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TRANSCRIPT
Corporate Information
Chairman’s Statement
Financial Highlights
Profile of Board of Directors
Profile of Chief Executive Officer
Financial Statements
Property of the Group
Analysis of Shareholdings
Notice of Annual General Meeting
Proxy Form
2
3-5
6
7-8
9
10
90
91-92
93-95
CONTENTS
Andalusian Villa in Village 4,Al-Falah Community Development Project in
Abu Dhabi
Multipurpose Hall atBesut Setiu Agropolitan Project in Terengganu
SPK-SENTOSA CORPORATION BERHAD (5347-X)2
Corporate Information
BOARD OF DIRECTORS Gen. Tan Sri Yaacob Bin Mat Zain (R)Chairman Ir. Dr. Azman Bin AhmadExecutive Director Brig. Gen. Dato’ Mohd Hashim Bin Haji Abu (R)
Rear Admiral Dato’ Yaacob Bin Haji Daud (R)
Lt. Gen. Datuk Hj Md Hanif Bin Hj Darimi RMAF (R) Bala Krishnan A/L Ponniah CHIEF EXECUTIVE OFFICER
Saiful Aznir Bin Shahabudin
COMPANY SECRETARY Fateh Hanum Bte Khairuddin(LS 0009093)
AUDITORS Ernst & Young21st Floor, MWE Plaza,No. 8 Lebuh Farquhar, 10200 Penang
REGISTRAR Shareworks Sdn Bhd 10-1, Jalan Sri Hartamas 8, Sri Hartamas50480 Kuala LumpurTel : +603 6201 1120Fax : +603 6201 3121
REGISTERED OFFICE 12th Floor, Menara PerakNo. 24, Jalan Perak, 50450 Kuala LumpurTel : +603 2264 5555Fax : +603 2264 5545
Animal Production Units in Besut SetiuAgropolitan Project in Terengganu
Modern Villa in Village 4,Al-Falah Community Projectin Abu Dhabi
Housing Area in Besut SetiuAgropolitan Project
in Terengganu
Dear valued shareholders,
On behalf of the Board of Directors, I hereby present the Annual Report and Audited Financial Statements of the Company and the Group for the financial year ended 31 December 2012.
ANNUAL REPORT 2012 3
Dear valued shareholders,
On behalf of the Board of Directors, I hereby present the Annual Report and Audited Financial Statements of the Company and the Group for the financial year ended 31 December 2012.
Chairman’sStatement
GROUP PERFORMANCE REVIEW
Revenue of the Group for the financial year ended 31 December 2012 was RM354.2 million compared to RM617.7 million in the previous year. This is mainly attributable to the Group’s international construction project in the United Arab Emirates (“UAE”) which is nearing completion. Furthermore, there was no significant new contracts achieved during the year under review.
The Group posted a significantly higher loss before tax of RM61.9 million compared to a loss before tax of RM7.6 million in 2011. This is mainly due to a higher operating loss from the construction segment and the recognition of impairment loss for goodwill amounting to RM18.5 million.
The Group’s construction segment registered an operating loss of RM42.6 million which was primarily due to the recognition of additional costs of labour, materials and variation orders for the international construction segment. The Group has initiated appropriate action to claim these additional costs.
The oil and gas segment also reported an operating loss of RM3.7 million due to business development costs incurred while performance from the associated company providing helicopter aviation services improved due to revision of rates charged to customers and new contracts secured.
The financial and operational difficulties faced by our Group has culminated in the Company being designated an affected Practice Note 17 (“PN17”) company by Bursa Malaysia Securities Berhad on 28 February 2013. The PN17 criteria was triggered based on the Group’s quarterly report for the period ended 31 December 2012 where the shareholders’ equity is less than 25% of the Group’s issued and paid-up capital.
The Company has withdrawn its listing status from the Official List of the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”). In compliance with Bursa Securities’ requirement for this withdrawal, Sharikat Permodalan Kebangsaaan Berhad
SPK-SENTOSA CORPORATION BERHAD (5347-X)4
Chairman’s Statementcont’d
(“SPKB”) had undertaken a voluntary general offer (“General Offer”) to acquire all the remaining ordinary shares of the Company not already held by SPKB and by SPKB’s wholly owned subsidiary. The General Offer was closed on 1 April 2013 and the Company was officially delisted on 19 April 2013.
REVIEW OF OPERATIONS
Construction Division
The projects undertaken during 2012 include the following:
o Al Falah Village 4 Project
This AED950 million contract involves the construction and completion of 730 villas for Village 4 of Al Falah Community Development Project in Abu Dhabi. Commenced in January 2010, this project is substantially complete and we expect to deliver the project to the client by the 3rd quarter of 2013.
o Pekan Agropolitan Project
This RM29 million contract involves the construction and completion of 213 units of houses, 10 units management quarters, amenities and infrastructure works for Pekan Agropolitan Development. The project was completed and delivered to the client in August 2012.
o Besut Setiu Agropolitan Project
This RM60 million contract involves the construction and completion of 100 units of houses, 5 units management quarters, amenities, 52 animal production units (“APU”), fodder plot and other associated facilities and infrastructure works for Besut Setiu Agropolitan Development. Commenced in September 2010, this project is substantially complete. However, due to major changes in the sewerage system requested by the relevant authorities, we are pursuing an EOT for the completion of the project. We expect to complete and hand over the project to the client by the 2nd quarter of 2013.
Oil and Gas Division
During the year, the Division focused on executing its existing projects as follows:
o GUMUSUT Kakap FPS Hull Project
This RM24 million contract which involves the execution of painting and blasting works for Gumusut-Kakap FPS
Hull project, was undertaken by a 80:20 joint-venture between our jointly controlled entity, namely Xervon Corp Sdn Bhd (formerly known as ThyssenKrupp Xervon Corp. Sdn Bhd), and Mindus (M) Sdn Bhd. Major works have been completed in accordance with the scheduled work programme and we are currently completing the touch up works. The final delivery of the project is expected to be in June 2013.
o Provision of Helicopter Aviation Services
Since its inception, the Awan group has performed well without incident and has been rated as one of the best helicopter aviation services provider in the South East Asia region.
The group operates 3 EC225 helicopters, 2 of which were purchased from Eurocopter Malaysia Sdn Bhd, and 1 S76C++ helicopter which together with the 3rd EC225, are under lease from CHC Helicopters (“CHC”). The group operates at 3 bases, namely Miri, Labuan and Kota Kinabalu.
PROSPECTS FOR 2013
Although the global growth outlook is expected to improve in 2013, the overall global situation continues to remain challenging. The pace of growth is contingent on the strength of the revival in private sector activity in the US, the commitment towards a credible and comprehensive set of crisis resolution polices in the euro area and the sustainability of domestic demand in the emerging economies.
Helicopter EC225 and Hangar atMiri General Aviation Area, Miri Airport
ANNUAL REPORT 2012 5
Chairman’s Statementcont’d
2013 seems likely to see the Malaysian economy continuing its growth momentum from 2012 which will be anchored by the continued resilience in domestic demand, supported by an expected maintenance of a low-interest rate policy and the further roll-out of the Economic Transformation Programme (“ETP”). However Malaysia cannot be immune from international events since the economy is susceptible to the pace of recovery of the global economy as mentioned above.
Growth in the construction sector is projected to remain strong, supported by the acceleration of ongoing major infrastructure projects particularly from the ETP and the Second Rolling Plan construction-related projects. The outlook of the oil and gas industry is expected to strengthen due to a recovery in the production of natural gas, and higher output of crude oil and condensates arising from the commencement of production from both marginal and new fields, such as Gumusut-Kakap in Sabah, and new wells in Sarawak and Terengganu.
Even though there are signs of recovery, we are cautiously optimistic of the prospects for the Group in 2013. Amid a very competitive domestic construction industry, the Group has previously been focusing on the construction industry in the UAE and as such, the Group may not be able to take advantage of the favourable outlook of the domestic construction industry in the immediate term. Despite this the Group will continue to pursue new domestic contracts to enhance our order book whilst concentrating on completing existing projects locally and internationally. The Group has relatively low levels of order book and thus far, the Group has managed to secure only 1 contract valued at RM143.1 million, for the design, development and maintenance of facilities through Public Private Partnership.
In addition, despite the Group’s effort in pursuing several opportunities in oil and gas support services, there is difficulty in securing new contracts due to the Group’s limited track record in the oil & gas industry. As an avenue to pursue new opportunities, the Company had entered into a shareholders’ agreement with Superior Energy Services B.V. for the formation of a joint venture company, Superior Energy Services (KL) Sdn Bhd for the purpose of carrying on the business of oilfield services and equipment, specialised in serving the drilling and production-related needs of oil and gas companies, as well as plug and abandonment and decommissioning services required at the end of a well’s life.
Overall the Board anticipates the coming year to be challenging based on the above and is uncertain if the Group is able to turnaround the business and return the Group to profitability in the short to medium term. In view of this the Board is also uncertain of the Group’s prospects in the long term.
ACKNOWLEDGEMENT
On behalf of my fellow Board members, I would like to express our utmost appreciation to our valued shareholders, business associates, customers, bankers, sub-contractors, suppliers and regulatory authorities for their steadfast support and unwavering confidence in our Group.
I would also like to thank the Management and staff for their dedication and commitment they have displayed amidst the challenges of a highly competitive and difficult operating environment during the course of the year. And last but not least, I would like to express my sincere appreciation and thanks to my fellow Board members for their foresight, guidance and invaluable advice that has helped steer the Group through the year.
Gen. Tan Sri Yaacob Bin Mat Zain (R)Chairman
SPK-SENTOSA CORPORATION BERHAD (5347-X)6
Financial HighlightsFive Year Group Financial Statistics
2012 2011 2010 2009 2008
RM’000 RM’000 RM’000 RM’000 RM’000
Revenue 354,203 617,676 360,599 210,061 208,447
Loss before tax (61,923) (7,641) (10,464) (14,669) (72,681)
Income tax expense (434) (147) 7,583 1,639 (2,371)
Loss for the year (62,357) (7,788) (2,881) (13,030) (75,052)
Loss attributable to owners of the parent (62,276) (7,879) (3,207) (13,645) (74,269)
Issued share capital 133,944 133,944 133,944 133,944 133,944
Reserves (129,591) (68,010) (59,789) (55,778) (41,928)
Non-controlling interests 10 (75) - - 87
Total equity 4,363 65,859 74,155 78,166 92,103
Total assets 177,987 342,654 352,111 274,394 281,128
Total liabilities (173,624) (276,795) (277,956) (196,228) (189,025)
Loss per share (sen) (46.5) (5.9) (2.4) (10.2) (55.5)
Gross dividend per share (sen) - - - - -
Net tangible assets per share (RM) 0.03 0.35 0.42 0.45 0.53
Net assets per share (RM) 0.03 0.49 0.55 0.58 0.69
Segment Reporting
2012 2011 2010 2009 2008
RM’000 RM’000 RM’000 RM’000 RM’000
REVENUE
Construction 348,694 601,771 321,572 185,498 87,987
Oil and gas 5,509 15,905 39,027 24,563 120,460
Others - - - - -
354,203 617,676 360,599 210,061 208,447
(LOSS)/PROFIT BEFORE TAX
Construction (45,688) (7,311) 1,591 (12,470) (16,936)
Oil and gas 2,071 19 (11,457) 2,171 (53,858)
Others (18,306) (349) (598) (4,370) (1,887)
(61,923) (7,641) (10,464) (14,669) (72,681)
ANNUAL REPORT 2012 7
Profile of Board of Directors
Gen. Tan Sri Yaacob Bin Mat Zain (R)ChairmanMalaysianAge: 77
Y.Bhg. Gen. Tan Sri Yaacob Bin Mat Zain (R), was appointed to the Board of Directors of SPK-Sentosa Corporation Berhad on 12 November 1997. He was the Chief of Defence Staff of the Malaysian Armed Forces, prior to his retirement in June 1993. Among the principal appointments held by him during his illustrious career in the Armed Forces included that of the Divisional Commander, Director of Military Intelligence, Chief of Army and subsequently Chief of the Malaysian Armed Forces. Currently, Gen. Tan Sri Yaacob Bin Mat Zain (R) also serves on the Board of various public and private companies, namely Sharikat Permodalan Kebangsaan Berhad, Affin Investment Bank Berhad and Mah Sing Group Berhad.
Gen. Tan Sri Yaacob Bin Mat Zain (R) does not have any family relationship with any Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has no conviction for any offences within the past 10 years.
Brig. Gen. Dato’ Mohd Hashim Bin Haji Abu (R)Malaysian
Age: 67
Y.Bhg. Brig. Gen. Dato’ Mohd Hashim Bin Haji Abu (R) was appointed to the Board of Directors of SPK-Sentosa Corporation Berhad on 26 March 2002. He was commissioned into the Royal Engineer Regiment of the Malaysian Armed Forces in 1965 and has attended various courses in various military institutions in Australia, United States of America and United Kingdom. His last held position prior to his retirement was Chief Engineer in the Malaysian Armed Forces with the rank of Brigadier General.
Brig. Gen. Dato’ Mohd Hashim Bin Haji Abu (R) does not have any family relationship with any Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has no conviction for any offences within the past 10 years.
Rear Admiral Dato’ Yaacob Bin Haji Daud (R)MalaysianAge: 70
Y.Bhg. Rear Admiral Dato’ Yaacob Bin Haji Daud (R) was appointed to the Board of Directors of SPK-Sentosa Corporation Berhad on 9 January 2009. He was the Director of Special Federal Task Force, National Security Council of the Prime Minister’s Department, prior to his retirement in June 1997. He graduated from the Britannia Royal Naval College, Dartmouth, England and was commissioned into the Royal Malaysian Navy in 1964. He has attended various courses in United Kingdom, United States of America, Netherlands and Australia. Among the principal appointments held by him during his career in the Navy included that of the Commanding Officer of ships, Director of Operations and Training in the Malaysian Armed Forces Headquarters, Fleet Operational Commander and Deputy Chief of Navy. He currently serves on the board of Ketengah Perwira Sdn. Bhd.
Rear Admiral Dato’ Yaacob Bin Haji Daud (R) does not have any family relationship with any Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has no conviction for any offences within the past 10 years.
SPK-SENTOSA CORPORATION BERHAD (5347-X)8
Lt. Gen. Datuk Hj Md Hanif Bin Hj Darimi RMAF (R)MalaysianAge: 61
Y.Bhg. Lt. Gen. Datuk Hj. Md. Hanif Bin Hj. Darimi RMAF (R) was appointed to the Board of Directors of SPK-Sentosa Corporation Berhad on 10 August 2010. He was the Air Operations Commander, prior to his retirement in April 2007. Among the principal appointments held by him during his career in the Royal Malaysian Air Force (RMAF) included that of the Commanding Officer of VVIP Flying Squadron, Base Commander of RMAF Subang and Inspector General of the RMAF. He currently serves on the board of Sharikat Permodalan Kebangsaan Berhad and is also a director of a few other private companies.
Lt. Gen. Datuk Hj. Md. Hanif Bin Hj. Darimi RMAF (R) does not have any family relationship with any Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has no conviction for any offences within the past 10 years.
Ir. Dr. Azman Bin AhmadExecutive Director
MalaysianAge: 51
Ir. Dr. Azman Bin Ahmad was appointed to the Board of Directors of SPK-Sentosa Corporation Berhad on 24 February 2003. He is a qualified Civil Engineer, with a Bachelor of Engineering (Hons) Civil Degree from University of Adelaide, Australia and a Ph.D in Engineering from University of Malaya. He has 30 years of experience in the corporate and construction industry. He is currently the Executive Vice Chairman of the board of Sharikat Permodalan Kebangsaan Berhad and is also a director of a few other private companies.
Ir. Dr. Azman Bin Ahmad is the brother-in-law to Saiful Aznir Bin Shahabudin, the Chief Executive Officer of the Company. He has no conflict of interest with the Company and he has no conviction for any offences within the past 10 years.
Bala Krishnan A/L PonniahMalaysianAge: 52
Bala Krishnan A/L Ponniah was appointed to the Board of Directors of SPK- Sentosa Corporation Berhad on 12 November 2012. He is a fellow member of the Institute of Chartered Accountants in England and Wales, Malaysian Institute of Accountants and the Malaysian Institute of Certified Public Accountants. He has over 30 years of working experiences in many areas including accounts, audit, finance, taxation, budgeting, corporate planning. Bala Krishnan A/L Ponniah does not have any family relationship with any Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has no conviction for any offences within the past 10 years.
Profile of Board of Directorscont’d
ANNUAL REPORT 2012 9
Profile of Chief Executive Officer
Saiful Aznir Bin Shahabudin Chief Executive OfficerMalaysianAge: 53
Saiful Aznir Bin Shahabudin was appointed to the Board of Directors of SPK-Sentosa Corporation Berhad (“SPK-Sentosa”) on 26 March 2002 and was subsequently appointed as Managing Director on 20 May 2004. Saiful Aznir Bin Shahabudin was redesignated as the Chief Executive Officer of the Company on 10 August 2010. He qualified as a member of the American Institute of Certified Public Accountants, and is a member of the Malaysian Institute of Certified Public Accountants. He holds a Master of Business Administration Degree from the University of Chicago and a Bachelor of Business Administration Degree from Western Michigan University. Prior to his appointment, he was the Group Chief Executive Officer of Encorp Group Sdn Bhd. He currently holds a directorship in Bumi Armada Berhad.
Saiful Aznir Bin Shahabudin is the brother-in- law to Ir. Dr. Azman Bin Ahmad, a Director of the Company. He has no conflict of interest with the Company and has no conviction for any offences within the past 10 years.
Saiful Aznir Bin Shahabudin is deemed a substantial shareholder in the Company by virtue of Section 6A(4) of the Companies Act, 1965 through his 99.99% interest in Gerak Jaguh Sdn. Bhd., which in turn has a direct equity of 24.43% in Sharikat Permodalan Kebangsaan Berhad (“SPKB”). SPKB is a substantial shareholder of SPK-Sentosa holding 90.74% of the equity interest.
Directors’ Report
Statement by Directors
Statutory Declaration
Independent Auditors‘ Report
Statements of Comprehensive Income
Statements of Financial Position
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
Supplementary Information
12-14
15
15
16-17
18-19
20-21
22
23-24
25-88
89
FINANCIAL STATEMENTS
Directors’ Report
Statement by Directors
Statutory Declaration
Independent Auditors‘ Report
Statements of Comprehensive Income
Statements of Financial Position
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
Supplementary Information
12-14
15
15
16-17
18-19
20-21
22
23-24
25-88
89
FINANCIAL STATEMENTS
SPK-SENTOSA CORPORATION BERHAD (5347-X)12
The directors hereby present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2012.
PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding. The principal activities of the subsidiaries are as disclosed in Note 15 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year, other than the acquisition of a new subsidiary whose intended principal activity is the development of facilities through private finance initiative.
RESULTS
Group Company
RM’000 RM’000
Loss for the year, attributable to:
Owners of the parent (62,276) (30,778)
Non-controlling interests (81) -
(62,357) (30,778) There were no material transfers to or from reserves or provisions during the financial year. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature other than as disclosed in the financial statements.
DIRECTORS
The names of the directors of the Company in office since the date of the last report and at the date of this report are: Gen. Tan Sri Yaacob bin Mat Zain (R) Brig. Gen. Dato’ Mohd Hashim bin Haji Abu (R) Rear Admiral Dato’ Yaacob bin Haji Daud (R) Ir. Dr. Azman bin Ahmad Lt. Gen. Datuk Hj Md Hanif bin Hj Darimi RMAF (R) Bala Krishnan A/L Ponniah (appointed on 12 November 2012) Meor Mohar Azhar bin Abd Ghani (resigned on 1 September 2012) DIRECTORS’ BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
Directors’ Report
ANNUAL REPORT 2012 13
Directors’ Reportcont’d
DIRECTORS’ BENEFITS cont’d Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as disclosed in Note 9 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest required to be disclosed by Section 169(8) of the Companies Act 1965, except as disclosed in Note 30 to the financial statements.
DIRECTORS’ INTERESTS According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares in the Company or its related corporations during the financial year were as follows:
Number of ordinary shares of RM1 each
Name of director1 January
2012 Acquired Sold 31 December
2012
Direct interest:
Ordinary shares of holding company (Sharikat Permodalan Kebangsaan Berhad)
Gen. Tan Sri Yaacob bin Mat Zain (R) 1,000 - - 1,000
Ir. Dr. Azman bin Ahmad 1,000 - - 1,000
Lt. Gen. Datuk Hj Md Hanif bin Hj Darimi RMAF (R) 1,000 - - 1,000
Ordinary shares of a fellow subsidiary (Sunshine Bonus Sdn. Bhd.)
Ir. Dr. Azman bin Ahmad 49,999 - - 49,999 None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.
OTHER STATUTORY INFORMATION (a) Before the statements of comprehensive income and statements of financial position of the Group and of the Company were
made out, the directors took reasonable steps:
(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that there were no known bad debts and that adequate provision had been made for doubtful debts; and
(ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.
(b) At the date of this report, the directors are not aware of any circumstances which would render:
(i) it necessary to write off any bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and
(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.
SPK-SENTOSA CORPORATION BERHAD (5347-X)14
OTHER STATUTORY INFORMATION cont’d (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence
to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.
(e) As at the date of this report, there does not exist:
(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or
(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.
(f) In the opinion of the directors, other than as disclosed in Note 1 to the financial statements:
(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and
(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.
ULTIMATE HOLDING COMPANY
The directors regard Sharikat Permodalan Kebangsaan Berhad, a company incorporated in Malaysia as the ultimate holding company.
SIGNIFICANT AND SUBSEQUENT EVENTS Details of significant and subsequent events are disclosed in Note 1 and Note 36 to the financial statements.
AUDITORS The auditors, Ernst & Young, have expressed their willingness to continue in office.
Signed on behalf of the Board in accordance with a resolution of the directors dated 23 April 2013.
GEN. TAN SRI YAACOB BIN MAT ZAIN (R) LT. GEN. DATUK HJ MD HANIF BIN HJ DARIMI RMAF (R)
Directors’ Reportcont’d
ANNUAL REPORT 2012 15
Statement by DirectorsPursuant to Section 169(15) of the Companies Act 1965
Statutory DeclarationPursuant to Section 169(16) of the Companies Act 1965
We, GEN. TAN SRI YAACOB BIN MAT ZAIN (R) and LT. GEN. DATUK HJ MD HANIF BIN HJ DARIMI RMAF (R), being two of the directors of SPK-SENTOSA CORPORATION BERHAD, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 18 to 88 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2012 and of their financial performance and cash flows for the year then ended. The supplementary information set out in Note 38 to the financial statements on page 89 have been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants, and the directive of Bursa Malaysia Securities Berhad.
Signed on behalf of the Board in accordance with a resolution of the directors dated 23 April 2013.
GEN. TAN SRI YAACOB BIN MAT ZAIN (R) LT. GEN. DATUK HJ MD HANIF BIN HJ DARIMI RMAF (R)
I, CHUNG KOK PENG, being the officer primarily responsible for the financial management of SPK-SENTOSA CORPORATION BERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 18 to 88 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the abovenamed CHUNG KOK PENG at Kuala Lumpur in the Federal Territory on 23 April 2013 CHUNG KOK PENG
Before me, Tengku Fariddudin bin Tengku SulaimanCommissioner for Oaths
SPK-SENTOSA CORPORATION BERHAD (5347-X)16
Independent Auditors’ Reportto the Members of SPK-Sentosa Corporation Berhad(Incorporated in Malaysia)
REPORT ON THE FINANCIAL STATEMENTS
We have audited the financial statements of SPK-Sentosa Corporation Berhad which comprise the statements of financial position as at 31 December 2012 of the Group and of the Company, and statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 18 to 88. Directors’ responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2012 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following:
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
(b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.
(c) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.
ANNUAL REPORT 2012 17
Independent Auditors’ Reportto the Members of SPK-Sentosa Corporation Berhad
(Incorporated in Malaysia)cont’d
OTHER REPORTING RESPONSIBILITIES The supplementary information set out in Note 38 on page 89 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
OTHER MATTERS 1. As stated in Note 2.2 to the financial statements, SPK-Sentosa Corporation Berhad adopted Malaysian Financial Reporting
Standards on 1 January 2012 with a transition date of 1 January 2011. These standards were applied retrospectively by the directors to the comparative information in these financial statements, including the statements of financial position as at 31 December 2011 and 1 January 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended 31 December 2011 and related disclosures. We were not engaged to report on the comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Group and of the Company for the year ended 31 December 2012 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 January 2012 do not contain misstatements that materially affect the financial position as of 31 December 2012 and financial performance and cash flows for the year then ended.
2. This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies
Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
Ernst & Young Lim Eng Huat AF: 0039 No. 2403/04/15(J) Chartered Accountants Chartered Accountant Penang, Malaysia Date: 23 April 2013
SPK-SENTOSA CORPORATION BERHAD (5347-X)18
Statements of Comprehensive Incomefor the Year Ended 31 December 2012
Group Company
2012 2011 2012 2011
Note RM’000 RM’000 RM’000 RM’000
Revenue 4 354,203 617,676 - -
Construction contract costs (383,664) (610,431) - -
Cost of goods sold (2,510) (125) - -
Gross (loss)/profit (31,971) 7,120 - -
Other income 5 5,618 10,618 13,728 59
Administrative expenses (13,933) (12,402) (1,051) (659)
Other expenses (23,161) (7,791) (43,155) (60,818)
Operating loss (63,447) (2,455) (30,478) (61,418)
Finance costs 6 (1,185) (1,127) - -
Share of profit of associates 7,339 1,385 - -
Share of loss of jointly controlled entities (4,630) (5,444) - -
Loss before tax 7 (61,923) (7,641) (30,478) (61,418)
Income tax expense 10 (434) (147) (300) 2
Loss for the year, net of tax (62,357) (7,788) (30,778) (61,416)
Loss attributable to:
Owners of the parent (62,276) (7,879) (30,778) (61,416)
Non-controlling interests (81) 91 - -
(62,357) (7,788) (30,778) (61,416)
Basic loss per share attributable to owners of the parent (sen) 11 (46.49) (5.88) - -
ANNUAL REPORT 2012 19
Statements of Comprehensive Incomefor the Year Ended 31 December 2012
cont’d
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
Loss for the year, net of tax (62,357) (7,788) (30,778) (61,416)
Other comprehensive income:
Foreign currency translation 861 (515) - -
Total comprehensive income for the year (61,496) (8,303) (30,778) (61,416)
Total comprehensive income attributable to:
Owners of the parent (61,581) (8,228) (30,778) (61,416)
Non-controlling interests 85 (75) - -
(61,496) (8,303) (30,778) (61,416)
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
SPK-SENTOSA CORPORATION BERHAD (5347-X)20
Statements of Financial Positionas at 31 December 2012
Group Company
2012 2011 1.1.2011 2012 2011 1.1.2011
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
ASSETS
Non-current assets
Plant and equipment 12 1,964 2,868 2,967 1 1 1
Investment property 13 5,700 4,500 4,500 5,700 4,500 4,500
Goodwill 14 - 18,500 18,500 - - -
Investments in subsidiaries 15 - - - - 19,036 62,251
Investments in associates 16 28,584 24,666 23,611 - - -
Investments in jointly controlled entities 17 1,801 2,354 1,652 980 - -
Trade receivables 18 3,812 18,945 8,285 - - -
41,861 71,833 59,515 6,681 23,537 66,752
Current assets
Trade and other receivables 18 75,981 145,751 139,934 42 20,047 32,704
Other current assets 19 23,222 71,283 81,527 5 - -
Tax recoverable 1,016 1,070 2,613 700 691 691
Cash and bank balances 21 35,907 52,717 68,522 171 149 2,206
136,126 270,821 292,596 918 20,887 35,601
TOTAL ASSETS 177,987 342,654 352,111 7,599 44,424 102,353
EQUITY AND LIABILITIES
Current liabilities
Tax payable 1 50 15 - - 15
Borrowings 23 25,892 48,932 41,474 - - -
Trade and other payables 25 138,231 211,230 224,075 35,677 41,969 38,410
Other current liabilities 26 4,261 1,170 4,470 - - -
168,385 261,382 270,034 35,677 41,969 38,425
Net current (liabilities)/assets (32,259) 9,439 22,562 (34,759) (21,082) (2,824)
ANNUAL REPORT 2012 21
Group Company
2012 2011 1.1.2011 2012 2011 1.1.2011
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
EQUITY AND LIABILITIES cont’d
Non-current liabilities
Deferred tax liabilities 22 930 630 630 930 630 630
Borrowings 23 382 642 849 - - -
Deferred revenue 24 222 277 334 222 277 334
Trade payables 25 3,705 13,864 6,109 - - -
5,239 15,413 7,922 1,152 907 964
TOTAL LIABILITIES 173,624 276,795 277,956 36,829 42,876 39,389
NET ASSETS/(LIABILITIES) 4,363 65,859 74,155 (29,230) 1,548 62,964
Equity attributable to owners of the parent
Share capital 27 133,944 133,944 133,944 133,944 133,944 133,944
Share premium 27 51,380 51,380 51,380 51,380 51,380 51,380
Foreign currency translation reserve 28 346 (349) - - - -
Accumulated losses (181,317) (119,041) (111,169) (214,554) (183,776) (122,360)
4,353 65,934 74,155 (29,230) 1,548 62,964
Non-controlling interests 10 (75) - - - -
Total equity/(shareholders’ deficit) 4,363 65,859 74,155 (29,230) 1,548 62,964
TOTAL EQUITY AND LIABILITIES 177,987 342,654 352,111 7,599 44,424 102,353
Statements of Financial Positionas at 31 December 2012
cont’d
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
SPK-SENTOSA CORPORATION BERHAD (5347-X)22
Statements of Changes in Equityfor the Year Ended 31 December 2012
Attributable to owners of the parent
Non-distributable
Share capital
(Note 27)
Share premium
(Note 27)
Foreign currency
translation reserve
(Note 28) Accumulated
losses Total
Non- controlling
interests Total
equity
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
At 1 January 2011 133,944 51,380 - (111,169) 74,155 - 74,155
Total comprehensive income - - (349) (7,879) (8,228) (75) (8,303)
Transaction with owners:
Waiver of amount due to holding company - - - 7 7 - 7
At 31 December 2011 133,944 51,380 (349) (119,041) 65,934 (75) 65,859
At 1 January 2012 133,944 51,380 (349) (119,041) 65,934 (75) 65,859
Total comprehensive income - - 695 (62,276) (61,581) 85 (61,496)
At 31 December 2012 133,944 51,380 346 (181,317) 4,353 10 4,363
Share capital
(Note 27)
Non- distributable
Share premium
(Note 27) Accumulated
losses
Total equity/
(shareholders’ deficit)
RM’000 RM’000 RM’000 RM’000
Company
At 1 January 2011 133,944 51,380 (122,360) 62,964
Net loss for the year, representing total comprehensive income - - (61,416) (61,416)
At 31 December 2011 133,944 51,380 (183,776) 1,548
At 1 January 2012 133,944 51,380 (183,776) 1,548
Net loss for the year, representing total comprehensive income - - (30,778) (30,778)
At 31 December 2012 133,944 51,380 (214,554) (29,230)
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
ANNUAL REPORT 2012 23
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (61,923) (7,641) (30,478) (61,418)
Adjustments for:
Bad debts written off - 378 - -
Impairment of goodwill 18,503 - - -
Impairment of investments in subsidiaries - - 19,386 43,215
Impairment of other receivables 4,613 7,357 23,769 17,603
Depreciation of plant and equipment 669 696 - -
Reversal of impairment of other receivables - (152) - -
Reversal of accrual of costs (576) (9) - -
Waiver of amount due to a former shareholder of a subsidiary (158) - - -
Waiver of amount due to a subsidiary - - (12,473) -
Waiver of amount due to third parties (233) - - -
Deferred revenue earned (55) (57) (55) (57)
Interest expense 47 58 - -
Interest income (730) (1,824) - (2)
Share of profit of associates (7,339) (1,385) - -
Share of loss of jointly controlled entities 4,630 5,444 - -
Loss on disposal of plant and equipment 27 9 - -
Plant and equipment written off 11 47 - -
Unwinding of discount 1,138 1,069 - -
Accretion of discount (1,602) (911) - -
Unrealised foreign exchange gain (435) (383) - -
Unrealised foreign exchange loss - 38 - -
Fair value adjustment on investment property (1,200) - (1,200) -
Gain on disposal of a jointly controlled entity - (6,239) - -
Operating loss before working capital changes (44,613) (3,505) (1,051) (659)
Decrease/(increase) in trade and other receivables 87,376 (24,119) (3,764) (4,946)
Decrease/(increase) in other current assets 51,235 15,093 (5) -
(Decrease)/increase in trade and other payables (84,954) (3,321) 6,172 3,559
Increase/(decrease) in other current liabilities 3,091 (3,300) - -
Cash from/(used in) operations 12,135 (19,152) 1,352 (2,046)
Interest paid (3,006) (4,661) - -
Income taxes (paid)/refunded (129) 1,431 - (13)
Net cash from/(used in) operating activities 9,000 (22,382) 1,352 (2,059)
Statements of Cash Flowsfor the Year Ended 31 December 2012
SPK-SENTOSA CORPORATION BERHAD (5347-X)24
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in short term deposits with licensed banks more than three months 14,044 12,908 - -
Interest received 802 1,761 - 2
Proceeds from disposal of plant and equipment 85 252 - -
Purchase of plant and equipment (139) (1,034) - -
Net cash outflow on acquisition of a subsidiary (3) - (350) -*
Advances to jointly controlled entities (4,275) (867) - -
Subscription of shares in jointly controlled entities (980) (700) (980) -
Dividend received from associates 2,000 - - -
Net cash from/(used in) investing activities 11,534 12,320 (1,330) 2
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of hire purchase liabilities (282) (326) - -
Proceeds from borrowings 25,634 17,317 - -
Repayment of borrowings (17,317) (12,556) - -
Net cash from financing activities 8,035 4,435 - -
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 28,569 (5,627) 22 (2,057)
CASH AND CASH EQUIVALENTS AT 1 JANUARY 4,262 9,889 149 2,206
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 32,831 4,262 171 149
* In the previous financial year, the net cash outflow on acquisition of a subsidiary was RM2.
Statements of Cash Flowsfor the Year Ended 31 December 2012cont’d
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
ANNUAL REPORT 2012 25
Notes to the Financial Statements31 December 2012
1. CORPORATE INFORMATION
The Company is a public limited liability company, incorporated and domiciled in Malaysia. The registered office of the Company is located at 12th Floor, Menara Perak, No. 24, Jalan Perak, 50450 Kuala Lumpur.
The principal activity of the Company is investment holding. The principal activities of the subsidiaries are as disclosed in Note 15. There have been no significant changes in the nature of these principal activities during the financial year, other than the acquisition of a new subsidiary whose intended principal activity is the development of facilities through private finance initiative.
The holding company and ultimate holding company is Sharikat Permodalan Kebangsaan Berhad (“SPKB”), which is incorporated in Malaysia.
On 22 November 2012, the Company announced that SPKB had, vide a letter dated 22 November 2012, requested the Board of Directors of the Company to consider undertaking a proposed voluntary withdrawal of the Company’s listing of and quotation from the Official List of the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”) pursuant to Paragraph 16.06 of the Listing Requirements of Bursa Securities (“Listing Withdrawal”).
As at 31 December 2012, the Company was listed on the Main Market of Bursa Securities.
The Company’s shareholders had on 10 January 2013 approved the Listing Withdrawal and the notice for the general offer by SPKB to acquire all the remaining ordinary shares of RM1.00 each in the Company (“Shares”) not already held by SPKB and its wholly-owned subsidiary, SPK Securities Sdn. Bhd. (“Offer Shares”), at a cash offer price of RM0.35 per Offer Share (“Offer”) has been sent to the Company’s shareholders on 31 January 2013.
As set out in the announcement made by the Company dated 6 February 2013, Bursa Securities had, vide its letter dated 5 February 2013, which was received on 6 February 2013, approved the Company’s application for the Listing Withdrawal subject to compliance with certain conditions as set out in the announcement. As a result, the Offer has become unconditional on 5 February 2013.
As set out in the announcement made by the Company on 28 February 2013 (“First Announcement”), the Company triggered the prescribed criteria pursuant to Paragraph 8.04 and Paragraph 2.1(a) of Practice Note 17 (“PN17”) under the Main Market Listing Requirements of Bursa Securities and as of that date, the Company is considered a PN17 company. The PN17 criteria was triggered as a result of the Company’s latest unaudited quarterly announcement for the full financial year ended 31 December 2012 that was announced on 28 February 2013, wherein the shareholders’ equity of the Company on a consolidated basis is less than 25% of the Company’s issued and paid-up share capital and such shareholders’ equity is also less than RM40 million.
As at the date of the First Announcement on 28 February 2013, the Company did not have a regularisation plan to address its PN17 status as the Company was undergoing the process of withdrawal of its listing status from the Official List of the Main Market of Bursa Securities, details of which are set out above.
On 26 March 2013, the trading in the Company’s shares has been suspended upon achieving 90% or more of the listed shares (excluding treasury shares) being held by a shareholder either singly or jointly with the associate of the said shareholder pursuant to Paragraph 9.19(48) of the Listing Requirements.
On 10 April 2013, SPKB issued a notice in accordance with Section 223(2) of the Capital Markets and Services Act 2007 to the shareholders of the Company who have not accepted the offer to inform them that they may exercise their rights to require SPKB to acquire the Offer Shares held by them on or before 9 July 2013.
On 19 April 2013, the Company was officially de-listed from Bursa Securities.
SPK-SENTOSA CORPORATION BERHAD (5347-X)26
Notes to the Financial Statements31 December 2012cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”) issued by the Malaysian Accounting Standards Board (“MASB”), International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia.
For all periods up to and including the year ended 31 December 2011, the Group and the Company prepared their financial statements in accordance with Financial Reporting Standards (“FRS”) in Malaysia. These financial statements for the year ended 31 December 2012 are the first the Group and the Company have prepared in accordance with MFRS and MFRS 1 First-Time Adoption of Malaysian Financial Reporting Standards (“MFRS 1”) has been applied.
The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.
The financial statements are presented in Ringgit Malaysia (“RM”) and all values are rounded to the nearest thousand (“RM’000”) except when otherwise indicated.
As at 31 December 2012, the Company has net current liabilities of RM34,759,000 (2011: RM21,082,000; 1.1.2011: RM2,824,000) and shareholders’ deficit of RM29,230,000 (2011: RM Nil; 1.1.2011: RM Nil). The Company relies on its holding company for continued financial support and has obtained an undertaking from the holding company to enable it to meet its obligations and liabilities as and when they fall due.
2.2 First-time adoption of MFRS
In preparing its opening MFRS Statement of Financial Position as at 1 January 2011 (which is also the date of transition), the Group has adjusted the amounts previously reported in financial statements prepared in accordance with FRS. An explanation of how the transition from FRS to MFRS has affected the statements of financial position is set out below. These notes include reconciliations of financial position for comparative periods at the date of transition reported under FRS to those reported for those periods and at the date of transition under MFRS. The transition from FRS to MFRS has not had a material impact on the statements of comprehensive income and statements of cash flows.
(a) Exemptions applied
MFRS 1 allows first-time adopters certain exemptions from the retrospective application of certain MFRS. The Group has applied the following exemptions allowed by MFRS 1:
(i) Business combination
There is an option to apply MFRS 3 Business Combinations (“MFRS 3”), prospectively from the date of transition or from a specific date prior to the date of transition. This provides relief from full retrospective application of MFRS 3 which would require restatement of all business combinations prior to the date of transition.
Acquisition before date of transition
The Group has elected to apply MFRS 3 prospectively from the date of transition. In respect of acquisitions prior to the date of transition,
- the classification of former business combinations under FRS is maintained;
- there is no re-measurement of original fair values determined at the time of business combination (date of acquisition); and
- the carrying amount of goodwill recognised under FRS is not adjusted.
ANNUAL REPORT 2012 27
Notes to the Financial Statements31 December 2012
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.2 First-time adoption of MFRS cont’d
(a) Exemptions applied cont’d
(ii) Foreign currency translation reserve
Under FRS, the Group recognised translation differences on foreign operations in a separate component of equity. Cumulative foreign currency translation differences for all foreign operations are deemed to be zero as at the date of transition to MFRS. Accordingly, at the date of transition to MFRS, the cumulative foreign currency translation differences of RM501,000 were adjusted to accumulated losses.
(b) Estimates
The estimates at 1 January 2011 and 31 December 2011 are consistent with those made for the same dates in accordance with FRS. The estimates used by the Group and the Company to present these amounts in accordance with MFRS reflect conditions at 1 January 2011, the date of transition to MFRS and as at 31 December 2011.
(c) Reconciliation of financial position as at 1 January 2011
The reconciliations of statements of financial position for comparative periods at the date of transition reported under FRS to those reported for those periods and at the date of transition under MFRS are provided below:
Group
FRS as at 1 January
2011
Note 2.2(a)(ii)Foreign
currency translation
reserve
MFRS as at 1 January
2011
RM’000 RM’000 RM’000
ASSETS
Non-current assetsPlant and equipment 2,967 2,967 Investment property 4,500 4,500 Goodwill 18,500 18,500 Investments in associates 23,611 23,611 Investments in jointly controlled entities 1,652 1,652 Trade receivables 8,285 8,285
59,515 59,515
Current assetsTrade and other receivables 139,934 139,934 Other current assets 81,527 81,527 Tax recoverable 2,613 2,613 Cash and bank balances 68,522 68,522
292,596 292,596
TOTAL ASSETS 352,111 352,111
SPK-SENTOSA CORPORATION BERHAD (5347-X)28
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.2 First-time adoption of MFRS cont’d
(c) Reconciliation of financial position as at 1 January 2011 cont’d
Group
FRS as at 1 January
2011
Note 2.2(a)(ii)Foreign
currency translation
reserve
MFRS as at 1 January
2011
RM’000 RM’000 RM’000
EQUITY AND LIABILITIES
Current liabilitiesTax payable 15 15 Borrowings 41,474 41,474 Trade and other payables 224,075 224,075 Other current liabilities 4,470 4,470
270,034 270,034
Net current assets 22,562 22,562
Non-current liabilitiesDeferred tax liabilities 630 630 Borrowings 849 849 Deferred revenue 334 334 Trade payables 6,109 6,109
7,922 7,922
TOTAL LIABILITIES 277,956 277,956
NET ASSETS 74,155 74,155
Equity attributable to owners of the parentShare capital 133,944 133,944 Share premium 51,380 51,380 Foreign currency translation reserve (501) 501 - Accumulated losses (110,668) (501) (111,169)
74,155 74,155 Non-controlling interests - -
Total equity 74,155 74,155
TOTAL EQUITY AND LIABILITIES 352,111 352,111
Notes to the Financial Statements31 December 2012cont’d
ANNUAL REPORT 2012 29
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.2 First-time adoption of MFRS cont’d
(d) Reconciliation of financial position as at 31 December 2011
Group
FRS as at 31 December
2011
Note 2.2(a)(ii)Foreign
currency translation
reserve
MFRS as at 31 December
2011
RM’000 RM’000 RM’000
ASSETS
Non-current assets
Plant and equipment 2,868 2,868
Investment property 4,500 4,500
Goodwill 18,500 18,500
Investments in associates 24,666 24,666
Investments in jointly controlled entities 2,354 2,354
Trade receivables 18,945 18,945
71,833 71,833
Current assets
Trade and other receivables 145,751 145,751
Other current assets 71,283 71,283
Tax recoverable 1,070 1,070
Cash and bank balances 52,717 52,717
270,821 270,821
TOTAL ASSETS 342,654 342,654
Notes to the Financial Statements31 December 2012
cont’d
SPK-SENTOSA CORPORATION BERHAD (5347-X)30
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.2 First-time adoption of MFRS cont’d
(d) Reconciliation of financial position as at 31 December 2011 cont’d
Group
FRS as at 31 December
2011
Note 2.2(a)(ii)Foreign
currency translation
reserve
MFRS as at 31 December
2011
RM’000 RM’000 RM’000
EQUITY AND LIABILITIES
Current liabilitiesTax payable 50 50 Borrowings 48,932 48,932 Trade and other payables 211,230 211,230 Other current liabilities 1,170 1,170
261,382 261,382
Net current assets 9,439 9,439
Non-current liabilitiesDeferred tax liabilities 630 630 Borrowings 642 642 Deferred revenue 277 277 Trade payables 13,864 13,864
15,413 15,413
TOTAL LIABILITIES 276,795 276,795
NET ASSETS 65,859 65,859
Equity attributable to owners of the parentShare capital 133,944 133,944 Share premium 51,380 51,380 Foreign currency translation reserve (850) 501 (349)Accumulated losses (118,540) (501) (119,041)
65,934 65,934 Non-controlling interests (75) (75)
Total equity 65,859 65,859
TOTAL EQUITY AND LIABILITIES 342,654 342,654
Notes to the Financial Statements31 December 2012cont’d
ANNUAL REPORT 2012 31
Notes to the Financial Statements31 December 2012
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.3 Standards and interpretations issued but not yet effective
The standards and interpretations that are issued but not yet effective up to the date of issuance of the Group’s and of the Company’s financial statements are disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective.
Effective forfinancial periods beginning on or
after
MFRS 101 Presentation of Items of Other Comprehensive Income (Amendments to MFRS 101) 1 July 2012
Amendments to MFRS 101 Presentation of Financial Statements (Annual Improvements 2009-2011 Cycle)
1 January 2013
MFRS 3 Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) 1 January 2013
MFRS 10 Consolidated Financial Statements 1 January 2013
MFRS 11 Joint Arrangements 1 January 2013
MFRS 12 Disclosure of Interests in Other Entities 1 January 2013
MFRS 13 Fair Value Measurement 1 January 2013
MFRS 119 Employee Benefits 1 January 2013
MFRS 127 Separate Financial Statements 1 January 2013
MFRS 128 Investment in Associates and Joint Ventures 1 January 2013
MFRS 127 Consolidated and Separate Financial Statements (IAS 27 as revised by IASB in December 2003)
1 January 2013
Amendments to IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments (Annual Improvements 2009-2011 Cycle)
1 January 2013
IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013
Amendments to MFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities 1 January 2013
Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards – Government Loans
1 January 2013
Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements 2009-2011 Cycle)
1 January 2013
Amendments to MFRS 116 Property, Plant and Equipment (Annual Improvements 2009-2011 Cycle)
1 January 2013
Amendments to MFRS 132 Financial Instruments Presentation (Annual Improvements 2009-2011 Cycle)
1 January 2013
Amendments to MFRS 134 Interim Financial Reporting (Annual Improvements 2009-2011 Cycle)
1 January 2013
Amendments to MFRS 10 Consolidated Financial Statements Transition Guidance 1 January 2013
Amendments to MFRS 11 Joint Arrangements: Transition Guidance 1 January 2013
Amendments to MFRS 12 Disclosure of Interests in Other Entities: Transition Guidance 1 January 2013
Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities 1 January 2014
Amendments to MFRS 10, MFRS 12 and MFRS 127 Investment Entities 1 January 2014
MFRS 9 Financial Instruments 1 January 2015
SPK-SENTOSA CORPORATION BERHAD (5347-X)32
Notes to the Financial Statements31 December 2012cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.3 Standards and interpretations issued but not yet effective cont’d
The directors expect that the adoption of the above standards and interpretations will have no material impact on the financial statements in the period of initial application except as discussed below:
Amendments to MFRS 101 Presentation of Financial Statements (Annual Improvements 2009-2011 Cycle)
The amendments to MFRS 101 change the grouping of items presented in other comprehensive income. Items that could be reclassified (or recycled) to profit or loss at a future point in time (for example, exchange differences on translation of foreign operations and net loss or gain on available-for-sale financial assets) would be presented separately from items which will never be reclassified (for example, actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affects presentation only and has no impact on the Group’s and the Company’s financial position and performance.
MFRS 3 Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) and MFRS 127 Consolidated and Separate Financial Statements (IAS 27 as revised by IASB in December 2003)
An entity shall apply these earlier versions of MFRS 3 and MFRS 127 only if the entity has elected to do so as allowed in MFRS 10 Consolidated Financial Statements. The adoptions of these standards are not expected to have any significant impact to the Group and the Company.
MFRS 10 Consolidated Financial Statements
MFRS 10 replaces part of MFRS 127 Consolidated and Separate Financial Statements that deals with consolidated financial statements and IC Interpretation 112 Consolidation – Special Purpose Entities.
Under MFRS 10, an investor controls an investee when (a) the investor has power over an investee, (b) the investor has exposure, or rights, to variable returns from its involvement with the investee, and (c) the investor has ability to use its power over the investee to affect the amount of the investor’s returns. Under MFRS 127 Consolidated and Separate Financial Statements, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
MFRS 10 includes detailed guidance to explain when an investor has control over the investee. MFRS 10 requires the investor to take into account all relevant facts and circumstances.
The directors anticipate that the application of the amendments to MFRS 10 may have impact on amounts reported in respect of the Group’s consolidated financial statements. However, the Group is currently still assessing the impact that this standard will have on the financial position and performance of the Group.
MFRS 11 Joint Arrangements
MFRS 11 replaces MFRS 131 Interests in Joint Ventures and IC Interpretation 113 Jointly-Controlled Entities – Non-monetary Contributions by Venturers.
The classification of joint arrangements under MFRS 11 is determined based on the rights and obligations of the parties to the joint arrangements by considering the structure, the legal form, the contractual terms agreed by the parties to the arrangement and when relevant, other facts and circumstances. Under MFRS 11, joint arrangements are classified as either joint operations or joint ventures.
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
ANNUAL REPORT 2012 33
Notes to the Financial Statements31 December 2012
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.3 Standards and interpretations issued but not yet effective cont’d
MFRS 11 Joint Arrangements cont’d
MFRS 11 removes the option to account for jointly controlled entities (“JCE”) using proportionate consolidation. Instead, JCE that meet the definition of a joint venture must be accounted for using the equity method.
The directors anticipate that the application of MFRS 11 will not have a significant impact on the Group’s consolidated financial statements. However, the Group is currently still assessing the impact that this standard will have on the financial position and performance of the Group.
MFRS 12 Disclosures of Interests in Other Entities
MFRS 12 includes all disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosures only and has no impact on the Group and the Company’s financial position or performance.
MFRS 13 Fair Value Measurement
MFRS 13 establishes a single source of guidance under MFRS for all fair value measurements. MFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under MFRS when fair value is required or permitted.
Upon adoption of MFRS 13, the Group will take into consideration the highest and best use of certain properties in measuring the fair value of such properties. The adoption of MFRS 13 is expected to result in higher fair value of certain properties of the Group.
MFRS 127 Separate Financial Statements
As a consequence of the new MFRS 10 and MFRS 12, MFRS 127 is limited to accounting for subsidiaries, jointly controlled entities and associates in separate financial statements.
MFRS 128 Investments in Associates and Joint Ventures
As a consequence of the new MFRS 11 and MFRS 12, MFRS 128 is renamed as MFRS 128 Investments in Associates and Joint Ventures. This new standard describes the application of the equity method to investments in joint ventures in addition to associates.
MFRS 9 Financial Instruments: Classification and Measurement
MFRS 9 reflects the first phase of the work on the replacement of MFRS 139 Financial Instruments: Recognition and Measurement and applies to classification and measurement of financial assets and financial liabilities as defined in MFRS 139 Financial Instruments: Recognition and Measurement. The adoption of the first phase of MFRS 9 will have an effect on the classification and measurement of the Group’s and of the Company’s financial assets. The Group and the Company will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.
SPK-SENTOSA CORPORATION BERHAD (5347-X)34
Notes to the Financial Statements31 December 2012cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.4 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.
Acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.
In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.
The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree net identifiable assets.
Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill in the statement of financial position. The accounting policy for goodwill is set out in Note 2.9. In instances where the latter amount exceeds the former, the excess is recognised as a gain on bargain purchase in profit or loss on the acquisition date.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
2.5 Subsidiaries
A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less any accumulated impairment losses.
2.6 Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.
The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associates is measured in the consolidated statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to associates is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profit or loss for the period in which the investment is acquired.
ANNUAL REPORT 2012 35
Notes to the Financial Statements31 December 2012
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.6 Associates cont’d
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associates. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss.
The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
In the Company’s separate financial statements, investments in associates are stated at cost less any accumulated impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.
2.7 Jointly controlled entities
The Group has interests in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.
Investments in jointly controlled entities are accounted for in the consolidated financial statements using the equity method of accounting as described in Note 2.6.
In the Company’s separate financial statements, investments in jointly controlled entities are stated at cost less any accumulated impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.
2.8 Transactions with non-controlling interest
Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Company.
Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent.
2.9 Goodwill
Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination.
SPK-SENTOSA CORPORATION BERHAD (5347-X)36
Notes to the Financial Statements31 December 2012cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.9 Goodwill cont’d
The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods. Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair value of the operation disposed of and the portion of the cash-generating unit retained.
2.10 Impairment of non-financial assets
The Group and the Company assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group and the Company make an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)).
In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.
Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period.
ANNUAL REPORT 2012 37
Notes to the Financial Statements31 December 2012
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.11 Plant and equipment
All items of plant and equipment are initially recorded at cost. The cost of an item of plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Subsequent to recognition, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. When significant parts of plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:
Motor vehicles 20% Office equipment and computers 10% - 33% Renovations, furniture and fittings 10% - 20% Machinery 12%
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.
An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.
2.12 Investment properties
Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value which reflects market conditions at the reporting date. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the year in which they arise.
A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value.
Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in profit or loss in the year of retirement or disposal.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for plant and equipment set out in Note 2.11 up to the date of change in use.
SPK-SENTOSA CORPORATION BERHAD (5347-X)38
Notes to the Financial Statements31 December 2012cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.13 Financial assets
Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.
The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.
(a) Financial assets at fair value through profit or loss
Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.
Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.
Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date.
The Group and the Company have not designated any financial assets as at fair value through profit or loss.
(b) Loans and receivables
Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.
Loans and receivables are classified as current, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.
(c) Held-to-maturity investments
Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group and the Company have the positive intention and ability to hold the investment to maturity.
Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.
ANNUAL REPORT 2012 39
Notes to the Financial Statements31 December 2012
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.13 Financial assets cont’d
(c) Held-to-maturity investments cont’d
Held-to-maturity investments are classified as non-current, except for those having maturity within 12 months after the reporting date which are classified as current.
The Group and the Company have not designated any financial assets as held-to-maturity investments.
(d) Available-for-sale financial assets
Available-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories.
After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.
Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less any accumulated impairment losses.
Available-for-sale financial assets are classified as non-current unless they are expected to be realised within 12 months after the reporting date.
The Group and the Company have not designated any financial assets as available-for-sale.
A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset.
SPK-SENTOSA CORPORATION BERHAD (5347-X)40
Notes to the Financial Statements31 December 2012cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.14 Impairment of financial assets
The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.
(a) Trade and other receivables carried at amortised cost
To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.
If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.
(b) Unquoted equity securities carried at cost
If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.
2.15 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management.
2.16 Construction contracts
Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. Contract costs are recognised as expense in the period in which they are incurred.
ANNUAL REPORT 2012 41
Notes to the Financial Statements31 December 2012
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.16 Construction contracts cont’d
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.
When the total of costs incurred on construction contracts plus recognised profits (less recognised losses) exceeds progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts.
2.17 Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.
(a) Construction contracts
Revenue from construction contracts is accounted for by the stage of completion method as described in Note 2.16.
(b) Sale of goods
Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.
(c) Rendering of services
Revenue is recognised when services are rendered.
(d) Interest income
Interest income is recognised on an accrual basis using the effective interest method.
(e) Dividend income
Dividend income is recognised when the right to receive payment is established.
(f) Rental income
Rental income from sub-lease of land is recognised on a straight-line basis over the term of the lease.
SPK-SENTOSA CORPORATION BERHAD (5347-X)42
Notes to the Financial Statements31 December 2012cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.18 Income taxes
(a) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.
(b) Deferred tax
Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all temporary differences, except:
- where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- in respect of taxable temporary differences associated with investments in subsidiaries, associates and jointly controlled entities, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:
- where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- in respect of deductible temporary differences associated with investments in subsidiaries, associates and jointly controlled entities, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.
ANNUAL REPORT 2012 43
Notes to the Financial Statements31 December 2012
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.18 Income taxes cont’d
(b) Deferred tax cont’d
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
2.19 Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.
Financial liabilities, within the scope of MFRS 139, are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.
(a) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences.
The Group and the Company have not designated any financial liabilities as at fair value through profit or loss.
(b) Other financial liabilities
The Group’s and the Company’s other financial liabilities include trade payables, other payables and loans and borrowings.
Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.
Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.
A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
SPK-SENTOSA CORPORATION BERHAD (5347-X)44
Notes to the Financial Statements31 December 2012cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.20 Leases - as lessee
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.
Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
2.21 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
2.22 Borrowing costs
Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period they are incurred.
2.23 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.
Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.
ANNUAL REPORT 2012 45
Notes to the Financial Statements31 December 2012
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.24 Employee benefits - defined contribution plans
The Malaysian companies in the Group make contributions to the Employee Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.
2.25 Foreign currency
(a) Functional and presentation currency
The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency.
(b) Foreign currency transactions
Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.
Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.
(c) Foreign operations
The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profit or loss.
Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date.
SPK-SENTOSA CORPORATION BERHAD (5347-X)46
Notes to the Financial Statements31 December 2012cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.26 Segment reporting
For management purposes, the Group is organised into operating segments based on their nature of business which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 35, including the factors used to identify the reportable segments and the measurement basis of segment information.
2.27 Share capital
An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments.
Ordinary shares are recorded at the proceeds received, net of directly attributable transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.
2.28 Contingencies
A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group and the Company.
Contingent liabilities and assets are not recognised in the statements of financial position of the Group and the Company.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions could result in outcomes that could require material adjustment to the carrying amount of the asset or liability affected in the future.
3.1 Judgements made in applying accounting policies
There are no critical judgements made by management in the process of applying the Group’s accounting policies that has significant effect on the amounts recognised in the financial statements.
ANNUAL REPORT 2012 47
Notes to the Financial Statements31 December 2012
cont’d
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES cont’d
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Impairment of goodwill
Goodwill is tested for impairment annually and at other times when such indicators exist. This requires an estimation of the value in use of the cash-generating units to which goodwill is allocated.
When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in the assumptions are given in Note 14.
(b) Impairment of investments
Investments are tested for impairment annually and at other times when such indicators exist. This requires an estimation of the value in use of the cash-generating units to which investments are allocated.
When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the carrying value and the key assumptions applied in the impairment assessment of investments are given in Note 15.
(c) Construction contracts
The Group recognises construction contracts revenue and expenses in the consolidated statements of comprehensive income by using the stage of completion method. The stage of completion is determined by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs.
Significant judgement is required in determining the stage of completion, the extent of the contract costs incurred, the estimated total contract revenue and costs, as well as the recoverability of the contract costs. In making the judgement, the Group evaluates based on past experience and by relying on the work of specialists.
A 10% difference in the estimated total construction contract costs or revenue would result in approximately 33% (2011: 21%) variance in the Group’s construction contract costs and 36% (2011: 20%) variance in the Group’s revenue recognised for the year.
(d) Impairment of loans and receivables
The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.
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. The carrying amount of the Group’s loans and receivables at the reporting date is disclosed in Note 18.
SPK-SENTOSA CORPORATION BERHAD (5347-X)48
Notes to the Financial Statements31 December 2012cont’d
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES cont’d
3.2 Key sources of estimation uncertainty cont’d
(e) Deferred tax assets
Deferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
Assumptions about generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future construction contract proceeds, operating costs, capital expenditure, dividends and other capital management transactions. Judgement is also required about application of income tax legislation. These judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the statements of financial position and the amount of unrecognised tax losses and unrecognised temporary differences.
The total carrying value of the unrecognised tax losses and capital allowances of the Group and Company was RM102,263,000 (2011: RM102,197,000; 1.1.2011: RM47,994,000) and RM90,000 (2011: RM90,000; 1.1.2011: RM89,000) respectively. Further details are given in Note 22.
4. REVENUE
Group
2012 2011
RM’000 RM’000
Construction contracts 351,311 617,532
Sale of goods 2,892 144
354,203 617,676
ANNUAL REPORT 2012 49
Notes to the Financial Statements31 December 2012
cont’d
5. OTHER INCOME
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
Interest income 730 1,824 - 2
Gain on disposal of a jointly controlled entity - 6,239 - -
Fair value adjustment on investment property (Note 13) 1,200 - 1,200 -
Reversal of impairment of other receivables (Note 18(c)) - 152 - -
Reversal of accrual of costs 576 9 - -
Deferred revenue earned 55 57 55 57
Foreign exchange gain:
- realised - 11 - -
- unrealised 435 383 - -
Accretion of discount 1,602 911 - -
Rental income 105 174 - -
Administration fee charged to subcontractors - 432 - -
Waiver of amount due to:
- a former shareholder of a subsidiary 158 - - -
- a subsidiary - - 12,473 -
- third parties 233 - - -
Miscellaneous 524 426 - -
5,618 10,618 13,728 59 6. FINANCE COSTS
Group
2012 2011
RM’000 RM’000
Interest expense on:
Borrowings 2,955 4,595
Hire purchase liabilities 51 66
3,006 4,661
Less: Interest expense capitalised in costs of construction contracts (Note 20) (2,959) (4,603)
47 58
Unwinding of discount 1,138 1,069
Total finance costs 1,185 1,127
SPK-SENTOSA CORPORATION BERHAD (5347-X)50
Notes to the Financial Statements31 December 2012cont’d
7. LOSS BEFORE TAX
The following amounts have been included in arriving at loss before tax:
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
Auditors’ remuneration:
- Ernst & Young Malaysia 115 118 30 27
- overprovision in prior years (5) (2) - -
- member firms of Ernst & Young Global Limited 35 38 - -
- other services 72 70 16 17
Bad debts written off - 378 - -
Depreciation of plant and equipment (Note 12) 669 696 - -
Employee benefits expense (Note 8) 5,565 6,925 10 10
Foreign exchange loss:
- realised 8 - - -
- unrealised - 38 - -
Impairment of goodwill (Note 14) 18,503 - - -
Impairment of investments in subsidiaries - - 19,386 43,215
Impairment of other receivables (Note 18(c)): 4,613 7,357 23,769 17,603
- subsidiaries - - 23,769 17,603
- jointly controlled entities 4,613 7,357 - -
Loss on disposal of plant and equipment 27 9 - -
Non-executive directors’ remuneration (Note 9) 127 128 109 113
Operating leases:
- minimum lease payments for equipment 84 57 - -
- minimum lease payments for premises 517 508 - -
Plant and equipment written off 11 47 - -
ANNUAL REPORT 2012 51
Notes to the Financial Statements31 December 2012
cont’d
8. EMPLOYEE BENEFITS EXPENSE
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
Wages and salaries 13,612 31,175 - -
Contributions to defined contribution plan 479 534 - -
Social security contributions 30 37 - -
Other benefits 3,673 4,303 10 10
17,794 36,049 10 10
Less: Employee benefits expense capitalised in costs of construction contracts (Note 20) (12,229) (29,124) - -
5,565 6,925 10 10 Included in employee benefits expense of the Group are executive directors’ remuneration amounting to RM627,000 (2011:
RM818,000) as further disclosed in Note 9.
9. DIRECTORS’ REMUNERATION
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
Executive directors’ remuneration (Note 8):
Salaries and other emoluments 543 724 - -
Contributions to defined contribution plan 65 75 - -
Fees 19 19 - -
627 818 - -
Non-executive directors’ remuneration (Note 7):
Fees 108 110 90 95
Other emoluments 19 18 19 18
127 128 109 113
Total directors’ remuneration 754 946 109 113
SPK-SENTOSA CORPORATION BERHAD (5347-X)52
Notes to the Financial Statements31 December 2012cont’d
9. DIRECTORS’ REMUNERATION cont’d
The number of directors of the Company whose total remuneration during the year fell within the band below is:
Number of directors
2012 2011
Non-executive directors:
Below RM50,000 5 4
The other directors of the Company, who are also directors of the holding company, are remunerated by the holding company and an associate.
10. INCOME TAX EXPENSE
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
Income tax:
Current year provision 116 178 - -
Under/(over) provision in prior years 18 (31) - (2)
134 147 - (2)
Deferred tax (Note 22):
- relating to origination and reversal of temporary differences 300 - 300 -
Total income tax expense 434 147 300 (2)
Current income tax is calculated at the Malaysian statutory tax rate of 25% (2011: 25%) of the estimated assessable profit for the year.
ANNUAL REPORT 2012 53
Notes to the Financial Statements31 December 2012
cont’d
10. INCOME TAX EXPENSE cont’d
A reconciliation of tax expense applicable to loss before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:
2012 2011
RM’000 RM’000
Group
Loss before tax (61,923) (7,641)
Taxation at Malaysian statutory tax rate of 25% (2011: 25%) (15,481) (1,910)
Income not subject to tax (1,392) (18)
Expenses not deductible for tax purposes 17,259 1,421
Utilisation of previously unrecognised tax losses (466) (40)
Utilisation of previously unrecognised unabsorbed capital allowances (6) (82)
Deferred tax assets recognised (15) -
Deferred tax assets not recognised 517 807
Under/(over) provision of tax expense in prior years 18 (31)
Income tax expense for the year 434 147
Company
Loss before tax (30,478) (61,418)
Taxation at Malaysian statutory tax rate of 25% (2011: 25%) (7,619) (15,355)
Income not subject to tax (3,118) (14)
Expenses not deductible for tax purposes 11,037 15,249
Deferred tax assets not recognised - 120
Overprovision of tax expense in prior years - (2)
Income tax expense for the year 300 (2)
Tax savings during the financial year arising from:
Group
2012 2011
RM’000 RM’000
Utilisation of current year tax losses - 197
Utilisation of previously unrecognised tax losses 466 40
SPK-SENTOSA CORPORATION BERHAD (5347-X)54
11. BASIC LOSS PER SHARE
The loss per share is calculated by dividing loss for the year, net of tax, attributable to owners of the parent by the number of ordinary shares in issue during the financial year.
Group
2012 2011
Loss for the year, net of tax, attributable to owners of the parent (RM’000) (62,276) (7,879)
Number of ordinary shares in issue (‘000) 133,944 133,944
Basic loss per share (sen) (46.49) (5.88) The Group does not have any potential dilutive instruments as at 31 December 2012.
12. PLANT AND EQUIPMENT
Motor vehicles
Office equipment
and computers
Renovations, furniture
and fittings Machinery Total
Group RM’000 RM’000 RM’000 RM’000 RM’000
At 31 December 2012
CostAt 1 January 2012 2,866 1,525 1,474 82 5,947 Additions - 86 53 - 139 Disposals (96) (82) (31) - (209)Write off - (286) (50) - (336)Exchange differences (61) (8) (1) (4) (74)
At 31 December 2012 2,709 1,235 1,445 78 5,467
Accumulated depreciationAt 1 January 2012 1,188 1,161 702 28 3,079 Depreciation charge for the year: 503 141 224 16 884
Recognised in profit or loss (Note 7) 316 131 222 - 669 Capitalised in costs of construction
contracts (Note 20) 187 10 2 16 215
Disposals (38) (46) (13) - (97)Write off - (275) (50) - (325)Exchange differences (31) (5) (1) (1) (38)
At 31 December 2012 1,622 976 862 43 3,503
Net carrying amountAt 31 December 2012 1,087 259 583 35 1,964
Notes to the Financial Statements31 December 2012cont’d
ANNUAL REPORT 2012 55
12. PLANT AND EQUIPMENT cont’d
Motor vehicles
Office equipment
and computers
Renovations, furniture
and fittings Machinery Total
Group cont’d RM’000 RM’000 RM’000 RM’000 RM’000
At 31 December 2011
Cost
At 1 January 2011 2,643 1,623 1,029 85 5,380
Additions 482 114 500 24 1,120
Transfer (38) - - - (38)
Disposals (264) (30) - - (294)
Write off - (152) (92) - (244)
Reclassification - (36) 36 - -
Exchange differences 43 6 1 (27) 23
At 31 December 2011 2,866 1,525 1,474 82 5,947
Accumulated depreciation
At 1 January 2011 745 1,129 522 17 2,413
Depreciation charge for the year: 514 207 205 16 942
Recognised in profit or loss (Note 7) 318 175 203 - 696
Capitalised in costs of construction contracts (Note 20) 196 32 2 16 246
Transfer (38) - - - (38)
Disposals (19) (8) - (6) (33)
Write off - (138) (59) - (197)
Reclassification - (33) 33 - -
Exchange differences (14) 4 1 1 (8)
At 31 December 2011 1,188 1,161 702 28 3,079
Net carrying amount
At 1 January 2011 1,898 494 507 68 2,967
At 31 December 2011 1,678 364 772 54 2,868
Notes to the Financial Statements31 December 2012
cont’d
SPK-SENTOSA CORPORATION BERHAD (5347-X)56
Notes to the Financial Statements31 December 2012cont’d
12. PLANT AND EQUIPMENT cont’d
Office equipment
and computers
Company RM’000
At 31 December 2012
Cost
At 1 January 2012 52
Write off (45)
At 31 December 2012 7
Accumulated depreciation
At 1 January 2012 51
Write off (45)
At 31 December 2012 6
Net carrying amount
At 31 December 2012 1
At 31 December 2011
Cost
At 1 January/31 December 2011 52
Accumulated depreciation
At 1 January/31 December 2011 51
Net carrying amount
At 1 January 2011 1
At 31 December 2011 1 Assets held under hire purchase arrangements
In the previous financial year, the Group acquired motor vehicles with an aggregate cost of RM86,000 by means of hire purchase arrangements. The cash outflow on acquisition of plant and equipment during the year amounted to RM139,000 (2011: RM1,034,000).
The carrying amount of motor vehicles held under hire purchase arrangements at the reporting date was RM602,000 (2011: RM979,000; 1.1.2011: RM1,340,000).
ANNUAL REPORT 2012 57
Notes to the Financial Statements31 December 2012
cont’d
13. INVESTMENT PROPERTY
Group and Company
2012 2011
RM’000 RM’000
At 1 January 4,500 4,500
Fair value adjustment (Note 5) 1,200 -
At 31 December 5,700 4,500 Valuation of investment property
Investment property is stated at fair value, which has been determined based on valuation at the reporting date. Valuation is performed by an accredited independent valuer with recent experience in the location and category of properties being valued. The valuation is based on the comparison method that makes reference to similar properties that were either transacted recently or listed for sale within the same location or comparable localities.
14. GOODWILL
Group
2012 2011
RM’000 RM’000
Cost
At 1 January 101,133 101,133
Addition (Note 15) 3 -
31 December 101,136 101,133
Accumulated impairment losses
At 1 January 82,633 82,633
Impairment loss (Note 7) 18,503 -
31 December 101,136 82,633
Net carrying amount
At 1 January 18,500 18,500
At 31 December - 18,500
SPK-SENTOSA CORPORATION BERHAD (5347-X)58
Notes to the Financial Statements31 December 2012cont’d
14. GOODWILL cont’d (a) Impairment losses recognised
The management of the Company has carried out an impairment test review for goodwill based on the recoverable amount of each cash-generating unit (“CGU”). The recoverable amount of a CGU has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by the executive directors covering a five-year period. The pre-tax discount rate applied to cash flow projections of the Group’s CGU is 18.1%.
During the financial year, the imparment test review has led to the recognition of impairment loss for goodwill of the construction unit amounting to RM18,503,000 (2011: Nil).
(b) Impairment test for goodwill
(i) Allocation of goodwill
Goodwill has been allocated to the Group’s CGU identified according to business segment as follows:
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Construction - 18,500 18,500
(ii) Key assumptions used in value in use calculation
The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill.
- Budgeted contract revenue
Budgeted contract revenue is estimated based on the assumption that the Group will secure a new project in 2013 and will complete the existing projects in hand.
- Budgeted gross margin
Budgeted gross margin is estimated based on the gross margin of actual projects on hand.
- Discount rate
The discount rates used are pre-tax and reflect specific risks relating to the industry.
(iii) Sensitivity to changes in assumptions
With regard to the assessment of value in use of the Group’s CGU, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to differ from its recoverable amount and require a reassessment of the amount of impairment of goodwill to be recognised in the financial statements.
ANNUAL REPORT 2012 59
Notes to the Financial Statements31 December 2012
cont’d
15. INVESTMENTS IN SUBSIDIARIES
Company
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Unquoted shares at cost 211,367 211,017 211,017
Less: Accumulated impairment losses (211,367) (191,981) (148,766)
- 19,036 62,251
(a) Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows:
Proportion ofownership interest (%)
Name of subsidiaries Principal activities 2012 2011 1.1.2011
Held by the Company:
Pembinaan SPK Sdn. Bhd. Investment holding and provision of civil contract services
100.0 100.0 100.0
Nadaprise Sdn. Bhd. Investment holding 100.0 50.0* 50.0*
Kumpolan Kemajuan Raya Sdn. Bhd. Dormant 100.0 100.0 100.0
SPK Era Sdn. Bhd. Dormant 100.0 100.0 -
Held by Pembinaan SPK Sdn. Bhd.:
Aspirasi Sama Sdn. Bhd. Investment holding 100.0 100.0 100.0
Golden Eastern Empire Sdn. Bhd. Investment holding 100.0 100.0 100.0
IASB Construction Sdn. Bhd. General contracting 100.0 100.0 100.0
Projek Hospital Temerloh Sdn. Bhd. Dormant 100.0 100.0 100.0
Komunikasi SPK Sdn. Bhd. Design, supply, construct, test and commission the 275kV Transmission Project for Sabah East-West Grid Interconnection via a 50:50 joint venture with Transmission Technology Sdn. Bhd.. The joint venture was terminated in the previous financial year
100.0 100.0 100.0
Budaya Positif Sdn. Bhd. Development of facilities through private finance initiative
100.0 - -
SPK-SENTOSA CORPORATION BERHAD (5347-X)60
Notes to the Financial Statements31 December 2012cont’d
15. INVESTMENTS IN SUBSIDIARIES cont’d (a) Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows: cont’d
Proportion ofownership interest (%)
Name of subsidiaries Principal activities 2012 2011 1.1.2011
Held by Nadaprise Sdn. Bhd.:
Rekayasa Industri Malaysia Sdn. Bhd. Engineering and construction works 70.0 70.0 70.0
Simfoni Temasek Sdn. Bhd. Design and supply of engineering equipment or systems and services to the oil and gas industry. The subsidiary ceased operations in the previous financial year
100.0 100.0 100.0
Ombak Sepakat Sdn. Bhd. Investment holding 87.5 87.5 87.5
SPK Oil & Gas Supplies and Services Sdn. Bhd.
Design and supply of engineering equipment systems and services to the oil and gas industry
100.0 100.0 100.0
SPK Oil & Gas Supplies and Services (L) Bhd**
Dormant - 100.0 100.0
* Shareholding held by the Company is 50% plus 1 share.** The subsidiary has been struck off from the register of the Companies Commission of Malaysia in accordance with Section
308(2) of the Companies Act 1965.
(b) Acquisition of subsidiary
On 24 December 2012, the Group, through Pembinaan SPK Sdn. Bhd., acquired 2 ordinary shares of RM1 each, representing 100% equity interest in Budaya Positif Sdn. Bhd. (”BPSB”) for a total cash consideration of RM3,000.
The excess of the cost of investment in BPSB over the net fair value of the identifiable assets and liabilities of BPSB as at the date of acquisition was RM2,998 which has been recorded as goodwill.
In the previous financial year, the Company subscribed for 2 new ordinary shares of RM1 at par, representing 2 subscribers’ shares in SPK Era Sdn. Bhd.. The intended principal activity of SPK Era Sdn. Bhd. is to provide specialised engineering services to the local and international oil and gas industry. The net cash outflow on acquisition of the subsidiary was RM2, being the fair value of the identifiable asset, represented by cash on hand, at the date of acquisition.
(c) Impairment test for investments
The management of the Company has carried out an impairment test review for investments based on the recoverable amount of each cash-generating unit (“CGU”). The recoverable amount of a CGU has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by the executive directors covering a five-year period. The pre-tax discount rate applied to cash flow projections of the CGU is 18.1%.
ANNUAL REPORT 2012 61
Notes to the Financial Statements31 December 2012
cont’d
15. INVESTMENTS IN SUBSIDIARIES cont’d
(c) Impairment test for investments cont’d
The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of investment.
- Budgeted contract revenue
Budgeted contract revenue is estimated based on the assumption that a subsidiary will secure a new project in 2013 and that subsidiary will complete its existing projects in hand.
- Budgeted gross margin
Budgeted gross margin is estimated based on the gross margin of actual projects on hand.
- Discount rate
The discount rates used are pre-tax and reflect specific risks relating to the industry.
During the financial year, the review has led to the recognition of impairment loss amounting to RM19,386,000 (2011: RM43,215,000) due to the decline in the long term profitability of a subsidiary.
16. INVESTMENTS IN ASSOCIATES
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Unquoted shares at cost 20,000 20,000 20,000
Share of post-acquisition reserves 9,133 6,548 4,409
Dilution of interest - (754) -
Foreign currency translation reserve (549) (1,128) (798)
28,584 24,666 23,611
SPK-SENTOSA CORPORATION BERHAD (5347-X)62
Notes to the Financial Statements31 December 2012cont’d
16. INVESTMENTS IN ASSOCIATES cont’d
Details of the associates, all of which are incorporated in Malaysia, are as follows:
Proportion ofownership interest (%)
Name of associates Principal activities 2012 2011 1.1.2011
Held by Nadaprise Sdn. Bhd.:
Awan Inspirasi Holdings Sdn. Bhd. Investment holding 20.0 20.0 25.0
Held by Awan Inspirasi Holdings Sdn. Bhd.:
Awan Inspirasi Global (L) Bhd Provision of offshore leasing services 100.0 100.0 100.0
Awan Inspirasi Sdn. Bhd. Provision of offshore aviation support services
100.0 100.0 100.0
Held by Simfoni Temasek Sdn. Bhd.:
Maces International Sdn. Bhd. Exploration and development in the specialty oilfield chemicals industry in the United Arab Emirates
30.0 30.0 30.0
The summarised financial information of the associates are as follows:
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Assets and liabilities:
Current assets 88,876 81,325 98,176
Non-current assets 243,783 217,313 82,663
Total assets 332,659 298,638 180,839
Current liabilities (38,581) (29,939) (86,382)
Non-current liabilities (151,157) (145,368) (13)
Total liabilities (189,738) (175,307) (86,395)
Income and expenses:
Revenue 215,501 183,296 188,386
Profit for the year 36,693 11,337 6,777
ANNUAL REPORT 2012 63
Notes to the Financial Statements31 December 2012
cont’d
17. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Unquoted shares at cost 5,521 4,541 3,011
Share of post-acquisition reserves (3,720) (2,187) (687)
Effects of adopting FRS 139 - - (570)
Foreign currency translation reserve - - (102)
1,801 2,354 1,652
Company
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Unquoted shares at cost 980 - - Details of the jointly controlled entities, all of which are incorporated in Malaysia unless otherwise stated, are as follows:
Proportion ofownership interest (%)
Name of jointly controlled entities Principal activities 2012 2011 1.1.2011
Held by the Company:
Superior Energy Services (KL) Sdn. Bhd.
Carrying on the business of oilfield services and equipment, specialised in serving the drilling and production-related needs of oil and gas companies, as well as plug and abandonment and decommissioning services required at the end of a well’s life
56.0 - -
Held by Komunikasi SPK Sdn. Bhd.:
TTSB - SPK Consortium* Design, supply, construct, test and commission the 275kV Transmission Project for Sabah East-West Grid. The joint venture was terminated in the previous financial year
- - 50.0
Held by Pembinaan SPK Sdn. Bhd.:
SPK - Bina Puri JV** Undertake the construction contract for the execution and implementation of Phase 1 Plot 1 Zone B Residential, Commercial and Recreational Development of Al Reem Island, Abu Dhabi, United Arab Emirates
70.0 70.0 70.0
SPK-SENTOSA CORPORATION BERHAD (5347-X)64
Notes to the Financial Statements31 December 2012cont’d
17. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES cont’d
Proportion ofownership interest (%)
Name of jointly controlled entities Principal activities 2012 2011 1.1.2011
Held by Nadaprise Sdn. Bhd.:
Wood Group Production Facilities (Malaysia) Sdn. Bhd.*** #
Participate in the business of oil and gas, petrochemical, liquefied natural gas, power generation and refining industries
67.5 67.5 67.5
Held by Ombak Sepakat Sdn. Bhd.:
Xervon Corp Sdn. Bhd. (formerly known as ThyssenKrupp Xervon Corp Sdn. Bhd.) #
Provision of support services to the oil and gas, petrochemical, industrial and power generation sectors, and in the main supplying services
51.0 51.0 51.0
* Unincorporated partnership in Malaysia.** Unincorporated partnership in Abu Dhabi, United Arab Emirates. *** Profits and losses sharing is on a 49% basis.# Based on unaudited management financial statements.
The Group’s share of the assets, liabilities, income and expenses of the jointly controlled entities are as follows:
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Assets and liabilities:
Current assets 15,698 14,072 44,712
Non-current assets 992 2,590 2,693
Total assets 16,690 16,662 47,405
Current liabilities, representing total liabilities (23,913) (20,516) (53,400)
Income and expenses:
Revenue and other income 4,486 1,821 19,802
Expenses, including finance costs and taxation (9,116) (7,265) (20,659)
ANNUAL REPORT 2012 65
Notes to the Financial Statements31 December 2012
cont’d
18. TRADE AND OTHER RECEIVABLES
Group Company
2012 2011 1.1.2011 2012 2011 1.1.2011
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Current
Trade receivables
Third parties 46,399 107,810 72,727 - - -
Holding company 7,857 15,372 17,062 - - -
Fellow subsidiaries 17,597 7,533 11,849 - - -
71,853 130,715 101,638 - - -
Less: Allowance for impairment - third parties - - (240) - - -
Trade receivables, net 71,853 130,715 101,398 - - -
Other receivables
Amounts due from related parties:
Holding company 178 - - - - -
Subsidiaries - - - 103,739 100,015 95,069
Associate 2,019 46 12,702 - - -
Jointly controlled entities 13,575 9,300 9,416 13 - -
Sundry receivables 319 11,536 16,348 - - -
Interest receivable 57 129 66 - - -
Deposits 1,460 3,310 2,930 29 2 2
17,608 24,321 41,462 103,781 100,017 95,071
Less: Allowance for impairment - related parties (13,480) (9,285) (2,926) (103,739) (79,970) (62,367)
Other receivables, net 4,128 15,036 38,536 42 20,047 32,704
75,981 145,751 139,934 42 20,047 32,704
SPK-SENTOSA CORPORATION BERHAD (5347-X)66
Notes to the Financial Statements31 December 2012cont’d
18. TRADE AND OTHER RECEIVABLES cont’d
Group Company
2012 2011 1.1.2011 2012 2011 1.1.2011
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Non-current
Trade receivables
Third parties 1,357 12,883 3,122 - - -
Holding company - 4,079 3,238 - - -
Fellow subsidiaries 2,455 1,983 1,925 - - -
Trade receivables, net 3,812 18,945 8,285 - - -
Total trade and other receivables (current and non-current) 79,793 164,696 148,219 42 20,047 32,704
Add: Cash and bank balances (Note 21) 35,907 52,717 68,522 171 149 2,206
Total loans and receivables 115,700 217,413 216,741 213 20,196 34,910
(a) Trade receivables
Current trade receivables are non-interest bearing and the credit period is generally for a period of 30 days (2011: 30 days; 1.1.2011: 30 days), extending up to 90 days (2011: 90 days; 1.1.2011: 90 days) for major customers. They are recognised at their original invoice amounts which represent their fair values on initial recognition.
Non-current trade receivables represent retention sums on contracts which are in the normal course of business and are due upon expiry of the defects liability period which is after 12 months from the reporting date.
Ageing analysis of trade receivables
Ageing analysis of the Group’s trade receivables is as follows:
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Neither past due nor impaired 67,850 149,644 81,291
1 to 30 days past due not impaired 6,043 - 28,005
31 to 60 days past due not impaired 446 - 387
61 to 90 days past due not impaired 1,311 - -
More than 121 days past due not impaired 15 16 -
7,815 16 28,392
Impaired - - 240
75,665 149,660 109,923
ANNUAL REPORT 2012 67
Notes to the Financial Statements31 December 2012
cont’d
18. TRADE AND OTHER RECEIVABLES cont’d
(a) Trade receivables cont’d
Receivables that are neither past due nor impaired
Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. None of them have been renegotiated during the financial year.
Receivables that are past due but not impaired
The balances of receivables that are past due but not impaired are unsecured in nature.
Receivables that are impaired
The Group’s trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:
GroupIndividually impaired
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Trade receivables - nominal amounts - - 240
Less: Allowance for impairment - - (240)
- - -
Movement in allowance accounts:
Group
2012 2011
RM’000 RM’000
At 1 January - 240
Written off - (240)
At 31 December - -
(b) Related party balances
Current amounts due from all related companies are unsecured, non-interest bearing and are repayable on demand.
Non-current amounts due from related companies represent retention sums on contracts and are due upon expiry of the defects liability period which is after 12 months from the reporting date.
Included in amount due from associate is dividend receivable amounting to RM2,000,000 (2011: Nil; 1.1.2011: Nil).
SPK-SENTOSA CORPORATION BERHAD (5347-X)68
Notes to the Financial Statements31 December 2012cont’d
18. TRADE AND OTHER RECEIVABLES cont’d
(c) Other receivables
Receivables that are impaired
The Group’s and the Company’s other receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:
Group Company
Individually impaired
2012 2011 1.1.2011 2012 2011 1.1.2011
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Other receivables - nominal amounts 13,562 9,301 4,527 103,739 100,015 95,069
Less: Allowance for impairment (13,480) (9,285) (2,926) (103,739) (79,970) (62,367)
82 16 1,601 - 20,045 32,702
Movement in allowance accounts:
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
At 1 January 9,285 2,926 79,970 62,367
Charge for the year (Note 7) 4,613 7,357 23,769 17,603
Written off - (846) - -
Reversal of impairment (Note 5) - (152) - -
Exchange differences (418) - - -
At 31 December 13,480 9,285 103,739 79,970
At the reporting date, the Group and the Company have provided allowances for impairment of amounts due from related companies that have been recording significant financial losses for the current and past two financial years.
ANNUAL REPORT 2012 69
Notes to the Financial Statements31 December 2012
cont’d
19. OTHER CURRENT ASSETS
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Prepaid expenses 429 775 697
Advance payments - 1,104 5
Accrued billing 293 - -
Gross amount due from customers on contracts (Note 20) 22,500 69,404 80,825
23,222 71,283 81,527
Company
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Prepaid expenses 5 - - 20. GROSS AMOUNT DUE FROM/(TO) CUSTOMERS ON CONTRACTS
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Construction contract costs incurred to date 1,278,097 1,521,474 1,184,417
Attributable losses (15,623) (8,806) (12,791)
1,262,474 1,512,668 1,171,626
Less: Progress billings (1,244,119) (1,444,434) (1,095,271)
18,355 68,234 76,355
Presented as:
Gross amount due from customers on contracts (Note 19) 22,500 69,404 80,825
Gross amount due to customers on contracts (Note 26) (4,145) (1,170) (4,470)
18,355 68,234 76,355
Retention sums on contracts included in trade receivables 60,202 44,625 20,793
SPK-SENTOSA CORPORATION BERHAD (5347-X)70
Notes to the Financial Statements31 December 2012cont’d
20. GROSS AMOUNT DUE FROM/(TO) CUSTOMERS ON CONTRACTS cont’d
The costs incurred to date on construction contracts include the following charges made during the financial year:
Group
2012 2011
RM’000 RM’000
Interest expense (Note 6) 2,959 4,603
Employee benefits expense (Note 8) 12,229 29,124
Depreciation (Note 12) 215 246
21. CASH AND BANK BALANCES
Group Company
2012 2011 1.1.2011 2012 2011 1.1.2011
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Cash on hand and at banks 13,158 17,064 10,934 171 149 2,206
Short term deposits with licensed banks 22,749 35,653 57,588 - - -
Cash and bank balances 35,907 52,717 68,522 171 149 2,206
Cash at banks of the Group amounting to RM5,156,000 (2011: RM5,045,000; 1.1.2011: RM5,123,000) are pledged to a bank as security for a bank guarantee facility granted to a subsidiary.
Deposits with licensed banks of the Group amounting to RM16,610,000 (2011: RM27,071,000; 1.1.2011: RM49,066,000) are pledged to banks as securities for credit facilities granted to the subsidiaries.
Short term deposits are made for varying periods of between 7 days and 1 year depending on the immediate cash requirements of the Group, and earn interests at the respective short-term deposit rates. The weighted average effective interest rate as at 31 December 2012 for the Group was 2.1% (2011: 2.0%) per annum.
ANNUAL REPORT 2012 71
Notes to the Financial Statements31 December 2012
cont’d
21. CASH AND BANK BALANCES cont’d
For the purpose of the statements of cash flows, cash and cash equivalents comprise the following as at the reporting date:
Group Company
2012 2011 1.1.2011 2012 2011 1.1.2011
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Cash and bank balances 35,907 52,717 68,522 171 149 2,206
Short term deposits with licensed banks more than three months (3,076) (17,120) (30,028) - - -
Bank overdraft (Note 23) - (31,335) (28,605) - - -
Cash and cash equivalents 32,831 4,262 9,889 171 149 2,206
22. DEFERRED TAX LIABILITIES
Group and Company
2012 2011
RM’000 RM’000
At 1 January 630 630
Recognised in profit or loss (Note 10) 300 -
At 31 December 930 630
Deferred income tax as at 31 December relates to the following:
Group and Company
As at 1 January
2011
Recognised in profit or
loss
As at 31 December
2011
Recognised in profit or
loss
As at 31 December
2012
RM’000 RM’000 RM’000 RM’000 RM’000
Deferred tax liability:
Investment property 630 - 630 300 930
SPK-SENTOSA CORPORATION BERHAD (5347-X)72
Notes to the Financial Statements31 December 2012cont’d
22. DEFERRED TAX LIABILITIES cont’d
Deferred tax assets have not been recognised in respect of the following items:
Group Company
2012 2011 1.1.2011 2012 2011 1.1.2011
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Unused tax losses 101,763 102,005 47,512 85 85 84
Unabsorbed capital allowances 500 192 482 5 5 5
Foreseeable losses - - 18,470 - - -
Other temporary differences 3,884 3,830 3,600 3,595 3,595 3,595
106,147 106,027 70,064 3,685 3,685 3,684
Deferred tax assets have not been recognised in respect of unused tax losses and unabsorbed capital allowances as the directors are of the opinion that it is not probable that future taxable profits will be available against which the unused tax losses and unabsorbed capital allowances can be utilised. The unused tax losses and unabsorbed capital allowances of the Company and of the respective subsidiaries are available for offsetting against future taxable profits subject to the agreement of the Inland Revenue Board.
23. BORROWINGS
Group
2012 2011 1.1.2011
Maturity RM’000 RM’000 RM’000
Current
Secured:
AED bank overdraft at EBOR + 3% per annum On demand - 31,335 28,605
AED revolving credits at EBOR + 3% per annum 2013 25,635 17,318 2,374
RM revolving credits at BLR + 1.5% per annum 2011 - - 10,183
Hire purchase liabilities (Note 31(c)) 2013 257 279 312
25,892 48,932 41,474
Non-current
Secured:
Hire purchase liabilities (Note 31(c)) 2014 - 2015 382 642 849
Total borrowings
Bank overdraft (Note 21) - 31,335 28,605
Revolving credits 25,635 17,318 12,557
Hire purchase liabilities (Note 31(c)) 639 921 1,161
26,274 49,574 42,323
ANNUAL REPORT 2012 73
Notes to the Financial Statements31 December 2012
cont’d
23. BORROWINGS cont’d
The remaining maturities of the borrowings as at 31 December 2012 are as follows:
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
On demand or within one year 25,892 48,932 41,474
More than 1 year and less than 2 years 215 258 262
More than 2 years and less than 5 years 167 384 587
26,274 49,574 42,323 Revolving credits
The revolving credits are secured by assignment of contract proceeds of the subsidiaries to the banks and corporate guarantees granted by the Company.
Hire purchase liabilities
The average discount rate implicit in the liabilities is 3.1% (2011: 3.2%) per annum. These liabilities are denominated in the respective functional currencies of the relevant entities in the Group.
24. DEFERRED REVENUE
Group and Company
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Total lease rental received 1,700 1,700 1,700
Recognised in profit or loss (1,478) (1,423) (1,366)
222 277 334 Deferred revenue represents lease rental received in advance for the sub-lease of a petrol kiosk site for a period of 30 years.
The lease rental is recognised on a straight-line basis over the period of the lease.
SPK-SENTOSA CORPORATION BERHAD (5347-X)74
Notes to the Financial Statements31 December 2012cont’d
25. TRADE AND OTHER PAYABLES
Group Company
2012 2011 1.1.2011 2012 2011 1.1.2011
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Current
Trade payables
Third parties 94,413 172,849 161,790 - - -
Corporate shareholder of a subsidiary 2,318 2,521 2,439 - - -
96,731 175,370 164,229 - - -
Other payables
Amounts due to related parties:
Holding company 9,363 4,079 4,225 9,256 3,689 2,848
Subsidiaries - - - 26,308 38,187 35,433
Fellow subsidiaries - 1,074 - - - -
Jointly controlled entities 9,024 6,208 7,647 - - -
Sundry payables 592 20,026 47,399 67 50 86
Accrued operating expenses 22,521 4,473 575 46 43 43
41,500 35,860 59,846 35,677 41,969 38,410
138,231 211,230 224,075 35,677 41,969 38,410
Non-current
Trade payables
Third parties 3,705 13,864 6,109 - - -
Total trade and other payables (current and non-current) 141,936 225,094 230,184 35,677 41,969 38,410
Add: Borrowings (Note 23) 26,274 49,574 42,323 - - -
Total financial liabilities carried at amortised cost 168,210 274,668 272,507 35,677 41,969 38,410
(a) Trade payables
Current trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from 30 to 90 days (2011: 30 to 90 days; 1.1.2011: 30 to 90 days).
Non-current trade payables represent retention sums on contracts which are in the normal course of business and are due upon expiry of the defects liability period which is after 12 months from the reporting date.
ANNUAL REPORT 2012 75
Notes to the Financial Statements31 December 2012
cont’d
25. TRADE AND OTHER PAYABLES cont’d
(b) Related party balances
Amounts due to all related companies are unsecured, non-interest bearing and are repayable on demand.
26. OTHER CURRENT LIABILITIES
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Advance payment 116 - -
Gross amount due to customers on contracts (Note 20) 4,145 1,170 4,470
4,261 1,170 4,470 27. SHARE CAPITAL AND SHARE PREMIUM
Number of ordinary shares of RM1 each Amount
2012 2011 2012 2011
‘000 ‘000 RM’000 RM’000
Authorised share capital
At 1 January/31 December 200,000 200,000 200,000 200,000
Number of ordinary shares of
RM1 each Share
capital Share
premium
Total share capital
and share premium
‘000 RM’000 RM’000 RM’000
Issued and paid up share capital
At 1 January/31 December 2011/At 1 January/31 December 2012 133,944 133,944 51,380 185,324
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.
SPK-SENTOSA CORPORATION BERHAD (5347-X)76
Notes to the Financial Statements31 December 2012cont’d
28. FOREIGN CURRENCY TRANSLATION RESERVE
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currency is different from that of the Group’s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group’s net investment in the foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation.
Group
2012 2011
RM’000 RM’000
At 1 January (349) -
Other comprehensive income 861 (515)
Less: Non-controlling interests (166) 166
At 31 December 346 (349) 29. CONTINGENT LIABILITIES
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Unsecured:
Interest on legal claims from subcontractors 69 924 5 A subcontractor of a subsidiary, Rekayasa Industri Malaysia Sdn. Bhd. (“Rekayasa”), has instituted legal proceedings against
Rekayasa for outstanding payments totalling RM554,000 together with interest at 8% per annum on the outstanding balance until the date of final payment. As at the reporting date, the legal case is pending negotiation with the subcontractor on its acceptance of the compromised settlement scheme with Rekayasa’s creditors pursuant to Section 176 of the Companies Act 1965.
No provision has been made for the interest claimed by the subcontractor of Rekayasa as the directors are of the opinion that the payment of interest for the above case is unlikely to materialise.
ANNUAL REPORT 2012 77
Notes to the Financial Statements31 December 2012
cont’d
30. RELATED PARTY TRANSACTIONS
(a) The Group and the Company had the following transactions with related parties during the financial year:
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
Holding company:
Receipt for progress billing to 67,169 50,809 - -
Construction work performed for (55,294) (50,542) - -
Management fees charged by 1,099 1,130 364 224
Advances from 250 3,755 250 3,775
Repayment of advances made to (8,500) (2,499) - (1,226)
Payments of expenses made on behalf by 7,642 2,442 7,601 2,442
Payments of expenses made on behalf of (535) (614) - -
Subsidiaries:
Advances from - - 87 250
Advances to - - (4,042) (5,590)
Repayment of advances made by - - - 250
Payments of expenses made on behalf of - - (2,964) (2,442)
Payments of expenses made on behalf by - - 737 1,234
Waiver of amount due to - - 12,473 -
Impairment of amount due from - - 23,769 17,603
Capitalisation of advances to - - 406 -
Fellow subsidiaries:
Construction work performed for 53,627 64,097 - -
Rental paid to 10 30 - -
Associate:
Interest charged to - (715) - -
Repayment of advances made by 216 12,788 - -
Dividend received and receivable from 4,000 - - -
Payments of expenses made on behalf of (208) (933) - -
Payments of expenses made on behalf by 20 15 - -
Jointly controlled entities:
Repayment of advances made by 206 - 206 -
Payments of expenses made on behalf of (390) (171) (219) -
Payments of expenses made on behalf by 104 226 - -
Capitalisation of advances to - 830 - -
Impairment of amount due from 4,613 7,357 - -
A former shareholder of a subsidiary:
Waiver of amount due to 158 - - -
SPK-SENTOSA CORPORATION BERHAD (5347-X)78
Notes to the Financial Statements31 December 2012cont’d
30. RELATED PARTY TRANSACTIONS cont’d
Information regarding outstanding balances arising from related party transactions as at 31 December 2012 and 2011 are disclosed in the respective notes to the financial statements.
(b) Compensation of key management personnel
The remuneration of directors and other members of key management personnel during the financial year were as follows:
Group Company
2012 2011 2012 2011
RM’000 RM’000 RM’000 RM’000
Short term employee benefits 2,292 2,787 109 113
Post-employment benefits
- defined contribution plan 65 75 - -
2,357 2,862 109 113 31. COMMITMENTS
(a) Capital commitments
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Capital expenditure
Approved and contracted for:
Procurement of services and materials - - 1,080
(b) Operating lease commitments - as lessee
The Group and the Company have entered into non-cancellable operating lease agreements for the use of premises and equipment. The leases have an average life of between 2 and 5 years with renewal option and no purchase option. There are no restrictions placed upon the Group and the Company by entering into these leases and no arrangements have been entered into for contingent rental payments.
The Group also leases certain premises and equipment under cancellable operating lease agreements. The Group is required to give notice for the termination of those agreements and the period of notice is 3 months.
ANNUAL REPORT 2012 79
Notes to the Financial Statements31 December 2012
cont’d
31. COMMITMENTS cont’d
(b) Operating lease commitments - as lessee cont’d
The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the reporting date but not recognised as liabilities are as follows:
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Future minimum lease payments:
Not later than 1 year 450 496 382
Later than 1 year but not later than 5 years 866 1,302 1,347
1,316 1,798 1,729
(c) Hire purchase liabilities
The Group has hire purchase arrangements for motor vehicles. Future minimum lease payments under hire purchase together with the present value of the net minimum lease payments are as follows:
Group
2012 2011 1.1.2011
RM’000 RM’000 RM’000
Minimum lease payments:
Not later than 1 year 290 328 374
Later than 1 year but not later than 2 years 236 292 308
Later than 2 years but not later than 5 years 171 409 641
Total future minimum lease payments 697 1,029 1,323
Less: Future finance charges (58) (108) (162)
Present value of hire purchase liabilities (Note 23) 639 921 1,161
Present value of payments:
Not later than 1 year 257 279 312
Later than 1 year but not later than 2 years 215 258 262
Later than 2 years but not later than 5 years 167 384 587
Present value of minimum lease payments 639 921 1,161
Less: Amount due within 12 months (Note 23) (257) (279) (312)
Amount due after 12 months (Note 23) 382 642 849
SPK-SENTOSA CORPORATION BERHAD (5347-X)80
Notes to the Financial Statements31 December 2012cont’d
32. FAIR VALUE OF FINANCIAL INSTRUMENTS
(a) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value
Group
2012 2011 1.1.2011
Carrying amount Fair value
Carrying amount Fair value
Carrying amount Fair value
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Financial liability:
Hire purchase liabilities 31(c) 639 648 921 931 1,161 1,169
Hire purchase liabilities
The fair value of hire purchase liabilities are estimated by discounting expected future cash flows at market incremental lending rate for similar types of leasing arrangements at the reporting date.
(b) Determination of fair value
Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value
The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value:
Note
Trade and other receivables (current) 18
Trade and other payables (current) 25
Borrowings (current) 23
The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the reporting date.
The carrying amounts of the current portion of borrowings are reasonable approximations of fair values due to the insignificant impact of discounting.
ANNUAL REPORT 2012 81
Notes to the Financial Statements31 December 2012
cont’d
33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its credit risk, liquidity risk, interest rate risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is and has been throughout the financial year under review, the Group’s policy that no trading in derivative financial instruments shall be undertaken.
(a) Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. The Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.
The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.
Exposure to credit risk
At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by:
- The carrying amount of each class of financial assets recognised in the statements of financial position.
- Amounts of RM105,975,000 and Nil (2011: RM198,596,000 and RM2,696,000; 1.1.2011: RM204,778,000 and RM21,677,000) relating to corporate guarantees provided by the Company to banks as securities for loans taken by a subsidiary and a jointly controlled entity respectively.
Credit risk concentration profile
The Group determines concentrations of credit risk by monitoring the country and industry sector profile of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the reporting date are as follows:
Group
2012 2011 1.1.2011
RM’000 % of total RM’000 % of total RM’000 % of total
By country:
Malaysia 35,470 47 35,414 24 45,880 42
United Arab Emirates 40,195 53 114,246 76 63,803 58
75,665 100 149,660 100 109,683 100
By industry sectors:
Construction 72,805 96 147,032 98 103,653 95
Oil and gas 2,860 4 2,628 2 6,030 5
75,665 100 149,660 100 109,683 100
At the reporting date, approximately 38% (2011: 18%; 1.1.2011: 36%) of the Group’s trade and other receivables were due from related parties while almost all of the Company’s other receivables were balances with related parties.
SPK-SENTOSA CORPORATION BERHAD (5347-X)82
Notes to the Financial Statements31 December 2012cont’d
33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES cont’d (a) Credit risk cont’d
Financial assets that are neither past due nor impaired
Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 18.
Financial assets that are either past due or impaired
Information regarding financial assets that are either past due or impaired is disclosed in Note 18.
(b) Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.
At the reporting date, approximately 99% (2011: 99%; 1.1.2011: 98%) of the Group’s loans and borrowings will mature in less than one year based on the carrying amount reflected in the financial statements.
ANNUAL REPORT 2012 83
Notes to the Financial Statements31 December 2012
cont’d
33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES cont’d
(b) Liquidity risk cont’d
Analysis of financial instruments by remaining contractual maturities
The table below summarises the maturity profile of the Group’s and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations.
On demand or
within one year
One to five years Total
Group RM’000 RM’000 RM’000
At 31 December 2012
Financial liabilities:
Trade and other payables 139,432 4,098 143,530
Borrowings 25,925 407 26,332
Total undiscounted financial liabilities 165,357 4,505 169,862
At 31 December 2011
Financial liabilities:
Trade and other payables 211,994 15,437 227,431
Borrowings 48,981 701 49,682
Total undiscounted financial liabilities 260,975 16,138 277,113
At 1 January 2011
Financial liabilities:
Trade and other payables 225,000 7,449 232,449
Borrowings 41,536 949 42,485
Total undiscounted financial liabilities 266,536 8,398 274,934
SPK-SENTOSA CORPORATION BERHAD (5347-X)84
Notes to the Financial Statements31 December 2012cont’d
33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES cont’d
(b) Liquidity risk cont’d
On demand or
within one year
One to five years Total
Company RM’000 RM’000 RM’000
At 31 December 2012
Financial liabilities:
Trade and other payables, excluding financial guarantees*, representing total undiscounted financial liabilities 35,677 - 35,677
At 31 December 2011
Financial liabilities:
Trade and other payables, excluding financial guarantees*, representing total undiscounted financial liabilities 41,969 - 41,969
At 1 January 2011
Financial liabilities:
Trade and other payables, excluding financial guarantees*, representing total undiscounted financial liabilities 38,410 - 38,410
* At the reporting date, the counterparty to the financial guarantees does not have a right to demand cash as the default has not occurred. Accordingly, financial guarantees under the scope of FRS 139 are not included in the above maturity profile analysis.
(c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises primarily from its loans and borrowings, bank overdraft and revolving credits at floating rates and hire purchase at fixed rates. The Group’s policy is to manage interest cost using a mix of fixed and floating rate debts.
Sensitivity analysis for interest rate risk
At the reporting date, if interest rates had been 10 basis points lower/higher, with all other variables held constant, the Group’s loss net of tax would have been RM44,000 (2011: RM74,000) lower/higher, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.
ANNUAL REPORT 2012 85
Notes to the Financial Statements31 December 2012
cont’d
33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES cont’d
(d) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
The Group has transactional currency exposures arising from sales, advance payments and amount due to a corporate shareholder that are denominated in currencies other than the respective functional currencies of the Group entities, primarily RM and Arab Emirates Dirham (“AED”). The foreign currencies in which these transactions are denominated are mainly US Dollars (“USD”), Indonesian Rupiah (“IDR”) and Singapore Dollars (“SGD”).
The Group is also exposed to currency translation risk arising from its net investments in foreign operations, in United Arab Emirates.
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Group’s loss net of tax to a reasonably possible change in the AED, USD, IDR and SGD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant:
Group
2012 2011
Loss net of tax Equity
Loss net of tax Equity
RM’000 RM’000 RM’000 RM’000
AED/RM
- strengthened 5% +2,308 -500 -204 -290
- weakened 5% -2,308 +500 +204 +290
USD/RM
- strengthened 5% +61 +543 +66 +290
- weakened 5% -61 -543 -66 -290
IDR/RM
- strengthened 5% +6 - +7 -
- weakened 5% -6 - -7 -
SGD/RM
- strengthened 5% +9 - +4 -
- weakened 5% -9 - -4 -
SPK-SENTOSA CORPORATION BERHAD (5347-X)86
Notes to the Financial Statements31 December 2012cont’d
34. CAPITAL MANAGEMENT
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2012 and 31 December 2011.
The Group’s gearing ratio, which is total borrowings (consisting of bank overdraft, revolving credits and hire purchase liabilities) divided by total equity is as follows:
Group
2012 2011
Total borrowings (RM’000) 26,274 49,574
Total equity (RM’000) 4,363 65,859
Gearing ratio (%) 602 75 35. SEGMENT INFORMATION
For management purposes, the Group is organised into business units based on their nature of business and has three reportable segments as follows:
(i) Domestic construction - construction of buildings and infrastructure works locally.
(ii) International construction - construction of buildings and infrastructure works overseas.
(iii) Oil and gas - provision of offshore and onshore support services to the oil and gas industry which include engineering, procurement, construction and commissioning for petrochemicals and oil and gas facilities, operations and maintenance services, development and redevelopment and/or management of oil and gas brownfields and refineries and trading and supply of oil and gas materials, products and equipment.
Except as indicated above, no operating segment has been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.
ANNUAL REPORT 2012 87
Notes to the Financial Statements31 December 2012
cont’d
35. SEGMENT INFORMATION cont’d
Domestic construction
International construction
Oil and gas Eliminations Consolidated
RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2012
Revenue
External, representing total revenue 134,503 214,191 5,843 (334) 354,203
Results
Segment loss (152) (42,446) (3,728) - (46,326)
Share of profit of associates 7,339
Share of loss of jointly controlled entities (4,630)
Fair value adjustment on investment property 1,200
Impairment of goodwill (18,503)
Unallocated corporate expenses (1,003)
Loss before tax (61,923)
Income tax expense (434)
Loss for the year, net of tax (62,357)
31 December 2011
Revenue
External, representing total revenue 150,420 451,351 15,905 - 617,676
Results
Segment loss (1,241) (6,960) (1,271) - (9,472)
Share of profit of associates 1,385
Share of loss of jointly controlled entities (5,444)
Gain on disposal of a jointly controlled entity 6,239
Unallocated corporate expenses (349)
Loss before tax (7,641)
Income tax expense (147)
Loss for the year, net of tax (7,788)
SPK-SENTOSA CORPORATION BERHAD (5347-X)88
Notes to the Financial Statements31 December 2012cont’d
36. SIGNIFICANT AND SUBSEQUENT EVENTS
(a) On 25 July 2012, the Company entered into an agreement with Superior Energy Services B.V. (“SES”) for the formation of a joint venture company, Superior Energy Services (KL) Sdn. Bhd. (formerly known as Raven Prosperity Equity Sdn. Bhd.) for the purpose of carrying on the business of oilfield services and equipment, specialised in serving the drilling and production-related needs of oil and gas companies, as well as plug and abandonment and decommissioning services required at the end of a well’s life.
The shareholdings of the parties in the joint venture company are as follows:
The Company : 56% SES : 44%
(b) On 25 January 2013, the Group, through Budaya Positif Sdn. Bhd. (“BPSB”), entered into a Concession Agreement (“CA”) with the Government of Malaysia and Universiti Malaysia Perlis (“UNIMAP”) for the design, development and maintenance of Student’s Residential Building Blocks for UNIMAP in Padang Siding, Perlis Indera Kayangan through Public Private Partnership (“the Project”). BPSB will be responsible to finance, design, develop, construct and maintain the Project. The construction period of the Project is 2.5 years and construction is expected to commence by June 2013 and to be completed in December 2015, thereafter, followed by maintenance of the Project for a period of 20 years. The Project is conditional upon BPSB securing financing for the Project within 6 months from the date of the execution of the CA.
37. AUTHORISATION OF FINANCIAL STATEMENTS FOR ISSUE
The financial statements for the year ended 31 December 2012 were authorised for issue in accordance with a resolution of the directors dated 23 April 2013.
ANNUAL REPORT 2012 89
Notes to the Financial Statements31 December 2012
cont’d
38. SUPPLEMENTARY INFORMATION
The breakdown of the accumulated losses of the Group and of the Company as at 31 December 2012 into realised and unrealised profits or losses is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.
Group Company
RM’000 RM’000
Total accumulated losses of the Company and its subsidiaries:
- Realised (386,152) (214,554)
- Unrealised 435 -
Total share of retained profits from associates:
- Realised 9,532 -
- Unrealised (399) -
Total share of accumulated losses from jointly controlled entities:
- Realised (12,748) -
- Unrealised 9 -
Less: Consolidation adjustments 208,006 -
Accumulated losses as per financial statements (181,317) (214,554)
SPK-SENTOSA CORPORATION BERHAD (5347-X)90
Location DescriptionDate of
Acquisition Tenure
Land Area
(sq. ft.)Existing
Use
Carrying Amount
(RM’000)
Bandar MenjalaraKepongKuala Lumpur
H.S. (D) 51604P.T. 44668
Mukim of Batu
20 January1986
Leasehold expires in Year 2077
36,010 Petrol Kiosk
5,700
The Property of the Groupas at 31 December 2012
ANNUAL REPORT 2012 91
Analysis of Shareholdingsas at 30 April 2013
THIRTY (30) LARGEST SHAREHOLDERS
Name of shareholdersNo. of
shares held% of
shareholdings
1. Sharikat Permodalan Kebangsaan Berhad 121,546,108 90.7437
2. SPK Securities Sdn Bhd 3,072,868 2.2941
3. Cimsec Nominees (Tempatan) Sdn Bhd CIMB Bank For Hamid Bin Mohd Sidek
2,680,000 2.0008
4. HDM Nominees (Asing) Sdn BhdPhillip Securities Pte Ltd for Tan Han Chuan
335,200 0.2503
5. Maybank Securities Nominees (Asing) Sdn BhdMaybank Kim Eng Securities Pte Ltd for Tan Han Chuan
187,100 0.1397
6. Amanah Raya BerhadAmanah Raya Capital Sdn Bhd
170,540 0.1273
7. Tan Han Chong 126,300 0.0943
8. Sng Choon Piow 90,000 0.0672
9. Jamilah Binti Adam 82,000 0.0612
10. Khoo Hun Heng 73,300 0.0547
11. Yap Yock Chin 72,500 0.0541
12. Ong Chong Hwa 70,000 0.0523
13. TA Nominees (Tempatan) Sdn BhdPledged Securities Account for Fauzana Suad Binti Abdul Razak
64,000 0.0478
14. Ong Beng Keong 59,000 0.0440
15. Jurutama Holdings Sdn Bhd 52,000 0.0388
16. Khoo Tew Choon 51,700 0.0386
17. Wong Sin Kiew 50,800 0.0379
18. Koh Bee Lian 50,000 0.0373
19. Chia Mei-Ling, Sharon (Xie Meiling, Sharon) 50,000 0.0373
20. Seow Foung Ying 47,000 0.0351
21. Cimsec Nominees (Asing) Sdn BhdExempt an for CIMB Securities (Singapore) Pte Ltd
47,000 0.0351
22. Citigroup Nominees (Asing) Sdn BhdExempt an for OCBC Securities Private Limited
45,099 0.0337
23. Chung Fah Heng 44,000 0.0328
24. Koon Swee Onn 40,600 0.0303
25. Arul Kanda A/L Kandasamy 40,000 0.0299
26. Gurcharan Singh A/L Amar Singh 39,000 0.0291
27. Siew Lam Yoo @ Woo Meng Chai 36,666 0.0274
28. Yap Mui Cheng Angela 35,000 0.0261
29. Chua Kian Seng 32,000 0.0239
30. Cheong You Chin 30,033 0.0224
129,319,814 96.5472
SPK-SENTOSA CORPORATION BERHAD (5347-X)92
Analysis of Shareholdingsas at 30 April 2013cont’d
SUBSTANTIAL SHAREHOLDERS
Name of shareholdersNo. of
shares held% of
shareholdings
1. Sharikat Permodalan Kebangsaan Berhad 121,546,108 90.7437
2. SPK Securities Sdn Bhd 3,072,868 2.2941
124,618,976 93.0378
ANNUAL REPORT 2012 93
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Fiftieth (50th) Annual General Meeting of SPK-SENTOSA CORPORATION BERHAD (“the Company”) will be held at the Royal Selangor Golf Club, Jalan Kelab Golf, Off Jalan Tun Razak, 55000 Kuala Lumpur on Thursday, 27 June 2013 at 9.00 a.m. for the transaction of the following business:-
AGENDA
As Ordinary Business 1. To receive and adopt the Audited Financial Statements for the year ended 31 December 2012 and the
Directors’ and Auditors’ Reports thereon.
2. To approve the payment of Directors’ Fees.
3. To re-elect as Director Lt. Gen. Datuk Hj. Md. Hanif Bin Hj. Darimi RMAF (R) who retires pursuant to Article 105 of the Company’s Articles of Association.
4. To re-elect as Director Bala Krishnan A/L Ponniah who retires pursuant to Article 110 of the Company’s Articles of Association.
5. To consider and if thought fit, pass the following Ordinary Resolution:
“THAT Gen. Tan Sri Yaacob Bin Mat Zain (R), retiring pursuant to Section 129(6) of the Companies Act, 1965 (“Act”), be re-appointed as a Director of the Company to hold office as a Director of the Company until the conclusion of the next annual general meeting (“AGM”) of the Company.”
6. To consider and if thought fit, pass the following Ordinary Resolution:
“THAT Rear Admiral Dato’ Yaacob Bin Haji Daud (R), retiring pursuant to Section 129(6) of the Act, be re-appointed as a Director of the Company to hold office as a Director of the Company until the conclusion of the next AGM of the Company.”
7. To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration.
As Special Business
To consider and if thought fit, pass the following Ordinary Resolutions:
Ordinary Resolution
8. Authority To Issue Shares Pursuant To Section 132D of the Act
“THAT pursuant to Section 132D of the Act, the Directors be and they are hereby authorised to issue shares in the Company at any time until the conclusion of the next AGM and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed 10 per centum (10%) of the issued share capital of the Company for the time being, subject always to the approvals of all relevant regulatory authorities being obtained for such issue and allotment.”
Resolution 1
Resolution 2
Resolution 3
Resolution 4
Resolution 5
Resolution 6
Resolution 7
Resolution 8
SPK-SENTOSA CORPORATION BERHAD (5347-X)94
Notice of Annual General Meetingcont’d
Ordinary Resolution
9. Proposed Renewal Of The Shareholders’ Mandate For Recurrent Related Party Transactions Of A Revenue Or Trading Nature Entered Into And/Or To Be Entered Into With Sharikat Permodalan Kebangsaan Berhad (“SPK”) And/Or Its Subsidiaries (“SPK Group”) And Persons Connected With The SPK Group (Including Saiful Aznir Bin Shahabudin And Ir. Dr. Azman Bin Ahmad)
“THAT, subject to the Act and the Memorandum and Articles of Association of the Company, approval be and is hereby given to the Company and/or its subsidiary companies (“Group”) to enter into all arrangements and/or transactions, involving the interests of Directors, major shareholders or persons connected with Directors and/or major shareholders of the Company and/or its subsidiary companies (“Related Parties”), provided that such arrangements and/or transactions are:
(i) recurrent transactions of a revenue or trading nature;(ii) necessary for the day-to-day operations; and(iii) carried out in the ordinary course of business and made at arm’s length on the Group’s normal
commercial terms and on terms not more favourable to the Related Parties than those generally available to the public and are not detriment to the minority shareholders of the Company (“Mandate”),
AND THAT the authority conferred by this resolution will commence immediately upon passing of this Ordinary Resolution and will continue in force until:
(a) the conclusion of the next AGM of the Company following the general meeting at which such Mandate was passed, at which time it will lapse, unless by a resolution passed at a general meeting whereby the authority is renewed; or
(b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or
(c) revoked or varied by resolution passed by the shareholders in a general meeting, whichever is the earlier,
AND FURTHER THAT the Directors of the Company and/or any one of them be authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions as contemplated and/or authorised by this Resolution.”
10. To transact any other business of which due notice shall have been given.
By Order of the Board
FATEH HANUM BTE KHAIRUDDIN (LS 0009093)Company Secretary
Kuala Lumpur5 June 2013
Resolution 9
ANNUAL REPORT 2012 95
NOTES:
1. Members whose names appear in the Record of Depositors on 20 June 2013 shall be eligible to attend the meeting.
2. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the meeting.
3. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if such appointer is a corporation under its common seal, or the hand of its attorney.
4. Where a member of the Company is an exempt authorised nominee as defined under Securities Industry (Central Depositories) Act 1991 (“SICDA”) which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. Where a member is an authorised nominee as defined under SICDA, it may appoint one (1) proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said securities account.
5. This instrument appointing a proxy must be deposited at the Registered Office of the Company at 12th Floor, Menara Perak, No. 24, Jalan Perak, 50450 Kuala Lumpur at least forty eight (48) hours, i.e. on or before 25 June 2013, at 9.00 a.m. before the time appointed for holding the meeting or adjourned meeting.
EXPLANATORY NOTES ON SPECIAL BUSINESS:
1. The proposed Ordinary Resolution under item 8 if passed, is to give the Directors of the Company flexibility to issue and allot shares for such purposes as the Directors in their absolute discretion consider to be in the interest of the Company without having to convene a general meeting. The proceeds raised from the general mandate will provide flexibility to the Company for purposes of funding any future investment projects, working capital, acquisitions, expansion and/or diversification proposals. This authority will expire at the next AGM of the Company. The Company had been granted a general mandate by its shareholders at the Forty Ninth (49th) AGM held on 7 June 2012 (“Previous Mandate”). The Previous Mandate granted by the shareholders had not been utilised and hence no proceed was raised therefrom.
2. The proposed adoption of the Ordinary Resolution under item 9 is to renew the shareholders’ mandate granted by the shareholders of the Company at the Forty Ninth (49th) AGM held on 7 June 2012. The proposed renewal of the shareholders’ mandate will enable the Company and its subsidiaries to enter into any of the recurrent related party transactions of a revenue or trading nature which are necessary for the Group’s day-to-day operations, subject to the transactions being in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.
Notice of Annual General Meetingcont’d
SPK-SENTOSA CORPORATION BERHAD (Company No: 5347-X)
(Incorporated in Malaysia)
PROXY FORM
I/We,..........................................................................................................................of.......................................................................................
.............................................................................................................................................being a member of SPK-SENTOSA CORPORATION
BERHAD, hereby appoint.................................................................................................................................................................of.....................
.....................................................................................................................................................or failing him/her................................................
................................................................of.............................................................................................................................................................
or failing *him/her, the *CHAIRMAN OF THE MEETING as *my/our proxy to vote for *me/us on *my/our behalf at the Fiftieth (50th) Annual General Meeting of the Company to be held at the Royal Selangor Golf Club, Jalan Kelab Golf, Off Jalan Tun Razak, 55000 Kuala Lumpur on Thursday, 27 June 2013 at 9:00 a.m. and at any adjournment thereof.
No. Resolutions For Against
1. To receive and adopt the Audited Financial Statements for the year ended 31 December 2012 and the Directors’ and Auditors’ Reports thereon. Resolution 1
2. To approve the payment of Directors’ Fees. Resolution 2
3. To re-elect as Director Lt. Gen. Datuk Hj. Md. Hanif Bin Hj. Darimi RMAF (R) who retires pursuant to Article 105 of the Company’s Articles of Association. Resolution 3
4. To re-elect as Director Bala Krishnan A/L Ponniah who retires pursuant to Article 110 of the Company’s Articles of Association. Resolution 4
5. To re-appoint Gen. Tan Sri Yaacob Bin Mat Zain (R) who retires pursuant to Section 129(6) of the Companies Act, 1965 (“Act”), to hold office as a Director of the Company until the conclusion of the next annual general meeting of the Company. Resolution 5
6. To re-appoint Rear Admiral Dato’ Yaacob Bin Haji Daud (R) who retires pursuant to Section 129(6) of the Act, to hold office as a Director of the Company until the conclusion of the next annual general meeting of the Company. Resolution 6
7. To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration. Resolution 7
8.
As Special BusinessOrdinary ResolutionAuthority under Section 132D of the Act, for the Directors to issue shares. Resolution 8
9.
As Special BusinessOrdinary ResolutionProposed renewal of the shareholders’ mandate for recurrent related party transactions of a revenue or trading nature entered into and/or to be entered into with Sharikat Permodalan Kebangsaan Berhad (“SPK”) and/or its subsidiaries (“SPK Group”) and persons connected with the SPK Group (including Saiful Aznir Bin Shahabudin and Ir. Dr. Azman Bin Ahmad). Resolution 9
* Strike out whichever not applicable.
(Please indicate with an “X” in the space provided on how you wish your votes to be cast. If you do not do so, the proxy will vote or abstain from voting at his discretion).
Dated this..................................day of ......................................... 2013 ................................................. Signature(s) of member(s)
Notes:-
1. Members whose names appear in the Record of Depositors on 20 June 2013 shall be eligible to attend the meeting.2. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provisions of Section
149(1)(a) and (b) of the Act, shall not apply to the Company. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the meeting.
3. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if such appointer is a corporation under its common seal, or the hand of its attorney.
4. Where a member of the Company is an exempt authorised nominee as defined under Securities Industry (Central Depositories) Act 1991 (“SICDA”) which holds ordinary shares in the Company for multiple beneficial owners in one securities account (‘omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. Where a member is an authorised nominee as defined under SICDA, it may appoint one (1) proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said securities account.
5. This instrument appointing a proxy must be deposited at the Registered Office of the Company at 12th Floor, Menara Perak, No. 24, Jalan Perak, 50450 Kuala Lumpur at least forty eight (48) hours, i.e. on or before 25 June 2013, at 9.00 a.m. before the time appointed for holding the meeting or adjourned meeting.
CDS Account No.
No. of Shares Held
AFFIXSTAMPHERE
THE SECRETARYSPK-SENTOSA CORPORATION BERHAD (5347-X)
12th Floor, Menara PerakNo. 24, Jalan Perak50450 Kuala Lumpur
1ST FOLD HERE
2ND FOLD HERE