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to theacquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying asseeets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within “other income” and “other expenses” respectively in profit or loss. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 57
59. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (b) Property, plant and equipment (cont’d) (ii) Subsequent costs The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. (iii)Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that componenets is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each componenet of an item of property, plant and equipment from the date that they are available for use. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use. The estimated useful lives for the current and comparative periods are as follows : Buildings Plant and machinery, office equipment and furniture and fittings Motor vehicles Computer Hardware and Software 2% 10% - 20% 20% 10% - 33% Depreciation methods, useful lives and residual values are reviewed at end of the reporting period and adjusted as appropriate. (c) Investment properties 58 (i) Investment property carried at fair value Investment properties are properties which are held either to earn rental income or for capital appreciation or for both, nut not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment properties are measured initially at cost and subsequently at fair value with any changes therein recognised in profit or loss for the period in which they arise. Where the fair value of the investment property under construction is not reliably determinable, the investment property under construction is measured at cost until either its fair value becomes reliably determinable or construction is complete, whichever is earlier. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
60. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (c) Investment properties (cont’d) (i) Investment property carried at fair value (cont’d) Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-costructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capital borrowing costs. An investment properties is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period in which the item is derecognised. (ii) Reclassification to/from investment property When an item of property, plant and equipment is transferred to investment property following a change in its use, any difference arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in equity as a revaluation of property, plant and equipment. However, if a fair value gain reverses a previous imairment loss, the gain is recognised in profit or loss. Upon disposal of an investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through profit or loss. When the use of a property changes such that it is reclassified as property, plant and equipment or inventories, its fair value at the date of reclassification becomes its cost for subsequent accounting. (d) Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”). In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 59
61. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (d) Impairment of non-financial assets (cont’d) Impairment losses are recognised in profit or loss in the year the assessment is carried out. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. 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 since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss. (e)Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses. On disposal of such investment, the difference between net disposal proceeds and their carrying amount is included in profit or loss. (f) Financial assets Financial assets are recognised in the statement of financial position when, and only when, the Group and the Company becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company determines the classification of their financial assets at initial recognition, and the categories include financial assets as loans and receivables and available-forsale financial assets. (i) Loans and receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current. (ii) Available-for-sale financial assets 60 Available-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
62. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (f) Financial assets (cont’d) (ii) Available-for-sale financial assets (cont’d) After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group and the Company’s right to receive payment is established. Investment in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss. Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date. A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. Regular way of purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commits to purchase or sell the asset. (g) Impairment of financial assets The Group and the Company assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. (i) Trade and other receivables and other financial assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 61
63. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (g) Impairment of financial assets (cont’d) (i) Trade and other receivables and other financial assets carried at amortised cost (cont’d) If any 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. The impairment 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 trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade 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 can be 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. (ii) Unquoted equity securities carried at cost If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods. (iii) Available-for-sale financial assets 62 Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired. If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
64. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (h) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand. (i)Inventories Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows: - - Raw materials: purchase costs on a first-in first-out basis. Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. These costs are assigned on a first-in first-out basis. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale. (j)Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably. 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. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. (k) Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. (i) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 63
65. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (k) Financial liabilities (cont’d) (i) Financial liabilities at fair value through profit or loss (cont’d) Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences. The Group and the Company have not designated any financial liabilities as at fair value through profit or loss. (ii) Other financial liabilities 64 The Group’s and the Company’s other financial liabilities include trade payables, other payables and loans and borrowings. Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. (l) Borrowing costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
66. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (m) Share capital An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. (n) Employee benefits Defined contribution plans The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. The Malaysian companies in the Group make contributions to the Employee Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed. (o)Leases (i) As lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. (ii) As lessor Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 65
67. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (p)Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable. (i) Sale of goods 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 costs or the possible return of goods. (ii) Rendering of services Revenue from services rendered is recognised net of service taxes and discount as and when the services are performed. (iii) Interest income Interest income is recognised using the effective interest method. (iv) Management fees Management fees are recognised when services are rendered. (v) Rental income Rental income is accounted for on a straight-line basis over the lease term. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis. (q) Income taxes (i) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. (ii) Deferred tax 66 Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
68. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (q) Income taxes (cont’d) (ii) Deferred tax (cont’d) Deferred tax liabilities are recognised for all temporary differences, except: - where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and - in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: - where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and - in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 67
69. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (r)Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group. Contingent liabilities and assets are not recognised in the statements of financial position of the Group. (s) Finance 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. (t) Segment reporting For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 23, including the factors used to identify the reportable segments and the measurement basis of segment information. (u) Non-current assets held for sale 68 Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary. Immediately before classification as held for sale, the measurement of the non-current assets is brought up-to-date in accordance with applicable MFRSs. Then, on initial classification as held for sale, non-current assets are measured in accordance with MFRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in profit or loss. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
70. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 2.4 Summary of Significant accounting policies (cont’d) (v) Fair value measurements Fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows : Level 1: quoted prices(unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: unobservable inputs for the asset or liability. The Group recognises transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers. 3. 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 Company’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They 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. Key sources of estimation uncertainty The key assumption concerning the future and other key sources of estimation uncertainty at the end of the reporting year that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as stated below:(a) Impairment of loans and receivables The Company assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Company considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 69
71. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d) (b) Useful Lives of Property, Plant and Equipment The Group estimates the useful lives of property, plant and equipment based on the period over which the assets are expected to be available for use, The estimated useful lives of property, plant and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets In addition, the estimation of the useful lives of property, plant and equipment are based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any year would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the property, plant and equipment would increase the recorded expenses and decrease the non-current assets. (c) Impairment of Investment in Subsidiaries The Group tests investment in subsidiaries for impairment annually in accordance with its accounting policy. More regular reviews are performed if events indicate that this is necessary. Significant judgement is required in the estimation of the present value of future cash flows generated by the subsidiaries which involve uncertainties and are significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Group’s tests for impairment of investment in subsidiaries. The management determined the recoverable amount of the investment in subsidiaries based on the individual assets’ value in use and the probability of the realisation of the assets. The present value of the future cash flows to be generated by the asset is the asset’s value in use, and it is assumed to be the same as the net worth of the asset as at the end of the reporting year. An impairment loss is recognised immediately in the profit or loss if the recoverable amount is less than the carrying amount In view of the above, the management are in the opinion that no impairment is required for the investment in subsidiaries as at the end of the reporting period. (d) Impairment of Non-current Assets The Group reviews the carrying amount of its non-current assets, which include property, plant and equipment and investment property, to determine whether there is an indication that those assets have suffered an impairment loss in accordance with relevant accounting policies on the respective category of non-current assets. Independent professional valuers to determine the carrying amount of these assets will be procured when the need arise. (e) Deferred tax assets 70 Deferred tax assets are recognised for unabsorbed capital allowances and other temporary differences to the extent that it is probable that taxable profit will be available against which unabsorbed capital allowances and other temporary differences can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
72. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d) (f) Net Realisable Values of Inventories Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgements and estimates. Possible changes in these estimates could result in revisions to the valuations of inventories. (g) Goodwill on consolidation The Group tests goodwill for impairment annually in accordance with its accounting policy. More regular reviews are performed if events indicate that this is necessary Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating unit to which goodwill has been allocated. The value-in-use calculation requires the management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. (h) Tax expense The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the capital allowances and deducibility of certain expenses when estimating the provision for taxation. There were transactions during the ordinary course of business for which the ultimate tax determination of whether additional taxes will be due is uncertain. The Company recognises liabilities for tax based on estimates of assessment of the tax liability due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax in the periods in which the outcome is known. 4.REVENUE 2017 RM’000 Sales of goods Services rendered Group 2016 RM’000 559 4,217 1,153 6,884 4,776 8,037 PJ BUM I BER HAD • ANN UAL R EPORT 201 7 71
73. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 5. COST OF SALES Group 2017 RM’000 Cost of sales Cost of goods sold Cost of services 2016 RM’000 247 2,936 526 4,491 3,183 5,017 The cost of inventories recognised as an expense during the financial year in the Group amounted to RM247,000 (2016: RM526,000). 6. OTHER INCOME 2017 RM’000 Gain on disposal of land Over accrued penalty for late payment Gain on item lost Interest income Reversal on settlement of term loan Bad debt recovered Reversal of negative trade debtors Reversal of long outstanding trade creditors Resubmission of sewerage application Management fee PJ B U M I B E R H AD • A NNUA L RE PORT 2017 2016 RM’000 2017 RM’000 Company 2016 RM’000 - 55 2 1 - - - 771 1 543 1,326 52 - - 2 - - - - 771 196 52 59 - - 2 - - - 1,200 1,200 1,202 2,219 117 72 Group 2,695
74. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 7. EMPLOYEE BENEFIT EXPENSES 2017 RM’000 Salaries, bonus and others Contribution to employees provident Fund Social security costs Other staff related expenses Group Company 2016 RM’000 2017 RM’000 2,012 2,330 827 1,201 237 69 11 275 46 11 91 51 - 134 30 6 2,329 2,662 969 1,371 2016 RM’000 The total number of employees of the Group and the Company (including directors) at the financial year ended was 59 and 14 (2016 : 62 and 21) Included in employee benefits expenses of the Group and of the Company are directors’ remuneration. The details of remuneration receivable by directors of the Company during the year are as follows: 2017 RM’000 Group Company 2016 RM’000 2017 RM’000 30 30 21 7 30 30 40 - 30 30 21 7 30 30 40 - 88 100 88 100 2016 RM’000 Directors’ remuneration: Directors’ fees Adlin bin Shaharudin Ahmad bin Md Daud Nik Md Nor Suhaimi bin Nik Ibrahim Abdul Rahman bin Haji Siraj Abd Rahim bin Embi The number of directors of the company whose total remuneration during the financial year fell within the following bands is analysed below : Number of directors 2017 2016 Non executive directors : RM0 to RM50,000 4 3 Managing director : RM0 to RM50,000 1 1 PJ BUM I BER HAD • ANN UAL R EPORT 201 7 73
75. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 8. FINANCE COST 2017 RM’000 Interest on borrowings 9. Group 795 2016 RM’000 2017 RM’000 653 - Company 2016 RM’000 217 LOSS BEFORE TAX 2017 RM’000 Loss before tax is arrived at after charging: Auditors’ remuneration - current year Depreciation of property, plant and equipment Bad debt written off Rental expense: - motor vehicles - office equipment - office premises Loss on disposal of land Loss on disposal of building Group Company 2016 RM’000 2017 RM’000 100 99 45 45 347 - 427 270 44 - 44 149 20 17 374 - - 13 337 84 13 334 - 52 13 374 1,302 84 2016 RM’000 10. INCOME TAX EXPENSES/(CREDIT) 2017 RM’000 Income tax Current year Over provision in prior years Deferred tax (Note 15) Current year Tax income resulting from reduction in statutory income tax rate Income tax (credit)/expenses 74 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 Group Company 2016 RM’000 2017 RM’000 3 (4) (1) 16 240 256 - - - 49 - - - (13) - - - 36 - - (1) 292 - - 2016 RM’000
76. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 10. INCOME TAX EXPENSES/(CREDIT) (cont’d) Domestic income tax is calculated at the Malaysian statutory tax rate of 24% assessable profit for the year. The reconciliation between tax expenses and the product of accounting profit multiplied by the applicable corporate tax rate for the year ended 31 December 2017 and 2016 are as follows: 2017 RM’000 Loss before tax Taxation at Malaysian statutory tax rate of 24% Expenses not deductible for tax purposes Deferred tax assets not recognised during the year Income not subject to tax Tax income resulting from reduction in statutory income tax rate (Over)/Under provision of income tax expense in prior years Over provision of income deferred tax in prior years Income tax (credit)/expenses Group 2016 RM’000 2017 RM’000 Company 2016 RM’000 (4,961) (1,154) (1,162) (887) (1,191) 761 (277) 495 (279) 133 (213) 252 433 - 295 (595) 146 - 123 (277) - 134 - 115 (4) 240 - - - (1) 292 - - - 11. BASIC LOSS PER ORDINARY SHARE The calculation of basic loss per ordinary share is based on the net loss attributable to ordinary shareholders divided by the number of ordinary shares outstanding during the financial year. 2017 RM’000 Group 2016 RM’000 Loss attributable to equity holders of the Company (4,912) (1,446) Number of ordinary shares in issue (‘000) 82,000 50,000 Basic loss per share (sen) (5.99) (2.89) PJ BUM I BER HAD • ANN UAL R EPORT 201 7 75
77. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 12. INVESTMENT IN SUBSIDIARIES 2017 RM’000 Unquoted shares, at cost Acquisition of new subsidiary Less: Accumulated impairment loss (a) 76 Company 2016 RM’000 33,500 16,000 (13,815) 33,500 (13,815) 35,685 19,685 Details of the subsidiaries are as follows: Country of incorporation Effective equity interest 2017 2016 % % Name of subsidiary Principal activities PJBumi Composites Sdn. Bhd. Manufacture and sale of Fibre Reinforced Plastic (“FRP”) Sewerage treatment plants and other FRP products Malaysia 100 100 PJBumi Waste Management Sdn. Bhd. Investment holding, solid waste management, garbage collection, area cleaning and other related activities Malaysia 100 100 PJBumi Services Sdn. Bhd. After-sales support services including connecting works of FRP tanks and mechanical and electrical equipment, providing maintenance, upgrading and/or rectification works, desludging works and sludge treatment Malaysia 100 100 PJBumi Construction Sdn. Bhd. Undertake works for civil, mechanical, electrical and erection engineering. Malaysia 100 100 PJBumi Resources Sdn. Bhd. Trading, logging and mining “currently dormant” Malaysia 100 100 Goldix Resources Sdn. Bhd. Investment holding Malaysia 70 - PJ B U M I B E R H AD • A NNUA L RE PORT 2017
78. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 12. INVESTMENT IN SUBSIDIARIES (cont’d) (b) Acquistion of a subsidiary during the financial year On 12 July 2017, the Company acquired the issued and paid-up share capital of Goldix Resources Sdn. Bhd. (“GRSB”) comprising 700,000 ordinary shares of RM 1.00 each which representing 70% equity interest in GRSB for total consideration of RM 16,000,000. The consideration was satisfied via the issuance of 32,000,000 of the Company’s new ordinary shares together with 10,000,000 new Company’s warrants. GRSB is the dormant company which do not have any activities during the financial year. The purpose of the acquisition is to enable the Group to assume control of its operation and at the same time diversified the Group’s business activities. The acquisition gave rise to a goodwill of RM 15,313,134 and which has been recognised in the consolidated statement of financial position. The goodwill arising from the acquisition of GRSB is attributable to gaining control over the operations of the Company future business activities. The acquisition had the following effects on the financial results of the Group in the financial year:GRSB’s amounts consolidated from the date of acquistion to 31.12.2017 RM - Revenue Administrative expenses (160,996) Loss before taxation (160,996) - Taxation Loss for the year (160,996) PJ BUM I BER HAD • ANN UAL R EPORT 201 7 77
79. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 12. INVESTMENT IN SUBSIDIARIES (cont’d) (b) Acquistion of a subsidiary during the financial year (cont’d) The assets acquired and liabilities recognised as at the date of acquisition were as follows:- Other receivables Cash and bank balance Other payables Net identifiable assets acquired Fair value recognised on acquisition RM GRSB’s carrying amount RM 985,911 985,911 6 6 (4,680) 15,313,134 Total purchase consideration 16,294,371 Non-controlling interests Total purchase consideration discharged by cash/ net cash outflow from acquisition (16,000,000) (294,371) - (c) Non-controlling interests in a subsidiary The Company’s non-wholly owned subsidiary is Goldix Resources Sdn Bhd where 30% equity interest and voting rights are held by non-controlling interests. The details or profit allocated to the non-controlling interests during the financial year as at the end of the reporting period are as follows:- 2017 RM Allocated to non-controlling interests: - Loss for the year 78 981,237 981,237 Goodwill on acquisition (Note 16) Total purchase consideration discharged by shares issued (4,680) (48,298) Group 2016 RM - Summarised financial information of Goldix Resources Sdn Bhd is set out below. The summarised financial information is presented before inter-company eliminations. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
80. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 12. INVESTMENT IN SUBSIDIARIES (cont’d) (c) Non-controlling interests in a subsidiary (cont’d) Summarised assets and liabilities Current assets Current liabilities Net assets 2017 RM 2016 RM 985,917 985,917 4,680 4,680 981,237 981,237 2017 RM 2016 RM - - Summarised profit or loss and other comprehensive income Revenue Loss for the year (160,996) (2,500) PJ BUM I BER HAD • ANN UAL R EPORT 201 7 79
81. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 13. PROPERTY, PLANT AND EQUIPMENT Group Freehold land RM’000 Buildings RM’000 Furniture, fittings, computers, equipment and machinery RM’000 Motor vehicles RM’000 Total RM’000 2017 Cost At 1 January 2017 Disposal Addition - 497 (264) - 4,312 3 1,480 - 6,289 (264) 3 At 31 December 2017 - 233 4,315 1,480 6,028 At 1 January 2017 - Accumulated depreciation Depreciation for for the year Disposal - 205 228 (261) 4,131 54 - 1,357 65 - 5,693 347 (261) At 31 December 2017 - 172 4,185 1,422 5,779 - 61 130 58 249 Accumulated depreciation and impairment loss Net carrying amount At 31 December 2017 The Group net book value of motor vehicles under finance lease arrangement is RM59,212 (2016 : RM118,424) 80 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
82. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 13. PROPERTY, PLANT AND EQUIPMENT (cont’d) Group (cont’d.) Freehold land RM’000 Buildings RM’000 Furniture, fittings, computers, equipment and machinery RM’000 Motor vehicles RM’000 4,296 16 - 1,480 - 28,495 16 (22,222) 4,312 1,480 6,289 4,069 62 - 1,292 65 - 9,532 427 (4,266) Total RM’000 2016 Cost At 1 January 2016 Addition Transfer to assets held for sale At 31 December 2016 8,057 (8,057) - 14,662 (14,165) 497 Accumulated depreciation and impairment loss At 1 January 2016 - Accumulated depreciation Depreciation for the year Transfer to as held for sale At 31 December 2016 606 (606) 3,565 300 (3,660) - 205 4,131 1,357 5,693 - 292 181 123 596 Net carrying amount At 31 December 2016 PJ BUM I BER HAD • ANN UAL R EPORT 201 7 81
83. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 13. PROPERTY, PLANT AND EQUIPMENT (cont’d) Company Furniture, fittings, computers, equipment and machinery RM’000 Motor vehicles RM’000 497 (264) 2,187 - 726 - 3,410 (264) 233 2,187 726 3,146 At 1 January 2017 - Accumulated depreciation Depreciation for the year Disposal 205 9 (41) 2,087 35 - 726 - 3,018 44 (41) At 31 December 2017 173 2,122 726 3,021 60 65 - 125 At 1 January 2016 Addition 497 - 2,186 1 726 - 3,409 1 At 31 December 2016 497 2,187 726 3,410 At 1 January 2016 - Accumulated depreciation Depreciation for the year 196 9 2,052 35 726 - 2,974 44 At 31 December 2016 205 2,087 726 3,018 292 100 - 392 Buildings RM’000 Total RM’000 2017 Cost At 1 January 2017 Disposal At 31 December 2017 Accumulated depreciation and impairment loss Net carrying amount At 31 December 2017 2016 Cost Accumulated depreciation Net carrying amount At 31 December 2016 82 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
84. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 14. INVESTMENT PROPERTIES Group and Company 2017 2016 RM’000 RM’000 Cost At 1 January Disposal of investment property 12,480 - 15,780 (3,300) At 31 December 12,480 12,480 1,825 1,825 1,825 1,825 Net carrying amount 10,655 10,655 Fair value of investment properties 10,655 10,655 Accumulated depreciation and impairment loss At 1 January - Accumulated depreciation At 31 December - Accumulated depreciation Included in the above are: Group and Company 2017 2016 RM’000 RM’000 Freehold land Building 4,799 5,856 4,799 5,856 10,655 10,655 The valuation of investment properties were prepared by a qualified external valuer using a comparative menthod of valuation. The valuation was performed on 15 March 2013. The Directors are of the opinion that the value of properties do not vary significantly than the last valuation. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 83
85. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 15. DEFERRED TAX ASSETS/(LIABILITIES) Deferred tax assets and liabilities are attributable to the following: 2017 RM’000 Group Property, plant and equipment Unabsorbed capital allowance Unutilised tax losses Assets 2016 RM’000 2017 RM’000 (2,057) Liabilities 2016 RM’000 2017 RM’000 2016 RM’000 - - 20 20 - - 20 20 1,887 1,887 - - 1,887 1,887 1,907 1,907 (2,057) (2,058) (2,058) (2,057) Net (150) (2,058) (151) The components and movement of deferred tax liabilities and assets during the year prior to offsetting are as follows (stated at gross) : Deferred tax assets of the Group: Unabsorbed capital allowances RM’000 Unutilised tax losses RM’000 Total RM’000 At 1 January 2016 Recognised in profit and loss 83 - 7,864 - 7,947 - At 31 December 2016 Recognised in profit and loss 83 - 7,864 - 7,947 - At 31 December 2017 83 7,864 7,947 Deferred tax liabilities of the Group: 84 Property, plant and equipment RM’000 At 1 January 2016 Recognised in profit and loss 8,403 173 At 31 December 2016 Recognised in profit and loss 8,576 (1) At 31 December 2017 8,575 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
86. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 15. DEFERRED TAX ASSETS/(LIABILITIES) (cont’d) Deferred tax assets have not been recognised in respect of the following temporary differences (stated at gross): 2017 RM’000 Other deductible temporary differences Unutilised business losses Unabsorbed capital allowances 2016 RM’000 (92) 26,394 7,154 (271) 15,214 240 33,456 15,183 2017 RM’000 Property, plant and equipment Unutilised business losses Unabsorbed capital allowances Group Company 2016 RM’000 (181) 12,966 149 (324) 12,695 129 12,934 12,500 Deferred tax asset have not been recognised in respect of the items because it is not probable that future taxable profit will be available against which the Company and its subsidiaries can utilise the benefits. The unutilised business losses, unabsorbed capital allowances and other deductible temporary differences are available indefinitely for offset against future taxable profits subject to no substantial change in shareholdings of the Company and the respective subsidiaries under Section 44(5A) and (5B) of Income Tax Act, 1967. 16. GOODWILL ON CONSOLIDATION 2017 RM’000 Group 2016 RM’000 Cost At the beginning of the year Acquisition of Goldix Resources Sdn. Bhd. 15,313 - At the end of the year 15,313 - Goodwill acquired in business combinations is allocated, at acquisition, to cash-generating units (“CGU”) that are expected to benefit from the business combinations. The carrying amount of goodwill has been allocated to the investment in Goldix Resources Sdn.Bhd. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 85
87. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 16. GOODWILL ON CONSOLIDATION (cont’d) The recoverable amount of CGU is determined base on value-in-use, which apply a discounted cash flow model using cash flow projections based on financial budget and projections approved by management. The key assumptions on which the management has based on for the computation of value-in-use are as follows: (i) Cash flow projection The three-year cash flow projections are based on the most recent budget approved by the management. (ii) Discount rate The discount rate of 12.5% is applied to the cash flow projections. The discount rate was based on the Group’s weighted average cost of capital. The Group believes that any reasonably possible change in the above key assumptions applied are not likely to materially cause recoverable amount to be lower than its carrying amount. 17.INVENTORIES 2017 RM’000 Group 2016 RM’000 At cost: Tools and accessories 86 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 178 352
88. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 18. TRADE AND OTHER RECEIVABLES Note Trade Trade receivables Less: Allowance for impairment loss 18.1 18.3 Non-trade Other receivables Less: Allowance for impairment loss Deposits Prepayments Total trade and other receivables Note Trade Trade receivables Less: Allowance for impairment loss 2017 RM’000 Group 2016 RM’000 11,544 (4,649) 11,324 (4,612) 6,895 6,712 2,539 (204) 1,775 (204) 2,335 365 207 1,571 367 4 2,907 1,942 9,802 8,654 2017 RM’000 Company 2016 RM’000 521 (422) 493 (422) 99 71 558 525 Other receivables Deposits 40 132 32 136 Total trade and other receivables 829 764 Non-trade Amounts due from subsidiaries 18.1 18.3 18.2 Note 18.1 The Group’s and the Company’s normal trade credit term is 30 to 60 days (2016: 30 to 60 days). Other credit terms are assessed and approved on a case-by-case basis. Trade receivables are recognised at their original invoice amounts which represent their fair values on initial recognition. The Group has significant concentration of credit risk from a group and a single customer. As at 31 December 2017, included in trade receivables is an amount owing from a group and a single customer amounting to RM2,959,415 (2016: RM2,403,109). PJ BUM I BER HAD • ANN UAL R EPORT 201 7 87
89. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 18. TRADE AND OTHER RECEIVABLES (cont’d) Ageing analysis of trade receivables The ageing analysis of the Group’s and of the Company’s trade receivables are as follows: 2017 RM’000 Group 2016 RM’000 707 521 1 to 30 days past due not impaired 31 to 60 days past due not impaired 61 to 90 days past due not impaired 91 to 120 days past due not impaired More than 121 days past due not impaired 210 53 185 179 5,561 262 432 395 169 4,933 Impaired 6,895 4,649 6,712 4,612 11,544 11,324 Neither past due nor impaired 2017 RM’000 Neither past due nor impaired More than 121 days past due not impaired Impaired Company 2016 RM’000 28 - 71 422 71 422 521 493 Receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group and the Company. None of the Group’s and of the Company’s trade receivables that are neither past due nor impaired have been renegotiated during the year. Receivables that are past due but not impaired The Group has trade receivables amounting to RM6,188,385 (2016: RM6,190,555) that is past due at the reporting date but not impaired and are unsecured in nature. Trade receivables that are past due but not impaired are creditworthy debtors, who by past trade practice, have paid after the expiry of the trade credit terms and the Group is currently still in active trading with the debtors. The Group does not anticipate recovery problem in respect of these debtors. 88 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
90. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 18. TRADE AND OTHER RECEIVABLES (cont’d) Receivables that are impaired The Group’s trade receivables that are impaired at the reporting date are as follows: Group Individually impaired 2017 2016 RM’000 RM’000 Trade receivables - nominal account Less: Allowance for impairment 4,649 (4,649) 4,612 (4,612) - - Note 18.2 The amount due from subsidiaries are in respect of advances and payments made on behalf which are non-trade in nature, unsecured, interest free, repayable on demand and expected to be settled in cash. Note 18.3 The movement of allowance accounts used to record the individual impairment are as follows: Group 2017 RM’000 At 1 January Doubtful debt recovered Charge for the year 4,612 - 37 5,939 (1,327) - At 31 December 4,649 4,612 2017 RM’000 2016 RM’000 Company 2016 RM’000 At 1 January Charge for the year 422 - 422 - At 31 December 422 422 Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 89
91. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 19. ASSETS CLASSIFIED AS HELD FOR SALE Freehold land and building held for sale comprise the followings: 2017 RM’000 Cost Accumulated depreciation Disposal Group 2016 RM’000 22,222 (4,266) 22,222 (4,266) 17,956 (17,956) 17,956 - 17,956 The disposal of a parcel of land and building of a subsidiary held in perpetuity under Lot PT 60592, HSD 35963, Bandar Sungai Petani, District of Kuala Muda, Kedah Darul Aman. The disposal had completed on 13 July 2017. 20. SHARE CAPITAL AND RESERVES Share capital Authorised share capital At the beginning/end of the year - 200,000 Issued and fully paid: At the beginning of the year Issuance during the year 50,000 32,000 50,000 - At the end of the year 82,000 50,000 Authorised share capital At the beginning/end of the year 90 Group and Company Number of ordinary shares 2017 2016 ‘000 unit ‘000 unit 2017 RM’000 Amount 2016 RM’000 - 100,000 Issued and fully paid: At the beginning of the year Issuance during the year Adjustments for the effects of Companies Act 2016 25,000 16,000 3,473 25,000 - At the end of the year 44,473 25,000 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
92. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 20. SHARE CAPITAL AND RESERVES (cont’d) During the financial year, the Company increased its issued and paid up share capital from RM 25,000,000 comprising 50,000,000 ordinary shares to RM 44,473,000 comprising 88,946,000 ordinary shares through the followings:(a) Issuance of 32,000,000 new ordinary shares at an issue price of RM 0.50 per ordinary shares for RM 16,000,000 as discharge of the purchase of consideration for an acquisition of a subsidiary during the financial year. (b) A transfer of share premium amounted to RM 3,473,000 to share capital account upon the commencement of the Companies Act 2016 (“The Act”) on 31 January 2017. The Act has removed the concept of authorised share capital and par value of share capital. In accordance to the Section 618(2) of the Act, the amount standing to the credit of the share premium account became part of the Company’s share capital upon the commencement of the Act. The change to no par value has no effect on the number of ordinary shares in issue. Reserves Note Accumulated losses Non-distributable : Share premium Revaluation reserve Warrant reserve (a) (b) (c) 2017 RM’000 Group Company 2016 RM’000 2017 RM’000 (27,416) (22,504) (23,507) (22,345) 4,694 81 3,473 8,452 - 2,694 81 3,473 2,694 - 4,775 11,925 2,775 6,167 2016 RM’000 (a) Share premium Share premium comprises the premium paid on subscription of shares in the Company over and above the par value of the shares. As mentioned in note 20, on the effective date of Companies Act 2016, the amount standing to the credit of the Company’s share premium became part of the Company’s share capital. (b) Revaluation reserve The revaluation reserve relates to the revaluation of property, plant and equipment and investment property. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 91
93. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 20. SHARE CAPITAL AND RESERVES (cont’d) (c) Warrant reserve The salient point of the warrants are as follows: i. Total number of warrant issued 14,999,996 ii. Total number of warrant outstanding 14,999,996 iii. Exercise period The exercise period is any time within a period of 5 years from the date issue up to the expiry date of 5 July 2022. iv. Exercise price per warrant RM0.50 each and subject to adjustments (where applicable) with the conditions provided in Deed Pool. v. Warrant entitlement Each warrant entitles the warrant holder during the exercise period to subscribe for every ten (10) existing shares held. 21.BORROWINGS This note provides information about the contractual terms of the Group’s and of the Company’s interestbearing loans and borrowings. For more information about the Group’s and the Company’s exposure to interest risk, see note 24. 2017 RM’000 Non-current Secured: Restructured loan Hire purchase Current Secured: Restructured loan Term loans Hire purchase Total 92 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 Group 2016 RM’000 - 5,678 60 - 5,738 59 300 59 59 359 59 6,097
94. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 21. BORROWINGS (cont’d) During the financial year, the Group had fully settled a loan of RM7,192,242 of a subsidiary after the disposal of the pledged property. The borrowings bear effective interest at rates ranging from 8% to 9.5% (2016: 8% to 9.5%) per annum. The borrowings are secured by: (i) fixed charge over the freehold land and buildings of the Group and of the Company (Notes 13); (ii) a negative pledge over the Company’s and certain subsidiaries’ assets; and (iii) corporate guarantee given by the Company and a subsidiary. The maturity of the borrowings are as follows: 2017 RM’000 Group 2016 RM’000 2017 RM’000 Company 2016 RM’000 Under 1 year 1 - 2 years 2 - 5 years 59 - 359 360 900 - - - - Over 5 years - 4,478 - - 22. TRADE AND OTHER PAYABLES Group Note 2017 RM’000 22.1 2,775 3,539 22.2 3,345 705 1,827 3,230 1,167 3,499 8,652 11,435 2016 RM’000 Current Trade Trade payables Non-trade Other payables Accrued expenses Amount due to a director PJ BUM I BER HAD • ANN UAL R EPORT 201 7 93
95. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 22. TRADE AND OTHER PAYABLES (cont’d) Note 2017 RM’000 Company 2016 RM’000 Current Trade Trade payables Non-trade Other payables Accrued expenses Amount due to a director Amount due to subsidiaries 22.1 22.2 22.3 - 519 1,500 459 1,204 18,363 568 538 2,885 15,850 21,526 20,360 Note 22.1 Trade payables are non-interest bearing and the normal trade credit terms granted to the Group and to the Company range from 30 days to 60 days. Note 22.2 The amount due to a director, Adlin bin Shaharudin is in respect of advances and payments made on behalf which are non-trade in nature, unsecured, interest free, repayable on demand and expected to be settled in cash. For the purpose of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decision, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or another entities. Note 22.3 The amount due to subsidiaries is in respect of advances and payments made on behalf which are non-trade in nature, unsecured, interest free, repayable on demand and expected to be settled in cash. 23. SEGMENTAL REPORTING For management purposes, the Group is organised into business segments based on their products and services. The Group’s chief operation decision maker reviews the information of each business segment on at least monthly basis for the purpose of resource and allocation and assessment of segment performance. 94 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
96. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 23. SEGMENTAL REPORTING (cont’d) Accordingly, the Group’s reportable segments under MFRS 8 are as follows: (i) Manufacturing (ii) Construction, Maintenance and design - manufacturing of Fibre Reinforced Plastic (“FRP”), Reinforced Concrete Sewerage Treatment Plants (“STP”) and Underground Storage Tanks (“UST”). - Construction, maintenance, after-sales support services and design of FRP, STP and UST. (iii) Waste management services - solid waste management, garbage collection, area cleaning, dump processing and other related activities. (iv) Investment - investment holding and management services. Segment revenue and results The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 2.4 (t). Segment results represent profit or loss before finance costs, interest income and tax expense. Inter-segment transactions are entered into in the ordinary course of business based on terms mutually agreed upon by the parties concerned. Segment assets Segment assets are measured based on all assets of the segment, excluding deferred tax assets and tax recoverable. Segment liabilities Segment liabilities are measured based on all liabilities, excluding tax liabilities and deferred tax liabilities. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 95
97. 96 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 notes to the financial statements Loss for the year Tax expense Loss before tax Interest income Finance costs Segment results External customers Segment Revenue - - (35) (426) (788) - 937 3,491 559 (2,049) 3,491 559 - - - (347) 1,080 1,080 - - - (488) 956 956 - 1 (7) (382) 2,302 2,302 (244) - (11) (317) 2,322 2,322 1 - - (155) 835 835 (13) - - 45 1,268 1,268 - - - (71) - - - - - - - - - - (7) (1,163) - - - - (216) (671) - - - - - - - - - - - - - - (653) (1,154) (292) (1,446) 1 (4,961) 1 (4,960) (501) 8,037 8,037 (795) (4,167) 4,776 4,776 Construction, Waste maintenance management Manufacturing and design services Construction Resources Investment Eliminations Consolidated 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 23. SEGMENTAL INFORMATION for the year ended 31 december 2016 (CONT’D)
98. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 97 notes to the financial statements Depreciation of property, plant and equipment Other segment information Total liabilities Segment liabilities Unallocated liabilities Total assets Segment assets Unallocated assets 303 28,170 20,000 222 2,661 2,607 24,062 9,296 25,509 - - 17,393 24,062 9,296 10 2,813 - 2,813 1,019 - 1,019 10 2,866 - 2,866 1,419 - 1,419 69 3,253 1,084 2,169 33,560 50 33,510 69 3,489 1,656 1,833 34,184 50 34,134 2 1,542 (8) 1,550 1,717 - 1,717 1 1,713 5 1,708 1,881 - 1,881 - 98 - 98 3 - 3 - 24 - 24 - - - 44 24,104 2,413 21,691 48,666 - 48,666 - - 50 - - 6,096 8,711 44 - - 347 22,773 (37,003) (34,768) 14,807 2,413 20,360 (37,003) (34,768) 31,595 (57,376) (54,453) 36,885 - 31,595 (57,376) (54,453) 36,835 427 24,267 6,735 17,532 38,688 50 38,638 Construction, Waste maintenance management Manufacturing and design services Construction Resources Investment Eliminations Consolidated 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 23. SEGMENTAL INFORMATION (CONT’D) for the year ended 31 december 2016 (CONT’D)
99. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 23. SEGMENTAL REPORTING (CONT’D) Major customers The following are major customers with revenue equal or more than 10% of the Group’s revenue: 2017 RM’000 - Customer A 2,014 Revenue 2016 RM’000 2,014 Segment Waste management services 24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Managing Director and Financial Controller. The audit committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year, the Group’s policy that no derivatives shall be undertaken. The Group and the Company do not apply hedge accounting. The Group’s and the Company’s exposure to the financial risks and the objectives, policies and processes put in place to manage these risks are discussed below. (i) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk primarily arises from its trade and other receivables. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statements of financial position and financial guarantee to a bank in respect of banking facility granted to an affiliated company. The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all new customers who wish to trade on credit terms are subject to credit evaluation procedures. In addition, receivable balances are monitored on an ongoing basis to minimise the Company’s exposure to bad debts. The Group has significant concentration of credit risk from a group and a single customer. As at 31 December 2017, included in trade receivables is an amount owing from a group and a single customer amounting to RM2,959,415 (2016: RM2,403,109). (ii) Liquidity risk 98 Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial obligations associated with financial liabilities. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
100. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (ii) Liquidity risk (cont’d) The Group and the Company practice prudent liquidity risk management to minimise the mismatch of financial assets and financial liabilities. This include maintains adequate cash and cash equivalent by the management to ensure as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. The repayment schedule of most defaulted banking facilities of the Group and of the Company have been restructured in the previous years. The Group actively manages its operating cash flows so as to ensure that all repayment and funding needs are met. Analysis of financial instruments by remaining contractual maturity The table below summarises the maturity profile of the Group’s and of the Company’s financial liabilities at the reporting date based on contractual undiscounted repayment obligations: 2017 Financial liabilities: Group Trade payables Other payables Hire Purchase Payables Contractual Interest On rate demand % RM’000 2,775 5,877 3.55 Total Total contractual carrying cash flow amount RM’000 RM’000 - - 2,775 5,877 2,775 5,877 57 - - 57 59 57 - - 8,709 8,711 - - - 21,526 21,526 3,539 7,896 - - - 3,539 7,896 3,539 7,896 - 57 273 110 6,937 8,931 167 16,141 119 5,978 11,435 330 7,047 8,931 27,743 17,532 519 19,841 - - - - 519 19,841 - 519 19,841 - 20,360 - - - 20,360 20,360 - 21,526 - - Within 1 to 5 More than years 5 years RM’000 RM’000 - - 8,652 Company Other payables Within 1 year RM’000 2016 Financial liabilities: Group Trade payables Other payables Hire Purchase Payables Borrowings Company Trade payables Other payables Borrowings 3.55 9.90 9.90 PJ BUM I BER HAD • ANN UAL R EPORT 201 7 99
101. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (iii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group’s and of the Company’s financial instruments will fluctuate because of changes in market interest rates. The Group’s and the Company’s has no exposure to interest rate risk since the interest on hire purchase loan is fixed. 25. FAIR VALUE OF FINANCIAL INSTRUMENTS The methods and assumptions used to determine the fair value of the following classes of financial assets and liabilities are as follows: (a) Cash and cash equivalents, trade and other receivables and payables The carrying amounts of cash and cash equivalents, trade and other receivables and payables are reasonable approximation of fair values due to short term nature of these financial instruments. (b)Borrowings The carrying amounts of the current portion of borrowings are reasonable approximation of fair values due to the insignificant impact of discounting. The carrying amount of long term floating rate loans approximates their fair value as the loans will be re-priced to market interest rate on or near reporting date. It is not practical to estimate the fair value of the Company’s investment in unquoted shares due to lack of active market to determine reliably the fair value of the financial asset. The carrying amount of other financial assets and liabilities recognised in the statements of financial position approximate their fair values. 100 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
102. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 25. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont’d) The following table presents the Group’s and the Company’s financial assets and liabilities that are measured at fair value as at 31 December into three different levels as defined below : Fair value of financial instruments not carried at fair value Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Carrying amount RM’000 - - 9,802 638 9,802 638 - - 10,440 10,440 - - 35,685 829 386 35,685 829 386 - - 36,900 36,900 - - 8,654 425 8,654 425 - - 9,079 9,079 - - 19,685 764 99 19,685 764 99 - - 20,548 20,548 Financial assets 2017 Group Trade and other receivables Cash and bank balances Company Investment in subsidiaries Trade and other receivables Cash and bank balances 2016 Group Trade and other receivables Cash and bank balances Company Investment in subsidiaries Trade and other receivables Cash and bank balances PJ BUM I BER HAD • ANN UAL R EPORT 201 7 101
103. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 25. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont’d) Fair value of financial instruments not carried at fair value Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Carrying amount RM’000 - - 8,652 57 - 8,652 59 - - - 8,709 8,711 - - 21,526 21,526 - - 21,526 21,526 - - 11,435 167 16,141 11,435 119 5,978 - - 27,743 17,532 - - 20,360 20,360 - - 20,360 20,360 Financial liabilities 2017 Group Trade and other payables Hire purchase payables Borrowings Company Trade and other payables 2016 Group Trade and other payables Hire purchase payables Borrowings Company Trade and other payables 102 (i) Policy on transfer between levels The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer. There were no transfers between levels during current and previous financial period/year. PJ B U M I B E R H AD • A NNUA L RE PORT 2017
104. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 25. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont’d) (ii) Level 1 fair value Level 1 fair value is derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. (iii) Level 2 fair value Level 2 fair value is estimated using inputs other than quited prices included within Level 1 that are observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices). Non-derivative financial instruments Fair value which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. (iv) Level 3 fair value Level 3 fair values for the financial assets and liabilities are estimated using unobservable inputs. The fair value of finance lease liabilities is calculated using discounted cash flows where the market rate of interest is determined by reference to similar lease arrangements. 26. SUBSEQUENT EVENTS On 5 February 2018, PJBumi Composites Sdn. Bhd. (“PJBC”), a wholly owned subsidiary of the Company was served with a winding-up petition by Lembaga Hasil Dalam Negeri (“LHDN”) for an on behalf of Government of Malaysia (“Petitioner”). The Petitioner claims that as at 21 August 2017, the accrued balance on income tax is RM2,082,434 and interest will be charged at 4% per annum from the date of judgement until full settlement with cost of RM6,563. The Winding Up Order has been granted against PJBC and PJBC’s stay application was dismissed with cost on 29 March 2018. Now PJBC appealing against the Winding Up Order and in the process of filing stay at Court of Appeal. 27. RELATED PARTIES Identity of related parties For the purpose of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decision, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or another entities. Related parties also include key management personnel as those persons having authority and responsibility for planning, directing, and controlling the activities of the Company either directly or indirectly. The key management personnel includes all the Directors of the Company. The Group has related party relationship with its key management personnel. (See note 7). PJ BUM I BER HAD • ANN UAL R EPORT 201 7 103
105. notes to the financial statements for the Year Ended 31 December 2017 (cont’d) 28. CAPITAL MANAGEMENT The primary objective of the Group’s capital management is to maintain on optimal capital structure in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group monitors capital using a gearing ratio, which is the net debt divided by total equity plus net debt. Net debt includes loans and borrowings, less cash and bank balances and short term deposits. Capital of the Group represents total equity. 104 PJ B U M I B E R H AD • A NNUA L RE PORT 2017
106. PROPERTIES HELD BY THE GROUP Description Sq .Ft Existing use Tenure Age of building *Net book value Lot 46-1 Jalan Setiawangsa 11A Taman Setiawangsa 54200 Kuala Lumpur Building 1,000 Vacant Freehold 26 years 59,216 2 Plot 2, PT60593 08000 Sungai Petani Kedah Darul Aman Factory Land and Building 201,716 Factory Malay Reserve 18 years 8,255,342 3 Plot 3, PT60594 08000 Sungai Petani Kedah Darul Aman Land 200,351 Vacant Malay Reserve 18 years 2,400,000 No Address 1 PJ BUM I BER HAD • ANN UAL R EPORT 201 7 105
107. shareholdings analysis As at 19 March 2018 Issued share capital Class of shares Voting Rights : RM41,000,000.00 : Ordinary shares : One vote per ordinary share Classification of Shareholders Category of Shareholders 1. 2. 3. Individual Body Corporate a. Banks / Finance Companies b. Trusts / Foundation / Charity c. Private / Limited Company Nominees No. of shares No. of shares 16,323,681 19.91 128,009 0.16 12,000 19,000 42,588,600 10,184,710 0.01 0.02 51.94 12.42 6,000,000 6,744,000 7.32 8.22 69,127,991 84.30 12,872,009 15.70 No. of shareholders <100 100 -1,000 1,001 – 10,000 10,001 – 100,000 100,001 - < 5% issued shares 5% and above of issued shares EMEF Technology Sdn Bhd Panama Ventures Sdn Bhd Tanjung Setara Sdn Bhd Veto Growth Sdn. Bhd. DB (Malaysia) Nominee (Asing) Sdn Bhd - Exempt An For Bank of Singapore Limited CMA i Capital Sdn Bhd Adlin bin Shaharudin 106 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 Foreign % Size of shareholdings List of Substantial Shareholders Malaysian Direct Interest % No. of % of shares shareholdings 9 215 292 177 62 5 334 171,432 1,515,506 5,792,200 27,238,228 47,282,300 0.00 0.21 1.85 7.06 33.22 57.66 760 82,000,000 100.00 No. of shares held Name Deemed % Interest % 15,169,000 10,028,600 8,542,900 7,428,500 18.50 12.23 10.42 9.06 - - 6,113,300 7.46 *15,169,000 **15,169,000 18.50 18.50
108. shareholdings analysis As at 19 March 2018 (cont’d) Directors’ Shareholdings Name Abd Rahim bin Embi Ahmad bin Md Daud Nik Md Nor Suhaimi bin Nik Ibrahim Adlin bin Shaharudin Direct Interest - No. of shares held Deemed % Interest - **15,169,000 % 18.50 Note : * Deemed interested by virtue of holding substantial interest in the shares of EMEF Technology Sdn Bhd ** Deemed interested by virtue of holding substantial interest in the shares of CMA i Capital Sdn Bhd 30 Largest Shareholders as at 19 March 2018 No. Shareholders 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. EMEF Technology Sdn Bhd Panama Ventures Sdn Bhd Tanjung Setara Sdn Bhd Veto Growth Sdn Bhd DB (Malaysia) Nominee (Asing) Sdn Bhd - Exempt An For Bank Of Singapore Limited TMF trustees Malaysia Berhad - Panama Ventures Sdn. Bhd. TMF Trustees Malaysia Berhad - Tanjung Setara Sdn. Bhd. TMF Trustees Malaysia Berhad - Veto Growth Sdn Bhd Cimsec Nominees (Tempatan) Sdn Bhd - CIMB Bank for Mohammed Amin bin Mahmud RHB Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mohd Shafei bin Abdullah RHB Capital Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Ab Ghaus bin Ismail HLB Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Leong Wye Keong Bijak Tulus Sdn Bhd TA Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Lau Yen Chang RHB Capital Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mohd Shafei bin Abdullah (CEB) Lim Lei Send Astra Taipan Sdn Bhd Shareholding % 15,169,000 10,028,600 8,542,900 7,428,500 18.50 12.23 10.42 9.06 6,113,300 7.46 2,314,300 2.82 1,971,400 2.40 1,714,300 2.09 1,701,500 2.08 1,579,900 1.93 1,034,600 1.26 810,700 716,800 0.99 0.87 632,000 0.77 570,000 565,000 555,200 0.70 0.69 0.68 PJ BUM I BER HAD • ANN UAL R EPORT 201 7 107
109. shareholdings analysis As at 19 March 2018 (cont’d) 30 Largest Shareholders (cont’d) as at 19 March 2018 No. Shareholders 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. Amerjeet Singh A/L Naib Singh Mokhsen bin Ibrahim Kenanga Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Ong Tee Paan Law Kim San Lim Yaw Jenn Mohd Noor Bin Bidin Lim Yaw Jenn Public Invest Nominees (Asing) Sdn Bhd - Exempt An For Phillip Securities Pte Ltd (Clients) Ang Ying Ying Maybank Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mohd Yunus bin Mohd Tasi Selvaraja A/L Krishnan Thevar Lim Yaw Shing HLB Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Lim Yaw Shing TOTAL 108 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 Shareholding % 551,800 525,828 0.67 0.64 513,600 490,000 470,100 451,000 450,000 0.63 0.60 0.57 0.55 0.55 450,000 388,000 0.55 0.47 365,900 360,000 342,000 0.45 0.43 0.41 337,900 0.41 67,144,128 81.88
110. warrantholdings analysis As at 19 March 2018 (cont’d) No. of Warrants in Issue Exercise price of the Warrants Expiry date of the Warrants No. of Warrant Holders : : : : 14,999,996 RM0.50 5 July 2022 763 Classification of Warrantholders Category of Warrantholders 1. 2. a. b. c. 3. Individual Body Corporate Banks / Finance Companies Trusts / Foundation / Charity Private / Limited Company Nominees Size of warrantholdings No. of warrants held Malaysian No. of % warrants held Foreign % 1,666,355 11.11 12,300 0.08 1,200 1,900 9,783,860 984,981 0.01 0.01 62.23 6.57 1,875,000 674,400 12.50 4.50 12,438,296 82.92 2,561,700 17.08 No. of warrantholders No. of warrants % of warrantholdings 71 459 165 57 7 4 1,869 171,715 539,900 1,726,682 2,917,930 9,641,900 0.01 1.14 3.60 11.51 19.46 64.28 763 14,999,996 100.00 <100 100 -1,000 1,001 – 10,000 10,001 – 100,000 100,001 - < 5% issued shares 5% and above of issued shares List of Substantial Warrantholders Name Panama Ventures Sdn Bhd Tanjung Setara Sdn Bhd Veto Growth Sdn. Bhd. EMEF Technology Sdn Bhd CMA i Capital Sdn Bhd Adlin bin Shaharudin Direct Interest 3,134,000 2,669,600 2,321,400 1,516,900 No. of warrants held Deemed % Interest 20.89 17.80 15.48 10.11 *1,516,900 **1,516,900 % 10.11 10.11 PJ BUM I BER HAD • ANN UAL R EPORT 201 7 109
111. warrantholdings analysis As at 19 March 2018 (cont’d) Directors’ Warrantholdings Name Abd Rahim bin Embi Ahmad bin Md Daud Nik Md Nor Suhaimi bin Nik Ibrahim Adlin bin Shaharudin Direct Interest - No. of warrant held Deemed % Interest - **1,516,900 % 10.11 Note : * Deemed interested by virtue of holding substantial interest in the shares of EMEF Technology Sdn Bhd ** Deemed interested by virtue of holding substantial interest in the shares of CMA i Capital Sdn Bhd 30 Largest Warrantholders as at 19 March 2018 No. Shareholders 1. 2. 3. 4. 5. 14. 15. Panama Ventures Sdn Bhd Tanjung Setara Sdn Bhd Veto Growth Sdn Bhd EMEF Technology Sdn Bhd TMF trustees Malaysia Berhad - Panama Ventures Sdn Bhd TMF Trustees Malaysia Berhad Tanjung Setara Sdn Bhd DB (Malaysia) Nominee (Asing) Sdn Bhd - Exempt An For Bank Of Singapore Limited TMF Trustees Malaysia Berhad - Veto Growth Sdn Bhd Cimsec Nominees (Tempatan) Sdn Bhd - CIMB Bank for Mohammed Amin bin Mahmud RHB Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mohd Shafei bin Abdullah RHB Capital Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Ab Ghaus bin Ismail TA Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Lau Yen Chang HLB Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Leong Wye Keong Bijak Tulus Sdn Bhd Astra Taipan Sdn Bhd 110 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 6. 7. 8. 9. 10. 11. 12. 13. Shareholding % 3,134,000 2,669,600 2,321,400 1,516,900 20.89 17.80 15.48 10.11 723,200 4.82 616,100 4.11 611,330 4.08 535,700 3.57 170,150 1.13 157,990 1.05 103,460 0.69 100,000 0.67 81,070 71,680 55,520 0.54 0.48 0.37
112. warrantholdings analysis As at 19 March 2018 (cont’d) 30 Largest Warrantholders (cont’d) as at 19 March 2018 No. Shareholders 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. Amerjeet Singh A/L Naib Singh Lim Lei Send HLIB Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Chee Phooi Phooi Mokhsen bin Ibrahim Law Kim San Lim Yaw Jenn Mohd Noor Bin Bidin Lim Yaw Jenn Public Invest Nominees (Asing) Sdn Bhd - Exempt An For Phillip Securities Pte Ltd (Clients) Selvaraja A/L Krishnan Thevar Ang Ying Ying Maybank Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mohd Yunus bin Mohd Tasi Lim Yaw Shing Lee Chee Siong HLB Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Lim Yaw Shing TOTAL Shareholding % 55,180 55,000 0.37 0.37 54,000 52,582 49,000 47,010 45,100 45,000 0.36 0.35 0.33 0.31 0.30 0.30 45,000 40,000 38,800 0.30 0.27 0.26 36,590 34,200 33,900 0.24 0.23 0.22 33,790 0.22 13,533,252 90.22 PJ BUM I BER HAD • ANN UAL R EPORT 201 7 111
113. notice of annual general meeting NOTICE IS HEREBY GIVEN THAT the Thirty-Third Annual General Meeting (“33rd AGM”) of the Company will be held at Concorde Hotel Shah Alam, Level 1, Orchid Meeting Room, No. 3, Jalan Tengku Ampuan Zabedah, 40100 Shah Alam, Selangor Darul Ehsan on Friday, 22 June 2018 at 10.00 am for the following purposes:AGENDA AS ORDINARY BUSINESS 1. To receive the Audited Financial Statements of the Company for the financial year ended 31 Please refer to December 2017 together with the Reports of the Directors and Auditors thereon. Note A 2. To approve the payment of Directors’ fees and benefits totaling to RM88,000.00 for the year ended 31 December 2017. 3. To re-elect the following directors retiring pursuant to the Company’s Articles of Association, and being eligible, offered themselves for re-election:(i) Encik Adlin Bin Shaharudin (Article 102) (ii) Encik Abd Rahim Bin Embi (Article 85) 4. To re-appoint Messrs Afrizan Tarmili Khairul Azhar as Auditors of the Company and to authorise the Board of Directors to fix their remuneration. Ordinary Resolution 1 Ordinary Resolution 2 Ordinary Resolution 3 Ordinary Resolution 4 AS SPECIAL BUSINESS To consider, and if thought fit, to pass the following Resolution: 5. AUTHORITY TO ALLOT SHARES IN GENERAL PURSUANT TO SECTION 75 (1) OF THE COMPANIES ACT 2016 “That pursuant to Section 75 (1) of the Companies Act, 2016 and subject to the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered to allot new 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 percent (10%) of the issued share capital of the Company thereat and that such authority shall continue in force until the conclusion of the next AGM of the Company and that the Directors be and are hereby further authorised to obtain the approval from Bursa Malaysia Securities Berhad for the listing and quotation of the additional shares so allotted”. 6. To transact any other business which may properly be transacted at an Annual General Meeting for which due notice shall have been given. By Order of the Board LIM SECK WAH (MAICSA NO. 0799845) M. CHANDRASEGARAN A/L S. MURUGASU (MAICSA NO.0781031) Company Secretaries Dated: 25 April 2018 Selangor 112 PJ B U M I B E R H AD • A NNUA L RE PORT 2017 Ordinary Resolution 5
114. notice of annual general meeting (cont’d) Notes:A. This Agenda item is meant for discussion only as the provision of Section 251 (1) (a) of the Companies Act, 2016 do not require a formal approval of the shareholders and hence, is not put forward for voting. 1. For the purpose of determining a member who shall be entitled to attend and vote at the Annual General Meeting, the Company shall be requesting the Record of Depositors as at 18 June 2018. Only a depositor whose name appears on the Record of Depositors as at 18 June 2018 shall be entitled to attend the said meeting or appoint proxies to attend, speak and vote on his/her stead. 2. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his/her stead. A member may appoint up to two proxies to attend the same meeting provided that he specifies the proportion of his shareholding to be represented by each proxy. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy. 3. Where a member is an authorised nominee as defined under the Security Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each Securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 4. A member who is an exempt authorized nominee is entitled to appoint multiple proxies for each omnibus account it holds. 5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing or, if the appointer is a corporation, either under the Corporation’s Common Seal or under the hand of an officer or attorney so authorized. 6. 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 set for holding the meeting or any adjournment thereof. 7. Explanatory Notes To Special Businesses Resolution Pursuant to Section 75 (1) of the Companies Act, 2016 The proposed Ordinary Resolution no. 5 is a renewal of the mandate given to the Company by the shareholders at the previous Annual General Meeting held on 19 May 2017, if duly passed, will give the Directors of the Company the flexibility to issue and allot new shares in the Company up to an amount not exceeding in total 10% of the issued share capital of the Company for such purposes as the Directors consider would be in the interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of next Annual General Meeting 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 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 shares in the Company, up to any amount not exceeding in total 10% of the issued share capital of the Company for the time being, for such purposes. The renewed authority for allotment of shares will provide flexibility to the Company for the allotment of shares for the purpose of funding future investment, working capital and/ or acquisitions. No shares have been issued and allotted by the Company since obtaining the said authority from its shareholders at the last Annual General Meeting held on 19 May 2017. PJ BUM I BER HAD • ANN UAL R EPORT 201 7 113
115. PROXY FORM PJBUMI BERHAD (Company No. 141537-M) (Incorporated in Malaysia) (Before completing this form please refer to the notes below) No. of ordinary shares held I/We (Full name in block letters) of I.C No./Co.No./CDS No.: (Full address) being a member/members of PJBUMI BERHAD hereby appoint the following person(s):Name of proxy, NRIC No. & Address No. of shares to be represented by proxy 1. 2. or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at Thirty-Third Annual General Meeting (“AGM”) of the Company to be held at Concorde Hotel Shah Alam, Level 1, Orchid Meeting Room, No. 3, Jalan Tengku Ampuan Zabedah, 40100 Shah Alam, Selangor Darul Ehsan on Friday, 22 June 2018 at 10.00 a.m. My/our proxy/proxies is/are to vote as indicated below:RESOLUTIONS RELATING TO :- FIRST PROXY For Against SECOND PROXY For Against Ordinary Resolution 1 – To approve Directors’ fees and benefits Ordinary Resolution 2 – To re-elect Encik Adlin Bin Shaharudin Ordinary Resolution 3 – To re-elect Encik Abd Rahim Bin Embi Ordinary Resolution 4 – To re-appoint Messrs Afrizan Tarmili Khairul Azhar as Auditors of the Company Ordinary Resolution 5 – Authority to allot shares (Please indicate with a “√” or “X” in the space provided how you wish your vote to be cast. If no instruction as to voting is given, the proxy/proxies may vote or abstain from voting at his/her/their discretion). Dated this …....….. day of ……….………..…… 2018 ………....................…………………. Signature/Common Seal Notes 1. For the purpose of determining a member who shall be entitled to attend and vote at the Annual General Meeting, the Company shall be requesting the Record of Depositors as at 18 June 2018. Only a depositor whose name appears on the Record of Depositors as at 18 June 2018 shall be entitled to attend the said meeting or appoint proxies to attend, speak and vote on his/her stead. 2. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his/her stead. A member may appoint up to two proxies to attend the same meeting provided that he specifies the proportion of his shareholding to be represented by each proxy. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy. 3. Where a member is an authorised nominee as defined under the Security Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each Securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 4. A member who is an exempt authorized nominee is entitled to appoint multiple proxies for each omnibus account it holds. 5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing or, if the appointer is a corporation, either under the Corporation’s Common Seal or under the hand of an officer or attorney so authorized. 6. 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 set for holding the meeting or any adjournment thereof.
116. 1st fold here AFFIX STAMP The Secretary PJBUMI BERHAD (141537-M) Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur. 2nd fold here
117. PJBUMI BERHAD (141537-M) 6, Jalan Astaka U8/83 Seksyen U8, Bukit Jelutong 40150 Shah Alam, Selangor D.E. Tel: (603) 7847 5740 Fax: (603) 7847 4597 www.pjbumi.com.my 118 PJ B U M I B E R H AD • A NNUA L RE PORT 2017