TIDMGSH
RNS Number : 4000U
Green & Smart Holdings plc
29 March 2019
29 March 2019
Green & Smart Holdings plc
("Green & Smart" or "the Company" or "the Group")
Final Results and Publication of Annual Report
Green & Smart Holdings plc (AIM: GSH), a renewable energy
company generating power from biogas captured through the treatment
of palm oil mill effluent ("POME") in Malaysia, announces its final
results for the 15 months ended 31 December 2018.
Financial Summary*
-- Revenue was RM1.92m (2017: RM45.34m)
-- Gross loss was RM1.84m (2017: profit of RM11.67m)
-- Operating loss was RM11.65m (2017: RM1.9m)
-- Loss before tax was RM13.65m (2017: RM2.7m)
-- Cash and cash equivalents at 31 December 2018 were RM0.47m (30 September 2017: RM0.09m)
* Due to the Company changing its financial year end during the
period under review, the 2018 results cover 15 months ended 31
December 2018 while the 2017 results cover 12 months ended 30
September 2017.
Operational Summary
-- Established itself as the only company in Malaysia to operate
plants with two different biogas systems - tank and lagoon - under
the Feed-in-Tariff ("FiT") mechanism
-- Received certificate of initial operation date ("IOD") for
the Group's second fully-owned biogas power plant, the 2.0MW Malpom
plant, and, towards the end of the year, received the commercial
operation date ("COD") that allows power to be sold to the national
electricity grid at the full tariff rate
-- Completed groundwork and commenced construction on the 2.7MW
Minyak plant, which will be the Group's largest fully-owned biogas
power plant to date
-- Commenced implementing bio-polishing facilities at the
Group's first fully-owned biogas power plant, the 2.0MW Kahang
plant, to further treat the wastewater by-product or POME and work
to upgrade gas production, which resulted in a temporary suspension
of operations while the upgrade work is underway
-- As previously stated, the development of the Group's pipeline
of other projects was suspended due to financial constraints,
however, following the Group raising c.RM17.09m in the second half
of 2018 through a subscription for new shares by Serba Dinamik
International Ltd. ("Serba Dinamik"), initial work has
recommenced
Mr. Saravanan Rasaratnam, Chief Executive Officer of Green &
Smart, said:
"This was a milestone period in the history of Green & Smart
as our second fully-owned biogas power plant began selling power to
the grid - making us the only company in Malaysia to own and
operate plants with two different biogas systems under the
Feed-in-Tariff mechanism - and we commenced construction of our
third fully-owned plant. While financial constraints undoubtedly
impeded our progress, our fundraising has resolved many of these
challenges and enabled us to move forwards.
"Our focus for 2019 is completing the upgrade works at our
Kahang plant to enable us to resume power sales and working towards
bringing onstream our third plant at Minyak. We have also begun
pursuing new EPCC opportunities. As a result, we expect revenue
generation in 2019 to be significantly higher than in the period to
31 December 2018 and, with continued supportive growth drivers, the
Board of Green & Smart looks to the future with
confidence."
Enquiries
Green & Smart Holdings plc
Saravanan Rasaratnam, Chief Executive Officer
Navindran Balakrishnan, Chief Operations Officer +603 2095 0024
Cantor Fitzgerald Europe (Nominated Adviser
and Broker)
Philip Davies, Richard Salmond +44 20 7894 7000
Luther Pendragon Ltd (Financial PR Adviser)
Claire Norbury, Alexis Gore +44 20 7618 9100
Operational Review
Green & Smart is focused on the construction, operation and
ownership of biogas power generation plants in Malaysia. These
plants, which are located on or near the site of a palm oil mill,
capture greenhouse gases (methane) released from palm oil mill
effluent ("POME") that is produced by the mill, which is then
converted into electricity to be sold to the Malaysian National
Grid under a long-term renewable energy power purchase agreement.
The Group also provides its services to third parties under
engineering, procurement, construction and commissioning ("EPCC")
contracts.
During the 15 months ended 31 December 2018, Green & Smart
achieved a number of operational milestones: in particular,
bringing onstream its second fully-owned biogas power plant -
becoming the only company in Malaysia to own and operate power
plants with two different biogas systems - and commencing
construction of its third fully-owned plant.
Specifically, at the Group's second fully-owned biogas plant,
the 2.0MW Malpom plant in Penang, during the period the Group
received the IOD from the regulatory authorities, which enabled
initial power sales to the grid to commence. Subsequently, towards
the end of the period, the formal COD was received, which allows
power generated to be sold to the national grid at the full tariff
rate. The Malpom plant is the Group's first specialised
self-contained covered lagoon-based system, which is developed for
mills with space constraints that prevents the setting up of a
conventional biogas facility. The Malpom biogas power plant is
performing well and converting POME at what management believe is
industry-leading efficiency levels.
At the Group's 2.0MW Kahang plant in Johor, which is its first
fully-owned plant, construction commenced of a bio-polishing
facility that will biologically treat the wastewater by-product of
the POME treatment process to remove recalcitrant carbon, reduce
the bio-chemical oxygen demand and improve the colour residue. This
will allow the water to be reused by the plant, which enhances the
overall sustainability of the process. The Group is also
undertaking some upgrade works to enhance the efficiency of the gas
production process. As a result, power production at the Kahang
facility had to be temporarily suspended while these modifications
took place, which are expected to be completed, with a return to
full operations, in the first half of 2019.
During the period, the Group completed the groundwork and
commenced plant construction at its third fully-owned biogas power
plant, the 2.7MW Minyak plant in Perak. This plant will be another
lagoon-based system and so the Group will be able to leverage its
experience with Malpom. With a capacity of 2.7MW, this will be
Green & Smart's largest plant to date. The Group intends to
complete construction and grid-connection by the 2019 year-end,
subject to securing banking facilities and regulatory approval, to
enable the award of the COD in the early 2020.
As a result, Green & Smart took some important steps forward
during the period in the development of its biogas power plants.
However, as previously mentioned, financial constraints meant that
the pace of operations needed to be slowed down, which delayed the
start, or recommencement, of power sales. In addition, with the
Group's limited resources focused on its fully-owned plants, the
Group was not in a position to pursue new EPCC contracts.
Consequently, revenue generation was substantially curtailed,
despite achieving several operational milestones.
Financial Review
The Group's financial performance for the 15-month period ended
31 December 2018 was mixed as growth in the first quarter was
counteracted by weakness for the rest of the period. Financial
constraints impacted the ability of the Group to progress certain
projects to completion that would have enabled the generation of
anticipated revenue and, although this was subsequently addressed
when c.RM17.09m was successfully raised from Serba Dinamik, the
Group was hindered from pursuing any further EPCC contracts during
the period. As a result, there was a marked decrease in revenue and
financial performance compared with the 12-month period ended 30
September 2017.
During the year, the Company changed its accounting reference
date from 30 September to 31 December in order to align its
reporting schedule with that of Serba Dinamik, which, as a public
company, updates the market on all its investments. As a result,
the period under review is the 15 months from 1 October 2017 to 31
December 2018 while the comparative period is the 12 months from 1
October 2016 to 30 September 2017.
Revenue
Revenue for the 15 months ended 31 December 2018 was RM1.92m (12
months of 2017: RM45.34m), which was generated by the provision of
EPCC services under previously-awarded contracts and from the sale
of power from the Group's biogas power plants. The financial
constraints that the Group faced impeded Green & Smart from
pursuing further EPCC contracts during the period. In addition,
during the period, the Group commenced work to upgrade its biogas
power plant at Kahang, which required a cessation in power
generation and, consequently, in power sales. However, this was
partly mitigated by the Group's Malpom biogas plant achieving its
COD towards the end of the year, enabling power to be sold to the
grid at the full tariff rate.
Gross Profit/(Loss) & Margin
The gross loss for the financial period to 31 December 2018 was
RM1.84m, with a negative gross margin of 95.6% (2017: profit of
RM11.67m; gross profit margin of 25.3%). This was primarily due to
the operations and maintenance cost of the existing biogas
facilities exceeding the revenue generated by the facilities.
Profit/(Loss)
Operating loss was RM11.65m (2017: RM1.9m loss). While the Group
managed to reduce its operating costs to RM9.93m (2017: RM13.83m),
the significant reduction in revenue resulted in a significant
increase in operating loss.
Earnings/(Loss) Per Share
On a consolidated level, the Group's basic loss per share for
the 15-month period ended 31 December 2018 was RM0.04 (2017:
RM0.01) based on the weighted number of ordinary shares.
Taxation
Green & Smart Sdn Bhd, the operating entity of the Group, is
a BioNexus Status Company granted by Malaysian Bioeconomy
Development Corporation Sdn Bhd. This company is entitled to an
income tax exemption on the statutory business income derived from
approved activities over five consecutive years of assessment
commencing from the first year in which Green & Smart Sdn Bhd
generates statutory income from relevant approved activities. The
tax exemption expired in the financial period ended 31 December
2018. Thereafter, Green & Smart Sdn Bhd became subject to a
concessionary tax rate of 20% for the following 10 years on its
taxable profits.
Cash Flow
Cash and cash equivalents at 31 December 2018 were RM0.47m (30
September 2017: RM0.09m).
In July 2018, the Company raised approximately c.RM17.09m
(GBP3.2m) via a subscription for new common shares by Serba
Dinamik. The net proceeds were used to advance the development of
the Group's third fully-owned biogas power plant at Minyak and for
working capital purposes.
At 31 December 2018, the Group had receivables of RM56.24m
(2017: RM76.79m), principally due from Megagreen Energy Sdn Bhd and
Concord Green Energy Sdn Bhd before allowance for impairment.
Payments of approximately RM20.5m were received from these parties
during the financial period and because of this progressive
recovery of debt, the Directors are confident that the debt will be
fully recovered in due course.
Outlook
The Group entered 2019 in a stronger position than in the
previous year. The fundraise in the latter part of 2018 enabled
progress to be made on the fully-owned projects, including bringing
Malpom onstream - which is now selling power to the grid at the
full tariff rate. The Group is on track to complete the upgrade
works at Kahang in the first half of this year, which will enable a
resumption of revenue generation at that plant. Following the
strengthening of the Group's financial position, it has been able
to recommence pursuing new EPCC opportunities, which would further
support cashflow. As a result, the Board is confident that revenue
generation in 2019 will be materially higher than for the 15 months
ended 31 December 2018.
Looking further ahead, the Group is progressing development at
the Minyak plant and is confident of receiving the banking
facilities to enable completion in preparation for receiving the
COD in early 2020, which will provide an additional revenue stream.
With the strengthened financial footing and improved cash flow, the
Group expects to be able to advance the remaining pipeline of
fully-owned biogas power plants and, at the appropriate juncture,
intends to bid for new FiT quotas for further sites.
The treatment of POME with biogas facilities is supported by
sustained economic, environmental and regulatory drivers. The new
government in Malaysia remains committed to providing incentives to
renewable power generation whilst legislating against discharge of
untreated POME in the environment. At the same time, consumer goods
companies increasingly demand palm oil from sustainable sources. As
one of the few fully-integrated providers and operators of biogas
plants in Malaysia, Green & Smart is well-positioned to benefit
from these trends.
As a result, with an anticipated significant increase in revenue
this year, the strengthening of the Group's foundations and
sustained supportive growth drivers, the Board of Green & Smart
looks to the future with confidence.
Publication of Annual Report
The Company's annual report and accounts for the 15-month period
ended 31 December 2018 has been published today and is available
under the Investor Relations section of the Green & Smart
website at: www.greennsmart.com.my
GREEN & SMART HOLDINGS plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at
31.12.2018 30.9.2017
ASSETS Note RM'000 RM'000
NON-CURRENT ASSETS
Intangible assets 5 831 899
Property, plant and equipment 6 41,636 36,544
Total non-current assets 42,467 37,443
----------- ------------------------
CURRENT ASSETS
Trade and other receivables 7 21,775 1,875
Amount owing by contract customers 9 401 401
Amount owing by related parties 8 34,635 71,662
Cash and cash equivalents 10 471 95
Total current assets 57,282 74,033
----------- ------------------------
Total assets 99,749 111,476
=========== ========================
EQUITY
Stated capital 11 61,052 43,954
Foreign translation reserve 25 (2,499) (2,987)
Retained profit (3,350) 10,311
Merger reserve 25 (4,028) (4,028)
Total shareholders' equity 51,175 47,250
Non-controlling interests 41 44
Total equity 51,216 47,294
----------- ------------------------
CURRENT LIABILITIES
Trade and other payables 12 30,888 48,140
Short-term borrowings 13 9,287 11,161
Total current liabilities 40,175 59,301
----------- ------------------------
NON-CURRENT LIABILITY
Government grant income 15 108 124
Amount owing to related parties 8 3,972 2,555
Long-term borrowings 17 387 476
Amount owing to directors 18 3,891 1,726
Total non-current liabilities 8,358 4,881
----------- ------------------------
Total liabilities 48,533 64,182
----------- ------------------------
Total liabilities and equity 99,749 111,476
=========== ========================
The notes to the financial statements form an integral part of
these financial statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 29 March 2019.
GREEN & SMART HOLDINGS plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the
15-MONTH 12-MONTH
PERIODED PERIODED
31.12.2018 30.09.2017
Note RM'000 RM'000
Revenue 19 1,924 45,344
Cost of sales (3,763) (33,673)
Gross (loss)/profit (1,839) 11,671
Other income 122 280
Less: operating expenses
Administrative expenses (9,930) (13,849)
Operating loss (11,647) (1,898)
Finance costs 20 (2,006) (800)
Loss before taxation 21 (13,653) (2,698)
Income tax expense 22 (11) (1)
Loss for the period/year (13,664) (2,699)
-------------- ------------------------
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit
or loss:
Exchange difference on translation of foreign
operations 488 (330)
Total comprehensive loss (13,176) (3,029)
============== ========================
Loss for the period/year attributable
to: -
- Owners of the company (13,661) (2,696)
- Non-controlling interest (3) (3)
(13,164) (2,699)
============== ========================
Total comprehensive loss attributable
to: -
- Owners of the company (13,173) (3,026)
- Non-controlling interest (3) (3)
(13,176) (3,029)
============== ========================
Loss per share:
Basic (RM) 24 (0.04) (0.01)
Diluted (RM) 24 (0.04) (0.01)
============== ========================
The notes to the financial statements form an integral part of
these financial statements.
All amounts are derived from continuing operations.
GREEN & SMART HOLDINGS plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Foreign Merger Retained Attributable Non- Total
capital translation reserve profit to owners controlling equity
reserve of the Company interest
Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Balance as at 1
October 2016 35,142 (2,657) (4,028) 13,007 41,464 47 41,511
Loss for the
year - - - (2,696) (2,696) (3) (2,699)
Other
comprehensive
income
Translation of
foreign
operations - (330) - - (330) - (330)
--------- ------------- --------- --------- ---------------- ---------------- ---------
Total
comprehensive
income - (330) - (2,696) (3,026) (3) (3,029)
--------- ------------- --------- --------- ---------------- ---------------- ---------
Transaction
with owners
Issuance of
shares* 11 8,812 - - - 8,812 - 8,812
--------- ------------- --------- --------- ---------------- ---------------- ---------
Balance at 30
September 2017 43,954 (2,987) (4,028) 10,311 47,250 44 47,294
Loss for the
year - - - (13,661) (13,661) (3) (13,664)
Translation of
foreign
operations - 488 - - 488 - 488
--------- ------------- --------- --------- ---------------- ---------------- ---------
Total
comprehensive
income /
(loss) - 488 - (13,661) (13,173) (3) (13,176)
--------- ------------- --------- --------- ---------------- ---------------- ---------
Transactions
with owners
Issuance
shares* 11 17,098 - - - 17,098 - 17,098
Balance at 31
December 2018 61,052 (2,499) (4,028) (3,350) 51,175 41 51,216
--------- ------------- --------- --------- ---------------- ---------------- ---------
The notes to the financial statements form an integral part of
these financial statements.
* The issue of shares is recognised net of fundraising cost
totaling to RM Nil (2017: RM0.3m).
GREEN & SMART HOLDINGS plc
CONSOLIDATED STATEMENT OF CASH FLOW
For the
15-MONTH 12-MONTH
PERIODED PERIODED
31.12.2018 30.09.2017
Note RM'000 RM'000
CASH FLOW FROM OPERATING ACTIVITIES
Loss before taxation (13,653) (2,698)
Adjustments for:
Amortisation of intangible assets 68 55
Depreciation of equipment 1,654 1,029
Impairment on investment in associates - 26
Impairment on amount owing by associates - 5,197
Impairment on other receivables - 114
Government grant income (16) (13)
Gain on disposal of investment - (250)
Interest expenses 20 1,966 795
--------------- -----------------
Cash flow from operating activities before
working capital changes (9,981) 4,255
Increase in trade and other receivables (3,423) (918)
(Decrease) /increase in trade and other payables (17,251) 13,198
Decrease / (increase) in amount owing from
related parties 20,550 (17,632)
--------------- -----------------
Cash flow used in/(from) operating activities (10,105) (1,097)
Tax paid (11) (1)
Interest paid 20 (1,966) (795)
--------------- -----------------
NET CASH FLOW USED FROM OPERATING ACTIVITIES (12,082) (1,893)
--------------- -----------------
CASH FLOW FOR INVESTING ACTIVITIES
Investment in associates - (1,000)
Purchase of plant and equipment 6 (6,746) (9,933)
--------------- -----------------
NET CASH FLOW USED IN INVESTING ACTIVITIES (6,746) (10,933)
--------------- -----------------
CASH FLOW FOR FINANCING ACTIVITIES
Issuance of new ordinary shares 11 17,098 2,809
Issuance of redeemable convertible preference
shares 11 - 6,000
Advances from related parties 1,417 -
Advances from directors 2,165 830
Repayment of hire purchase obligations (83) (82)
Drawdown of short-term loans - 1,493
Repayment of term loans (1,785) (282)
--------------- -----------------
NET CASH FLOW FROM FINANCING ACTIVITIES 18,812 10,768
--------------- -----------------
Net decrease in cash and cash equivalents (16) (2,058)
Effects of foreign exchange translation 392 -
Cash and cash equivalents at the beginning
of the period 95 2,153
--------------- -----------------
Cash and cash equivalents at the end of the
period 10 471 95
--------------- -----------------
The notes to the financial statements form an integral part of
these financial statements.
GREEN & SMART HOLDINGS plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODED 31 DECEMBER 2018
1. GENERAL INFORMATION
Green & Smart Holdings plc ("the Company") was incorporated
as a public limited company in Jersey with registration number
119200 on 7 August 2015. The registered office of the Company is 12
Castle Street, St. Helier, Jersey JE2 3RT, Channel Islands.
Pursuant to a resolution ratified at the Annual General Meeting
of the Company on 25 October 2018,
the Group's financial year was changed from 30 September to 31
December 2018.
The Company is listed on the AIM market of the London Stock
Exchange. The Company's nature of operations is to act as the
holding company of a group of subsidiaries that are involved in
research and development, provision of professional engineering
consultancy and process design services in the areas of industrial
biotechnology, pollution control and renewable energy; and
engineering, procurement and construction of various waste
treatment plants/systems; development, commercialisation, operation
and maintenance of renewable energy plants.
The consolidated financial statements include the financial
statements of the Company and its controlled subsidiaries (the
"Group") as follows:
Place of Registered
Name incorporation address Principal activity Effective interest
31.12.2018 30.09.2017
---------------- ------------ ----------------------- ----------- -----------
Green & Smart
Ventures Sdn
Bhd Malaysia Note 1 Holding company 100% 100%
---------------- ------------ ----------------------- ----------- -----------
Green & Smart
Sdn Bhd Malaysia Note 1 IPP & EPCC contractor 100% 100%
---------------- ------------ ----------------------- ----------- -----------
Our Energy Group
(M) Sdn Bhd Malaysia Note 2 IPP 51% 51%
---------------- ------------ ----------------------- ----------- -----------
Note 1 - registered address: 3-2, 3rd Mile Square, No.151, Jalan
Kelang Lama, Batu 3 1/2 , 58100 Kuala Lumpur.
Note 2 - registered address: 54B Damai Complex, Jalan Lumut,
50400 Kuala Lumpur.
2. BASIS OF PREPARATION
The financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
("IFRS") issued by the International Accounting Standards Board
("IASB"), including related interpretations issued by the
International Financial Reporting Interpretations Committee
("IFRIC").
As permitted by Companies (Jersey) Law 1991 only the
consolidated financial statements are presented.
The financial statements are presented in RM unless otherwise
stated, and is the currency of the primary economic environment in
which the Group operates. All values are rounded to the nearest
thousand ringgit ("RM'000") except where otherwise indicated.
The results for 31 December 2018 are prepared for a 15 month
period and therefore the comparative amounts are not entirely
comparable.
Going Concern
The financial statements are required to be prepared on the
going concern basis unless it is inappropriate to do so.
The Directors, having considered "Going Concern and Liquidity
Risk: Guidance for Directors of UK Companies" issued by The
Financial Reporting Council in 2016, consider the going concern
basis of preparation to be appropriate in preparing the financial
statements. The key conclusions are summarised below.
The Group made a loss for the period of RM13.65m (2017: RM2.70m)
and recorded a net cash outflow from operating activities of
RM12.08m (2017: RM1.89m). At the reporting date the Group held cash
and cash equivalents of RM0.47m (2017: RM0.09m) and had current
liabilities of RM40.18m (2017: RM59.30m).
As described in note 7, amounts of RM17.91m (2017: RM24.3m) is
due to the Group from Concord Green Energy Sdn Bhd ("CGE"). Further
debts arose during the financial period of approximately RM Nil
(2017: RM19.47m) from CGE. During the period, a repayment schedule
was undertaken with CGE who committed to a monthly repayment of
RM2.0m until full and final settlement of outstanding debts. A
total of RM6.48m was collected during the financial period and a
further RM6.0m was collected post period end.
As described in note 8, amounts of RM38.33m (2017: RM51.15m) is
due to the Group from Megagreen Energy Sdn Bhd ("MGE"). Further
debts arose during the financial period of approximately RM1.27m
(2017: RM28.43m) from MGE. During the period, a repayment schedule
was undertaken with MGE who committed to a monthly repayment of
RM3.0m until full and final settlement of outstanding debts. A
total of RM14.09m was collected during the financial period. Post
period end, RM3.0m was collected but the repayment plan was paused
whilst re-negotiations are taking place.
The Directors consider the amounts owing to be recoverable in
full.
On 19 July 2018 the Company announced that it had raised
approximately RM17.09m (GBP3.2m) via the subscription for
51,806,000 new common shares by Serba Dinamik International Ltd, at
a price of approximately 6.19 pence (RM0.33) per share (the
"Subscription"). The net proceeds of the Subscription will be used
to advance the development of the Company's third fully-owned
biogas power plant at Minyak and for working capital purposes.
The Directors have prepared financial projections and plans for
a period of at least 12 months from the date of approval of these
financial statements, taking into account the proceeds of the
Subscription, and have considered the mitigating actions that could
be taken in the event that the anticipated receipts from Megagreen
Energy and Concord Green Energy are not forthcoming in accordance
with the assurances provided to the Directors by management of
those undertakings.
Based on their review of those financial projections and plans,
the Directors consider the going concern basis of preparation to be
appropriate.
New standards, amendments to and interpretations OF published
standards not yet IN effect
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective.
IFRS 9 is not expected to impact the measurement of financial
instruments, whilst IFRS 15 may have an impact on revenue
recognition relating to construction contracts. IFRS 16 will impact
the treatment of operating leases and their presentation.
The Group plans to adopt these new standards on the required
effective date. In the case of IFRS 15 this will be in the
financial year ending 31 December 2019. The majority of the Group's
revenue is expected to be driven by contract revenue. The Group
currently recognises revenue from contracts on a percentage
completion basis. The Directors are reviewing current and pipeline
contracts in order to assess the potential impact of IFRS 15 and
developing appropriate systems, internal controls, policies and
procedures necessary to collect information for the purpose of
disclosure as required by IFRS 15. Revenue from the sale of power
is currently recognised on delivery and IFRS 15 is not expected to
result in a material change to this.
The adoption of IFRS 16 is expected to have a material impact on
the Group's reported results in the following financial year. The
total future minimum lease payments under the non-cancellable
operating leases is approximately RM13.06m (2017: RM14.90m) (see
note 28).
3. basis of COnSOLIDATION
The consolidated financial statements comprise the financial
information of the Company and its subsidiaries made up to the end
of the reporting period. Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power over the investee. The consolidated financial
statements present the results of the Company and its subsidiaries
and joint arrangements as if they formed a single entity.
Inter-company transactions and balances between Group companies are
therefore eliminated in full. The financial information of
subsidiaries is included in the Group's financial statements from
the date that control commences until the date that control
ceases.
On 6 May 2016, the Company entered into agreements with all of
the shareholders of Green & Smart Ventures Sdn Bhd ("G&S
Venture") for a share for share exchange regarding the ordinary
shares in Green & Smart Holdings plc and ordinary shares in
G&S Venture. As a result of this transaction, the ultimate
shareholders in the Company received shares in Green & Smart
Holdings plc in direct proportion to their original shareholdings
in G&S Venture.
The acquisition of G&S Venture by the Company was that of a
re-organisation of entities which were under common control. As
such, that combination also falls outside the scope of IFRS 3
'Business Combinations' (Revised 2008). The Directors have,
therefore, decided that it is appropriate to reflect the
combination using the merger basis of accounting in order to give a
true and fair view. No fair value adjustments were made as a result
of that combination.
4. SIGNIFICANT ACCOUNTING POLICIES
4.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated by the
directors and management and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The estimates
and judgements that affect the application of the Group accounting
policies and disclosures, and have a significant risk of causing a
material adjustment to the carrying amounts of assets, liabilities,
income and expenses are discussed below: -
a) Impairment of assets
When the recoverable amount of an asset is determined based on
the estimate of the value-in-use of the cash-generating unit to
which the asset is allocated, the management is required to make an
estimate of the expected future cash flows from the cash-generating
unit and also to apply a suitable discount rate in order to
determine the present value of those cash flows.
b) Impairment of trade and other receivables
An impairment loss is recognised when there is objective
evidence that a financial asset is impaired. Management
specifically reviews its loans and receivable financial assets and
analyses historical bad debts, customer concentrations, customer
creditworthiness, current economic trends and changes in the
customer payment terms when making a judgement to evaluate the
adequacy of the allowance for impairment losses. Where there is
objective evidence of impairment, the amount and timing of future
cash flows are estimated based on historical loss experience for
assets with similar credit risk characteristics. If the expectation
is different from the estimation, such difference will impact the
carrying value of receivables.
As described in note 7, amounts of RM17.91m (2017: RM24.3m) is
due to the Group from Concord Green Energy Sdn Bhd ("CGE"). Further
debts arose during the financial period of approximately RM Nil
(2017: RM19.47m) from CGE. During the period, a repayment schedule
was undertaken with CGE who committed to a monthly repayment of
RM2.0m until full and final settlement of outstanding debts. A
total of RM6.48m was collected during the financial period. A
further RM6.0m was collected post period end.
As described in note 8, amounts of RM38.33m (2017: RM51.15m) is
due to the Group from Megagreen Energy Sdn Bhd ("MGE"). Further
debts arose during the financial period of approximately RM1.27m
(2017: RM28.43m) from MGE. During the period, a repayment schedule
was undertaken with MGE who committed to a monthly repayment of
RM3.0m until full and final settlement of outstanding debts. A
total of RM14.09m was collected during the financial period. Post
period end, RM3.0m was collected but the repayment plan was paused
whilst re-negotiations are taking place.
c) Construction contracts
As described in note 4.13, the Group's accounting approach
reflects a sound judgement as potential losses on contract are
being considered and reflected with its probability immediately
upon occurrence while contract revenue which cannot be estimated
reliably is realised only after confirmed by written agreement. The
carrying amounts of the Group's construction contracts due
from/(to) customers at the end of the reporting period/year are
disclosed in note 9 including any allowance for impairment if there
is a material uncertainty to fully recover costs of each
contract.
4.2 FUNCTIONAL AND FOREIGN CURRENCIES
a) Transactions and balances
Transactions in foreign currencies are converted into the
respective functional currencies on initial recognition, using the
exchange rates approximating those ruling at the transaction dates.
Monetary assets and liabilities at the end of the reporting period
are translated at the rates ruling as of that date. Non-monetary
assets and liabilities are translated using exchange rates that
existed when the values were determined. All exchange differences
are recognised in profit or loss.
b) Foreign operations
Assets and liabilities of foreign operations are translated to
RM at the rates of exchange ruling at the end of the reporting
period. Revenues and expenses of foreign operations are translated
at exchange rates approximating those ruling at the dates of the
transactions. All exchange differences arising from translation are
taken directly to other comprehensive income and accumulated in
equity under the foreign exchange translation reserve. On the
disposal of a foreign operation, the cumulative amount recognised
in other comprehensive income relating to that particular foreign
operation is reclassified from equity to profit or loss.
4.3 FINANCIAL INSTRUMENTS
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
4.3.1 Financial Assets
On initial recognition, financial assets are classified as
either financial assets at fair value through profit or loss,
held-to-maturity investments, loans and receivables financial
assets, or available-for-sale financial assets, as appropriate. The
Group currently holds financial assets as:
a) Loans and receivables financial assets
Trade receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are
classified as loans and receivables financial assets, using the
effective interest method less impairment. Interest is recognised
by applying the effective interest method, except for short-term
receivables when the recognition of interest would be
immaterial.
4.3.2 Financial Liabilities
All financial liabilities are initially measured at fair value
plus directly attributable transaction costs and subsequently
measured at amortised cost using the effective interest method
other than those categorised as fair value through profit or
loss.
Financial liabilities 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.
4.3.3 Equity Instruments
Instrument classified as equity are measured at cost and are not
remeasured subsequently.
a) Ordinary shares
Incremental costs directly attributable to the issue of new
ordinary shares or options are shown in equity as a deduction, net
of tax, from proceeds.
4.3.4 Derecognition
A financial asset or part of it is derecognised when, and only
when, the contractual rights to the cash flows from the financial
asset expire or the financial asset is transferred to another party
without retaining control or substantially all risks and rewards of
the asset. On derecognition of a financial asset, the difference
between the carrying amount and the sum of the consideration
received (including any new asset obtained less any new liability
assumed) and any cumulative gain or loss that had been recognised
in equity is recognised in profit or loss.
A financial liability or a part of it is derecognised when, and
only when, the obligation specified in the contract is discharged
or cancelled or expires. On derecognition of a financial liability,
the difference between the carrying amount of the financial
liability extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in profit or loss.
4.4 PROPERTY, PLANT AND EQUIPMENT
a) Owned Assets
Items of property, plant and equipment are stated at cost less
accumulated depreciation and any accumulated impairment losses, if
any. The cost of an asset comprises its purchase price and any
directly attributable costs of bringing the asset to the location
and condition for its intended use.
b) Depreciation
Depreciation is charged to profit or loss (unless it is included
in the carrying amount of another asset) on the straight-line basis
to write off the depreciable amount of the assets net of the
estimated residual values over their estimated useful lives. Assets
under construction is depreciated from the date it is ready to use.
Depreciation of an asset does not cease when the asset becomes idle
or is retired from active use unless the asset is fully
depreciated. The principal annual rates used for this purpose
are:-
Estimated Useful Lives
Office equipment 5 -10 years
-----------------------
Furniture and fittings 5 -10 years
-----------------------
Plant & machinery 20 years
-----------------------
Renovation 5 -10 years
-----------------------
Industrial building 50 years
-----------------------
Motor vehicle 5 years
-----------------------
The depreciation method, useful lives and residual values are
reviewed, and adjusted if appropriate, at the end of each reporting
period to ensure that the amounts, method and periods of
depreciation are consistent with previous estimates and the
expected pattern of consumption of the future economic benefits
embodied in the items of the property, plant and equipment.
c) Subsequent expenditure
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when the cost
is incurred and it is probable that the future economic benefits
associated with the asset will flow to the Group and the cost of
the asset can be measured reliably. The carrying amount of parts
that are replaced is derecognised. The costs of the day-to-day
servicing of property, plant and equipment are recognised in profit
or loss as incurred. Cost also comprises the initial estimate of
dismantling and removing the asset and restoring the site on which
it is located for which the Group is obligated to incur when the
asset is acquired, if applicable.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected from its
use. Any gain or loss arising from de-recognition of the asset is
recognised in profit or loss.
4.5 INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible
assets are carried at cost less accumulated amortisation and any
accumulated impairment losses (note 5). The useful lives of
intangible assets are assessed to be either finite or
indefinite.
Intangible assets with finite lives are amortised on
straight-line basis over the estimated economic useful lives and
assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite useful
life are reviewed at least at each financial period / year end.
The amortisation expense on intangible assets with finite useful
lives is recognised in the profit or loss in the expense category
consistent with the function of the intangible asset.
a) Trademark
Trademarks are stated at cost less accumulated amortisation and
any impairment losses (note 5). Trademarks are tested for
impairment annually or more frequently if the events or changes in
circumstances indicate that the carrying value may be impaired
either individually or at cash generating unit level. Trademarks
are amortised over a period of ten (10) years.
b) Research and development expenditure
Research expenditure is recognised as an expense when it is
incurred.
Development expenditure is recognised as an expense except that
costs incurred on development projects are capitalised as
non-current assets to the extent that such expenditure is expected
to generate future economic benefits. Such development expenditure
is capitalised if, and only if an entity can demonstrate all of the
following:
(i) its ability to measure reliably the expenditure attributable to the asset under development;
(ii) the product or process is technically and commercially feasible;
(iii) its future economic benefits are probable;
(iv) its intention to complete and the ability to use or sell
the developed assets; and
(v) the availability of adequate technical, financial and other
resources to complete the asset under development.
Capitalised development expenditure is measured at cost less
accumulated amortisation and impairment losses, if any. Development
expenditure initially recognised as an expense is not recognised as
assets in the subsequent period.
The development expenditure is amortised on a
straight-line-method over its expected useful life when the
products are ready for sale or use. In the event that the expected
future economic benefits are no longer probable of being recovered,
the development expenditure is written down to its recoverable
amount.
4.6 IMPAIRMENT
a) Impairment of Financial Assets
All financial assets (other than those categorised at fair value
through profit or loss), are assessed at the end of each reporting
period whether there is any objective evidence of impairment as a
result of one or more events having an impact on the estimated
future cash flows of the asset. For an equity instrument, a
significant or prolonged decline in the fair value below its cost
is considered to be objective evidence of impairment.
An impairment loss in respect of held-to-maturity investments
and loans and receivables financial assets is recognised in profit
or loss and 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.
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 through profit or loss to
the extent that the carrying amount of the financial asset at the
date the impairment is reversed does not exceed what the amortised
cost would have been had the impairment not been recognised.
b) Impairment of Non-Financial Assets
The carrying values of assets, other than those to which IAS 36:
Impairment of Assets does not apply, are reviewed at the end of
each reporting period for impairment when there is an indication
that the assets might be impaired. Impairment is measured by
comparing the carrying values of the assets with their recoverable
amounts. The recoverable amount of the assets is the higher of the
assets' fair value less costs to sell and their value--in--use,
which is measured by reference to discounted future cash flow.
An impairment loss is recognised in profit or loss
immediately.
When there is a change in the estimates used to determine the
recoverable amount, a subsequent increase in the recoverable amount
of an asset is treated as a reversal of the previous impairment
loss and is recognised to the extent of the carrying amount of the
asset that would have been determined (net of amortisation and
depreciation) had no impairment loss been recognised. The reversal
is recognised in profit or loss immediately.
4.7 INCOME TAXES
Income tax for the period comprises current and deferred
tax.
Current tax is the expected amount of income taxes payable in
respect of the taxable profit for the reporting period and is
measured using the tax rates that have been enacted or
substantively enacted at the end of the reporting period, and any
adjustment to tax payable in respect of previous financial
years.
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial
statements.
Deferred tax liabilities are recognised for all taxable
temporary differences other than those that arise from the initial
recognition of an asset or liability in a transaction which is not
a business combination and at the time of the transaction, affects
neither accounting profit nor taxable profit.
Deferred tax assets are recognised for all deductible temporary
differences, unused tax losses and unused tax credits to the extent
that it is probable that future taxable profits will be available
against which the deductible temporary differences, unused tax
losses and unused tax credits can be utilised. The carrying amounts
of deferred tax assets are reviewed at the end of each reporting
period/year and reduced to the extent that it is no longer probable
that sufficient future taxable profits will be available to allow
all or part of the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period/year when the asset
is realised or the liability is settled, based on the tax rates
that have been enacted or substantively enacted at the end of the
reporting period/year.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when the deferred income taxes relate
to the same taxation authority.
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 transactions either in
other comprehensive income or directly in equity. Deferred tax
arising from a business combination is included in the resulting
goodwill or excess of the acquirer's interest in the net fair value
of the acquiree's identifiable assets, liabilities and contingent
liabilities over the business combination costs.
4.8 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash in hand, bank balances,
demand deposits, bank overdrafts and short-term, highly liquid
investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value
with original maturity periods of three months or less.
4.9 EMPLOYEE BENEFITS
a) Short-term benefits
Wages, salaries, paid annual leave and sick leave, bonuses and
non-monetary benefits are measured on an undiscounted basis and are
recognised in profit or loss and included in the development costs,
where appropriate, in the period/year in which the associated
services are rendered by employees of the Group.
b) Defined contribution plans
The Group's contribution to defined contribution plans are
recognised in profit or loss in the period/year to which they
relate. Once the contributions have been paid, the Group has no
further liability in respect of the defined contribution plans.
4.10 REVENUE AND OTHER INCOME
(i) Revenue from construction contracts
Revenue from construction contracts is recognised based on the
methods as described in note 4.14(i).
(ii) Sale of goods
Revenue from the sale of goods is recognised upon delivery of
products and customers' acceptance, if any.
(iii) Government grants
Grants that compensate the Group for expenses incurred are
recognised in profit or loss on a systematic basis over the period
necessary to match them with the related costs which they are
intended to compensate for.
Grants that compensate the Group for the costs of assets are
recognised in profit or loss on a systematic basis over the
expected life of the related asset.
(iv) Revenue from Sale of Electricity
Revenue from the sale of electricity generated from the
renewable energy plant is recognised as and when the electricity is
delivered to the off-taker, based on the invoiced value of sale of
electricity, computed at a predetermined rate. Accrued unbilled
revenues are reversed in the following month when actual billing
occurs.
4.11 BORROWING COSTS
Borrowing costs, directly attributable to the acquisition,
construction or production of a qualifying asset, are capitalised
as part of the cost of those assets, until such time as the assets
are ready for their intended use or sale. Capitalisation of
borrowing costs is suspended during extended periods in which
active development is interrupted.
All other borrowing costs are recognised in profit or loss as
expenses in the period in which they are incurred. No interest
costs were capitalised during the period.
Investment income earned on the temporary investment of specific
borrowing pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
4.12 CONTINGENT LIABILITIES
A contingent liability is a possible obligation that arises from
past events and whose existence will only be confirmed by the
occurrence of one or more uncertain future events not wholly within
the control of the Group. It can also be a present obligation
arising from past events that is not recognised because it is not
probable that an outflow of economic resources will be required or
the amount of obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the
notes to the financial statements. When a change in the probability
of an outflow occurs so that the outflow is probable, it will then
be recognised as a provision.
4.13 CONSTRUCTION CONTRACTS
(i) Contract revenue
Contract revenue is recognised on the percentage of completion
method based on works performed. The stage of completion is
measured by reference to the actual cost incurred to date to
estimated total cost for each contract.
Where the outcome of a contract cannot be reliably estimated,
contract revenue is recognised to the extent of contract costs
incurred that are likely to be recoverable. Contract costs are
recognised as expenses in the period in which they are
incurred.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognised as an expense
immediately.
(ii) Amount due from / (to) customer for contract work
Amount due from / (to) customer for contract work is the net
amount of cost incurred for construction and contract-in-progress
plus profit attributable to contract-in-progress less foreseeable
losses, if any, and progress billings. Contract cost incurred to
date include costs directly related to the contract or attributable
to contract activities in general and costs specifically chargeable
to the customer under the terms of the contract.
5. INTANGIBLE ASSETS
Trademarks Patents Total
RM'000 RM'000 RM'000
Cost
At 1 October 2016 1,319 8 1,327
Addition - - -
At 30 September 2017 1,319 8 1,327
Addition - - -
At 31 December 2018 1,319 8 1,327
----------------------- ------------------------ -----------------------
Trademarks Patents Total
RM'000 RM'000 RM'000
Accumulated depreciation
At 1 October 2016 369 4 373
Charge for the year 54 1 55
At 30 September 2017 423 5 428
Charge for the period 67 1 68
At 31 December 2018 490 6 496
----------------------- ------------------------ -----------------------
Net book value
At 31 December 2018 829 2 831
----------------------- ------------------------ -----------------------
At 30 September 2017 896 3 899
----------------------- ------------------------ -----------------------
(a) Trademark
The trademarks "GRASS", "POME-MAS" and "GREENPAK" are registered
in Malaysia in respect of patented wastewater and bio-waste
treatment technologies. These trademarks have been granted for an
indefinite period, however, they are being amortised over ten (10)
years in line with Management's best estimate of their expected
useful life.
The remaining amortisation period of trademarks is between one
(1) to four (4) years, the remaining amortisation period of patents
is between seven (7) to thirteen (13) years.
6. PLANT AND EQUIPMENT
Furniture Renovation Office Equipment Assets under Industrial Motor Vehicle Total
& Fittings Construction Building
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At Cost
At 1 October 2017 159 344 167 14,672 21,587 807 37,736
Addition - - - 6,746 - - 6,746
At 31 December
2018 159 344 167 21,418 21,587 807 44,482
----------------------- ----------------------- ----------------------- ------------------- ------------------- ---------------------- -----------
Less: Accumulated
Depreciation
At 1 October 2017 32 58 52 - 810 240 1,192
Charge for the
period 21 44 38 - 1,349 202 1,654
At 31 December
2018 53 102 90 - 2,159 442 2,847
----------------------- ----------------------- ----------------------- ------------------- ------------------- ---------------------- -----------
Carrying Amount
At 31 December
2018 106 242 77 21,418 19,428 365 41,636
----------------------- ----------------------- ----------------------- ------------------- ------------------- ---------------------- -----------
Furniture Renovation Office Equipment Assets under Industrial Motor Vehicle Total
& Fittings Construction Building
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At Cost
At 1 October 2016 163 456 141 26,371 - 732 27,863
Additions - 18 31 9,888 - 75 10,012
Adjustments (4) (130) (5) - - - (139)
Reclassification - - - (21,587) 21,587 - -
At 30 September
2017 159 344 167 14,672 21,587 807 37,736
----------------------- ----------------------- ----------------------- ------------------- ------------------- ---------------------- -----------
Less: Accumulated
Depreciation
At 1 October 2016 15 35 26 - - 87 163
Charge for the
year 17 23 26 - 810 153 1,029
At 30 September
2017 32 58 52 - 810 240 1,192
----------------------- ----------------------- ----------------------- ------------------- ------------------- ---------------------- -----------
Carrying Amount
At 30 September
2017 127 286 115 14,672 20,777 567 36,544
----------------------- ----------------------- ----------------------- ------------------- ------------------- ---------------------- -----------
6. PLANT AND EQUIPMENT (CONT'D)
a) Included in the assets of the Group at the end of the
reporting period were motor vehicles with a total net book value of
RM0.37m (2017: RM0.57m), which were acquired under hire purchase
terms.
b) Assets under construction represents biogas power plant under
construction. It is subject to depreciation only when completed and
ready for use. No interest was capitalised during the financial
year, but total interest capitalised to date included in the Asset
under construction amounts to RM0.54m (2017: RM0.54m).
c) Industrial building with carrying amount of approximately
RM19.43m (2017: RM20.78m) and Assets under construction with
carrying amount of approximately RM21.42m (2017: RM14.67m) are
pledged against the banking facility (note 16).
d) Acquisition of plant and equipment: -
31.12.2018 30.09.2017
RM'000 RM'000
Cash paid to acquire property, plant
and equipment 6,746 9,933
----------- ------------------
7. TRADE AND OTHER RECEIVABLES
31.12.2018 30.09.2017
RM'000 RM'000
Trade receivables 20,152 104
Less: allowance for impairment loss (1,575) -
----------- -------------------------
18,577 104
----------- -------------------------
Other receivables & deposits 3,701 2,185
Less: allowance for impairment loss (503) (414)
----------- -------------------------
3,198 1,771
----------- -------------------------
21,775 1,875
-----------
Allowance for impairment losses
Opening balance (414) (300)
Reclassification (Note c) (1,435) -
Additions during the year (229) (114)
Closing balance (2,078) (414)
----------- -------------------------
a) The Group's normal credit terms range from 90 to 120 days
(2017: 90 to 120 days). Other credit terms are assessed and varied
on a case-by-case basis.
b) Trade and other receivables that are individually determined
to be impaired relate to customers that have defaulted on payments
or the amount due from third parties considered irrecoverable.
c) Include in the Trade Receivables is an amount of RM17.91m
(2017: RM24.3m) due from CGE. CGE was previously classified as a
Related Party (Note 8). During the financial period, a repayment
arrangement was structured with CGE for a monthly payment of RM2.0m
and total monies received during the financial period was RM6.49m.
Due to reclassification, the comparative amounts are not entirely
comparable.
8. AMOUNTS OWING BY / (TO) RELATED PARTIES
Party Relationship Trade Receivables Other Receivables Other Payables Total
RM'000 RM'000 RM'000 RM'000
31.12.2018
Megagreen
Energy Sdn Related
Bhd party 34,088 4,243 - 38,331
Less: Allowance for
impairment loss (3,762) - - (3,762)
30,326 4,243 - 34,569
Makmur
Hidro Related
Sdn Bhd. party - 66 - 66
30,326 4,309 - 34,635
----------------------- ----------------------- ----------------------- -----------------------
K2M
Ventures
Sdn Bhd Ultimate - - (3,972) (3,972)
holding
co.
30,326 4,309 (3,972) 30,663
----------------------- ----------------------- ----------------------- -----------------------
Party Relationship Trade Receivables Other Receivables Other Payables Total
RM'000 RM'000 RM'000 RM'000
30.9.2017
Megagreen
Energy Sdn Related
Bhd party 48,660 2,485 - 51,145
Concord
Green
Energy Sdn Related
Bhd party 24,398 1,250 - 25,648
73,058 3,735 - 76,793
----------------------- ----------------------- ----------------------- -----------------------
Less: Allowance
for impairment
loss (5,197) - - (5,197)
----------------------- ----------------------- ----------------------- -----------------------
67,861 3,735 - 71,596
----------------------- ----------------------- ----------------------- -----------------------
Makmur
Hidro Related
Sdn Bhd. party - 66 - 66
----------------------- ----------------------- ----------------------- -----------------------
67,861 3,801 - 71,662
K2M
Ventures
Sdn Bhd Ultimate - - (2,555) (2,555)
holding
co.
67,861 3,801 (2,555) 69,107
----------------------- ----------------------- ----------------------- -----------------------
31.12.2018 30.09.2017
RM'000 RM'000
Allowance for impairment losses
Opening balance 5,197 -
Reclassification (*) (1,435) -
Movement for the year - 5,197
Closing balance 3,762 5,197
------------------ ---------------------
* For the financial period to 31 December 2018, Concord Green
Energy Sdn Bhd ("CGE") is no longer classified as a related party
following the Group's disposal of its interest in the Company. The
outstanding amount is now reflected as a Trade Receivable (Note
7).
Amounts owing by related parties principally comprise trade
debts due from Megagreen Energy Sdn Bhd ("MGE"). The amounts due
are collectible in cash, have arisen in the ordinary course of the
business of the Group and are subject to credit terms of 30 days.
The amounts owing are analysed as follows:
31.12.2018 30.09.2017
RM'000 RM'000
Not past due - 47,041
Past due by less than 3 months - -
Past due by less than 3 - - -
6 months
Past due by 6 months and above 34,088 26,017
34,088 73,058
----------- ----------------------
During the financial period, a repayment arrangement was
structured with MGE for a monthly payment of RM3.0m and they have
continued to meet their payment obligation. Total monies received
during the financial period was RM14.09m. Post period end, RM3.0m
was collected but the repayment plan was paused whilst
re-negotiations are taking place.
9. DUE FROM/ (TO) CUSTOMERS FOR CONSTRUCTION CONTRACTS
31.12.2018 30.09.2017
RM'000 RM'000
Aggregate cost incurred to
date 52,669 52,669
Add: attributable profits 18,386 18,386
71,055 71,055
Less: progress billings (70,654) (70,654)
401 401
----------- ----------------------
Represented by:
Amounts owing from contract
customers 401 401
Amounts owing to contract - -
customers
10. CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the cash flow statement
comprise the following amounts:
31.12.2018 30.09.2017
RM'000 RM'000
Cash and bank balances 471 95
----------- -----------
11. STATED CAPITAL
No. of shares RM'000
Issued and Fully Paid-Up at no
par value
1 October 2015 2 -
Issuance of shares:
On 20 January 2016 100 -
On 6 May 2016 - share exchange
agreement 232,222,120 13,069
On 6 May 2016 - on AIM admission 44,444,445 24,531
Less: transaction costs - (2,458)
30 September 2016 276,666,667 35,142
-------------------------- -----------------------
Issuance of shares:
On 19 December 2016 10,761,367 6,000
On 19 June 2017 6,141,778 3,083
Less: transaction costs - (271)
30 September 2017 293,569,812 43,954
-------------------------- -----------------------
Issuance of shares:
-------------------------- -----------------------
On 19 July 2018 51,806,000 17,098
-------------------------- -----------------------
Less: transaction costs -
-------------------------- -----------------------
31 December 2018 345,375,812 61,052
-------------------------- -----------------------
On 19 December 2016, the Company issued 10,761,367 Ordinary
Shares at a subscription price of 10.62 pence per Subscription
Share pursuant to a Share Swap Agreement dated the same to MTDC.
This followed the conversion by MTDC of 6,000,000 Preference Shares
in Green & Smart Sdn Bhd, acquired pursuant to an Investment
Agreement dated 16 December 2016. At that date of the share
issuance, MTDC held 19,476,367 shares in the Company, amounting to
6.78% of the enlarged issued share capital of the Company, which
stood at 287,428,034.
During the financial year on 19 June 2017, the Company issued
6,141,778 Ordinary Shares (representing approximately 2.1% of the
Company's issued share capital as enlarged by the Shares) at 9p per
Ordinary Share to raise approximately RM3.12 million (GBP552,759,
at an exchange rate of RM5.6461 to GBP1) and 5,848,664 five-year
warrants (exercisable at 9.25 pence per share) to subscribe in
aggregate up to 5,848,664 Shares.
During the financial period on 19 July 2018, the Company issued
a further 51,806,000 Ordinary Shares (representing approximately
15% of the Company's issued share capital as enlarged by the
Shares) at 6.19p per Ordinary Share to raise approximately RM17.09m
(GBP3.12, at an exchange rate of RM5.4487 to GBP1).
At 31 December 2018, the Company's issued share capital was
345,375,812 ordinary shares.
12. TRADE AND OTHER PAYABLES
31.12.2018 30.09.2017
RM'000 RM'000
Trade payable 13,797 15,016
Other payables and accruals 17,091 33,124
30,888 48,140
----------- ---------------
The normal credit terms granted to the Group by the suppliers
are 90 days (2017: 90 days) from invoice date.
13. SHORT-TERM BORROWINGS
31.12.2018 30.09.2017
RM'000 RM'000
Mezzanine loan 1,509 1,412
Hire purchase payables (note
14) 87 81
Term loans (note 16) 7,691 9,668
9,287 11,161
----------- -----------
14. HIRE PURCHASE PAYABLES
31.12.2018 30.09.2017
RM'000 RM'000
Minimum hire purchase payments:
- not later than one year 110 110
- later than one year and not later
than five years 406 440
- later than five years 26 133
542 683
Less: Future finance charges (68) (126)
474 557
----------- -----------------------
Current
Not later than one year (note
13) 87 81
Non-current (note 17)
Later than one year and not later
than five years 362 421
Later than five years 25 55
387 476
474 557
----------- -----------------------
The hire purchase payables of the Group at the end of the
reporting period bore effective interest rates ranging from 5.20%
to 5.36% (2017: 5.20% - 5.36%).
15. DEFERRED GRANT INCOME
The Group received a government grant in financial years 2007
and 2008 which was provided for the project "Greenpak", to develop
a new individual septic tank using Upflow Anaerobic Sludge Blanket
principle. The grant income is amortised on a systematic basis over
the useful life of the related patent.
During the financial period ended 31 December 2018, an amortised
amount of RM15,625 was recognised (12 months of 2017: RM12,500) as
other income in profit or loss.
16. TERM LOAN
31.12.2018 30.09.2017
RM'000 RM'000
Current (note 13)
Not later than one year 7,691 9,668
----------- ---------------------
The term loans are secured against: -
(i) Capital work-in-progress as disclosed in note 7(c) to the financial statement;
(ii) Fixed and floating charge over present and future assets;
(iii) A guarantee by Credit Guarantee Corporation Berhad ("CGC");
(iv) Corporate guarantee from holding company; and
(v) Joint and several guarantees by the directors.
During the previous financial year, due to delayed repayment and
the lender being in a position to declare the term loan outstanding
as immediately due and payable, the entire term loan was
reclassified as a current liability. On 17 October 2017, the Group
received a supplemental letter of offer from the lender to vary the
terms & conditions of the facility & reschedule the
repayment period.
17. LONG TERM BORROWINGS
31.12.2018 30.09.2017
RM'000 RM'000
Hire purchase payables (note
14) 387 476
----------- ----------------------
18. AMOUNT OWING TO DIRECTORS
The amounts owing to directors are unsecured, interest free and
have no fixed terms of repayment.
19. REVENUE
Revenue represents contract revenue recognised based on
percentage of completion method and the net invoiced value of
powers sold, after allowances for returns and trade discounts. All
revenues are derived from Malaysia.
31.12.2018 30.09.2017
RM'000 RM'000
Contract revenue recognised based
on percentage of completion method 1,058 44,378
Net invoiced value of power sold 866 966
1,924 45,344
----------- -------------------
20. FINANCE COSTS
31.12.2018 30.09.2017
RM'000 RM'000
Bank charges 10 5
Bank guarantee charges 30 -
----------- ------------------------
Hire purchase interest 59 18
Short-term loan interest 1,124 155
Term loan interest 783 622
----------- ------------------------
1,966 795
----------- ------------------------
2,006 800
----------- ------------------------
21. PROFIT / (LOSS) BEFORE TAXATION
31.12.2018 30.09.2017
RM'000 RM'000
Profit/(loss) before taxation is
arrived at after charging/(crediting):-
Auditors' remuneration
Fees payable to Company's auditor and
its associates
for the audit of the consolidated financial
statements 136 337
Non-audit fees payable to Company's auditor relating
to the transaction services - 15
Allowance for impairment losses:
-
Investment in associates - 26
Amount owing by associates - 5,197
Other receivables - 114
Amortisation of intangible assets 68 55
Depreciation of plant and equipment 1,654 1,029
Rental of premises 173 152
Rental of equipment 12 8
Rental of motor vehicles 268 243
Unrealised (gain) /loss on foreign
exchange (19) 86
Realised gain on foreign exchange (88) (13)
Waiver of debt - (506)
Government grant income (16) (13)
Employees Provident Fund 433 321
22. INCOME TAX EXPENSE
The Company is regarded as resident for tax purposes in Jersey
and on the basis that the Company is neither a financial service
company nor a utility company for the purpose of the Income Tax
(Jersey) Law 1961, as amended, the Company is subject to income tax
in Jersey at a rate of zero per cent.
Green & Smart Sdn Bhd ("G&S") is granted BioNexus status
by a government agency, namely Malaysian Bioeconomy Development
Corporation Sdn Bhd (previously known as Malaysian Biotechnology
Corporation Sdn. Bhd). Therefore, G&S is entitled to tax
exemption on the statutory business income derived from approved
activities over five consecutive years of assessment commencing
from the first year in which G&S generates statutory income
from the relevant approved activities. The tax exemption expired in
the financial period ended 31 December 2018.
A reconciliation of income tax expense applicable to the profit
before taxation at the statutory tax rate to income tax expense at
the effective tax rate of the Group is as follows: -
31.12.2018 30.09.2017
RM'000 RM'000
Loss before taxation (13,653) (2,698)
----------- ---------------------
Tax at the statutory tax rate of 24% (2017:24%) (3,276) (647)
Tax effect
of:
Non-deductible expenses 3,438 2,420
Tax exempt
income (207) (4,470)
Under provision of income tax in the previous 11 -
financial year
Income tax expenses for the period/year 11 1
----------- ---------------------
Domestic income tax is calculated at the Malaysian statutory tax
rate of 24% (2017: 24%) of the estimated assessable profit for the
financial period.
Subject to the agreement of the Inland Revenue Board, at 31
December 2018, the Group has deferred tax assets not recognised in
the financial statements for the following item under the liability
method:-
31.12.2018 30.09.2017
RM'000 RM'000
Unabsorbed tax losses 1,264 1,260
----------- ---------------------
No deferred tax assets are recognised in the financial
statements for the above item as it is not probable that taxable
profits will be available against which the deductible temporary
differences can be utilised. The unused tax losses do not expire
under current tax legislation. The availability of unused tax
losses for offsetting against future taxable profits in Malaysia
are subject to there being no substantial changes in shareholdings
of the subsidiary undertakings under the Income Tax Act 1967 and
the application of guidelines issued by the tax authorities.
23. RELATED PARTY TRANSACTIONS
a) Identities of Related Parties
Parties are considered to be related to the Company if the
Company has the ability, directly or indirectly, to control or
jointly control the party or exercise significant influence over
the party in making financial and operating decisions, or vice
versa, or where the Company and the party are subject to common
control.
In addition to the information detailed elsewhere in the
financial statements, the Company has related party relationships
with its directors, key management personnel and entities within
the same group of companies.
b) Other than those disclosed elsewhere in the financial
statements, the Group also carried out the following significant
transactions with the related parties during the financial period:
-
31.12.2018 30.09.2017
RM'000 RM'000
Megagreen Energy Sdn. Bhd.
- Contract revenue - 25,060
- Amounts owing by related parties 34,569 47,383
Amount owing to K2M Ventures Sdn.
Bhd (3,972) (2,555)
Amount owing from Makmur Hidro
Sdn, Bhd. 66 66
Net amount owing to Saravanan Rasaratnam (1,204) (396)
Amount owing to Navindran Balakrishnan (1,428) (593)
Amount due to Serba Dinamik Sdn. (460) -
Bhd.
c) Compensation of key management personnel
The remuneration of directors and other members of key
management personnel during the period are as follows: -
31.12.2018 30.09.2017
RM'000 RM'000
Short-term employee benefits 2,355 1,673
Defined contribution plan (EPF) 183 167
2,538 1,840
----------- ----------------------
Included in the total key management
personnel
compensation are:-
Directors' remuneration 1,336 1,077
Executive Directors' Fees 426 455
Non-Executive Directors' Fees 445 455
2,207 1,987
----------- ----------------------
The key management personnel are those personnel having
authority and responsibility for planning, directing and
controlling the activities within the Group, either directly or
indirectly.
The payment of emoluments to the director is disclosed in the
remuneration report.
24. EARNINGS PER SHARE
The calculation of earnings per share is based on the following
earnings and number of shares:
31.12.2018 30.09.2017
Loss attributable to the owners
of the company (RM'000) (13,163) (2,696)
Weighted average shares in
issue for 315,155,645 286,273,137
basic earnings per share
Adjustment for:
Warrants instruments 7,232,013 2,845,503
Weighted average shares in
issue for
diluted earnings per share 322,387,658 289,118,640
------------ ------------
Basic earnings per share (RM
- cent) (4.33) (0.94)
Diluted earnings per share
(RM - cent) (4.33) (0.94)
------------ ------------
Diluted EPS amounts are calculated by dividing the profit or
loss for the year attributable to equity holders of the Group by
the weighted average number of ordinary shares outstanding during
the period plus the weighted average number of ordinary shares that
would be issued on conversion of all the dilutive potential
ordinary shares and issued warrants into ordinary shares. The
potential ordinary shares are anti-dilutive and therefore the
diluted loss per share has not been calculated.
25. RESERVES
a) Foreign currency translation reserves
The foreign exchange translation reserves arose from the
translation of the financial information of foreign subsidiaries
and are not distributable by way of dividends.
b) Merger reserves
The accounting treatment for Group reorganisation is scoped out
of IFRS 3. Accordingly, as required under IAS 8 - Accounting
Policies, Changes in Accounting Estimates and Errors, the Group has
referred to current UK GAAP to assist its judgement in identifying
a suitable accounting policy. The introduction of the new holding
company has been accounted for as a capital reorganisation using
the merger accounting principles prescribed under current UK GAAP.
Therefore, the consolidated financial statements of Green &
Smart Holdings plc are presented as if the Company has always been
the holding company for the Group.
The use of merger accounting principles has resulted in a
balance on Group capital and reserves that have been classified as
a merger reserve and included in the Group's shareholders' funds.
The consolidated financial statements include the results of the
Company and all its subsidiary undertakings made up to the same
accounting date.
26. CONTINGENCIES
No provisions are recognised on the following matters as it is
not probable that a future sacrifice of economic benefits will be
required or the amount is not capable of reliable measurement:-
31.12.2018 30.09.2017
RM'000 RM'000
Corporate guarantee given to licensed
banks for credit facilities granted
to a related party 32,729 33,446
----------- -----------
The Group has provided Megagreen Energy with a corporate
guarantee in support of a loan facility. As the Group has only a
15% interest in Megagreen, it has no effective control over whether
any claim may be made under this guarantee. Credit Guarantee
Corporation Malaysia Berhad has confirmed that repayment of the 60%
of the amount borrowed by Megagreen under the facility is
guaranteed by Credit Guarantee Corporation Malaysia Berhad up to
June 2025 pursuant to the Green Technology Financing Scheme -
established by the Malaysian government. On that basis, the
Directors expect the exposure of G&S under the guarantee to be
limited to approximately RM14.1m (2017: RM14.1m).
27. CAPITAL COMMITMENTS
At 31 December, the Group had the following capital commitments
in respect to plant & equipment:
31.12.2018 30.09.2017
RM'000 RM'000
Approved and contracted for construction
of plant and equipment 17,064 11,880
----------- -----------
28. OPERATING LEASE COMMITMENT
The Company leases a number of office premises, motor vehicles,
equipment and land under non-cancellable operating leases. The
future minimum lease payments under the non-cancellable operating
leases are as follows: -
31.12.2018 30.09.2017
RM'000 RM'000
Not later than one year 1,293 1,302
Later than one year and not later
than five years 4,124 4,747
Later than five years 7,638 8,841
13,055 14,890
------------------ ------------------
29. OPERATING SEGMENTS
(a) Operating segments
Operating segments are prepared in a manner consistent with the
internal reporting provided to the management as its chief
operating decision maker in order to allocate resources to segments
and to assess their performance. Currently the Group operates under
two operating segments providing consulting and contract services
to customers in the renewable energy sector and the supply of power
to National Grid.
Information on geographical segments is not presented as the
Group operates wholly in Malaysia where all of its assets and
liabilities are located.
The information provided to management for the reportable
segments during each period/year are as follows:
Consulting
Business Segments & contract Power Head office Total
RM'000 RM'000 RM'000 RM'000
31.12.2018
Contract revenues 1,058 - - 1,058
Power sold - 866 - 866
------------------ ----------------- -------------- -----------------
Group revenues 1,058 866 - 1,924
Gross Profit/(Loss) 222 (2,061) - (1,839)
Net Loss (6,282) (7,382) - (13,664)
Segment Assets 51,547 43,957 4,245 99,749
Segment Liabilities 15,965 16,875 15,695 48,535
Capital Expenditure - 6,746 - 6,746
Depreciation and amortisation - 1,418 304 1,722
Consulting
Business Segments & contract Power Head office Total
RM'000 RM'000 RM'000 RM'000
30.09.2017
Contract revenues 44,378 - - 44,378
Power sold - 966 966
------------------ ----------------- -------------- -----------------
Group revenues 44,378 966 - 45,344
Gross Profit/(Loss) 12,491 (1,326) - 11,165
Net Loss (1,186) (1,510) - (2,696)
Segment Assets 72,097 36,704 2,675 111,476
Segment Liabilities 36,809 15,347 12,026 64,182
Capital Expenditure - 9,872 - 9,872
Depreciation and amortisation - 810 219 1,029
(b) Information about major customers
During the financial period, the following customers contributed
more than 10% of the revenue for the Group:
31.12.2018 30.09.2017
RM'000 RM'000
Megagreen Green Sdn Bhd - 25,060
Felcra Processing & Engineering 1,058 -
Sdn Bhd
Tenaga Nasional Berhad 866 -
Concord Green Energy Sdn Bhd - 19,318
1,924 44,378
----------- -----------
30. WARRANT INSTRUMENTS
31.12.2018 30.09.2017
Average exercise Number Average exercise Number
price per warrants of warrants price per warrants of warrants
At 1 October 0.092p 7,232,013 0.09p 1,383,333
Granted during
the period/year - - 0.0925p 5,848,680
Exercised during
the period/year - - - -
Forfeited during
the period/year - - - -
As at 31 December 0.092p 7,232,013 0.092p 7,232,013
-------------------- ------------- -------------------- -------------------
On 6 May 2016, the Company granted 1,383,333 warrants to S.P.
Angel Corporate Finance LLP, the Company's nominated adviser, at
the exercise price of 9 pence each with an expiring date of 5
years.
On 19 June and 28 June 2017, the Company issued 5,848,680
warrants to subscribers to a private placing arranged by Charles
Street Securities Europe LLP ("CSS") and to CSS as part of the fee
arrangements for arranging the placement. Of the total warrants
issued, 2,777,778 were issued to CSS as fees payable in connection
with that placement. The warrants issued to subscribers are outside
the scope of IFRS2. In accordance with IFRS2 the fair value of the
warrants issued as fees for the placement services provided has
been estimated as RM220,000. This has been recognised within the
stated capital component of equity as the costs were directly
incurred in raising the related equity funds.
31. ULTIMATE CONTROLLING PARTIES
Although K2M Ventures Sdn Bhd held 32.52% of the Company's share
capital at the reporting date, as that entity is jointly controlled
by Saravanan Rasaratnam and Navindran Balakrishnan, the Directors
consider there is no ultimate controlling party.
32. FINANCIAL INSTRUMENTS
The Group's activities are exposed to a variety of market risks
(including foreign currency risk, interest rate risk and equity
price risk), credit risks and liquidity risks. The Group's overall
financial risk management policy focuses on the unpredictability of
finance market and seek to minimise potential adverse effects on
the Group's financial performance by having in place adequate
financial resources for the development of the Group's business
whilst managing its market risk, credit risk and liquidity
risk.
The Group holds the following financial instruments:
31.12.2018 30.09.2017
RM'000 RM'000
Financial Assets
Trade receivables 18,577 104
Other receivables and deposits 3,198 1,771
Amount owing by contract customers 401 401
Amount owing by related parties 34,635 71,662
Cash and bank balances 471 95
57,282 74,033
----------- -----------
Financial Liabilities
Trade payables 13,797 15,016
Other payables and accruals 17,091 33,124
Amount owing to related parties 3,972 2,555
Amount owing to directors 3,891 1,726
Hire purchase payables 474 557
Term loans 9,200 11,080
48,425 64,058
----------- -----------
32.1 Financial Risk Management Policies
The following sections provide details on the Group's exposure
to the abovementioned financial risks and the objectives, policies
and processes for the management of these risks.
32.1.1 Market Risk
(a) Foreign Currency Risk
The Group is exposed to foreign currency risk on transactions
and balances that are denominated in currencies other than
functional currency. The currencies giving rise to this risk are
primarily the United States Dollar ("USD") and Great British Pound
("GBP"). Foreign currency risk is monitored closely on an on-going
basis to ensure that the net exposure is at an acceptable level. At
the end of the reporting period, the Group does not have any
derivative financial instruments used to hedge foreign currency
risk.
The Group exposure to foreign currency risk, based on the
carrying amounts at the reporting date is as follows:
USD GBP RM TOTAL
31.12.2018 RM'000 RM'000 RM'000 RM'000
Financial Assets
Trade receivables - - 18,577 18,577
Other receivables and
deposit - - 3,198 3,198
Amount owing by contract customers - - 401 401
Amount owing by related
parties - - 34,635 34,635
Cash and bank balance 13 - 458 471
13 - 57,269 57,282
------- -------- --------- ---------
Financial Liabilities
Trade payables 936 - 12,861 13,797
Other payables and accruals - 1,774 15,317 17,091
Amount owing to related
parties - 1,938 2,034 3,972
Amount owing to directors - 1,986 1,905 3,891
Hire purchases - - 474 474
Term loans - 1,509 7,691 9,200
936 7,207 40,282 48,425
------- -------- --------- ---------
Net financial assets/(liabilities) (923) (7,207) 16,987 8,857
Less: Net financial liabilities
denominated - - (16,987) (16,987)
in the Company's functional currency
Currency exposure (923) (7,207) - (8,130)
------- -------- --------- ---------
USD GBP EURO RM TOTAL
30.09.2017 RM'000 RM'000 RM'000 RM'000 RM'000
Financial Assets
Trade receivables - - - 104 104
Other receivables and
deposits - 26 - 1,745 1,771
Amount owing by contract
customers - - - 401 401
Amount owing by related parties - - - 71,662 71,662
Cash and bank balance 1 13 - 81 95
1 39 - 73,993 74,033
-------- ----------------------- -------- ------------------------ ---------
Financial Liabilities
Trade payables 3,153 1,586 3,332 6,945 15,016
Other payables and accruals - 334 - 32,790 33,124
Amount owing to related
parties 2,005 - - 550 2,555
Amount owing to directors - 1,217 - 509 1,726
Hire purchase - - - 557 557
Term loans - 1,412 - 9,668 11,080
5,158 4,549 3,332 51,019 64,058
-------- ----------------------- -------- ------------------------ ---------
Net financial
assets/(liabilities) (5,157) (4,510) (3,332) 22,974 9,975
Less: Net financial liabilities
denominated
in the Company's functional
currency - - - (22,974) (22,974)
Currency exposure (5,157) (4,510) (3,332) - (12,999)
-------- ----------------------- -------- ------------------------ ---------
The following details the sensitivity analysis of the Group's
profit after tax to a reasonably possible change in the foreign
currencies at the end of the reporting period with all other
variables held constant:
Increase/(Decrease)
31.12.2018 30.09.2017
RM RM
Effects on Profit After
Taxation
USD/RM
- strengthened by 1% (9) (51)
- weakened by 1% 9 51
GBP/RM
- strengthened by 1% (72) 45
- weakened by 1% 72 (45)
EUR/RM
- strengthened by 1% - 33
- weakened by 1% - (33)
A weakening of the above currencies against Ringgit Malaysia at
the reporting date would have had the equal but opposite effect on
the above currencies to the amounts shown above, with all other
variables held constant.
(b) Interest Rate Risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group's exposure to interest
rate risk arises mainly from interest-bearing financial
liabilities. The Group's policy is to obtain the most favourable
interest rates available. Any surplus funds of the Group will be
placed with licensed financial institutions to generate interest
income.
The sensitivity analysis is not presented as the sensitivity
impact is immaterial because the loan has a fixed interest rate
which is subsequently rolled-up into the principal.
(c) Equity Price Risk
The Group does not have any quoted investments and hence is not
exposed to equity price risk.
32.1.2 Credit Risk
The Group's exposure to credit risk, or the risk of
counterparties defaulting, arises mainly from trade and other
receivables. The Group manages its exposure to credit risk by the
application of credit approvals, credit limits and monitoring
procedures on an ongoing basis.
The Group uses ageing analysis to monitor the credit quality of
the trade receivables. Any receivables having significant balances
past due, which are deemed to have higher credit risk, are
monitored individually.
The Group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of the trade
and other receivables as appropriate. The main components of this
allowance are a specific loss component that relates to
individually significant exposures, and a collective loss component
established for groups of similar assets in respect of losses that
have been incurred but not yet identified (where applicable).
Impairment is estimated by management based on prior experience and
the current economic environment.
The Group provided a financial guarantee to financial
institutions for credit facilities granted to an associate
undertaking, as disclosed in note 27 to the financial statements.
The Group monitors its exposure to credit risk, or the risk of
counterparties defaulting, arises mainly from trade and other
receivables. The Group manages its exposure to credit risk by the
application of credit approvals, credit limits and monitoring
procedures on an on-going basis.
Credit risk concentration profile
The Group's major concentration of credit risks relates to the
amount owing by 2 (2017: 2) customers which constitutes
approximately 90% (2017: 98%) of its trade & other receivables
at the end of the reporting period.
The ageing analysis of receivables (including amount owing by
associates and amount owing by affiliates) and at the end of the
reporting period is disclosed in note 9.
At the end of the reporting period, trade receivables that are
individually impaired were those with significant long outstanding
obligations. These receivables are not secured by any collateral or
credit enhancement, but have nevertheless demonstrated that they
are meeting their obligations though payments have been
protracted.
32.1.3 Liquidity Risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group
maintains a level of cash and cash equivalents and bank facilities
deemed adequate by the management to ensure as far as possible,
that they will have sufficient liquidity to meet its liabilities
when they fall due.
The following table sets out the maturity profile of the
financial liabilities at the reporting date based on contractual
undiscounted cash flows:
Contractual
Effective undiscounted
interest rate Carrying amount cashflow Within 1 year 1-5 years
% RM'000 RM'000 RM'000 RM'000
31.12.2018
Trade payables 13,797 13,797 13,797 -
Other payables and accruals 17,091 17,091 17,091 -
Amount owing to related
parties 3,972 3,972 3,972 -
Amount owing to directors 3,891 3,891 - 3,891
Hire purchase payables 6.4-6.9 474 474 87 387
Term loans 5.0-8.0 9,200 9,200 9,200 -
48,425 48,425 44,147 4,278
------------------- -------------- ----------------------- ----------
30.09.2017
Trade payables 15,016 15,016 15,016 -
Other payables and accruals 33,124 33,124 33,124 -
Amount owing to related
parties 2,555 2,555 2,555 -
Amount owing to directors 1,726 1,726 - 1,726
Hire purchase payables 6.4 - 6.9 557 557 81 476
Term loans 5.0 - 8.0 11,080 11,080 11,080 -
64,058 64,058 61,856 2,202
------------------- -------------- ----------------------- ----------
32.1.4 Fair Values Measurements
The fair values of the financial assets and financial
liabilities maturing within the next 12 months approximated their
carrying amounts due to the relatively short-term maturity of the
financial instruments.
Fair Value of Financial Instrument Fair Value of Financial Instrument Total Carrying
Carried at Fair Value Not Carried at Fair Value Fair Amount
Value
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
31.12.2018
Term loans - - - - 9,200 - 9,200 9,200
Hire
purchase
payables - - - - 474 - 474 474
Amount owing
to
directors - - - - - 3,891 3,891 3,891
---------- ----------- ------------ ---------- ---------- ---------- ---------- ---------
30.09.2017
Term loans - - - - 11,080 - 11,080 11,080
Hire
purchase
payables - - - - 557 - 557 557
Amount owing
to
directors - - - - - 1,726 1,726 1,726
---------- ----------- ------------ ---------- ---------- ---------- ---------- ---------
32.1.4 Fair Values Measurements
Fair Value of Financial Instruments Not Carried at Fair
Value
The fair values, which are for disclosure purposes, have been
determined using the following basis:-
(i) The fair value of term loan with fixed interest rate is
determined by discounting the relevant cash flows using current
market interest rate for similar instruments at the end of the
reporting period. The interest rate (per annum) used to discount
the estimated cash flows is as follows:-
31.12.2018 30.09.2017
% %
Hire purchase payables 6.4-6.9 6.4-6.9
Term loan (fixed interest
rate) 5.0-8.0 5.0-8.0
=========== ===========
(ii) The carrying amount of term loan with variable interest
rate approximates its fair value.
(iii) The fair value of amount owing to directors (non-current)
is determined by discounting the relevant cash flows using current
market interest rates for similar instruments at rates of 4.5% per
annum.
33. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that it will be able to
maintain an optimal capital structure so as to support their
businesses and maximise shareholders' value. To achieve this
objective, the Group may make adjustments to the capital structure
in view of changes in economic conditions, such as adjusting the
amount of dividend payment, returning of capital to shareholders or
issuing new shares.
The Group manages its capital based on debt-to-equity ratio that
complies with debt covenants and regulatory, if any. The
debt-to-equity ratio is calculated as total borrowings from
financial institutions divided by total equity.
There was no change in the Group's approach to capital
management during the financial period.
The debt-to-equity ratio of the Group at the end of the
reporting period was as follows:
31.12.2018 30.09.2017
RM'000 RM'000
Hire purchase payables 474 557
Term loans 9,200 11,079
Less: Cash and bank balances (471) (95)
Net debt 9,203 11,541
----------- ----------------
Total shareholders'
equity 51,175 47,250
----------- ----------------
Debt-to-equity ratio 0.18 0.24
34. SIGNIFICANT EVENT OCCURING AFTER THE REPORTING PERIOD
None.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KVLFLKXFBBBX
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