scgm profile - latest announcement thermoforming machines and as at 30 april 2017, scgm ... as part...
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SCGM PROFILE SCGM Bhd is one of the largest food packaging producer in Malaysia.
The Group is located at Kulai, Johor, Malaysia and it offers a one-stop solution for all consumers and industrial packaging needs. The Group has invested in advance thermoforming machines and as at 30 April 2017, SCGM Bhd has the capabilities to produce more than 32.5 million kg of extrusion sheets.
Providing in house mould capabilities with 5 Computer Numerical Control Machines, SCGM Bhd is able to provide faster turnaround time to our customers for those who wish to customise their products and to cater to their packaging needs.
SCGM Bhd has been listed on the main market of Bursa Malaysia since 2008 and with a market capitalisation of RM588 million as at 30 April 2017.
VISION AND MISSIONOUR VALUESSCGM PROFILE
OVERVIEW
TABLE OFCONTENTS
2017 Highlights
Five Years Group Financial Highlights
Quarterly Financial Highlights
Financial Calendar 2017
Investor Relations
Corporate Milestones
Commitment to Service Quality and Excellence
23568
1012
MANAGEMENT INSIGHTS 2017
Message from the Chairman
Management Discussion and Analysis
1518
FINANCIAL STATEMENTS 2017
Share Information
Directors’ Report
Statement by Directors and Statutory Declaration
Independent Auditors’ Report
Statements of Financial Position
Statements of Profit or Loss and Other
Comprehensive Income
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
222329303536
373941
OUR GROUP STRUCTURE
Corporate Structure
Corporate Information
Profile of Directors
Business Process
Research & Development
969798
106115
CORPORATE GOVERNANCE
Statement on Corporate Governance
Statement on Risk Management and Internal Control
Audit Committee Report
118136144
OUR PEOPLE
Corporate Social Responsibility
Biodiversity and Cultural Report
151154
HIGHLIGHTS & ACHIEVEMENTS 2017
Notable Achievements
Corporate Event Highlights
Media Highlights
155157160
ADDITIONAL INFORMATION
2017HIGHLIGHTS
Leadership Transition
Dato’ Sri Lee Hock Guan was promoted asDeputy Managing Director.
Expansion Plans
Extrusion capacity will be increased to62.6 million kg per annum.
Tenders awarded totalling RM 80 million forthe construction of new plant located atSengkang, Kulai.
Environment
To preserve the environment by adoptingdegradable addictives used in theproduction process.
Promoting exclusively degradable lunch boxes/food trays for SEA Games in August 2017.
Innovation
First in Asean to deploy 2-color extrusionmachine
Awards
Recipient for the Best Under Billion Awards- Best Return on Assets- Best Enterprise Value Growth- Best in Transparency- Golden Eagle Award
Analysis of Shareholdings
Notice of Tenth Annual General Meeting
Share Buy-Back Statement
List of Properties
Proxy Form
162165170178
3
SCGM BHD | Annual Report 2017
FIVE YEARS GROUPFINANCIAL HIGHLIGHTS
SCGM Bhd
Revenue Segmentation Geographical
Revenue
Profit After Tax
Total Assets
Total Equity
Return on Total Assets
Return on Equity
Dividend Per Share (sen)
Dividend Paid (RM million)
Payout Ratio
Local
Export
TOTAL
Local
Export
Food
Electronic, Extrusion, Medicaland Others
Total
Food
Electronic, Extrusion, Medicaland Others
Customer
74.64
22.25
96.89
75.60
24.70
100.30
78.71
27.92
106.63
79.39
54.12
133.51
95.70
83.08
178.78
56.96
39.93
96.89
58.8%
41.2%
56.52
43.78
100.30
56.4%
43.6%
57.42
49.21
106.63
53.8%
46.2%
70.61
62.90
133.51
52.9%
47.1%
110.39
68.39
178.78
61.7%
38.3%
96.89
7.84
78.90
65.90
10.2%
12.4%
3.0
4.0
51.0%
100.30
11.49
84.78
73.39
14.0%
16.5%
6.1
8.0
69.6%
106.63
15.46
90.63
73.64
17.6%
21.0%
7.9
10.4
67.3%
133.51
20.19
130.52
110.97
18.3%
21.9%
10.0
13.2
65.4%
178.78
23.00
228.11
164.80
12.8%
16.7%
8.0
11.1
48.3%
FY2013 FY2014 FY2015 FY2016 FY2017
77.0%
23.0%
75.4%
24.6%
73.8%
26.2%
59.5%
40.5%
53.5%
46.5%
4
SCGM BHD | Annual Report 2017
FIVE YEARS GROUPFINANCIAL HIGHLIGHTS
Revenue (RM’mil) Profit After Tax (RM’mil) Dividend Per Share (sen)
Total Assets (RM’mil)Dividend Payout
Dividend Paid (RM’mil) Payout Ratio
Minumum 40%dividend policy
Total Equity (RM’mil)
Geographical Segmentation Customer Segmentation Earning Per Share(sen)#
FY2013 FY2014 FY2015 FY2016 FY2017
96
.9
100
.3
106
.6
133
.5
178
.8
FY2013 FY2014 FY2015 FY2016 FY2017
7.8
11.5
15.5
20
.2
23
.0
FY2013 FY2014 FY2015 FY2016 FY2017
3.0
6.1
7.9
10.0
8.0
5.4
0
7.9
1
10.6
5
13.9
1
15.8
4FY2013 FY2014 FY2015 FY2016 FY2017
4.0
8.0
10.4
13.2
11.1
51.0%
69.6%67.3%
65.4%
48.3%
FY2013 FY2014 FY2015 FY2016 FY2017
78
.9
84
.8
90
.6
130
.5
22
8.1
FY2013 FY2014 FY2015 FY2016 FY2017
65.9 73.4 73.6 111.0 164.8
FY2013 FY2014 FY2015 FY2016 FY2017FY2013 FY2014 FY2015 FY2016 FY2017
41.
2%
43
.6%
46
.2%
47
.1%
38
.3%
58
.8%
56
.4%
53
.8%
52
.9%
61.
7%
Food Electronic Extrusion, Medicaland Others
FY2013 FY2014 FY2015 FY2016 FY2017
77
.0%
75
.4%
73
.8%
59
.5%
17.4
%
16.9
%
20
.4%
36
.8%
5.6% 7.7%5.8%
3.7%
53
.5%
43
.3%
3.2%
#based on 145.2 million shares
Local Export
5
SCGM BHD | Annual Report 2017
FY2017 Quarterly Revenue (RM’mil)
1Q17 2Q17 3Q17 4Q17
37
.9
42
.0
46
.0
52
.9
FY2017 Quarterly PBT (RM’mil)
FY2017 Earning Per Share (sen)#
6.4
6.5
7.1
6.6
FY2017 Quarterly PATMI (RM’mil)
5.5
5.4
7.0
5.1
FY2017 Geographical Segmentation5
7.2
%
59
.5%
60
.0%
68
.3%
42
.8%
40
.5%
40
.0%
31.
7%
Local Export
FY2017 Customer Segmentation
56.9%
39.2%
3.9%
53.9% 54.0%
3.9% 3.6%
42.2% 42.4%
50.4%
1.7%
47.9%
Food Electronic Extrusion, Medical and Others
QUARTERLYFINANCIAL HIGHLIGHTS
1Q17 2Q17 3Q17 4Q17
3.8
0
3.7
4
4.8
1
3.5
0
1Q17 2Q17 3Q17 4Q17
1Q17 2Q17 3Q17 4Q17
1Q17 2Q17 3Q17 4Q17
1Q17 2Q17 3Q17 4Q17
#based on 145.2 million shares
7
SCGM BHD | Annual Report 2017
6
SCGM BHD | Annual Report 2017
FINANCIALCALENDAR 2017
23 June
June
2016
Announced 4Q16unaudited financial results
Declared Fourth interimdividend of 2 sen
per share in respectof FY2016
Proposed renewal ofshareholders’ approval
for Share Buy-Backby the Company.
11Issued Share Buy-Back
Statement andAnnual Report 2016
282016
August AugustIssued Notice of Ninth AnnualGeneral Meeting (“9th AGM”)
Revision to utilisationof proceeds from
the Private Placement I
Proposed PrivatePlacement II
102016
September2
2016
2016
7Convened EGM
- Shareholders approvedthe Proposed Private
Placement II
October2016 8
Press release - SCGM Bhdsets to commence
constructionof new factory
February2017
24Completed the Private
Placement of upto 13.2 million newordinary shares.
February 2017
8Announced 2Q17
unaudited financial results
Declared second interimdividend of 2 sen per share
in respect of FY2017
December2016
28Proposed Bonus Issue of
Share and ProposedBonus Issue of
Warrants
April2017
Convened 9th AGM
Announced 1Q17 unauditedfinancial results
Declared first interimdividend of 2 sen
per share in respectof FY2017
March15 2017Announced 3Q17
unaudited financial results
Redesignated Dato’ Sri Lee Hock Guan asDeputy Managing Director.
Declared third interimdividend of 2 sen
per share in respectof FY2017
20Issued Notice of Extraordinary
General Meeting (“EGM”)
September 2016
September201621
Issued Circular andNotice of EGMto shareholders
8
SCGM BHD | Annual Report 2017
INVESTORRELATIONS
The various global developments and a slew of internal updates, from 1 May 2016 to 30 April 2017
necessitated constant and timely Investor Relations activities to facilitate accurate information
flow.
As part of its fund-raising exercises to finance its expansion plans, SCGM successfully undertook
a private placement involving the issuance of 13.2 million placement shares at RM3.20 apiece,
which raised RM42.2 million in proceeds for the Group’s growth initiatives.
On 8 February 2017, SCGM announced that it had awarded contracts totalling RM54 million to
commence construction of its new manufacturing facility in Kulai, Johor. The new plant, which is
slated for completion in end 2018, would bump up the Group’s extrusion capacity to 62.6 million
kilogrammes per year (kg/year) from 36.0 million kg/year at the time of announcement, hence
enabling SCGM to meet current and future demand.
SCGM also proposed on 28 April 2017 to undertake a 1-for-3 Bonus Issue entailing the issuance of
48.4 million new SCGM shares, together with free warrants on a 2-for-15 basis involving 19.4
million warrants. Both exercises, to be implemented concurrently, are meant to encourage trading
liquidity of SCGM shares, enable greater participation by investors and potentially broaden the
shareholder base. Assuming the theoretical exercise price of Warrants of RM4.05 and full
conversion within the three years, the Warrants exercise would potentially raise up to RM78.4
million in proceeds for the Group.
These exercises clearly demonstrate SCGM’s growth path in terms of increasing its production
capacity and enlarging its footprint in the local and international markets, so as to become the
premier provider of thermo-form food and beverage packaging products in the region.
Corporate Announcements
Date
10 Aug 2016
8 Feb 2017
24 Feb 2017
28 Apr 2017
Bursa Announcement
Bursa Announcement
and Press Release
Bursa Announcement
Bursa Announcement
Announcement of Private Placement
Contracts awarded for commencement of construction
of new manufacturing facility in Kulai
Listing of Private Placement shares
Announcement of 1-for-3 Bonus Issue and 2-for-15
Warrant Issue
Events
9
SCGM BHD | Annual Report 2017
As part of SCGM’s initiatives to provide timely and up-to-date reports on the Group’s operational
and financial performance, the key management conducted four group investor briefings for
institutional fund managers and analysts in FY2017. These were complemented by a series of
one-on-one investor meetings and conference calls for those who could not attend in person. We
met with approximately 280 analysts and fund managers throughout FY2017.
We also ensured that the financial results, investor presentations and press releases were sent to
interested parties and made available immediately on the Group’s Investor Relations website.
Furthermore we continued to update both the buy and sell-side during pre-closed-period via site
visits and/or one-on-one meetings, to ensure that the investment community is kept abreast of
latest developments. SCGM welcomed more than 10 fund managers and analysts to our premises in
Kulai, during the financial year.
AGM/EGM
SCGM held its Ninth Annual General Meeting (“9th AGM”) on 2 September 2016. The Chairman
presented the 2016 financial performance and outlined the Group’s priorities for 2017. Senior
management and the Board of Directors took note of shareholders’ feedback and addressed
queries on both the financial performance and operational strategies.
Investor briefings, meetings and site visits
Investor briefings:
Date
5 Sep 2016
13 Dec 2016
16 Mar 2017
23 June 2017
Events
Investor Briefing and Conference Call
Investor Briefing and Conference Call
Investor Briefing and Conference Call
Investor Briefing and Conference Call
In respect of Financial Results Announcement
1st Quarter Unaudited Financial Results
2nd Quarter Unaudited Financial Results
3rd Quarter Unaudited Financial Results
4th Quarter Unaudited Financial Results
10 CORPORATEMILESTONES
SCGM BHD | Annual Report 2017
Lee Soon Seng Plastic Industries Sdn Bhd started the business on
4th May 1984 with 2 semi auto vacuum forming machines and 8 employees.
1984
Lee Soon Seng Plastic Industries
1992 1996Expanded facilities to
40,000 sq feet
2001Sijil Anugerah
ISO 9002
2004
Our FirstHIPS and PPExtrusion machine.
2008Listed in
Kuala LumpurStock Exchange(KLSE) on 28th February.
LSSPI is fully owned by SCGM Bhd.
built up area.
Built-up area : 15,000 sq ftLand Area : 30,000 sq ft
Construction of a new factory
11
SCGM BHD | Annual Report 2017
2009
2013
2009 11
Expanded facilities to
170,000 sq feetbuilt up area.
2015
2016
2017
To save the only planet we live - Earth.
We produce Polylactic Acid PLAplastic sheet which is 100% from plant.
Our "Hygienic" PP disposable cups fully automation machine is born. Single line process from resin to packaging.
Our latest arrival
3 station“press forming” machine.
*All illustrations are artist's impressions only
to be ready in December 2018.758,638 sq ft*
Our latest manufacturing plant witha total build-up area of
*PHASE I : 603,637 sq ft / PHASE II : 155,001 sq ft
12
SCGM BHD | Annual Report 2017
Since SCGM Group’s early days, customers
have been core to everything we do. The first
of our five SCGM Group Values is that we are
customer-centric. We exist for our customers
and we sell products that our customers
understand and value. We exist to serve the
needs of our discerning customer needs as
well as to cater to their wants.
The second of our SCGM Group values is high
performance. We work hard and we work
strategically for customers, staff and other
stakeholders. Internally, we measure,
differentiate and recognise our people
according to their individual contributions
while aligning everyone to the performance of
the company as a whole. Customers can
therefore expect our people to always strive to
excel in their service levels.
In placing the needs of our customers, we have
segmented our response to ensure that we can
serve them in the manner to which they are
accustomed. We are responsible for ensuring
that customer are delivered with the right
customised packaging solutions, often by
understanding what does the customers wants
and how to add value to their products.
For smaller companies we have different teams
leading customer relationship management
depending on the customer’s primary
requirements, and then cross-selling other
suitable products of the Group.
CUSTOMER DRIVEN
COMMITMENT TO SERVICE QUALITYAND EXCELLENCE
Anticipating customers’ needsEffectively fulfilling customers’ wants
14
SCGM BHD | Annual Report 2017
DATO’ SRI LEE HOCK SENGExecutive Chairman
DATO’ SRI LEE HOCK CHAIManaging Director
MESSAGE FROM THE CHAIRMANDATO’ SRI LEE HOCK SENG
ECONOMIC AND SECTOR REVIEW
Gross Development Product (GDP) growth in
South East Asia increased marginally to 4.7%
in 2016 according to the Asian Development
Bank (ADB), compared to 4.4% previously.
The expansion was led by high growth in
Philippines and Vietnam, which overshadowed
the impact of slower growth from Thailand.
Even so, the Malaysian economy was muted in
2016, with global crude oil prices remaining
low on lack of demand by major economies as
well as the oversupply due to the Organization
of Petroleum Exporting Countries removing
restrictions on crude oil production. These
factors cast a pall on domestic consumption
as well as corporate and public sector
spending, leading Malaysia to post slower GDP
growth of 4.2% in 2016, versus 5.0% in 2015.
Despite the dampened outlook overall,
demand for thermo-form packaging
continued its strong uptrend during the year.
The biggest jump in demand for our products
was from the local market, where an increasing
number of states began enforcing the ban on
polystyrene packaging products for food and
beverage (F&B) items. Our food packaging
products are viable replacements for the
polystyrene, as they meet the required
environmental and health safety standards.
Against this backdrop, SCGM achieved yet
another successful year, charting record
breaking financial results for FY2017.
MANAGEMENTINSIGHTS 2017
15
SCGM BHD | Annual Report 2017
Dear Shareholders,
I am very pleased to report that SCGM Bhd
(SCGM or the Group) achieved a remarkable
financial year ended 30 April 2017 (FY2017),
reaching new heights as we captured the
tremendous opportunities in the food packaging
sector.
16
SCGM BHD | Annual Report 2017
MANAGEMENT INSIGHTS 2017
FUTURE PROSPECTS
Bank Negara Malaysia has forecasted an
improved GDP growth of between 4.3% to
4.8% for 2017, spurred by strong exports
across major sectors of manufacturing, mining
and construction. This is expected to also
positively enhance domestic private consumer
spending and spur further investments by the
public and private sector entities.
For the South East Asia region, ADB predicts
that GDP growth is expected to remain at a
similar level of 4.8% in 2017 in comparison to
2016, with all economies expected to show a
stable growth level.
With the uptrend in the local economy and
stable regional expansion, coupled with
increasing awareness of environmental care,
we believe that the prospects for the F&B
sector and thermo-form packaging industry
are bright. We will push forward by using our
expertise to serve our existing customers as
well as enter new markets to sustain our
growth pace for the long-term.
CORPORATE EXERCISES
• Private placement
On 24 February 2017, SCGM completed a 10%
private placement exercise with the issuance
and listing of 13.2 million new ordinary shares
on the Main Market of Bursa Malaysia
Securities Berhad.
With the issue price of new shares of RM3.20
apiece, the Group raised RM42.2 million in
proceeds, of which RM41.6 million would be
allocated as capital expenditure for the
construction of our new factory, and the
balance RM0.6 million to defray expenses
related to the corporate exercise.
The private placement increased SCGM’s
share base to 142.5 million shares, from 132.0
million shares previously.
• Bonus Issue and Warrant Issue
On 28 April 2017, the Group proposed a 1-for-3
bonus issue of 48.4 million shares and 2-for-15
issue of 19.4 million free warrants. At an
indicative exercise price of RM4.05 per
warrant, the exercise is expected to raise
RM78.4 million in gross proceeds to finance
the Group’s daily operations.
The bonus issue of shares and warrants
(assuming fully exercised) would increase
SCGM’s share base from 142.5 million shares
to 213.0 million shares. The increase in share
base is aimed at improving the market trading
liquidity of the company and enabling
shareholders participate in the Group’s
growth story.
The exercises are subject to shareholders’
approval at the extraordinary general meeting
on 7 July 2017.
SCGM BHD | Annual Report 2017
CORPORATE SOCIAL RESPONSIBILITY
SCGM has always held in high regard its
responsibility in looking after the welfare of
the larger community, encompassing our
employees, the general public and the
environment. This is a basic tenet of our
operations and part of our contribution to
enhance the wellbeing of society.
The various initiatives undertaken by the
Group to accomplish this objective are
detailed in the Sustainability Report in this
Annual Report.
APPRECIATION
I would like to sincerely extend my gratitude to
the Board of Directors, management team and
valued employees of SCGM for giving their all
in achieving another record breaking year.
Despite the economic issues faced during the
year, all of your sweat and blood that was put
in has paid off, and I look forward to another
great year ahead with all of you.
I would also like to thank all our customers,
business associates and shareholders for
continuing to believe in us and look forward to
your continuous support in the coming year.
Thank you.
Dato’ Sri Lee Hock Seng
Executive Chairman of SCGM Bhd
MANAGEMENT INSIGHTS 2017 17
MANAGEMENT DISCUSSIONAND ANALYSIS
MANAGEMENTINSIGHTS 2017
18
OPERATIONS HIGHLIGHTS
One of the Group’s key successes in FY2017
was the significant increase in our customer
base in both the local and regional arenas. This
was helped by a fundamental shift in the
external environment, as well as SCGM’s ability
to adapt its products to suit the market.
For one thing, environmental and health safety
concerns led to various states in Malaysia
banning the usage of polystyrene packaging
for food, including Selangor, Federal Territory
of Kuala Lumpur, Perak, Melaka, Penang and
Johor. Resulting from this, thermo-form food
packaging, being an eco-friendly alternative,
became highly sought-after by vendors,
manufacturers and retailers in the affected
areas.
SCGM, being a trusted name in the industry for
many decades, was thereby able to meet this
escalated demand in the domestic market, by
producing more thermo-form lunchboxes and
extending our distribution channel to include
distributors in urban and suburban areas.
SCGM secured 131 new customers throughout
Malaysia during the year.
SCGM also expanded its reach in other
countries with increased exports of our
thermo-form products. The Group added 17
new foreign customers in the year under
review, from countries such as Australia, India,
Indonesia, Philippines, Singapore, China, Chile
and Hong Kong.
SCGM BHD | Annual Report 2017
Indeed, FY2017 has proven to be yet another
year of accomplishments for SCGM, as we made
swift progress in our expansion plans, in our
quest towards becoming a leading provider of
thermo-form F&B packaging products for the
region. SCGM continued to go from strength to
strength in the year under review.
19
SCGM BHD | Annual Report 2017
In order to meet the higher demand, SCGM
commissioned additional machinery of two
extruders and four thermoforming machines
in rented premises in Kulai in December 2016.
The additional facility increased the Group’s
production capacity by 11.0 million
kilogrammes (kg) per year, adding to the 25.0
million kg per year in the existing factory.
These milestones pushed SCGM into achieving
its best-ever financial performance in FY2017.
FINANCIAL REVIEW
I am pleased to report that SCGM attained
record-breaking revenue for the ninth
consecutive year in FY2017. Group sales rose
33.9% to RM178.8 million in FY2017, compared
to RM133.5 million previously.
The unabated demand in the local market
prompted a strong 56.4% jump in sales to
RM110.4 million in FY2017, compared to
RM70.6 million a year ago. Export sales also
recorded a gain of 8.7% to RM68.4 million,
versus RM62.9 previously.
Group profit before tax stood at RM26.6
million in FY2017, increasing by a marginal 3.1%
from RM25.8 million a year ago.
During FY2017, the Group incurred higher
operating costs of utilities, staff and raw
materials. It was noted that resin prices were
on an upward trend in the second half of
FY2017, which resulted in a time lag in cost
pass-throughs.
Even so, SCGM still achieved its highest net
profit in its corporate history, with bottom line
increasing 13.9% to RM23.0 million, versus
RM20.2 million in a year ago. Correspondingly,
basic EPS also rose to 17.1 sen from 16.2 sen a
year ago. This excellent net profit was helped
by the Group’s enjoyment of Reinvestment
Allowance, in recognition of qualifying capital
expenditure.
The Group continued to maintain a healthy
balance sheet as at 30 April 2017, with cash
and bank balances and other financial asset
amounting to RM56.8 million and total
borrowings equalling RM29.7 million. Against
shareholders’ funds of RM164.8 million, this
places SCGM in a net cash position, and thus
adequately able to fund its growth plans.
However, the Group’s Return on Equity (ROE)
dipped during the year to 16.7% from 21.9%
previously, due to the larger base of
shareholders’ funds resulting from the
corporate exercises. Return on Assets (ROA)
had also decreased to 12.8% in FY2017 from
18.3% previously, attributable to a higher total
asset value from acquisition of new machinery
and three parcels of land which are earmarked
for the Group’s near-term expansion.
MANAGEMENT INSIGHTS 2017
20
SCGM BHD | Annual Report 2017
DIVIDEND
In respect of FY2017, the Group paid four
interim dividends of 2.0 sen, 2.0 sen, 2.0 sen
and 2.0 sen in the first, second, third and
fourth quarters respectively, amounting to a
total dividend of 8.0 sen per share. This
translates to a total dividend payout of RM11.1
million representing 48.3% of total FY2017 net
profit.
The dividend payout is in line with the Group’s
dividend policy instituted since FY2015, to pay
no less than 40% of annual net profit as
dividend to our shareholders.
We are immensely appreciative to our
shareholders for the vote of confidence over
the past year and hope to count on your
continued support going forward.
GROWTH PROSPECTS
We are mindful of the vast potential in the
thermo-form food packaging, in light of
greater environmental consciousness and
health safety, as well as constant changes in
lifestyles. Therefore, we are aligning our
strategies to continue our upward trajectory in
the coming years.
i. Increasing customer base to improve
market share
With certain states already banning the use
of polystyrene packaging, it is widely
anticipated that other states would follow
suit within the next few years. This is
expected to open a pathway for us to
obtain new customers nationwide.
Besides gaining new customers locally, we
are aiming to increase our market share in
existing export markets, especially
countries in the South East Asian region
and Australia.
We will continue to enhance our product
quality to provide high-standard and
innovative products to both our current
and potential customers.
ii. Introduce new line of eco-friendly food
packaging
In support of global efforts to reduce
carbon footprint, the Group is proud to
introduce into the market degradable
thermo-form packaging, developed in
collaboration with Sugianto Tanto - the
founder and world - renowned innovator
of eco - tech plastic solutions.
SCGM would commercially produce this
range of degradeable thermo-form plastic
packaging in the financial year ending 30
April 2018 (FY2018). Notably, our
‘Benxon’-brand Degradable Plastic
Packaging has been awarded the license
by SIRIM to use the Eco-Label Mark from
June 2017 onwards.
As a further testament to the Group’s
support for the national environmental -
friendly agenda, SCGM is the exclusive
provider of degradable food lunchboxes
and trays for the 29th South East Asian
Games and 9th ASEAN Para Games
(KL2017) in August and September 2017
respectively.
MANAGEMENT INSIGHTS 2017
21
SCGM BHD | Annual Report 2017
Additionally, we are aware of that
constantly-changing lifestyles of end-users
necessitates the Group’s continued
research and development (R&D) to
generate innovative and high quality
products that meet evolving requirements.
iii. Increasing production capacity
In view of the continuous uptrend in
thermos-form packaging from the local and
regional markets, the Group has put in
motion plans to expand our production
capacity to meet the demand.
Thus far, the Group is making good
progress in the construction of a second
factory in Kulai, which is expected to be
completed in December 2018. The capital
expenditure (CAPEX) for the second
factory is estimated to be approximately
RM125.0 million, financed by proceeds from
the completed private placement as well as
internal funds. Upon completion, the
Group’s extrusion capacity is expected to
increase to 62.6 million kg per year,
compared to 36.0 million kg per year
currently.
In addition, the Group also intends to set up
presence in the Klang Valley in the second
half of FY2018 to cater to lunchbox demand
in the Central Peninsular region. To this end,
SCGM plans to rent a factory in Telok
Panglima Garang, Klang to house four
thermo-form machines and two extrusion
machines, with total extrusion capacity of 5
million kg per year. The planned CAPEX of
RM20.0 million would be financed by
internal funds and/or borrowings.
MANAGEMENT INSIGHTS 2017
In conclusion, SCGM is entering a very
promising time. We look forward to reaching
the next level and further cementing our
position as one of the leading thermo-form
plastic packaging manufacturers in the region.
Dato’ Sri Lee Hock Chai
Managing Director of SCGM Bhd
SHAREINFORMATION
22
SCGM BHD | Annual Report 2017
FINANCIALSTATEMENTS 2017
Company Name
SCGM Bhd
Stock Name
SCGM
Stock Code
7247(Bursa Malaysia)
Ticket Code
Bloomberg : SCGM.MKReuters : SCGB.KL
SCGM BHD (Company No: 779028 H)
(Incorporated in Malaysia)
The Directors of SCGM Bhd have pleasure in submitting their report together with the audited
financial statements of the Group and of the Company for the financial year ended 30 April 2017.
PRINCIPAL ACTIVITIES
The Company is principally engaged in investment holding.
The principal activities of the subsidiary are disclosed in Note 7 to the Financial Statements.
There have been no significant changes in the nature of these activities of the Company and its
subsidiary during the financial year.
RESULTS
RESERVES AND PROVISIONS
There were no material transfers to or from reserves or provisions during the financial year.
DIVIDENDS
The amount of dividends paid and declared since the end of the last financial year were as follows:-
23
SCGM BHD | Annual Report 2017
DIRECTORS’ REPORT
GroupRM
CompanyRM
Profit for the financial year
Attributable to:-
Owners of the Company
23,000,585
23,000,585
11,309,642
11,309,642
RM
2,640,000
In respect of financial year ended 30 April 2016:-
Final single tier dividend of 2 sen per ordinary share and paid on 27 July
2016
DIRECTORS’ REPORT24
SCGM BHD | Annual Report 2017
DIVIDENDS (CONT’D)
The amount of dividends paid and declared since the end of the last financial year were as follows
(cont’d):-
RM
Cont’d
2,640,000
2,640,000
2,904,000
10,824,000
In respect of financial year ended 30 April 2017:-
First interim single tier dividend of 2 sen per ordinary share and paid on 7
October 2016
Second interim single tier dividend of 2 sen per ordinary share and paid on 13
January 2017
Third interim single tier dividend of 2 sen per ordinary share and paid on 14
April 2017
The Directors declared fourth interim single tier dividend in respect of the financial year ended 30
April 2017 of 2 sen per ordinary share on 21 June 2017 and payable on 25 July 2017. The financial
statements for the current financial year do not reflect this dividend. Such dividend will be
accounted for in equity as appropriation of unappropriated profit in the financial year ending 30
April 2018.
The Directors do not propose any payment of final dividend in respect of the current financial year.
DIRECTORS
The Directors who held office during the financial year and up to the date of this report are as
follows:-
Dato’ Sri Lee Hock Seng (Executive Chairman)*
Dato’ Sri Lee Hock Chai (Managing Director)*
Dato’ Sri Lee Hock Guan (Deputy Managing Director)*
Lee Hock Meng (Executive Director)*
Amrik Singh Harcharan Singh (Independent Non-Executive Director)
Tang Nai Soon (Independent Non-Executive Director)
Wong Tun Boon (Independent Non-Executive Director)
*Directors of the Company and its subsidiary.
25
SCGM BHD | Annual Report 2017
DIRECTORS’ INTERESTS
By virtue of Dato’ Sri Lee Hock Seng, Dato’ Sri Lee Hock Chai, Dato’ Sri Lee Hock Guan and Mr. Lee
Hock Meng’s direct and indirect interest in the Company, they are also deemed to have interest in
shares of the subsidiary to the extent that the Company has an interest under Section 8 of the
Companies Act, 2016.
DIRECTORS’ BENEFITS
During and at the end of the financial year, no arrangement subsisted to which the Company is a
party, with the object or objects of enabling the Directors of the Company to acquire any benefits
by means of the acquisition of shares in or debentures of the Company or any other body
corporate.
Since the end of the previous financial year, no Director has received or become entitled to receive
any benefit (other than as disclosed in Note 27 to the Financial Statements) by reason of a contract
made by the Company or a related corporation with the Director or with a firm of which the
Director is a member, or with a company in which the Director has a substantial financial interest.
According to the Register of Directors’ Shareholdings, the beneficial interests of those who were Directors at the end of the financial year in shares of the Company are as follows:-
Number of ordinary shares
Dato’ Sri Lee Hock Seng - direct interest - indirect interest
Dato’ Sri Lee Hock Chai - direct interest - indirect interest
Dato’ Sri Lee Hock Guan - direct interest - indirect interest
Lee Hock Meng - direct interest - indirect interest
Amrik Singh Harcharan Singh- direct interest- indirect interest
Tang Nai Soon
Wong Tun Boon
As at
1.5.2016 Bought Sold
As at
30.4.2017
13,054,71122,961,500
9,283,42922,961,500
9,283,43322,961,500
8,893,42922,961,500
63,00024,000
90,000
180,000
59,600-
70,000-
70,000-
--
--
20,000
-
--
--
--
--
--
-
-
13,114,31122,961,500
9,353,42922,961,500
9,353,43322,961,500
8,893,42922,961,500
63,00024,000
110,000
180,000
DIRECTORS’ REPORT
26
SCGM BHD | Annual Report 2017
DIRECTORS’ REMUNERATION
The Directors’ remuneration is disclosed in Notes 23 and 26 to the Financial Statements.
There was no indemnity given to or insurance effected for the Directors and Officers of the
Company.
ISSUE OF SHARES AND DEBENTURES
During the current financial year, the Company had increased its issued and fully paid-up ordinary
share capital from RM66,000,000 to RM132,586,423 by:-
(a) issuance of 13,200,000 new ordinary shares at RM3.20 each through a private placement; and
(b)
All the new ordinary shares issued during the financial year ranked pari passu in all respects with
the existing ordinary shares of the Company.
There were no issuance of debentures during the financial year.
OTHER STATUTORY INFORMATION
Before the financial statements of the Group and of the Company were made out, the Directors
took reasonable steps:-
(a)
(b)
At the date of this report, the Directors are not aware of any circumstances:-
(a)
(b)
(c)
to ascertain that action had been taken in relation to the writing off of bad debts and the
making of provision for doubtful debts and satisfied themselves that all known bad debts had
been written off and adequate provision had been made for doubtful debts; and
the transfer of share premium pursuant to Section 618(2) of the Companies Act, 2016
amounting to RM24,346,423 and became part of the Company’s share capital. There is no
impact in the numbers of ordinary shares in issue as a result of this transfer.
which would render the amounts written off for bad debts or the amount of the provision for
doubtful debts in the financial statements of the Group and of the Company inadequate to any
substantial extent; or
which would render the values attributed to current assets in the financial statements of the
Group and of the Company misleading; or
which have arisen which would render adherence to the existing method of valuation of assets
or liabilities of the Group and of the Company misleading or inappropriate; or
to ensure that any current assets which were unlikely to be realised in the ordinary course of
business including the value of current assets as shown in the accounting records of the Group
and of the Company have been written down to an amount which the current assets might be
expected so to realise.
DIRECTORS’ REPORT
27
SCGM BHD | Annual Report 2017
OTHER STATUTORY INFORMATION (CONT’D)
At the date of this report, the Directors are not aware of any circumstances:- (cont’d)
(d) not otherwise dealt with in this report or the financial statements which would render any
amount stated in the financial statements misleading.
At the date of this report, there does not exist:-
(a)
(b)
In the opinion of the Directors:-
(a)
(b)
(c)
SIGNIFICANT EVENTS
The significant events are disclosed in Note 30 to the Financial Statements.
AUDITORS’ REMUNERATION
The Auditors’ Remuneration is disclosed in Note 23 to the Financial Statements.
any charge on the assets of the Group and of the Company which has arisen since the end of
the financial year which secures the liability of any other person; or
no contingent liability or other liability has become enforceable or is likely to become
enforceable within the period of twelve months after the end of the financial year which, in the
opinion of the Directors, will or may affect the ability of the Group and of the Company to meet
their obligations as and when they fall due;
any contingent liability of the Group and of the Company which has arisen since the end of the
financial year.
the results of operations of the Group and of the Company during the financial year were not
substantially affected by any item, transaction or event of a material and unusual nature; and
there has not arisen in the interval between the end of the financial year and the date of this
report any item, transaction or event of a material and unusual nature likely to affect
substantially the results of operations of the Group and of the Company for the current
financial year in which this report is made.
DIRECTORS’ REPORT
28
SCGM BHD | Annual Report 2017
AUDITORS
The Auditors, Messrs SJ Grant Thornton have expressed their willingness to continue in office.
Signed on behalf of the Board of Directors in accordance with a resolution of the Board of
Directors.
............................................................... DATO’ SRI LEE HOCK SENG DIRECTORS ............................................................... DATO’ SRI LEE HOCK CHAI
Johor Bahru
28 June 2017
)))))))))))))))
DIRECTORS’ REPORT
29
SCGM BHD | Annual Report 2017
STATEMENT BY DIRECTORS
STATUTORY DECLARATION
SCGM BHD (Company No: 779028 H)
(Incorporated in Malaysia)
In the opinion of the Directors, the financial statements set out on pages 35 to 93 are drawn up in
accordance with Malaysian Financial Reporting Standards, International Financial Reporting
Standards and the requirements of the Companies Act, 2016 in Malaysia so as to give a true and fair
view of the financial position of the Group and of the Company as at 30 April 2017 and of their
financial performance and cash flows for the financial year then ended.
In the opinion of the Directors, the information set out on page 94 has been compiled in
accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised
Profits or Losses in the Context of Disclosures pursuant to Bursa Malaysia Securities Berhad Listing
Requirements, issued by the Malaysian Institute of Accountants, and presented based on the
format prescribed by Bursa Malaysia Securities Berhad.
Signed on behalf of the Board of Directors in accordance with a resolution of the Board of
Directors.
....................................................................... .......................................................................
DATO’ SRI LEE HOCK SENG DATO’ SRI LEE HOCK CHAI
Johor Bahru
28 June 2017
I, Ng Chye Huat, being the Officer primarily responsible for the financial management of SCGM Bhd,
do solemnly and sincerely declare that to the best of my knowledge and belief, the financial
statements set out on pages 35 to 93 and the supplementary information set out on page 94 are
correct and I make this solemn declaration conscientiously believing the same to be true and by
virtue of the Statutory Declarations Act 1960.
Subscribed and solemnly declared by
the abovenamed at Johor Bahru in the
State of Johor this day of
28 June 2017 ..............................................................................
NG CHYE HUAT
Before me:
Commissioner for Oaths
)
)
)
)
30
SCGM BHD | Annual Report 2017
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SCGM BHD
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
We have audited the financial statements of SCGM Bhd., (“the Company”), which comprise the
statements of financial position as at 30 April 2017, and the statements of profit or loss and other
comprehensive income, statements of changes in equity and statements of cash flows for the
financial year then ended, and notes to the financial statements, including a summary of significant
accounting policies, as set out on pages 35 to 93.
In our opinion, the accompanying financial statements give a true and fair view of the financial
position of the Group and of the Company as at 30 April 2017, and of their financial performance
and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting
Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) and the requirements
of the Companies Act, 2016 in Malaysia.
Basis for Opinion
We conducted our audit in accordance with approved standards on auditing in Malaysia and
International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further
described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our
report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence and Other Ethical Responsibilities
We are independent of the Group and of the Company in accordance with the By-Laws (on
Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”)
and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance
with the By-Laws and the IESBA Code.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the Group and of the Company for the current financial
year. These matters were addressed in the context of our audit of the financial statements of the
Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
SCGM BHD(Incorporated in Malaysia)
Company No: 779028 H
Key Audit Matters (cont’d) 31
SCGM BHD | Annual Report 2017
Allowance for impairment of trade receivables
The riskRefer to Note 32(c) to the Financial Statements. We focused on this area because the Group has
material amount of trade receivables that are past due but not impaired. The key associate risk was
the recoverability of billed trade receivables as management judgement is required in determining
the completeness of the trade receivables provision and in assessing its adequacy through
considering the expected recoverability of the year-end trade receivables.
Our responseWe have obtained an understanding of the Group’s policy on impairment of trade receivables and
evaluated management’s judgement in calculating the allowance for impairment of trade
receivables. This includes reviewing the ageing of receivables and testing the integrity of ageing by
calculating the due date for a sample of invoices. We also checked the recoverability of outstanding
receivables through examination of subsequent cash receipts and tested the operating
effectiveness of the relevant control procedures that management has in place.
Inventory valuation
The riskThe Group holds significant amount of inventories as detailed in Note 8 to the Financial Statements.
It is subject to a risk that the inventories become slow-moving or obsolete and rendering it not
saleable or can only be sold for selling prices that are less than the carrying value. There is inherent
subjectivity and estimation involved in determining the accuracy of inventory obsolescence
provision and in making an assessment of its adequacy due to risks of inventory prices not valid and
inventory not stated at the lower of cost or net realisable value.
Our responseWe have obtained an understanding on the Group’s accounting policy in making the accounting
estimates for inventories write-down which is in line with its business environment. We have also
attended the year-end physical inventories count to validate counts performed by the Group.
Besides that, we also tested a sample of inventories to ensure that they were held at the lower of
cost and net realisable value. We have also evaluated management judgement and Group’s
accounting policy with regards to the application of provision to the inventories.
Capitalisation of property, plant and equipment and capital work-in-progress
The riskThe Group holds a significant amount of property, plant and equipment and capital work-in-progress
as at 30 April 2017 as detailed in Notes 4 and 5 to the Financial Statements respectively.
The significant level of capital expenditure requires consideration of the nature of costs incurred to
ensure that capitalisation of property, plant and equipment and capital work-in-progress meets the
specific recognition criteria as set out in MFRS 116 – property, plant and equipment, specifically in
relation to assets constructed by the Group and the application and management judgement in
assigning appropriate useful economic lives.
Key Audit Matters (cont’d)32
SCGM BHD | Annual Report 2017
Capitalisation of property, plant and equipment and capital work-in-progress (cont’d)
Our responseWe have assessed the nature of property, plant and equipment and capital work-in-progress
capitalised by the Group in order to test the validity of amounts capitalised and evaluating whether
assets capitalised meet the recognition criteria as set out in MFRS 116.
We also considered whether capitalisation of assets ceased when the asset is in the location and
condition necessary for it to be capable of operating in the manner intended by the Group and that
a consistent approach was applied by the Group across all operations.
Furthermore, we challenged the useful economic lives assigned with reference to the Group’s
historical experience, our understanding of the future utilisation of assets by the Group and by
reference to the depreciation policies applied by third parties operating similar assets.
Information Other than the Financial Statements and Auditors’ Report Thereon
The Directors of the Company are responsible for the other information. The other information
comprises the information included in the annual report, but does not include the financial
statements of the Group and of the Company and our auditors’ report thereon, which is expected
to be made available to us after the date of this auditors’ report.
Our opinion on the financial statements of the Group and of the Company does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements of the Group and of the Company, our
responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements of the Group and of the
Company or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Directors for the Financial Statements
The Directors of the Company are responsible for the preparation of financial statements of the
Group and of the Company that give a true and fair view in accordance with MFRSs, IFRSs and the
requirements of the Companies Act, 2016 in Malaysia. The Directors are also responsible for such
internal control as the Directors determine is necessary to enable the preparation of financial
statements of the Group and of the Company that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements of the Group and of the Company, the Directors are
responsible for assessing the Group’s and the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ Responsibilities for the Audit of the Financial Statements 33
SCGM BHD | Annual Report 2017
Our objectives are to obtain reasonable assurance about whether the financial statements of the
Group and of the Company as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with approved
standards on auditing in Malaysia and ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
As part of an audit in accordance with approved standards on auditing in Malaysia and ISAs, we
exercise professional judgement and maintain professional scepticism throughout the audit. We
also:-
- Identify and assess the risks of material misstatement of the financial statements of the Group
and of the Company, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s and of the Company’s internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
- Conclude on the appropriateness of Directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s and the Company’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditors’ report to the related disclosures in the financial statements of the
Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditors’ report.
However, future events or conditions may cause the Group or the Company to cease to continue
as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements of the Group
and of the Company, including the disclosures, and whether the financial statements of the
Group and of the Company represent the underlying transactions and events in a manner that
achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial statements of the
Group. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
34
SCGM BHD | Annual Report 2017
Auditors’ Responsibilities for the Audit of the Financial Statements (cont’d)
We communicated with the Directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provided the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with Directors, we determined those matters that were of most
significance in the audit of the financial statements of the Group and of the Company for the
current financial year and are therefore the key audit matters. We described these matters in our
auditors’ report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Other Reporting Responsibilities
The supplementary information set out on page 94 is disclosed to meet the requirement of Bursa
Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible
for the preparation of the supplementary information in accordance with Guidance on Special
Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of
Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the
Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities
Berhad. In our opinion, the supplementary information is prepared, in all material respects, in
accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
Other Matters
This report is made solely to the members of the Company, as a body, in accordance with Section
266 of the Companies Act, 2016 in Malaysia and for no other purpose. We do not assume
responsibility to any other person for the content of this report.
Johor Bahru28 June 2017
SJ GRANT THORNTON(NO. AF: 0737)
CHARTERED ACCOUNTANTS
KISHAN NARENDRA JASANI(NO: 3223/12/17(J))
CHARTERED ACCOUNTANT
35
SCGM BHD | Annual Report 2017
STATEMENTS OF FINANCIAL POSITION AS AT 30 APRIL 2017
Note 2017
RM
2016
RM
2017
RM
2016
RM
Group Company
The accompanying notes form an integral part of the financial statements.
ASSETSNon-current assets Property, plant and equipment 4
Capital work-in-progress 5
Prepaid land lease payments 6
Investment in a subsidiary 7
Total non-current assets
Current assets Inventories 8
Trade receivables 9
Other receivables 10
Other financial asset 11
Tax recoverable
Fixed deposit with a licensed bank 12
Cash and bank balances 13
Total current assets
Total assets
EQUITY AND LIABILITIESEQUITY Share capital 14
Share premium 14
Reverse acquisition reserve 15
Unappropriated profit 16
Total equity
LIABILITIESNon-current liabilities Deferred tax liabilities 17
Finance lease creditors 18
Borrowings 19
Total non-current liabilities
Current liabilities Trade payables 20
Other payables 21
Finance lease creditors 18
Borrowings 19
Tax payable
Total current liabilities
Total liabilities
Total equity and liabilities
-
-
-
-
90,076,2367,676,292
164,247
97,916,775
25,160,710 41,191,859
4,339,63844,086,312 2,658,332
12,753,896
130,190,747
228,107,522
134,886,423
(28,227,000) 58,141,904
164,801,327
5,540,0001,545,0357,414,822
14,499,857
9,938,13218,105,579
2,279,43618,483,191
48,806,338
63,306,195
228,107,522
-
-
-
50,091,9891,228,755
166,441
51,487,185
17,105,37132,800,436
4,220,38016,764,469
59,595126,981
7,954,805
79,032,037
130,519,222
66,000,00027,227,367
(28,227,000)45,965,319
110,965,686
3,400,0003,824,471
7,224,471
5,967,1123,433,7772,296,176
632,000
12,329,065
19,553,536
130,519,222
-
-
-
134,693,256
134,693,256
-
-
-
-
-
-
151,850
151,850
134,845,106
132,586,423-
-
2,221,405
134,807,828
-
-
-
-
-
37,278 -
-
-
37,278
37,278
134,845,106
-
-
-
92,901,000
92,901,000
-
-
2,226 -
59,595 -
88,882
150,703
93,051,703
66,000,00024,927,367
-
1,735,763
92,663,130
-
-
-
-
-
388,573 -
-
-
388,573
388,573
93,051,703
36
SCGM BHD | Annual Report 2017
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 30 APRIL 2017
Note
Revenue 22
Cost of sales
Gross profit
Other income
Selling and distribution expenses
Administration expenses
Other expenses
Finance costs
Profit before tax 23
Tax (expense)/income 24
Profit for the financial year
Other comprehensive income, net of tax Items that will be/will not be reclassified subsequently to profit or loss
Other comprehensive income for the financial year, net of tax
Total comprehensive income for the financial year
Profit attributable to:- Owners of the Company
Total comprehensive income attributable to:- Owners of the Company
Earnings per share attributable to owners of the Company
Earnings per ordinary share - Basic (sen) 25
- Diluted (sen) 25
Company
Group
178,784,555
(137,833,041)
40,951,514
2,584,226
(7,851,086)
(8,001,587)
(353,174)
(726,462)
26,603,431
(3,602,846)
23,000,585
-
-
23,000,585
23,000,585
23,000,585
17.12
-
11,480,000
-
11,480,000
-
-
(170,358)
-
-
11,309,642
-
11,309,642
-
-
11,309,642
11,309,642
11,309,642
2017
RM
2016
RM
30,600,000
-
30,600,000
-
-
(896,781)
-
-
29,703,219
59,840
29,763,059
-
-
29,763,059
29,763,059
29,763,059
2017
RM
2016
RM
133,505,495
(94,455,515)
39,049,980
1,633,001
(5,849,837)
(7,805,673)
(787,240)
(482,830)
25,757,401
(5,563,172)
20,194,229
-
-
20,194,229
20,194,229
20,194,229
16.16
-
The accompanying notes form an integral part of the financial statements.
37
SCGM BHD | Annual Report 2017
STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 APRIL 2017
Group
Balance at 1 May 2015 40,000,000 3,937,345 (28,227,000) 57,933,745 73,644,090
Transactions with owners:
For the financial year ended 30 April 2015
- Final single tier dividend of 4 sen
per share and paid on 18 September 2015 - - - (3,200,000) (3,200,000)
For the financial year ended 30 April 2016
- First interim single tier dividend of 5 sen per share and paid on 15 July 2015 - - - (4,000,000) (4,000,000)
- Second interim single tier dividend of
3 sen per share and paid on 13 January 2016 - - - (3,960,000) (3,960,000)
- Third interim single tier dividend of 2 sen
per share and paid on 12 April 2016 - - - (2,640,000) (2,640,000)
- Issuance of shares from bonus issue (Note 14) 20,000,000 (1,637,345) - (18,362,655) -
- Issuance of shares from private placement (net) (Note 14) 6,000,000 24,927,367 - -
30,927,367
Total transactions with owners 26,000,000 23,290,022 - (32,162,655) 17,127,367
Profit for the financial year - - - 20,194,229 20,194,229Other comprehensive income for the
financial year - - - - -
Total comprehensive income for the
financial year - - - 20,194,229 20,194,229
Balance at 30 April 2016 66,000,000 27,227,367 (28,227,000) 45,965,319 110,965,686
Transactions with owners:
For the financial year ended 30 April 2016
- Fourth interim single tier dividend of 2 sen
per share and paid on 27 July 2016 - - - (2,640,000) (2,640,000)
For the financial year ended 30 April 2017
- First interim single tier dividend of 2 sen
per share and paid on 7 October 2016 - - - (2,640,000) (2,640,000)
- Second interim single tier dividend of
2 sen per share and paid on 13 January 2017 - - - (2,640,000) (2,640,000)
- Third interim single tier dividend of 2 sen
per share and paid on 14 April 2017 - - - (2,904,000) (2,904,000)
- Issuance of shares from private placement (net) (Note 14) 42,240,000 (580,944) -
- 41,659,056
Total transactions with owners 42,240,000 (580,944) - (10,824,000) 30,835,056
Profit for the financial year - - - 23,000,585 23,000,585Other comprehensive income for the
financial year - - - - -
Total comprehensive income for the
financial year - - - 23,000,585 23,000,585
Transfer pursuant to Section 618(2) of Companies Act, 2016 (Note 14) 26,646,423 (26,646,423) - - -
Balance at 30 April 2017 134,886,423 - (28,227,000) 58,141,904 164,801,327
Non-distributable DistributableReverse
Share Share acquisition Unappropriated Totalcapital premium reserve profit equityRM RM RM RM RM
Attributable to equity holders of the Company
38
SCGM BHD | Annual Report 2017
STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 APRIL 2017 (CONT’D)
The accompanying notes form an integral part of the financial statements.
Distributable
Share Share Unappropriated
capital premium profit Total
RM RM RM RM
Company
Balance at 1 May 2015 40,000,000 1,637,345 4,135,359 45,772,704
Transactions with owners:
For the financial year ended 30 April 2015
- Final single tier dividend of 4 sen per share and paid on 18 September 2015 - - (3,200,000) (3,200,000)
For the financial year ended 30 April 2016
- First interim single tier dividend of 5 sen per share and paid on 15 July 2015 - - (4,000,000) (4,000,000)
- Second interim single tier dividend of 3 sen per share and paid on 13 January 2016 - - (3,960,000) (3,960,000)
- Third interim single tier dividend of 2 sen per share and paid on 12 April 2016 - - (2,640,000) (2,640,000)
- Issuance of shares from bonus issue (Note 14) 20,000,000 (1,637,345) (18,362,655) -
- Issuance of shares from private placement (net) (Note 14) 6,000,000 24,927,367 - 30,927,367
Total transactions with owners 26,000,000 23,290,022 (32,162,655) 17,127,367
Profit for the financial year - - 29,763,059 29,763,059
Other comprehensive income for the financial year - - - -
Total comprehensive income for the financial year - - 29,763,059 29,763,059
Balance at 30 April 2016 66,000,000 24,927,367 1,735,763 92,663,130
Transactions with owners:
For the financial year ended 30 April 2016
- Fourth interim single tier dividend of 2 sen per share and paid on 27 July 2016 - - (2,640,000) (2,640,000)
For the financial year ended 30 April 2017
- First interim single tier dividend of 2 sen per share and paid on 7 October 2016 - - (2,640,000) (2,640,000)
- Second interim single tier dividend of 2 sen per share and paid on 13 January 2017 - - (2,640,000) (2,640,000)
- Third interim single tier dividend of 2 sen per share and paid on 14 April 2017 - - (2,904,000) (2,904,000)
- Issuance of shares from private placement (net) (Note 14) 42,240,000 (580,944) - 41,659,056
Total transactions with owners 42,240,000 (580,944) (10,824,000) 30,835,056
Profit for the financial year - - 11,309,642 11,309,642
Other comprehensive income for the financial year - - - -
Total comprehensive income for the financial year - - 11,309,642 11,309,642
Transfer pursuant to Section 618(2) of Companies Act, 2016 (Note 14)
Non-distributable
24,346,423 (24,346,423) - -
Balance at 30 April 2017 132,586,423 - 2,221,405 134,807,828
Attributable to equity holders of the Company
39
SCGM BHD | Annual Report 2017
STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 APRIL 2017
Note 2017 2016 2017 2016RM RM RM RM
OPERATING ACTIVITIES
Profit before tax 26,603,431 25,757,401 11,309,642 29,703,219
Adjustments for:- Allowance for impairment of receivables 201,882 53,588 - - Allowance for impairment of receivables no longer required (7,400) - - -
Amortisation of prepaid land lease payments 2,194 2,194 - - Bad debts written off - 56 - - Depreciation of property, plant and equipment 8,403,119 6,113,573 - - Distribution reinvestment income (442,613) (300,771) - - Dividend income - - (11,480,000) (30,600,000) Fair value loss on financial asset carried at fair value through profit and loss 75,129 46,270 - - Gain on disposal of property, plant and equipment (137,053) (15,377) - - Interest expense 726,462 482,830 -
--
Interest income (54,418) (26,022) - Inventories written down 1,645,996 1,025,402 - - Loss/(Gain) on redemption on financial asset carried at fair value through profit and loss 8,897 (9,967) - - Property, plant and equipment written off - 53,403 - - Reversal of inventories written down (1,025,402) (1,070,821) - - Unrealised (gain)/loss on foreign exchange (123,793) 564,768 - -
Operating profit/(loss) before working capital changes 35,876,431 32,676,527 (170,358) (896,781)
Changes in working capital:- Inventories (8,675,933) (2,228,846) - - Receivables (8,802,791) (11,151,484) 2,226 (2,226) Payables 779,601 (1,467,893) (351,295) 296,749
Cash flows generated from/(used in) operations 19,177,308 17,828,304 (519,427) (602,258)
Tax paid (4,753,178) (5,093,152) - (6,070) Tax refunded 59,595 - 59,595 -
Net cash flows from/(used in) operating activities 14,483,725 12,735,152 (459,832) (608,328)
INVESTING ACTIVITIES
Dividend received - - 11,480,000 30,600,000 Increase in investment in a subsidiary - - (41,792,256) (30,664,668) Interest received 54,418 26,022 - - Payment to acquire financial asset (46,792,256) (24,000,000) - - Proceeds from disposal of property, plant and equipment 151,800 15,377 - - Proceeds from redemption of financial asset 19,829,000 7,499,999 - - Purchase of property, plant and equipment A (36,614,918) (13,095,275) - -
Net cash flows used in investing activities (63,371,956) (29,553,877) (30,312,256) (64,668)
FINANCING ACTIVITIES
Dividend paid (10,824,000) (13,800,000) (10,824,000) (13,800,000) Drawdown of short term borrowings 30,375,000 - - - Drawdown of term loan 9,000,000 - - - Interest paid (726,462) (482,830) - - Issuance of share capital 14 41,659,056 30,927,367 41,659,056 30,927,367 Proceeds from finance lease creditors - 4,860,145 - - Repayment of finance lease creditors (2,296,176) (2,612,516) - - Repayment of short term borrowings (13,026,000) - - - Repayment of term loan (450,987) - -
--
Repayment to subsidiary - - (16,426,865)
Net cash flows from financing activities 53,710,431 18,892,166 30,835,056 700,502
CASH AND CASH EQUIVALENTS
Net change 4,822,200 2,073,441 62,968 27,506 Effect of exchange rate changes (150,090) 5,160 - - At beginning of financial year 8,081,786 6,003,185 88,882 61,376
At end of financial year B 12,753,896 8,081,786 151,850 88,882
CompanyGroup
40
SCGM BHD | Annual Report 2017
STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 APRIL 2017 (CONT’D)
The accompanying notes form an integral part of the financial statements.
NOTES TO THE STATEMENTS OF CASH FLOWS
A. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT
During the financial year, property, plant and equipment were acquired by the following means:-
Cash payments Outstanding in payables Total purchase of property, plant and equipment
B. CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the statements of cash flows comprise the following
statements of financial position amounts:-
Cash and bank balances Fixed deposit with a licensed bank
Group
2017RM
36,614,91810,420,331
47,035,249
2016RM
13,095,27526,200
13,121,475
Group
2017RM
12,753,896
-
12,753,896
2016RM
7,954,805
126,981
8,081,786
Company
2017RM
151,850
-
151,850
2016RM
88,882
-
88,882
41
SCGM BHD | Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS - 30 APRIL 2017
1. GENERAL INFORMATION
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS
The Company is principally engaged in investment holding.
The principal activities of the subsidiary are disclosed in Note 7 to the Financial Statements.
There have been no significant changes in the nature of these activities during the financial
year.
The Company is a public limited liability company, incorporated and domiciled in Malaysia and
listed on the Main Market of the Bursa Malaysia Securities Berhad. The registered office of the
Company is located at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250
Kuala Lumpur. The principal place of business of the Company is located at Lot 3304, Batu 24 ½,
Jalan Kulai-Air Hitam, 81000 Kulai, Johor Darul Takzim.
The financial statements were authorised for issue by the Board of Directors in accordance
with a resolution of the Directors on 28 June 2017.
Statement of compliance
The financial statements of the Group and of the Company have been prepared in
accordance with Malaysian Financial Reporting Standards (“MFRSs”), International
Financial Reporting Standards (“IFRSs”) and the requirements of the Companies Act,
2016 in Malaysia.
Basis of measurement
The financial statements of the Group and of the Company are prepared under
historical cost convention, unless otherwise indicated in the summary of significant
accounting policies.
Historical cost is generally based on the fair value of the consideration given in
exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date and its measurement assumes that the transaction to sell the asset or transfer the
liability takes place either in the principal market for the asset or liability, or in the
absence of a principal market, in the most advantageous market for the asset or
liability. The principal or the most advantageous market must be accessible to by the
Group and the Company.
The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market
participants act in their economic best interest.
2 . 1
2 . 2
SCGM BHD (Company No: 779028 H)
(Incorporated in Malaysia)
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D)42
SCGM BHD | Annual Report 2017
Basis of measurement (cont’d)
A fair value measurement of a non-financial market takes into account a market
participant’s ability to generate economic benefits by using the asset in its highest and
best use or by selling it to another market participant that would use the asset in its
highest and best use.
The Group and the Company use valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorised within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to their fair value measurement as a whole:-
Level 1
Level 2
Level 3
For assets and liabilities that are recognised in the financial statements on a recurring
basis, the Group and the Company determine whether transfers have occurred
between levels in the hierarchy by re-assessing categorisation (based on the lowest
level input that is significant to their fair value measurement as a whole) at the end of
each reporting period.
The Group and the Company have established control framework in respect of
measurement of fair values of financial instruments. The Board of Directors have overall
responsibility for overseeing all significant fair value measurements. The Board of
Directors regularly reviews significant unobservable inputs and valuation adjustments.
For the purpose of fair value disclosures, the Group and the Company have determined
classes of assets and liabilities on the basis of the nature, characteristics and risks of the
asset or liability and the level of fair value hierarchy as explained above.
Functional and presentation currency
The financial statements are presented in Ringgit Malaysia (“RM”) which is the
Company’s functional currency and all values are rounded to the nearest RM except
when otherwise stated.
2 . 2
2 . 3
- Quoted (unadjusted) market prices in active markets for identical assets or
liabilities.
- Valuation techniques for which the lowest level input that is significant to their
fair value measurement is directly or indirectly observable.
- Valuation techniques for which the lowest level input that is significant to their
fair value measurement is unobservable.
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) 43
SCGM BHD | Annual Report 2017
MFRSs
Adoption of new or revised MFRSs
The Group and the Company have consistently applied the accounting policies set out in
Note 3 to the Financial Statements to all periods presented in these financial statements.
At the beginning of the current financial year, the Group and the Company adopted
amendments to MFRSs and IC Interpretations which are mandatory for the financial
periods beginning on or after 1 January 2016.
Initial application of all the relevant new and revised MFRSs and amendments/
improvements to MFRSs and IC Interpretations that are effective did not have material
impact to the financial statements of the Group and of the Company.
Standards issued but not yet effective
At the date of authorisation of these financial statements, the Malaysian Accounting
Standards Board (“MASB”) has approved certain new standards, amendments and
interpretations to existing standards which are not yet effective, and have not been early
adopted by the Group and the Company.
The management anticipates that all of the relevant pronouncements will be adopted in
the Group’s and the Company’s accounting policies for the first period beginning after
the effective date of the pronouncement. The initial application of the new standards,
amendments and interpretations are not expected to have any material impacts to the
financial statements of the Group and the Company except as mentioned below:-
Amendment to MFRS 107 Disclosure initiative
The amendment to MFRS 107 requires entity to provide disclosures on changes in
liabilities arising from financing activities, including changes from cash flows and
non-cash changes. The adoption of this amendment is not expected to have any financial
impact on the Group and on the Company.
This amendment is effective for annual periods beginning on or after 1 January 2017, with
early application permitted. Application of this amendment will result in additional
disclosure to be provided by the Group and the Company.
Amendment to MFRS 112 Recognition of deferred tax assets for unrealised losses
The amendment to MFRS 112 clarified the accounting treatment of deferred tax assets for
unrealised losses on fixed-rate debt instruments measured at fair value. The adoption of
the amendment is not expected to have any financial impact on the Group and the
Company.
This amendment is effective for annual periods beginning on or after 1 January 2017, with
early application permitted. If an entity applies this amendment for an earlier period, it
must disclose that fact. This amendment is not expected to have any impact on the
Group and on the Company.
2 . 4
2. 4. 1
2. 4. 2
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D)44
SCGM BHD | Annual Report 2017
MFRSs (cont’d)
Standards issued but not yet effective (cont’d)
MFRS 9 Financial instruments
MFRS 9 replaces MFRS 139 Financial Instruments: Recognition and Measurement and
all previous version of MFRS 9. The new standard introduces extensive requirements
and guidance for classification and measurement of financial assets and financial
liabilities which fall under the scope of MFRS 9, new “expected credit loss model”
under the impairment of financial assets and greater flexibility has been allowed in
hedge accounting transactions. Upon adoption of MFRS 9, financial assets will be
measured at either fair value or amortised cost. It is also expected that the investment
in unquoted shares will be measured at fair value through other comprehensive
income.
This standard will come into effect on or after 1 January 2018 with early adoption
permitted. Retrospective application is required, but comparative information is not
compulsory. The adoption of MFRS 9 will result in a change in accounting policy. The
Group and the Company are currently assessing the financial impact of adopting
MFRS 9.
MFRS 15 Revenue from contracts with customers
MFRS 15 replaces the guidance in MFRS 111, Construction Contracts, MFRS 118,
Revenue, IC Interpretation 13, Customer Loyalty Programmes, IC Interpretation 15,
Agreements for Construction of Real Estate, IC Interpretation 18, Transfers of Assets
from Customers and IC Interpretation 131, Revenue – Barter Transactions Involving
Advertising Services. Upon adoption of MFRS 15, it is expected that the timing of
revenue recognition might be different as compared with current practices.
This standard will come into effect on or after 1 January 2018 with early adoption
permitted. The adoption of MFRS 15 will result in a change in accounting policy. The
Group and the Company are currently assessing the financial impact of adopting
MFRS 15.
MFRS 16 Leases
MFRS 16 replaces MFRS 117 Leases, IC Interpretation 4 Determining whether an
Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27
Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
MFRS 16 sets out the principles for the recognition, measurement, presentation and
disclosure of leases and requires lessees to account for all leases under a single
on-balance sheet model similar to the accounting for finance leases under MFRS 117.
The standard includes two recognition exemptions for lessees – leases of ’low-value’
assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term
of 12 months or less).
2 . 4
2. 4. 2
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) 45
SCGM BHD | Annual Report 2017
MFRSs (cont’d)
Standards issued but not yet effective (cont’d)
MFRS 16 Leases (cont’d)
At the commencement date of a lease, a lessee will recognise a liability to make lease
payments (i.e., the lease liability) and an asset representing the right to use the
underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be
required to separately recognise the interest expense on the lease liability and the
depreciation expense on the right-of-use asset.
Lessees will be also required to remeasure the lease liability upon the occurrence of
certain events (e.g., a change in the lease term, a change in future lease payments
resulting from a change in an index or rate used to determine those payments). The
lessee will generally recognise the amount of the remeasurement of the lease liability
as an adjustment to the right-of-use asset.
Lessor accounting under MFRS 16 is substantially unchanged from today’s accounting
under MFRS 117. Lessors will continue to classify all leases using the same classification
principle as in MFRS 117 and distinguish between two types of leases: operating and
finance leases.
MFRS 16 also requires lessees and lessors to make more extensive disclosures than
under MFRS 117.
MFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early
application is permitted, but not before an entity applies MFRS 15. A lessee can choose
to apply the standard using either a full retrospective or a modified retrospective
approach. The standard’s transition provisions permit certain reliefs.
The Group and the Company are currently assessing the financial impact of adopting
MFRS 16.
IC Interpretation 22 Foreign currency transactions and advance consideration
This interpretation addresses how to determine the date of the transaction for the
purpose of determining the exchange rate to use on initial recognition of the related
asset, expense or income (or part of it) on the derecognition of a non-monetary asset
or non-monetary liability arising from the payment or receipt of advance consideration
in a foreign currency.
If there are multiple payments or receipts in advance, the entity shall determine a date
of the transaction for each payment or receipt of advance consideration.
This standard will come into effect on or after 1 January 2018 with early adoption
permitted. The adoption of this amendment is not expected to have any financial
impact on the Group.
2 . 4
2. 4. 2
46
SCGM BHD | Annual Report 2017
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D)
Significant Accounting Estimates and Judgements
Estimates, assumptions concerning the future and judgements are made in the
preparation of the financial statements. They affect the application of the Group’s
accounting policies and reported amounts of assets, liabilities, income and expenses,
and disclosures made. Estimates and underlying assumptions are assessed on an
on-going basis and are based on experience and relevant factors, including
expectations of future events that are believed to be reasonable under the
circumstances. The actual results may differ from the judgements, estimates, and
assumptions made by management, and will seldom equal the estimated results.
Estimation uncertainty
Information about significant estimates and assumptions that have the most
significant effect on recognition and measurement of assets, liabilities, income and
expenses are discussed below.
Useful lives of depreciable assets
The management estimates the useful lives of the property, plant and equipment to be
within 5 to 50 years and reviews the useful lives of depreciable assets at each
reporting date. At 30 April 2017, the management assesses that the useful lives
represent the expected utility of the assets to the Group. The carrying amounts are
analysed in Note 4 to the Financial Statements. Actual results, however, may vary due
to change in the expected level of usage and technological developments, which result
in adjustment to the Group’s assets.
Impairment of loans and receivables
The Group and the Company assess at end of each reporting date whether there is any
objective evidence that a financial asset is impaired. Factors such as probability of
insolvency or significant financial difficulties of the receivables and default or
significant delay in payments are considered in determining whether there is objective
evidence of impairment.
Where there is objective evidence of impairment, the amount and timing of future
cash flows are estimated based on historical loss experience for assets with similar
credit risk characteristics.
Impairment of property, plant and equipment and prepaid land lease payments
The Group carries out impairment tests based on a variety of estimation including
value-in-use of cash-generating unit to which the property, plant and equipment and
prepaid land lease payments are allocated. Estimating the value-in-use requires the
Group to make an estimate of the expected future cash flows from cash-generating
unit and also to choose a suitable discount rate in order to calculate present value of
those cash flows.
2 . 5
2. 5. 1
47
SCGM BHD | Annual Report 2017
2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D)
Significant Accounting Estimates and Judgements (cont’d)
Estimation uncertainty (cont’d)
Impairment of inventories
The management reviews inventories to identify damaged, obsolete and slow-moving inventories which require judgement and changes in such estimates could result in revision to valuation of inventories.
The carrying amount of the Group’s inventories at the end of the reporting period is disclosed in Note 8 to the Financial Statements.
Income taxes/Deferred tax liabilities
Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business.
The Group and the Company recognise tax liabilities based on estimates of whether additional taxes will be due. Where the final tax outcome is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made.
Fair value of financial instruments
Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial assets and liabilities. In applying the valuation techniques, management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arms’ length transaction at the end of the reporting period.
Significant management judgement
The following is significant management judgement in applying the accounting policies of the Group that has the most significant effect on the financial statements.
Classification of leasehold land
The classification of leasehold land as a financial lease or an operating lease requires the use of judgement in determining the extent to which risks and rewards incidental to its ownership lie. Despite the fact that there will be no transfer of ownership by the end of the lease term and that the lease term does not constitute the major part of the indefinite economic life of the land, management considered that the present value of the minimum lease payments approximated to the fair value of the land at the inception of the lease.
As management has determined that the Group has not obtained substantially all the risks and rewards of ownership of the leasehold land, the leases have been classified as operating leases and accounted for accordingly.
2 . 5
2. 5. 1
2. 5. 2
48
SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES
Consolidation
Subsidiary
Subsidiary is entity, including structured entities, controlled by the Group or the
Company. Control exists when the Group or the Company is exposed, or has rights, to
variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Potential voting rights are considered when
assessing control only when such rights are substantive. Besides, the Group considers
it has de facto power over an investee when, despite not having the majority of voting
rights, it has the current ability to direct the activities of the investee that significantly
affect the investee’s return.
Investment in a subsidiary is stated at cost in the Company’s statement of financial
position. Where an indication of impairment exists, the carrying amount of the
subsidiary is assessed and written down immediately to its recoverable amount.
Upon the disposal of investment in a subsidiary, the difference between the net
disposal proceeds and its carrying amount is included in profit or loss.
Basis of consolidation
The Group’s financial statements consolidate the audited financial statements of the
Company and its subsidiary, which have been prepared in accordance with the Group’s
accounting policies. Amounts reported in the financial statements of subsidiary have
been adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group. The financial statements of the Company and its subsidiary are
all drawn up to the same reporting period.
All intra-group balances, income and expenses and unrealised gains and losses
resulting from intra-group transactions are eliminated in full.
The subsidiary is consolidated from the date on which control is transferred to the
Group and is no longer consolidated from the date that control ceases.
Changes in the Company owners’ ownership interest in a subsidiary that do not result
in a loss of control are accounted for as equity transactions. In such circumstances, the
carrying amounts of the controlling and non-controlling interests are adjusted to
reflect the changes in their relative interests in the subsidiary company. Any difference
between the amount by which the non-controlling interest is adjusted and the fair
value of the consideration paid or received is recognised directly in equity and
attributed to owners of the Company.
3 . 1
3. 1. 1
3. 1. 2
The Group and the Company apply the significant accounting policies, as summarised below,
consistently throughout all periods presented in the financial statements.
49
SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Consolidation (cont’d)
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an
acquisition is measured as the aggregate of the consideration transferred, measured
at acquisition date fair value and the amount of any non-controlling interest in the
acquiree. For each business combination, the Group elects whether it measures the
non-controlling interest in the acquiree either at fair value or at the proportionate
share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed
and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities
assumed for appropriate classification and designation in accordance with the
contractual terms, economic circumstances and pertinent conditions as at the
acquisition date. This includes the separation of embedded derivatives in host
contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the
acquirer’s previously held equity interest in the acquiree is remeasured to fair value at
the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at
fair value at the acquisition date. Subsequent changes in the fair value of the
contingent consideration which is deemed to be an asset or liability will be recognised
in accordance with MFRS 139 either in profit or loss or as a change to other
comprehensive income. If the contingent consideration is classified as equity, it will not
be remeasured. Subsequent settlement is accounted for within equity. In instances
where the contingent consideration does not fall within the scope of MFRS 139, it is
measured in accordance with the appropriate MFRS.
Goodwill is initially measured at cost, being the excess of the aggregate of the
consideration transferred and the amount recognised for non-controlling interest over
the net identifiable assets acquired and liabilities assumed. If this consideration is lower
than the fair value of the net assets of the subsidiary acquired, the difference is
recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill acquired in a business
combination is, from the acquisition date, allocated to each of the Group’s
cash-generating units that are expected to benefit from the combination, irrespective
of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a cash-generating unit and part of the operation within
that unit is disposed of, the goodwill associated with the operation disposed of is
included in the carrying amount of the operation when determining the gain or loss on
disposal of the operation. Goodwill disposed of in this circumstance is measured
based on the relative values of the operation disposed of and the portion of the
cash-generating unit retained.
3 . 1
3. 1. 3
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SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Consolidation (cont’d)
Loss of control
Upon the loss of control of a subsidiary, the Group derecognises the assets and
liabilities of the subsidiary, any non-controlling interests and the other components of
the equity related to the subsidiary. Any surplus or deficit arising on the loss of control
is recognised in profit or loss.
If the Group retains any interest in the previous subsidiary, then such interest is
measured at fair value at the date that control is lost. Subsequently, it is accounted for
as an equity accounted investee or as an available-for-sale financial asset depending
on the level of influence retained.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated
depreciation and any impairment losses.
Depreciation is provided on the straight-line method in order to write-off the cost of
each asset over its estimated useful life. Capital work-in-progress is not depreciated
until it is completed and ready for commercial utilisation. No depreciation is provided
on freehold land.
The principal annual depreciation rates used are as follows:-
Included in equipment, plant and machinery is plant and machinery, factory
equipment, electrical installation and fire extinguisher.
Included in furniture, fittings and others is renovation and electrical installation,
signboard, mobile phone, furniture and fittings, office equipment, air conditioner and
computer.
Restoration cost relating to an item of property, plant and equipment is capitalised
only if such expenditure is expected to increase the future benefits from the existing
property, plant and equipment beyond its previously assessed standard of
performance.
Property, plant and equipment are written down to recoverable amount if, in the
opinion of the Directors, it is less than their carrying value. Recoverable amount is the
net selling price of the property, plant and equipment i.e. the amount obtainable from
the sale of an asset in an arm’s length transaction between knowledgeable, willing
parties, less the costs of disposal.
3 . 1
3. 1. 4
3 . 2
Buildings 50 years
5 – 10 years
5 years
5 – 10 years
Equipment, plant and machinery
Motor vehicles
Furniture, fittings and others
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SCGM BHD | Annual Report 2017
Property, plant and equipment (cont’d)
The residual values, useful life and depreciation method are reviewed at each financial
year end to ensure that the amount, method and period of depreciation are consistent
with previous estimates and the expected pattern of consumption of the future
economic benefits embodied in the items of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset is included in profit or loss in the financial year in which
the asset is derecognised.
Capital work-in-progress
Capital work-in-progress consists of factory building and electrical installation for
intended use as production facilities. The amount is stated at cost and not depreciated
until it is completed and ready for their intended use.
Asset acquired under lease agreements
Accounting by lessees
Finance leases
Lease of property, plant and equipment acquired under hire purchase and finance
lease arrangements which transfer substantially all the risks and rewards of ownership
to the Group are capitalised. The depreciation policy on these assets is similar to that
of the Group’s property, plant and equipment depreciation policy.
Outstanding obligation due under hire purchase and finance lease arrangements after
deducting finance expenses are included as liabilities in the financial statements.
Finance charges on hire purchase and finance lease arrangements are allocated to
profit or loss over the period of the respective agreements.
Leased assets
Leasehold land that normally has an indefinite economic life and title is not expected
to pass to the Group by the end of the lease term is treated as operating lease. The
payment made on entering into or acquiring a leasehold land is accounted for as
prepaid land lease payment and is amortised over the lease term of 99 years (2016: 99
years).
3 . 2
3 . 3
3 . 4
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
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SCGM BHD | Annual Report 2017
Inventories
Inventories consist of raw materials, work-in-progress and finished goods and are
stated at the lower of cost and net realisable value.
Cost of raw materials is determined on the first-in-first-out method which includes the
original cost of purchase plus the incidental cost incurred in bringing the inventories to
their present location and condition. Cost of work-in-progress and finished goods
include cost of materials, direct labour and an appropriate proportion of production
overheads.
Net realisable value represents the estimated selling price in the ordinary course of
business less selling and distribution costs and all other estimated costs to completion.
Income tax
Income tax on profit or loss for the year comprises current tax expense and deferred
tax.
Current tax expense is the expected amount of income taxes payable in respect of the
taxable profit for the financial year and is measured using the tax rates that have been
enacted or substantively enacted by the reporting date.
Deferred tax liabilities and assets are provided for under the liability method at the
current tax rate in respect of all temporary differences at the reporting date between
the carrying amount of an asset or liability in the statements of financial position and
its tax base including unused tax losses and capital allowances.
Deferred tax asset are recognised only to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences can be
utilised. The carrying amount of a deferred tax asset is reviewed at each reporting
date. If it is no longer probable that sufficient taxable profit will be available to allow
the benefit of part or the entire deferred tax asset to be utilised, the carrying amount
of the deferred tax asset will be reduced accordingly. When it becomes probable that
sufficient taxable profit will be available, such reductions will be reversed to the extent
of the taxable profit.
Current tax expense and deferred tax are recognised in profit or loss, except when it
arises from a transaction which is recognised directly in equity, in which case the
deferred tax is also charged or credited directly in equity, or when it arises from a
business combination that is an acquisition, in which case the deferred tax is included
in the resulting goodwill.
3 . 5
3 . 6
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
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SCGM BHD | Annual Report 2017
Income tax (cont’d)
Deferred tax is measured at the tax rates that are expected to apply in the period
when the asset is realised or the liability is settled, based on tax rates that have been
enacted or substantively enacted by the reporting date.
Foreign currency transactions and balances
Transactions in foreign currencies are initially recorded at the functional currency rates
prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at
the functional currency spot rate of exchange ruling at the reporting date.
All differences are taken to the profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency
are translated using the exchange rates as at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value is determined. The gain or loss
arising in translation of non-monetary items is recognised in line with the gain or loss
of the item that gave rise to the translation difference (translation differences on items
whose gain or loss is recognised in other comprehensive income or profit or loss is also
recognised in other comprehensive income or profit or loss respectively).
Dividends
Interim dividends are simultaneously proposed and declared, because the articles of
association of the Company grant the Directors the authority to declare interim
dividends. Consequently, interim dividends are recognised directly as a liability when
they are proposed and declared.
Final dividends proposed by the Directors are not accounted for in shareholders’
equity as an appropriation of unappropriated profit, until they have been approved by
the shareholders in a general meeting. When these dividends have been approved by
the shareholders and declared, they are recognised as a liability.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will
flow to the Group and the Company and the revenue can be reliably measured.
Revenue is measured at the fair value of consideration received or receivable. Revenue
from sale of goods is recognised upon the transfer of significant risk and rewards of
ownership of the goods to the customer. Revenue is not recognised to the extent
where there are significant uncertainties regarding recovery of the consideration due,
associated cost or the possible return of goods.
3 . 6
3 . 7
3 . 8
3.9
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
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SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Revenue recognition (cont’d)
Other revenues are recognised on the following bases:-
Interest income from a financial asset is recognised when it is probable that the
economic benefits will flow to the Group and the amount of income can be measured
reliably. Interest income is accounted for on accrual basis.
Dividend income is recognised when the Group’s right to receive payment is
established.
Sales and inter-company transactions between companies of the Group are excluded
from revenue of the Group.
Financial assets
Financial assets are recognised in the statements of financial position when, and only
when, the Group and the Company become a party to the contractual provisions of
the financial instrument and they are derecognised when the contractual rights to the
cash flows from the financial asset expire, or when the financial asset and all
substantial risks and rewards are transferred.
Financial assets are measured initially at fair value plus transactions costs, except for
financial assets carried at fair value through profit or loss, which are measured initially
at fair value. Financial assets are subsequently measured as described below.
For the purpose of subsequent measurement, financial assets other than those
designated and effective as hedging instruments are classified into the following
categories upon initial recognition:-
a) Loans and receivables
b) Financial assets at fair value through profit or loss
c) Held-to-maturity investments
d) Available-for-sale financial assets
The category mentioned above determines subsequent measurement of a financial
asset and whether any resulting income and expense is recognised in profit or loss or
in statement of comprehensive income. All financial assets except for those at fair
value through profit or loss are subject to review for impairment at least once at each
reporting date. Financial assets are impaired when there is any objective evidence that
a financial asset or a group of financial assets is impaired. Different criteria are applied
to determine impairment for each category of financial assets, as described in Note
3.12.
All income and expenses relating to financial assets are recognised in profit or loss.
3 . 9
3 . 10
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SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Financial assets (cont’d)
Other than loan and receivables and financial assets at fair value through profit or loss,
the Group and the Company do not have available-for-sale financial assets and
held-to-maturity investments.
A financial asset or part of it is derecognised when, and only when the contractual
rights to the cash flows from the financial asset expire or the financial asset is
transferred to another party without retaining control or substantially all risks and
rewards of the asset. On derecognition of a financial asset, the difference between the
carrying amount and the sum of the consideration received (including any new asset
obtained less any new liability assumed) and any cumulative gain or loss that had
been recognised in equity is recognised in the profit or loss.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets that are
either classified as held for trading or that meet certain conditions and are designated
at fair value through profit or loss upon initial recognition. All derivative financial
instruments (including separated embedded derivatives) which are acquired
principally for the purpose of selling in the near term and contingent consideration in
a business combination fall into this category, except for those that are financial
guarantee contracts or those designated and effective as hedging instruments.
Subsequent to initial recognition, assets in this category are measured at fair value
with gains or losses recognised in profit or loss. The fair values of derivative financial
instruments are determined by reference to active market transactions or using a
valuation technique where no active market exists. Net gains or net losses on financial
assets at fair value through profit or loss do not include exchange differences, interest
and dividend income. Exchange differences, interest and dividend income on financial
assets at fair value through profit or loss are recognised separately in profit or loss as
part of other expenses or other income.
Financial assets at fair value through profit or loss could be presented as current or
non-current. Financial assets that are held primarily for trading purposes are
presented as current whereas financial assets that are not held primarily for trading
purposes are presented as current or non-current based on the settlement date.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market and they are measured at amortised
cost using effective interest method, less provision for impairment subsequently.
Discounting is omitted where the effect of discounting is immaterial in subsequent
measurement. Cash and cash equivalents, trade and most other receivables of the
Group and of the Company fall into this category of financial instruments.
3 . 10
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SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Financial assets (cont’d)
Loans and receivables (cont’d)
Loans and receivables are classified as current assets and those that mature 12 months
after the reporting date are classified as non-current.
Financial liabilities
Financial liabilities are recognised when the Group and the Company become a party
to the contractual provisions of the financial instrument. Financial liability is
derecognised when it is extinguished, discharged, cancelled or expires.
Financial liabilities are measured initially at fair value plus transactions costs, except
for financial liabilities carried at fair value through profit or loss, which are measured
initially at fair value. Subsequently, they are measured at amortised cost using the
effective interest method except for financial liabilities held for trading or designated
at fair value through profit or loss, that are carried subsequently at fair value with gains
or losses recognised in profit or loss.
All derivative financial instruments which are not designated and effective as hedging
instruments are accounted for at fair value through profit or loss.
The Group’s and the Company’s financial liabilities include trade payables, other
payables and finance lease creditors and borrowings.
A financial liability or a part of it is derecognised when, and only when, the obligation
specified in the contract is discharged or cancelled or expires. On derecognition of a
financial liability, the difference between the carrying amount of the financial liability
extinguished or transferred to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
Impairment of financial assets
The Group assesses at each reporting date whether there is any objective evidence
indicating that a financial asset, other than financial asset at ‘fair value through profit
or loss’, might be impaired.
Trade and other receivables and other financial assets carried at amortised cost
The Group considers factors such as the probability of insolvency or significant
financial difficulties of the debtor and default or significant delay in payments to
determine whether there is objective evidence that an impairment loss has occurred.
For certain categories of financial assets, such as trade receivables, assets that are
assessed not to be impaired individually are subsequently assessed for impairment on
a collective basis based on similar risk characteristics. Objective evidence of
impairment for a portfolio of receivables could include the Group’s past experience
with industry group, increase in cases of delayed payments and observable changes
in economic conditions.
3 . 10
3 . 11
3 . 12
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SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Impairment of financial assets (cont’d)
Trade and other receivables and other financial assets carried at amortised cost
(cont’d)
If such evidence exists, the amount of impairment loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash
flows discounted at the financial asset’s original effective interest rate and the loss is
recognised in profit or loss.
The carrying amount of the financial asset is reduced by the impairment loss directly
for all financial assets with the exception of receivables, where the carrying amount is
reduced through the use of an allowance account. When a receivable becomes
uncollectible, it is written off against the allowance account.
If in a subsequent period, the amount of the impairment loss decreases and the
decrease related objectively to an event occurring after the impairment was
recognised, the previously recognised impairment loss is reversed to the extent that
the carrying amount of the asset does not exceed its amortised cost at the reversal
date. The amount of reversal is recognised in profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the
statement of financial position if, and only if, there is a currently enforceable legal right
to offset the recognised amounts and there is an intention to settle on a net basis, or
to realise the assets and settle the liabilities simultaneously.
Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of non-financial
assets to determine whether there is any indication of impairment.
If any such indication exists, or when annual impairment testing for an asset is
required, the recoverable amount is estimated and an impairment loss is recognised
whenever the recoverable amount of the asset or a cash-generating unit is less than its
carrying amount. Recoverable amount of an asset or a cash-generating unit is the
higher of its fair value less costs to sell and its value in use.
IIn assessing value in use, estimated future cash flows are discounted to present value
using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. Impairment losses of continuing
operations are recognised in profit or loss in those expense categories consistent with
the function of the impaired asset.
An impairment loss is recognised as an expense in profit or loss immediately.
3 . 12
3 . 13
3 . 14
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SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Impairment of non-financial assets (cont’d)
An assessment is made at each reporting date as to whether there is any indication
that previously recognised impairment losses for an asset other than goodwill may no
longer exist or may have decreased. If such indication exists, the recoverable amount
is estimated. A previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset’s recoverable amount.
That increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for the asset
in prior years.
All reversals of impairment losses are recognised as income immediately in profit or
loss. After such a reversal, depreciation charge is adjusted in future periods to allocate
the revised carrying amount of the asset, less any residual value, on a systematic basis
over its remaining useful life.
Interest-bearing borrowings
Interest-bearing borrowings are recorded at the amount of proceeds received, net of
transaction costs incurred. Borrowing costs are recognised as an expense in profit or
loss in the period in which they are incurred. However, borrowing costs incurred to
finance the construction of property, plant and equipment are capitalised as part of
the cost of those assets during the period of time that is required to complete and
prepare the assets for its intended use.
Employee benefits
(i)
(ii)
3 . 14
3 . 15
3. 16
Short term benefits
Wages, salaries, bonuses and social security contributions are recognised as an
expense in the financial year in which the associated services are rendered by
employees of the Group. Short term accumulating compensated absences such
as paid annual leave are recognised when services are rendered by employees
that increase their entitlement to future compensated absences, and short term
non-accumulating compensated absences such as sick leave are recognised
when the absences occur.
Defined contribution plans
Defined contribution plans are post-employment benefit plans under which the
Group pays fixed contributions into separate entities or funds and will have no
legal or constructive obligation to pay further contribution if any of the funds do
not hold sufficient assets to pay all employee benefits relating to employee
services in the current and preceding financial years.
Such contributions are recognised as an expense in profit or loss as incurred. As
required by law, the Group makes such contributions to the Employees Provident
Fund (“EPF”).
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SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, bank balances and short term
demand deposits which are readily convertible to known amount of cash and which
are subject to an insignificant risk of changes in value.
For the purpose of the statements of financial position, cash and cash equivalents
restricted to be used to settle a liability of 12 months or more after the reporting date
are classified as non-current asset.
Operating segments
An operating segment is a component of the Group that engages in business activities
from which it may earn revenues and incur expenses, including revenue and expenses
that relate to transactions with any of the Group’s other components. All operating
segments’ operating results are reviewed regularly by the chief operating decision
maker to make decisions about resources to be allocated to the segment and to
assess its performance, and for which discrete financial information is available.
Inter-segment transfers
Segment revenues, expenses and result include transfers between segments. The
prices charged on inter-segment transactions are based on negotiation basis. These
transfers are eliminated on consolidation.
Equity
An equity instrument is any contract that evidences a residual interest in the assets of
the Company after deducting all of its liabilities. Ordinary shares are equity
instruments.
Prior to Companies Act, 2016 which came into operation on 31 January 2017, share
premium includes any premiums received on issue of share capital. Any transaction
costs associated with the issuing of shares are deducted from share premium, net of
any related income tax benefits. Effective on 31 January 2017 and subsequent period,
transaction costs associated with the issuing of shares are deducted against equity.
Unappropriated profit includes all current and prior period profit.
All transactions with shareholders are recorded separately within equity.
Provision
Provisions are recognised when there is a present legal or constructive obligation that
can be estimated reliably, as a result of a past event, when it is probable that an
outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are not recognised for future operating losses.
3 . 17
3 . 18
3 . 19
3. 20
3. 21
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SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Provision (cont’d)
Any reimbursement that the Group and the Company can be virtually certain to
collect from a third party with respect to the obligation is recognised as a separate
asset. However, this asset may not exceed the amount of the related provision.
Provisions are reviewed at each reporting date and adjusted to reflect the current best
estimate. If it is no longer probable that an outflow of economic resources will be
required to settle the obligation, the provision is reversed. Where the effect of the time
value of money is material, provision are discounted using a current pre tax rate that
reflects, where appropriate, the risks specific to the liability. When discounting is used,
the increase in the provision due to the passage of time is recognised as a finance cost.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails
to make payment when due.
Financial guarantee contracts are recognised initially as a liability at fair value, net of
transaction costs. Subsequent to initial recognition, financial guarantee contracts are
recognised as income in profit or loss over the period of the guarantee. If the debtor
fails to make payment relating to financial guarantee contract when it is due and the
Group, as the issuer, is required to reimburse the holder for the associated loss, the
liability is measured at the higher of the best estimate of the expenditure required to
settle the present obligation at the reporting date and the amount initially recognised
less cumulative amortisation.
Contingent liabilities
A contingent liability is a possible obligation that arises from past events and whose
existence will only be confirmed by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the Group. It can also be a
present obligation arising from past events that is not recognised because it is not
probable that outflow of economic resources will be required or the amount of
obligation cannot be measured reliably.
Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary
shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary
shareholders of the Company over the weighted average number of ordinary shares
outstanding during the financial period. Diluted EPS is determined by adjusting the
profit or loss attributable to ordinary shareholders and the weighted average number
of ordinary shares outstanding for the effects of all dilutive potential ordinary shares,
which comprise of convertible notes and share options granted to employees.
3 . 21
3 . 22
3 . 23
3 . 24
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SCGM BHD | Annual Report 2017
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Related parties
A related party is a person or entity that is related to the entity that is preparing its
financial statements (“the reporting entity”).
(a)
(b)
A related party transaction is a transfer of resources, services or obligations between
the reporting entity and its related party, regardless of whether a price is charged.
Goods and services tax (“GST”)
GST is a consumption tax based on value-added concept. GST is imposed on goods
and services at every production and distribution stage in the supply chain including
importation of goods and services, at the applicable tax rate of 6%. Input GST that the
Group and the Company paid on purchases of business inputs can be deducted from
output GST.
Revenue, expenses and assets are recognised net of the amount of GST except:-
(i) where the GST incurred in a purchase of assets or services is not recoverable
from the authority, in which case the GST is recognised as part of the cost of
acquisition of the assets or as part of the expense item as applicable; and
(ii) receivables and payables that are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is
included as part of receivables or payables in the statements of financial position.
3 . 25
3 . 26
A person or a close member of that person’s family is related to the reporting
entity if that person:-
(i)
(ii)
(iii)
Has control or joint control over the reporting entity;
Has significant influence over the reporting entity; or
Is a member of the key management personnel of the reporting entity.
An entity is related to the reporting entity if any of the following conditions
applies:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
The entity and the reporting entity are members of the same group;
One entity is an associate or joint venture of the reporting entity;
Both entities are joint ventures of the same third party;
One entity is a joint venture of a third entity and the other entity is an
associate of the same third entity;
The entity is a post-employment benefit plan for the benefits of employees
of the reporting entity or an entity related to the reporting entity;
The entity is controlled or jointly-controlled by a person identified in (a)
above;
A person identified in (a)(i) above has significant influence over the entity
or is a member of the key management personnel of the reporting entity; or
The entity or any member of a group of which it is a party, provides key
management personnel services to the reporting entity.
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SCGM BHD | Annual Report 2017
4. PROPERTY, PLANT AND EQUIPMENT
Group
Land and buildings
Equipment, plant and machinery
Motorvehicles
Furniture,fittings and
others TotalRM RM RM RM RM
Cost
At 1 May 2015 19,768,046 54,081,535 5,221,537 2,473,438 81,544,556Additions 155,700 11,698,304 1,020,942 246,529 13,121,475Disposal - - (175,093) - (175,093)Written off - (3,813,758) - (315,189) (4,128,947)
At 30 April 2016 19,923,746 61,966,081 6,067,386 2,404,778 90,361,991Additions 12,801,904 33,216,956 888,294 128,095 47,035,249Disposal - (15,800) (1,243,014) - (1,258,814)Transfer from capital work-in-
progress 1,008,109 358,755 - - 1,366,864
At 30 April 2017 33,733,759 95,525,992 5,712,666 2,532,873 137,505,290
Accumulated depreciation
At 1 May 2015 2,558,913 29,908,125 4,074,813 1,865,215 38,407,066Charge for the financial year 339,437 5,170,463 442,288 161,385 6,113,573Disposal - - (175,093) - (175,093)Written off - (3,769,378) - (306,166) (4,075,544)
At 30 April 2016 2,898,350 31,309,210 4,342,008 1,720,434 40,270,002Charge for the financial year 357,049 7,251,139 620,170 174,761 8,403,119Disposal - (1,053) (1,243,014) - (1,244,067)
At 30 April 2017 3,255,399 38,559,296 3,719,164 1,895,195 47,429,054
Net carrying amount
30 April 2016 17,025,396 30,656,871 1,725,378 684,344 50,091,989
30 April 2017 30,478,360 56,966,696 1,993,502 637,678 90,076,236
Analysis of land and buildings as at 30 April: -
Group Freehold
land Buildings Total
Cost
RM RM RM
At 1 May 2015 2,880,308 16,887,738 19,768,046Additions - 155,700 155,700
At 30 April 2016 2,880,308 17,043,438 19,923,746Additions 12,789,354 12,550 12,801,904Transfer from capital work-in-progress 138,109 870,000 1,008,109
At 30 April 2017 15,807,771 17,925,988 33,733,759
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SCGM BHD | Annual Report 2017
4. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Group (cont’d) Freehold
land Buildings Total
Accumulated depreciation
RM RM RM
At 1 May 2015 - 2,558,913 2,558,913
Charge for the financial year - 339,437 339,437
At 30 April 2016 - 2,898,350 2,898,350
Charge for the financial year - 357,049 357,049
- 3,255,399 3,255,399
Net carrying amount
At 30 April 2016
At 30 April 2017
2,880,308 14,145,088 17,025,396
At 30 April 2017 15,807,771 14,670,589 30,478,360
The net carrying amount of property, plant and equipment which are acquired under finance
lease arrangements amounted to RM7,377,756 (2016: RM8,914,654).
During the previous financial year, the net carrying amount of property, plant and equipment
pledged to the bank amounted to RM7,009,294. These property, plant and equipment have been
discharged during the current financial year.
Included in the property, plant and equipment of the Group are fully depreciated property, plant
and equipment with a total cost of RM19,203,837 (2016: RM14,805,028) but still in use.
5. CAPITAL WORK-IN-PROGRESS
Group Land andbuildings
Electrical installation Total
RM RM RM
Additions/At 30 April 2016
and 1 May 2016 870,000 358,755 1,228,755
Additions 7,814,401 - 7,814,401
Transferred to property,
plant and equipment (1,008,109) (358,755) (1,366,864)
At 30 April 2017 7,676,292 - 7,676,292
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6. PREPAID LAND LEASE PAYMENTS
Group
7. SUBSIDIARY
2017 2016
Leasehold land:-
RM RM
Cost
At 1 May and 30 April 216,425 216,425
Accumulated amortisation
At 1 May 49,984 47,790
Charge for the financial year 2,194 2,194
At 30 April 52,178 49,984
Net carrying amount 164,247 166,441
Amounts to be amortised:- Not later than one year 2,194 2,194
- Later than one year but not later than five years 8,776 8,776
- Later than five years 153,277 155,471
164,247 166,441
The leasehold land is amortised over the leasehold period of 99 years.
Investment in a subsidiary
Company
2017 2016
RM RM
Unquoted shares - At cost:-
At 1 May 92,901,000 43,927,000
Addition during the financial year
- Cash 41,792,256 30,664,668
- Non-cash - 18,309,332
At 30 April 134,693,256 92,901,000
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SCGM BHD | Annual Report 2017
7. SUBSIDIARY (CONT’D)
8. INVENTORIES
Investment in a subsidiary (cont’d)
The particulars of the subsidiary are as follows:-
Name of company
Place of
incorporation Principal activities
Lee Soon Seng
Plastic Industries Sdn. Bhd.
(“LSSPI”)
Malaysia
Effective equity
interest
2017 2016
% %
100 100 Manufacturing and
trading of plastic
products.
During the current financial year, the Company increased its equity interest in LSSPI by way of cash
payment amounted to RM41,792,256 with additional issuance of ordinary shares to the Company.
The reversal of inventories written down was made when the related inventories were subsequently
sold above their carrying amounts and increased in net realisable value because of changed
economic circumstances.
Group2017 2016
RM RM
Raw materials 18,709,428 11,760,615Work-in-progress 211,726 612,627Finished goods 6,239,556 4,732,129
Total inventories 25,160,710 17,105,371
Recognised in profit or loss
Inventories recognised in cost of sales 96,851,296 63,776,738Inventories written down 1,645,995 1,025,402Reversal of inventories written down (1,025,402) (1,070,821)
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SCGM BHD | Annual Report 2017
9. TRADE RECEIVABLES
Group
2017RM
2016RM
Amount due from a company connected with
certain Directors
Trade receivables
1,220,63640,331,605
482,65632,483,680
41,552,241 32,966,336
Less: Allowance for impairment of trade
receivables (360,382) (165,900)
41,191,859 32,800,436
Movement in allowance for impairment of trade receivables:-
Group 2017
RM 2016 RM
At 1 May (165,900) (112,312)Charge for the financial year (201,882) (53,588) Reversal of impairment - payment received 7,400 - At 30 April (360,382) (165,900)
are unhedged): -
Group 2017
RM 2016
RM
Malaysian Ringgit 28,372,244 19,075,296Australian Dollar 141,545 500,350 Singapore Dollar 9,139,022 7,335,251US Dollar 3,937,065 6,055,439Euro (37,635) - 41,552,241 32,966,336
Trade receivables comprise amounts receivable from sales of goods. The credit terms granted on
sales of goods ranged from 30 days to 90 days (2016: 30 days to 90 days). Allowance has been
made for estimated irrecoverable trade receivables based on the default experience of the
Group.
The currency exposure profile of the trade receivables is as follows (foreign currency balances
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SCGM BHD | Annual Report 2017
10. OTHER RECEIVABLES
11. OTHER FINANCIAL ASSET
Group Company2017 2016 2017 2016
RM RM RM RM
Advance payment to
suppliers 1,870,308 813,562 - -
Non-trade receivables 450 9,845 - -
Deposits for purchase
of property, plant
and equipment 791,012 2,782,595 - -
Sundry deposits 52,206 44,935 - -
GST receivable 1,343,088 299,690 - -
Prepayments 282,574 269,753 - 2,226
4,339,638 4,220,380 - 2,226
Group Company2017 2016 2017 2016
RM RM RM RM
Malaysian Ringgit 1,867,201 1,808,466 - 2,226Euro 357,610 665,393 - -
US Dollar 2,114,827 1,746,521 - -
4,339,638 4,220,380 -
2,226
Group
2017 2016
RM RM
Financial asset carried at fair value through profit or loss (“ FVTPL”) Non-derivative financial asset designated at FVTPL 44,086,312 16,764,469
Quoted market value in Malaysia 44,086,312 16,764,469
The other financial asset refers to investment in quoted islamic money market funds.
During the financial year, the Group recognised fair value adjustment loss of RM75,129
(2016: RM46,270) for the other financial asset as there were decline in the fair value of this
investment below its cost.
are unhedged):
The currency exposure profile of the trade receivables is as follows (foreign currency balances
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SCGM BHD | Annual Report 2017
12. FIXED DEPOSIT WITH A LICENSED BANK
13. CASH AND BANK BALANCES
14. SHARE CAPITAL AND SHARE PREMIUM
Group
Group Company 2017 2016 2017 2016 RM RM RM RM
Malaysian Ringgit 4,020,042 4,596,754 151,850 88,882
Australian Dollar 96,123 9,117 - -
Euro 727,350 866 - -
Japanese Yen 63 26 - -
Singapore Dollar 4,142,560 2,403,533 - -
US Dollar 3,767,416 944,065 - -
New Zealand Dollar 342 444 - -
12,753,896 7,954,805 151,850 88,882
Share capital 2017 2016 2017 2016
Unit Unit RM RM
Group
Issued and fully paid-up:-
Ordinary shares
At 1 May 132,000,000 80,000,000 66,000,000 40,000,000
Issued during the
financial year
– Bonus issue - 40,000,000 - 20,000,000
– Private placement 13,200,000 12,000,000 42,240,000 6,000,000
Transfer pursuant to
Section 618(2) of the
Companies Act, 2016 - - 26,646,423 -
At 30 April 145,200,000 132,000,000 134,886,423 66,000,000
During the previous financial year, the fixed deposit with a licensed bank is on fixed rate basis
and matures within 1 month to 12 months period.
The effective interest rate on fixed deposit with a licensed bank is at 3.45% (2016: ranged from
2.95% to 3.45%) per annum.
The entire fixed deposit with a licensed bank is denominated in Malaysian Ringgit.
The currency exposure profile of the cash and bank balances is as follows (foreign
currency balances are unhedged):-
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SCGM BHD | Annual Report 2017
14. SHARE CAPITAL AND SHARE PREMIUM (CONT’D)
Share capital (cont’d) 2017 2016 2017 2016 Unit Unit RM RM
Company Issued and fully paid-up:-
Ordinary shares
At 1 May 132,000,000 80,000,000 66,000,000 40,000,000
Issued during the
financial year
– Bonus issue - 40,000,000 - 20,000,000
– Private placement 13,200,000 12,000,000 42,240,000 6,000,000
Transfer pursuant to
Section 618(2) of the
Companies Act, 2016 - - 24,346,423 -
At 30 April 145,200,000 132,000,000 132,586,423 66,000,000
Share premium Group Company
2017 2016 2017 2016 RM RM RM RM
At 1 May 27,227,367 3,937,345 24,927,367 1,637,345
Movement during
the financial year:- Issuance of shares
from bonus issue - (1,637,345) - (1,637,345)
Issuance of shares
from private
placement - 25,320,000 - 25,320,000
Private placement
expenses (580,944) (392,633) (580,944) (392,633)
Transfer pursuant
to Section 618(2)
of the Companies
Act, 2016 (26,646,423) - (24,346,423) -
At 30 April - 27,227,367 - 24,927,367
New ordinary shares issued during the financial year ranked pari passu in all respect with the
existing ordinary shares of the Company.
The new Companies Act, 2016 (“the Act”), which came into operation on 31 January 2017,
abolished the concept of authorised share capital and par value of share capital.
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SCGM BHD | Annual Report 2017
14. SHARE CAPITAL AND SHARE PREMIUM (CONT’D)
15. REVERSE ACQUISITION RESERVE
16. UNAPPROPRIATED PROFIT
17. DEFERRED TAX LIABILITIES
Share premium (cont’d)
The amount standing to the credit of the share premium account of the Group and of the Company
of RM26,646,423 and RM24,346,423 respectively became part of the Group’s and the Company’s
share capital pursuant to the transitional provisions set out in Section 618(2) of the Act.
Notwithstanding this provision, the Group and the Company may within 24 months from the
commencement of the Act, use the amount standing to the credit of their share premium account for
purposes as set out in Section 618(3) of the Act. There is no impact in the numbers of ordinary shares
in issue or the relative entitlement of any of the members as a result of this transition.
Reverse acquisition reserve arising from the reverse acquisition of the Company by LSSPI is as
follows:-
Group 2017 2016 RM RM
Group 2017 2016 RM RM
Paid-up share capital of the Company immediately
prior to the reverse acquisition 1,000 1,000Shares issued by the Company to acquire LSSPI 30,427,000 30,427,000Reversal of LSSPI’s paid-up share capital
pursuant to reverse acquisition (2,200,000) (2,200,000)Equity instruments deemed issued to the owner of
the legal parent (1,000) (1,000)
28,227,000 28,227,000
Effective from 1 January 2014, the Company is required by the Income Tax Act 1967 to pay
dividend under single tier income tax system. As such, the Company may frank the payment of
dividends out of its entire unappropriated profit.
3,400,000 2,527,0002,140,000 873,000
At 1 May
Transferred from profit or loss (Note 24)
At 30 April 5,540,000 3,400,000
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SCGM BHD | Annual Report 2017
17. DEFERRED TAX LIABILITIES (CONT’D)
18. FINANCE LEASE CREDITORS
The deferred tax liabilities are made up of temporary differences arising from:-
Group 2017 2016
RM RM
Carrying amount of qualifying property, plant and
equipment in excess of their tax base 5,991,000 3,819,000Inventories written down (395,000) (246,000)Allowance for impairment of receivables (86,000) (40,000)Unrealised foreign exchange 30,000 (133,000)
5,540,000 3,400,000
Group 2017 2016
RM RM
Minimum lease payment
- within 1 year 2,439,204 2,590,871- after 1 year but not later than 5 years 1,588,627 4,027,831
4,027,831 6,618,702Less: Interest-in-suspense (203,360) (498,055)
3,824,471 6,120,647
Total principal sum payable
- within 1 year 2,279,436 2,296,176- after 1 year but not later than 5 years 1,545,035 3,824,471
3,824,471 6,120,647
The interest rates on the finance lease ranged from 2.28% to 3.20% (2016: 2.28% to 3.20%) per
annum.
The limit of corporate guarantee given to a finance lease creditor for finance lease facility
granted to the subsidiary is RMNil (2016: RM852,000).
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SCGM BHD | Annual Report 2017
19. BORROWINGS
Group2017 2016
RM RM
Current
Unsecured:-
Term loan 1,134,191 -
Bankers’ acceptance 2,349,000 -
Revolving credit 15,000,000 -
Total current 18,483,191 -
Non-current
Unsecured:-
Term loan 7,414,822 -
Total non-current 7,414,822 -
Total borrowings 25,898,013 -
Term loan
The term loan of the Group is obtained by way of corporate guarantee from the Company and
negative pledge on the subsidiary’s assets.
The term loan of the Group bears interest at the rate of 4.65% (2016: Nil) per annum.
The term loan of the Group is repayable by monthly installments.
Bankers’ acceptance
The bankers’ acceptance of the Group is obtained by way of corporate guarantee from the
Company and negative pledge on the subsidiary’s assets.
The bankers’ acceptance bears interest at rates ranging from 4.33% to 4.39% (2016: 4.04% to
4.51%) per annum.
Revolving credit
The revolving credit of the Group is obtained by way of corporate guarantee from the Company
and negative pledge on the subsidiary’s assets.
The revolving credit bears interest at rates ranging from 4.55% to 5.51% (2016: 4.80% to 5.80%) per
annum.
The entire borrowings are denominated in Malaysian Ringgit.
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SCGM BHD | Annual Report 2017
20. TRADE PAYABLES
21. OTHER PAYABLES
22. REVENUE
Group
Trade payables comprise amounts outstanding for trade purchases. The credit terms granted to
the Group ranged from 30 days to 90 days (2016: 30 days to 90 days).
The currency exposure profile of the trade payables is as follows (foreign currency balances are
unhedged):-
Group2017 2016
RM RM
Malaysian Ringgit 8,837,016 5,678,354US Dollar 940,527 236,530Singapore Dollar 22,266 52,228Euro 138,323 -
9,938,132 5,967,112
Group Company 2017 2016 2017 2016
RM RM RM RM
Non-trade payables 14,843,352 665,160 4,178 -
Accrual of payroll 1,775,324 1,322,420 17,100 16,500Accrual of expenses 1,486,903 1,446,197 16,000 372,073
18,105,579 3,433,777 37,278 388,573
Group Company2017 2016 2017 2016
RM RM RM RM
Malaysian Ringgit 7,925,934 3,231,411 37,278 388,573Singapore Dollar 747 3,541 - -
US Dollar 9,464,752 198,825 - -
Euro 714,146 - - -
18,105,579 3,433,777 37,278 388,573
The currency exposure profile of the other payables is as follows (foreign currency balances are
unhedged):-
Revenue of the Group represents sale of plastic products, net of discounts and returns.
Revenue of the Company represents dividend income from the subsidiary.
74
SCGM BHD | Annual Report 2017
23. PROFIT BEFORE TAX
Profit before tax has been determined after charging/(crediting), amongst others, the following
items:-
Group Company2017 2016 2017 2016 RM RM RM RM
Auditors’
remuneration - statutory 61,500 59,000 9,000 9,000- non-statutory 34,000 18,000 7,000 7,000Directors’
remuneration
- fees 66,000 72,000 66,000 72,000- other emoluments 3,903,603 3,640,225 2,800 3,000Rental of car 3,800 - - -
Rental of hostel 101,026 96,622 - -
Rental of warehouse 237,200 23,500 - -
Realised gain on
foreign exchange (1,818,432) (1,280,864) - -
The estimated monetary value of benefits provided to the Directors of the Company during the
financial year by way of usage of the subsidiary’s assets and other benefits amounted to
RM126,395 (2016: RM129,497).
The remuneration paid (Company and Group basis) to the Directors of the Company is
categorised as follows:-
Other Fees emoluments Total RM RM RM
Group 2017
Executive Directors - 3,900,803 3,900,803 Non-Executive Directors 66,000 2,800 68,800
Total 66,000 3,903,603 3,969,603
2016
Executive Directors - 3,637,225 3,637,225Non-Executive Directors 72,000 3,000 75,000
Total 72,000 3,640,225 3,712,225
Company
2017
Non-Executive Directors 66,000 2,800 68,800
2016
Non-Executive Directors 72,000 3,000 75,000
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SCGM BHD | Annual Report 2017
23. PROFIT BEFORE TAX (CONT’D)
24. TAX EXPENSE/(INCOME)
The remuneration paid to the Directors of the Company analysed into bands are as follows:-
Number of Directors
RM100,000 to
<RM100,000 RM900,000
2017 Executive Directors - 4
Non-Executive Directors 3 -
2016 Executive Directors - 4
Non-Executive Directors 3 -
Group Company
2017 2016 2017 2016
RM RM RM RM
Current tax expense/(income):
Current year’s tax expense 1,400,000 4,482,000 - -
Under/(Over)provision in prior
financial years 62,846 208,172 - (59,840)
1,462,846 4,690,172 - (59,840)
Deferred tax (Note 17): Relating to originating and
reversal of temporary
differences 2,140,000 873,000 - -
3,602,846 5,563,172 - (59,840)
Malaysian income tax is calculated at the statutory tax rate of 24% (2016: 24%) of the estimated
taxable profits for the financial year.
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24. TAX EXPENSE/(INCOME) (CONT’D)
25. EARNINGS PER ORDINARY SHARE
The reconciliations of income tax expense/(income) applicable to profit before tax at the
statutory tax rate to the income tax expense/(income) at the effective tax rate of the Group and
of the Company are as follows:-
Group Company2017 2016 2017 2016
RM RM RM RM
Profit before tax 26,603,431 25,757,401 11,309,642 29,703,219
Tax expense at
Malaysian statutory tax
rate of 24% (2016 :
24%) 6,384,823 6,181,776 2,714,314 7,128,773
Tax effects in respect of:- Income not subject to tax (170,606) (72,219) (2,755,200) (7,344,000)Expenses not deductible
for tax purpose 727,010 911,279 40,886 215,227Utilisation of
reinvestment allowance (3,401,227) (1,665,836) - -
Under/(Over) provision
of income tax in prior
financial years 62,846 208,172 - (59,840)
Total tax expense/
(income) 3,602,846 5,563,172 - (59,840)
(a) Basic earnings per ordinary share
(b) Diluted earnings per ordinary share
The calculation of basic earnings per ordinary share was based on Group’s profit for the
financial year attributable to owners of the Company over the weighted average number of
ordinary shares calculated as follows:-
There is no diluted earnings per ordinary share as there is no potential dilutive ordinary
share.
Group2017 2016
Profit after tax for the financial year attributable
to owners of the Company (RM) 23,000,585 20,194,229
Weighted average number of ordinary shares in
issue 134,386,849 124,934,426
Basic earnings per ordinary share (sen) 17.12 16.16
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SCGM BHD | Annual Report 2017
26. EMPLOYEE BENEFITS EXPENSE
27. RELATED PARTY DISCLOSURES
Group Company2017 2016 2017 2016
RM RM RM RM
Staff costs 20,370,886 16,650,565 - 44,351
Employee benefits expense of the Group and of the Company consist of, amongst others, the
following items:-
Group Company 2017 2016 2017 2016
RM RM RM RM
Directors’
remuneration
- Salary 2,845,160 2,688,000 - -
- Allowance 2,800 3,000 2,800 3,000- EPF 604,860 572,100 - -
- Bonus 448,000 375,000 - -
- SOCSO 2,783 2,125 - -
Defined
contribution plan –Staff EPF 653,146 465,615 - 5,031
(a) The related party transactions of the Group and of the Company during the financial year were
as follows:-
(b) The outstanding balance arising from related party transactions as at the reporting date is
disclosed in Note 9 to the Financial Statements.
(c) The remuneration of key management personnel is same with the Directors’ remunerations as
disclosed in Notes 23 and 26 to the Financial Statements. Key management personnel
comprise of persons having authority and responsibility for planning, directing and controlling
the activities of the Company either directly or indirectly and entity that provides key
management personnel services to the Company. The Company has no other members of key
management personnel apart from the Board of Directors.
Group Company2017 2016 2017 2016RM RM RM RM
Sales to a company
connected with
certain Directors 2,444,347 1,290,593 - -
Dividend income
from the
subsidiary - - 11,480,000 30,600,000
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SCGM BHD | Annual Report 2017
28. CAPITAL COMMITMENTS
29. CONTINGENT LIABILITIES
30. SIGNIFICANT EVENTS
(a) The Companies Act, 2016 (“New Act”) was enacted to replace the Companies Act, 1965 and
was passed by Parliament on 4 April 2016. The New Act was subsequently gazetted on
15 September 2016. On 26 January 2017, the Minister of Domestic Trade, Co-operatives and
Consumerism announced that the effective date of the New Act, except for section 241 and
Division 8 or Part III of the New Act, to be 31 January 2017.
Group2017 2016
RM RM
Authorised but not contracted for:-
- Equipment, plant and machinery - 3,736,500- Building - 5,697,500
- 9,434,000
Authorised and contracted for:-
- Land - 10,658,193- Building 62,161,246
2,580,264-
- Equipment, plant and machinery 5,176,906
64,741,510 15,835,099
Company2017 2016
RM RM
Unsecured:-
Corporate guarantees given to licensed
financial institutions for credit facilities granted
to the subsidiary - Limit 114,108,000 27,908,000Corporate guarantees given to a finance lease
creditor for finance lease facility granted to
the subsidiary - Limit - 852,000
The corporate guarantees do not have determinable effect on the terms of the credit facilities
due to the banks requiring guarantee as a pre-condition for approving the credit facilities
granted to the subsidiary. The actual terms of the credit facilities are likely to be the best
indicator of “at market” terms and hence the fair value of the credit facilities are equal to the
credit facilities and contract bond amount received by the subsidiary. As such, there is no value
on the corporate guarantee to be recognised in the financial statements.
Significant events during the financial year
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SCGM BHD | Annual Report 2017
30. SIGNIFICANT EVENTS (CONT’D)
31. OPERATING SEGMENTS - GROUP
(a) Business segments
The Group is organised on two major operating segments. These operating segments are
monitored separately for the purpose of making decisions about resource allocation and
performance assessment. Segment performance is evaluated based on operating profit or loss
which, in certain respects as explained in the table below, is measured differently from
operating profit in the consolidated financial statements.
The following summary describes the operations in each of the Group’s reportable segments:-
Transfer prices between operating segments are on negotiated basis.
(b) On 10 August 2016, the Company announced a proposal to carry out a Private Placement
Exercise (“Private Placement”) involving the issuance of up to 13,200,000 new ordinary shares
in the Company’s shares (“Placement Shares”). On 16 February 2017, the issue price of
13,200,000 Placement Shares, being the first and only tranche of the Private Placement, was
fixed at RM3.20 per Placement Share. The Private Placement was completed on 24 February
2017.
(c) On 28 April 2017, the Company announced that it proposed to undertake a bonus issue of
48,400,000 new ordinary shares in the Company (“SCGM Share(s)”) (“Bonus Share(s)”) on
the basis of one (1) Bonus Share for every three (3) existing SCGM Shares held on an
entitlement date to be determined later.
On the same day itself, the Company announced that it also proposed to undertake a bonus
issue of 19,360,000 new warrants in the Company (“Warrant(s)”) on the basis of two (2)
Warrants for every fifteen (15) existing SCGM Shares held on the same entitlement date as the
above bonus issue.
On 13 June 2017, Bursa Malaysia Securities Berhad has resolved to approve the above bonus
issue.
Significant events during the financial year (cont’d)
Significant event after the financial year
The Directors declared fourth interim single tier dividend in respect of the financial year ended 30
April 2017 of 2 sen per ordinary share on 21 June 2017 and payable on 25 July 2017. The financial
statements for the current financial year do not reflect this dividend. Such dividend will be
accounted for in equity as an appropriation of unappropriated profit in the financial year ending 30
April 2018.
The Directors do not propose any payment of final dividend in respect of the current financial year.
Operating segments Business activities
Manufacturing Manufacturing and trading of plastic products.
Investment holding Investment holding.
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SCGM BHD | Annual Report 2017
31. OPERATING SEGMENTS – GROUP (CONT’D)
(a) Business segments (cont’d)
Manufacturing Investment
holding Eliminations Notes ConsolidatedRM RM RM RM
2017 Revenue External revenue 178,784,555 - - 178,784,555 Inter-segment revenue
Inter-segment revenue
- 11,480,000 (11,480,000) A - Total revenue 178,784,555 11,480,000 (11,480,000) 178,784,555 Results Segment profit/(loss) 27,445,833 (170,358) - B 27,275,475 Interest income 54,418 - - 54,418 Finance costs (726,462) - - (726,462) Depreciation and
amortisation (8,405,313) - - (8,405,313) Tax expense (3,602,846) - - (3,602,846) Other non-cash
expenses (638,256) - - C (638,256) 2016 Revenue External revenue 133,505,495 - - 133,505,495
- 30,600,000 (30,600,000) A -
Total revenue 133,505,495 30,600,000 (30,600,000) 133,505,495 Results Segment profit/(loss) 27,110,990 (896,781) - B 26,214,209 Interest income 26,022 - - 26,022 Finance costs (482,830) - - (482,830) Depreciation and
amortisation (6,115,767) - - (6,115,767) Tax expense (5,623,012) 59,840 - (5,563,172) Other non-cash
expenses (647,322) - - C (647,322)
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SCGM BHD | Annual Report 2017
31. OPERATING SEGMENTS – GROUP (CONT’D)
(a) Business segments (cont’d)
Manufacturing Investment
holding Eliminations Notes ConsolidatedRM RM RM RM
2017
Assets
Segment assets
Segment assets
225,297,340 134,845,106 (134,693,256) D 225,449,190
Additions to non-current
Additions to non-current
assets other than financial instruments 54,849,650 - - E 54,849,650
Liabilities
Segment liabilities 28,006,433 37,278 - F 28,043,711
2016
Assets
130,368,519 92,992,108 (92,901,000) D 130,459,627
assets other than financial instruments 14,350,230 - - E 14,350,230
Liabilities
Segment liabilities 9,012,316 388,573 - F 9,400,889
Notes to the nature of adjustments and eliminations to arrive at amounts reported in the
consolidated financial statements:-
A. Inter-segment revenues are eliminated on consolidation.
B. The following items are added to/(deducted from) segment profit to arrive at “profit
before tax” presented in the consolidated income statement:-
2017 2016
RM RM
Segment profit 27,275,475 26,214,209Interest income 54,418 26,022Finance costs (726,462) (482,830)
Profit before tax 26,603,431 25,757,401
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SCGM BHD | Annual Report 2017
31. OPERATING SEGMENTS – GROUP (CONT’D)
(a) Business segments (cont’d)
Notes to the nature of adjustments and eliminations to arrive at amounts reported in the
consolidated financial statements (cont’d):-
C. Other non-cash income/(expenses) consist of the following items as presented in the
respective notes to the financial statements:-
D. The following items are added to segment assets to arrive at total assets reported in the
consolidated statement of financial position:-
2017 2016
RM RM
Allowance for impairment of receivables (201,882) (53,588)Bad debts written off - (56)
Property, plant and equipment written off - (53,403)Inventories written down (1,645,996) (1,025,402)Allowance for impairment of receivables
no longer required 7,400 -
Gain on disposal of property, plant and
equipment 137,053 15,377Reversal of inventories written down 1,025,402 1,070,821Unrealised gain/(loss) on foreign exchange 123,793 (564,768)(Loss)/Gain on redemption on financial
asset carried at fair value through profit
or loss (8,897) 9,967 Fair value loss on financial asset carried at
fair value through profit or loss (75,129) (46,270)
(638,256) (647,322)
2017
RM 2016
RM
Segment assets 225,449,190 130,459,627Tax recoverable 2,658,332 59,595
Total assets 228,107,522 130,519,222
83
SCGM BHD | Annual Report 2017
31. OPERATING SEGMENTS – GROUP (CONT’D)
(a) Business segments (cont’d)
(b) Geographical information
There is no geographical information presented as the Group is predominantly operating in
Malaysia.
(c) Major customers
The Group does not have any revenue from a single external customer which represent 10%
or more of the Group’s revenue.
Notes to the nature of adjustments and eliminations to arrive at amounts reported in the
consolidated financial statements (cont’d):-
E. Additions to non-current assets other than financial instruments consist of :-
F. The following items are added to segment liabilities to arrive at total liabilities reported
in the consolidated statement of financial position:-
2017
RM2016
RM
47,035,249 13,121,475Property, plant and equipment
Capital work-in-progress 7,814,401 1,228,755
54,849,650 14,350,230
2017
RM2016
RM
28,043,711 9,400,8893,824,471 6,120,647
25,898,013 -
- 632,0005,540,000 3,400,000
Segment liabilities
Finance lease creditors
Borrowings
Tax payable
Deferred tax liabilities
Total liabilities 63,306,195 19,553,536
84
SCGM BHD | Annual Report 2017
32. FINANCIAL INSTRUMENTS
(a) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates.
The Group is exposed to foreign currency risk mostly on its sales and purchases that are
denominated in a currency other than the functional currency of the Group. The currencies
giving rise to this risk are primarily US Dollar (“USD”), Singapore Dollar (“SGD”), EURO,
Australian Dollar (“AUD”), Japanese Yen (“JPY”) and New Zealand Dollar (“NZD”).
Based on carrying amounts as at the reporting date, foreign currency denominated financial
assets and liabilities which expose the Group to currency risk are disclosed below:-
Risk management objectives and policies
The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets
and liabilities by category are summarised in Notes 3.10 and 3.11 respectively. The main types of risks
are foreign currency risk, interest rate risk, credit risk and liquidity risk.
Financial risk management policy is established to ensure that adequate resources are available for the
development of the Group’s business whilst managing its foreign currency risk, interest rate risk, credit
risk and liquidity risk. The Group operates within clearly defined policies and procedures that are
approved by the Board of Directors to ensure the effectiveness of the risk management process.
USD SGD EURO AUD JPY NZD RM RM RM RM RM RM
3,937,065 9,139,022 (37,635) 141,545 - -2,114,827 - 357,610 - - -
3,767,416 4,142,560 727,350 96,123
237,668
63 342
9,819,308 13,281,582 1,047,325 63 342
(940,527) (22,266) (138,323) - - -
(9,464,752) (747) (714,146) - - -
(10,405,279) (23,013) (852,469) - - -
2017 Financial assets Trade receivables Other receivables Cash and cash
equivalents
Financial liabilitiesTrade payables Other payables
Net exposure (585,971) 13,258,569 194,856 237,668 63 342
85
SCGM BHD | Annual Report 2017
32. FINANCIAL INSTRUMENTS (CONT’D)
(a) Foreign currency risk (cont’d)
Risk management objectives and policies (cont’d)
Foreign currency sensitivity analysis
The following table illustrates the sensitivity of profit in regards to the Group’s financial assets and
financial liabilities and the RM/USD, RM/SGD, RM/EURO, RM/AUD, RM/JPY and RM/NZD with ‘all
other things being equal’.
It assumes a 8% (2016: 5%) change of the RM/USD, RM/SGD, RM/EURO, RM/AUD, RM/JPY and
RM/NZD exchange rates respectively. The percentage has been determined based on the average
market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on
the Group’s foreign currency denominated financial instruments held at each reporting date.
If the RM had strengthened against the USD, SGD, EURO, AUD, JPY and NZD by 8% (2016: 5%)
respectively, this would have the following impact:-
USD SGD EURO AUD JPY NZDRM RM RM RM RM RM
2016 Financial assetsTrade receivables 6,055,439 7,335,251 - 500,350 - -Other receivables 1,746,521 - 665,393 - - -Cash and cash
equivalents 944,065 2,403,533 866 9,117 26 444
8,746,025 9,738,784 666,259 509,467 26 444
Financial liabilities Trade payables (236,530) (52,228) - - - -Other payables (198,825) (3,541) - - - -
(435,355) (55,769) - - - -
Net exposure 8,310,670 9,683,015 666,259 509,467 26 444
Increase/(Decrease) on profit for the financial year
USD SGD EURO AUD JPY NZD TotalRM RM RM RM RM RM RM
2017 46,878 (1,060,686) (15,588) (19,013) (5) (27) (1,048,441)
2016 (415,534) (484,151) (33,313) (25,473) (1) (22) (958,494)
86
SCGM BHD | Annual Report 2017
32. FINANCIAL INSTRUMENTS (CONT’D)
Foreign currency risk (cont’d)
Foreign currency sensitivity analysis (cont’d)
If the RM had weakened against the USD, SGD, EURO, AUD, JPY and NZD by 8% (2016: 5%)
respectively, then the impact to profit for the financial year would be the opposite effect.
Exposures to foreign exchange rates vary during the financial year depending on the volume
of overseas transactions. Nonetheless, the analysis above is considered to be representative of
the Group's exposures to foreign currency risk.
Risk management objectives and policies (cont’d)
(a)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial
instruments will fluctuate because of changes in market interest rates.
The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to
changes in interest rates. The Group’s variable rate borrowings are exposed to the risk of
change in cash flows due to changes in interest rates. Short term receivables and payables are
not significantly exposed to interest rate risk.
The Group’s interest rate management objective is to manage interest expenses consistent
with maintaining an acceptable level of exposure to interest rate fluctuation.
Interest rate sensitivity
The Group and the Company are exposed to changes in market interest rates through bank
borrowings at variable interest rates. Other borrowings are at fixed interest rates. The
exposure to interest rates for the Group’s and the Company’s short term placement is
considered immaterial.
The interest rate profile of the Group’s and of the Company’s significant interest-bearing
financial instruments, based on carrying amounts as at the end of the reporting period is as
follows:-
(b)
Group CompanyRM RM
(3,824,471) -
(2,349,000) -
(15,000,000) -
(21,173,471) -
(8,549,013) -
2017 Fixed rate instruments Financial liabilities
Finance lease creditors
Bankers’ acceptance
Revolving credit
Net financial liabilities
Floating rate instrumentFinancial liability
Term loan
Net financial liability (8,549,013) -
87
SCGM BHD | Annual Report 2017
32. FINANCIAL INSTRUMENTS (CONT’D)
Interest rate risk (cont’d)
Interest rate sensitivity (cont’d)
The interest rate profile of the Group’s and of the Company’s significant interest-bearing
financial instruments, based on carrying amounts as at the end of the reporting period is as
follows (cont’d):-
The following table illustrates the sensitivity of profit to a reasonably possible change in
interest rates of +/- 25 (2016: 25) basis points (“bp”). These changes are considered to be
reasonably possible based on observation of current market conditions. The calculations are
based on a change in the average market interest rates for each period, and the financial
instruments held at each reporting date that are sensitive to changes in interest rates. All other
variables are held constant.
Risk management objectives and policies (cont’d)
(b)
Group Company
2016
RM RM
Fixed rate instruments Financial asset Fixed depositwith a licensed bank 126,981 -
Financial liability
Finance lease creditors (6,120,647) - Net financial liability (5,993,666) -
(Decrease)/Increase on
profit for the financial year
+ 25 bp - 25 bp
Group
RM RM
30 April 2017 (21,373) 21,373
30 April 2016 - -
88
SCGM BHD | Annual Report 2017
The Group continuously monitors defaults of customers and other counterparties, identified
either individually or by group, and incorporate this information into its credit risk controls.
Where available at reasonable cost, external credit ratings and/or reports on customers and
other counterparties are obtained and used. The Groups’ policy is to deal only with
creditworthy counterparties.
The Groups’ management considers that all the above financial assets that are not impaired or
past due for each of the reporting dates under review are of good credit quality.
The ageing analysis of trade receivables of the Group is as follows:-
32. FINANCIAL INSTRUMENTS (CONT’D)
Credit risk
Credit risk is the risk that counterparty fails to discharge an obligation to the Group and the
Company. The Group’s and the Company’s maximum exposure to credit risk is limited to the
carrying amount of financial assets recognised at the reporting date, as summarised below:-
Risk management objectives and policies (cont’d)
(c)
Group Company2017 2016 2017 2016RM RM RM RM
12,753,896 8,081,786 151,850 88,88241,191,859 32,800,436 - -2,713,976 3,650,937 - -
Classes of financial
assets – carrying
amounts:-Cash and cash
equivalents Trade receivables Other receivables Other financial asset 44,086,312 16,764,469 - -
100,746,043 61,297,628 151,850 88,882
Allowance for impairment loss Individually Collectively
Gross impaired impaired Total Net RM RM RM RM RM
21,825,551 - - - 21,825,551 12,709,037 - - - 12,709,037
3,973,138 - - - 3,973,138 1,205,693 - - - 1,205,693
1,315,094 - - - 1,315,094
2017 Within terms Past due 1 to 30 days Past due 31 to 60 days Past due 61 to 90 days Past due 91 to 120
days Past due more than
120 days 523,728 (360,382) - (360,382) 163,346
41,552,241 (360,382) - (360,382) 41,191,859
89
SCGM BHD | Annual Report 2017
None of the Groups’ financial assets are secured by collateral or other credit enhancements
and none of the carrying amount of financial assets whose terms have been renegotiated that
would otherwise be past due or impaired.
In respect of trade and other receivables, the Group is not exposed to any significant credit
risk exposure to any single counterparty or any group of counterparties having similar
characteristics. Trade receivables consist of a large number of customers in various industries
and geographical areas. Based on historical information about customer default rates, the
management consider the credit quality of trade receivables that are not past due or impaired
to be good.
The credit risk for cash and cash equivalents and short term placements is considered
negligible, since the counterparties are reputable banks with high quality external credit
ratings.
32. FINANCIAL INSTRUMENTS (CONT’D)
Credit risk(cont’d)
The ageing analysis of trade receivables of the Group is as follows (cont’d):-
Risk management objectives and policies (cont’d)
(c)
Allowance for impairment loss Individually Collectively
Gross impaired impaired Total Net RM RM RM RM RM
2016 Within terms 12,408,205 - - - 12,408,205Past due 1 to 30 days 8,624,995 - - - 8,624,995Past due 31 to 60 days 5,595,105 - - - 5,595,105Past due 61 to 90 days 2,125,459 - - - 2,125,459Past due 91 to 120
days 1,337,098 - - - 1,337,098Past due more than
120 days 2,875,474 (165,900) - (165,900) 2,709,574
32,966,336 (165,900) - (165,900) 32,800,436
90
SCGM BHD | Annual Report 2017
32
. F
INA
NC
IAL
IN
ST
RU
ME
NT
S (
CO
NT
’D)
Liq
uid
ity r
isk
Liq
uid
ity r
isk is
the r
isk a
risi
ng
fro
m t
he G
rou
p a
nd
th
e C
om
pan
y n
ot
bein
g a
ble
to
meet
their
ob
ligati
on
s d
ue t
o s
ho
rtag
e o
f fu
nd
s.
In m
an
ag
ing
th
eir
exp
osu
res
to liq
uid
ity r
isk, th
e G
rou
p a
nd
th
e C
om
pan
y m
ain
tain
a level o
f cash
an
d c
ash
eq
uiv
ale
nts
an
d b
an
k c
red
it
facili
ties
deem
ed
ad
eq
uate
by t
he m
an
ag
em
en
t to
en
sure
th
at
they w
ill h
ave s
uff
icie
nt
liqu
idit
y t
o m
eet
their
lia
bili
ties
as
an
d w
hen
th
ey
fall
du
e.
Th
e f
ollo
win
g t
ab
le s
ho
ws
the a
reas
wh
ere
th
e G
rou
p a
nd
th
e C
om
pan
y a
re e
xp
ose
d t
o liq
uid
ity r
isk:-
Ris
k m
an
ag
em
en
t o
bje
cti
ve
s an
d p
oli
cie
s (c
on
t’d
)
(d)
Gro
up
C
om
pan
y C
urr
en
t N
on-
cu
rren
t C
urr
en
t N
on
-cu
rren
t L
ess
th
an
1 year
Betw
een
1 to
5 y
ears
Mo
re t
han
5years
Less
th
an
1year
Betw
een
1 to
5 y
ears
Mo
re t
han
5 years
RM
RM
RM
RM
RM
RM
20
17
No
n-d
eri
vati
ve f
inan
cia
l lia
bili
ties
Term
lo
an
1,5
08
,77
23
,01
7,5
44
5,4
17
,61
0-
--
Ban
kers
’ accep
tan
ce
2
,34
9,0
00
--
--
-R
evo
lvin
g c
red
it
15
,00
0,0
00
--
--
-F
inan
ce lease
cre
dit
ors
2,4
39
,20
41
,58
8,6
27
--
- --
Tra
de p
ayab
les
9,9
38
,13
2-
--
--
Oth
er
payab
les
18
,10
5,5
79
--
37
,27
8-
-
To
tal u
nd
isco
un
ted
fin
an
cia
l lia
bili
ties
4
9,3
40
,68
74
,60
6,1
71
5,4
17
,61
03
7,2
78
--
Fin
an
cia
l g
uara
nte
es*
11
4,1
08
,000
-
-
--
-
91
SCGM BHD | Annual Report 2017
32
. F
INA
NC
IAL
IN
ST
RU
ME
NT
S (
CO
NT
’D)
Liq
uid
ity r
isk (
co
nt’
d)
Th
e f
ollo
win
g t
ab
le s
ho
ws
the a
reas
wh
ere
th
e G
rou
p a
nd
th
e C
om
pan
y a
re e
xp
ose
d t
o liq
uid
ity r
isk (
co
nt’
d):
-
* T
his
exp
osu
re is
inclu
ded
in li
qu
idit
y r
isk f
or
illu
stra
tio
n o
nly
. No
fin
an
cia
l gu
ara
nte
e w
as
calle
d u
po
n b
y t
he h
old
ers
as
at
the e
nd
of
the
r
ep
ort
ing
peri
od
.
Th
e a
bo
ve a
mo
un
ts r
efl
ect
the c
on
tractu
al u
nd
isco
un
ted
cash
flo
ws,
wh
ich
may d
iffe
r fr
om
th
e c
arr
yin
g v
alu
es
of
the f
inan
cia
l lia
bili
ties
at
the r
ep
ort
ing
date
.
Ris
k m
an
ag
em
en
t o
bje
cti
ve
s an
d p
oli
cie
s (c
on
t’d
)
(d)
Gro
up
C
om
pan
y C
urr
en
t
No
n-cu
rren
t C
urr
en
t N
on-
cu
rren
t L
ess
th
an
1year
B
etw
een
1 to
5 y
ears
M
ore
th
an
5 years
Less
th
an
1 year
B
etw
een
Mo
re t
han
5 years
RM
RM
R
M R
M R
M
RM
20
16
No
n-d
eri
vati
ve f
inan
cia
l lia
bili
ties
Fin
an
ce lease
cre
dit
ors
2,5
90
,87
14
,02
7,8
31
--
--
Tra
de p
ayab
les
5,9
67
,11
2-
--
--
Oth
er
payab
les
3,4
33
,77
7-
-3
88
,57
3-
-
To
tal u
nd
isco
un
ted
fin
an
cia
l lia
bili
ties
1
1,9
91
,76
04
,02
7,8
31
-3
88
,57
3-
-
Fin
an
cia
l g
uara
nte
es*
28
,76
0,0
00
--
--
-
1 to
5 y
ears
92
SCGM BHD | Annual Report 2017
33. CAPITAL MANAGEMENT OBJECTIVE
34. FAIR VALUE OF FINANCIAL INSTRUMENTS
The primary capital management objective of the Group is to maintain a strong capital base and
safeguard the Group’s ability to continue as a going concern, so as to sustain future development
of the business. There is no change to the objectives in financial years ended 2017 and 2016.
The Group manages its capital by regularly monitoring its current and expected liquidity
requirement and modifies the combination of equity and borrowings from time to time to meet
the needs. Shareholders’ equity and gearing ratio of the Group are as follows:-
The Group has complied with Practice Note No. 17 (Revision on 3 August 2009, 22 September
2011 and 25 March 2013) of Main Market Listing Requirements of Bursa Malaysia Securities
Berhad which requires the Group to maintain a consolidated shareholders’ equity not less than
25% of the issued and paid-up capital of the Company and such shareholders’ equity is not less
than RM40 million.
The carrying amounts of financial assets and liabilities of the Group and of the Company as at the
reporting date are approximately at their fair values due to their short term nature or they are
floating rate instruments that are re-priced to market interest rates on or near the reporting
date.
Fair value hierarchy
The following table provides an analysis of financial instruments that are measured subsequent
to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair
value is observable.
2017 2016
RM RM
Total equity 164,801,327 110,965,686Borrowings 29,722,484 6,120,647
Debt-to-equity ratio 0.18 0.06
93
SCGM BHD | Annual Report 2017
There were no transfers between Level 1 and 2 during the reporting period.
34. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT’D)
Fair value hierarchy (cont’d)
Group Quoted in
active markets for
identical instruments
Significant other
observable inputs
Significant unobservable
inputs Total Level 1 Level 2 Level 3
RM RM RM RM
2017 Financial asset : Financial asset carried
at fair value through
profit or loss
( “FVTPL” )
- Non-derivative
financial asset
designated at
FVTPL 44,086,312 - - 44,086,312
2016 Financial asset : Financial asset carried
at fair value through
profit or loss
( “FVTPL” )
- Non-derivative
financial asset
designated at
FVTPL 16,764,469 - - 16,764,469
94
SCGM BHD | Annual Report 2017
Bursa Malaysia Securities Berhad has, on 25 March 2010 and 20 December 2010, issued directives
requiring all listed corporations to disclose the breakdown of unappropriated profits or
accumulated losses into realised and unrealised on group and company basis, as the case may
be, in quarterly reports and annual audited financial statements.
The breakdown of unappropriated profit as at the reporting date that has been prepared by the
Directors in accordance with the directives from Bursa Malaysia Securities Berhad stated above
and Guidance on Special Matter No. 1 issued on 20 December 2010 by the Malaysian Institute of
Accountants are as follows:-
The above disclosures were reviewed and approved by the Board of Directors in accordance
with a resolution of the Directors on 28 June 2017.
DISCLOSURE OF REALISED AND UNREALISED PROFITS/(LOSSES)
Group Company 2017 2016 2017 2016
RM RM RM RM
Total unappropriated profit
of the Company and its
subsidiary:
- Realised 75,038,111 80,530,087 2,221,405 1,735,763
- Unrealised (5,416,207) (3,964,768) - -
69,621,904 76,565,319 2,221,405 1,735,763
Consolidation adjustments (11,480,000) (30,600,000) - -
58,141,904 45,965,319 2,221,405 1,735,763
96
SCGM BHD | Annual Report 2017
OUR GROUPSTRUCTURE
From left to right : Wong Tun Boon, Amrik Singh Harcharan Singh, Dato’ Sri Lee Hock Guan, Dato’ Sri Lee Hock Seng, Dato’ Sri Lee Hock Chai, Lee Hock Meng, Tang Nai Soon.
CORPORATE STRUCTURE
SCGM BHD
LSSPI
100%
Our Company was incorporated in Malaysia
on 29 June 2007 under the Companies Act
1965 as a public limited company. Our
Company is an investment holding company
while our subsidiary, namely, Lee Soon Seng
Plastic Industries Sdn. Bhd. (“LSSPI”) is
principally involved in the manufacturing and
trading of plastic products. The structure of
our Group is as follows:
97
SCGM BHD | Annual Report 2017
CORPORATE INFORMATION
REGISTERED OFFICECOMPANY SECRETARIES
Lim Seck Wah
(MAICSA No. 0799845)
M. Chandrasegaran A/L S. Murugasu
(MAICSA No. 0781031)
Ng Chye Huat (MIA 14186)
(Appointed with effect from 21 June 2017)
PRINCIPAL PLACE OF BUSINESS
Lot 3304, Batu 24 ½Jalan Kulai-Air Hitam, 81000 Kulai, Johor
Tel : 07-652 2288
E-mail : [email protected]
Website : www.scgmbhd.com
www.plastictray.com
STOCK EXCHANGE LISTING
Level 15-2,
Bangunan Faber Imperial Court
Jalan Sultan Ismail, 50250 Kuala Lumpur
Tel : 03-2692 4271
Fax : 03-2732 5388
SHARE REGISTRAR
Mega Corporate Services Sdn Bhd (187984-H)
Level 15-2, Bangunan Faber Imperial Court
Jalan Sultan Ismail, 50250 Kuala Lumpur
Tel : 03-2692 4271
Fax : 03-2732 5388
Bursa Malaysia Securities Berhad
Main Market Stock Name : SCGM
Stock Code: 7247
SOLICITORSAmrik Singh & Co Advocates & Solicitors
No. 37, Jalan Seruling 2,
Taman Sri Kulai Baru 2,
81000 Kulai, Johor
Tel : 07-662 6730
PRINCIPAL BANKERSAlliance Bank Malaysia Berhad
AmBank Islamic Berhad
AmBank (M) Berhad
CIMB Islamic Bank Berhad
Hong Leong Bank Berhad
Malayan Banking Berhad
Public Bank Berhad
RHB Bank Berhad
DATO’ SRI LEE HOCK SENGExecutive Chairman
DATO’ SRI LEE HOCK CHAIManaging Director
DATO’ SRI LEE HOCK GUANDeputy Managing Director
LEE HOCK MENGExecutive Director
BOARD OF DIRECTORS
AMRIK SINGH HARCHARAN SINGHIndependent Non-Executive Director Independent Non-Executive Director
Independent Non-Executive Director
WONG TUN BOON
TANG NAI SOON
AUDITORSSJ Grant Thornton (AF:0737)
Unit 29-08, Level 29, Menara Landmark
12, Jalan Ngee Heng, 80000 Johor Bahru
Tel : 07-223 1848
Fax : 07-224 9848
98
SCGM BHD | Annual Report 2017
PROFILEOF DIRECTORS
DATO’ SRILEE HOCK SENGExecutive Chairman
Dato’ Sri Lee Hock Seng, Malaysian, aged 67,
was appointed as the Executive Chairman /
Managing Director of SCGM Bhd on 19
December 2007. He was redesignated as
Executive Chairman on 9 December 2015. He
is one of the founders of Lee Soon Seng
Plastic Industries Sdn. Bhd. (LSSPI) and has
been the Managing Director of LSSPI since its
incorporation on 4 May 1984. In 1995, he
completed an external training programme,
namely the 7th Asian Factory Management
Course 1995 in Taipei, Taiwan. Subsequently, in
1997, he completed a course in Middle
Management Leadership Training Programme
in Johor Bahru, Johor.
Dato’ Sri Lee started his career in 1969 as a
Marketing and Distribution personnel with Lee
Soon Seng, a distributor and wholesaler for
F&N (M) Sdn Bhd. In 1984, he left Lee Soon
Seng to set up LSSPI.
Presently, he is responsible for the strategic
business development and future directions
of our Group. He frequently travels abroad to
keep abreast with the latest developments in
the packaging industry and to explore new
market prospects for our Group.
Furthermore, his responsibilities also include
the development and implementation of
marketing strategies and product distribution.
He was awarded the DIMP which carries the
title of Dato’ and the SSAP which carries the
title of Dato’ Sri by the Sultan of Pahang in
2010 and 2012 respectively. He is a member of
the Remuneration Committee of the
Company.
He does not hold any directorships in other
public companies.
Malaysian
67/Male
19 December 2007
Nationality
Age/Gender
Date Joined
99
SCGM BHD | Annual Report 2017
PROFILE OF DIRECTORS
Dato’ Sri Lee Hock Chai, Malaysian, aged 55,
was appointed as the Executive Director of
SCGM on 19 December 2007. He is the
Executive Director of Lee Soon Seng Plastic
Industries Sdn. Bhd. since 4 May 1984. He is one
of the founders of Lee Soon Seng Plastic
Industries Sdn. Bhd.. He began his career as a
Factory Manager with LSSPI in 1984.
In 1998, he was promoted to the position as an
Operations Manager. His responsibilities
include developing new products and provides
engineering support, machinery and factory
facility maintenance.
Managing Director
DATO’ SRILEE HOCK CHAI
Malaysian
55/Male
19 December 2007
Nationality
Age/Gender
Date Joined
Dato‘ Sri Lee Hock Chai was promoted to the
position of Managing Director since 9
December 2015. He is to implement and
execute the strategic business development
and the growth of the company.
He has more than thirty two (32) years of
experience in the field of research and
development. He was awarded the SSAP which
carries the title of Dato’ Sri by the Sultan of
Pahang in 2012.
He does not hold any directorships in other
public companies.
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SCGM BHD | Annual Report 2017
DATO’ SRILEE HOCK GUANDeputy Managing Director
Malaysian
57/Male
19 December 2007
Dato’ Sri Lee Hock Guan, Malaysian, aged 57,
was appointed as the Executive Director of
SCGM on 19 December 2007 and was
redesignated as Deputy Managing Director on
15 March 2017. He has been the Executive
Director of LSSPI since 4 May 1984. In 1997, he
completed a course on Middle Management
Leadership Training Programme in Johor
Bahru, Johor.
Mr. Lee began his career in 1979 as a Sales
Executive in Lee Soon Seng, a distributor and
wholesaler for F&N (M) Sdn Bhd.
His assists the Managing Director which
include planning for material requirements,
manpower and production capacity, providing
general machinery maintenance and ensuring
overall safety in production.
He frequently travels abroad to enhance his
knowledge in new technology and automation
for production. He has more than than thirty
two (32) years of experience in the field of
production. He was awarded the SSAP which
carries the title of Dato’ Sri by the Sultan of
Pahang in 2012.
He does not hold any directorships in other
public companies.
Deputy Managing Director
Malaysian
57/Male
19 December 2007
Nationality
Age/Gender
Date Joined
PROFILE OF DIRECTORS
101
SCGM BHD | Annual Report 2017
LEEHOCK MENGExecutive Director
Lee Hock Meng, Malaysian, aged 64, was
appointed as the Executive Director of SCGM
on 19 December 2007. He was the Executive
Director of LSSPI since 4 May 1984. In 1997, he
participated in the 9th seminar on Factory
Management and Marketing for Overseas
Chinese Businessman.
In 1979, he began his career with Lee Soon
Seng, a distributor and wholesaler for F&N (M)
Sdn Bhd, as a Sales Executive.
He was attached to Lee Soon Seng for
approximately eleven (11) years before joining
LSSPI in 1990 as a Logistics Manager. He is
presently the Executive Director, responsible
for overseeing shipping and logistic
arrangements for the Group.
He does not hold any directorships in other
public companies.
LEELEEHOCK MENGHOCK MENGExecutive Director
Malaysian
64/Male
19 December 2007
Nationality
Age/Gender
Date Joined
PROFILE OF DIRECTORS
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SCGM BHD | Annual Report 2017
AMRIK SINGHHARCHARANSINGHIndependentNon-Executive Director
Amrik Singh Harcharan Singh, Malaysian, aged
48, was appointed as the Independent
Non-Executive Director of SCGM on 19
December 2007. He graduated with an
Honours Degree from the University of
London in 1994. He is an Advocate and
Solicitor since 1996. He has more than
seventeen (17) years experience in handling
civil litigation matters, as well as Industrial
Court cases.
He has been appointed as the legal adviser
and counsel for the Food Industry Employees
Union for the state of Johor, Malaysia which is
recognised by the United Nations.
He is currently acting as counsel for more
than five (5) legal firms throughout the
country. He is also running his own legal
advisory firm under the name of Messrs.
Amrik Singh and Co. since 2003. He is a
member of the Audit Committee and the
Nomination Committee of the Company.
He does not hold any directorships in other
public companies.
Malaysian
48/Male
19 December 2007
Nationality
Age/Gender
Date Joined
PROFILE OF DIRECTORS
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SCGM BHD | Annual Report 2017
Wong Tun Boon, Malaysian, aged 41, was
appointed as the Independent Non-Executive
Director of SCGM on 19 December 2007. He
holds a Bachelor of Commerce (Honours)
degree from the University of Windsor, Canada,
which he obtained in 1998. After graduation up
to 2001, he worked in two (2) audit firms,
namely Syarikat Y.S. Tay and Azman, Wong,
Salleh & Co. He also completed his post
graduate studies and was conferred the
Masters Degree of Business by the Victoria
University of Technology, Australia in 2001.
He joined M. S. Wong & Co. in Johor as an audit
& tax senior executive from 2001 till 2005. In
2004, Mr. Wong fulfilled all required practical
requirements and was successfully admitted as
the member of the Certified Practicing
Accountant (CPA), Australia and also the
Malaysia Institute of Accountants (“MIA”).
Mr Wong had set up his own firm in Johor and
has been practicing as a Chartered
Accountant and Company Secretary since
then. His firm, Thomas Wong & Co., which is
registered with MIA, provides a range of
complementary professional services such as
accountancy, secretarial and taxation services.
He is also a Government Licensed Tax
Consultant approved by the Ministry of
Finance.
He is the Chairman of the Audit Committee
and the Remuneration Committee, and a
member of the Nomination Committee of the
Company.
He does not hold any directorships in other
public companies.
IndependentNon-Executive Director
WONG TUN BOON
Malaysian
41/Male
19 December 2007
Nationality
Age/Gender
Date of Appointment
PROFILE OF DIRECTORS
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SCGM BHD | Annual Report 2017
Tang Nai Soon, Malaysian, aged 48, was
appointed as the Independent Non -
Executive Director of SCGM on 19 December
2007. He graduated with a degree in
Computer Science (Hons) from Universiti
Teknologi Malaysia (UTM) in 1993. Up to 1994,
he worked as a marketing executive in CTE
Computer (M) Sdn Bhd, Johor Bahru.
Subsequently, he was the Personal Assistant
for YB Datuk Lim Si Cheng, Member of
Parliament for Senai/ Kulai since June 1995.
He was the Kulai District Councillor from
1996 to 2006.
He was also appointed as the Advisor for the
Juvenile Court in Johor Bahru as well as the
Village Chief of the Ayer Bemban New
Village in 2006 and 2007, respectively.
Mr. Tang was the Pekan Nanas state
assemblyman (2008-2013) and he is currently
the Special Assistant to Minister in The Prime
Minister's Department.
He is a member of the Audit Committee and
the Remuneration Committee, and the
Chairman of the Nomination Committee of the
Company. Mr. Tang is also an Independent
Non-Executive Director of Spring Gallery
Berhad.
TANGNAI SOONIndependentNon-Executive Director
Malaysian
48/Male
19 December 2007
Nationality
Age/Gender
Date Joined
PROFILE OF DIRECTORS
105
SCGM BHD | Annual Report 2017
Save as disclosed above, Dato’ Sri Lee Hock Seng,
Dato’ Sri Lee Hock Chai, Dato’ Sri Lee Hock Guan and
Mr Lee Hock Meng are siblings. The other Directors
do not have any family relationship with any Director
and/or major shareholder of the Company.
None of the Directors have any conflict of interest
with the Company.
None of the Directors has been convicted of any
offences within the past five (5) years.
OTHER INFORMATIONOF DIRECTORS
PROFILE OF DIRECTORS
Sheet Extrusion
Vacuum Forming
Die-cutting
Packing
Storage
Delivery
MANUFACTURING PROCESS FLOW
BUSINESS PROCESS
SCGM BHD | Annual Report 2017
One Stop Solution from resin to raw material and plastic packaging material.
107
Storage Facilities
Output up to 800kg/hour
Fully Automatic Forming-Punching
Fully Automatic Forming-Punching
Oversea & Local TransportationOversea & Local Transportation
Our core business products can be classified into the following categories:
THERMO-VACUUM FORMED PLASTIC PACKAGING
We have more than 5,000 different moulds in current use to form thermo-vacuum formed plastic
packaging products, We have the capabilities to thermo-vacuum form single-layer and multilayer
extrusion sheets into plastic packaging, with thickness ranging from less than 0.11mm to 2mm, the
extrusion sheets we use in our thermo-vacuum forming process are APET, PET-G, GAG, PVC,
HIPS, PP and OPS sheets.
Our packaging is used to pack a variety of food products, including sandwiches, cakes,
chocolates, biscuits, salads and moon cakes. Meanwhile, we are able to produce antistatic and
black conductive trays to hold semi-finished electronic products, such as liquid crystal display
and hard disk drive parts, as well as packaging to store end-products, such as computer software.
Thermo-vacuum formed plastic packaging for food products should not contain any components
that could migrate into the food, including harmful chemicals, contaminants and other relevant
ingredients. They should also adequately protect the quality, freshness and safety of the food
products, and ideally add to the appeal of the product by having attractive designs.
Similarly, thermo-vacuum formed plastic packaging for electronic products should adequately
protect the products, for example from theft and/or damage, and at the same time provide total
product visibility to showcase the products, if it is displayed in retail outlets.
Our thermo-vacuum formed plastic packaging is capable of both providing protection to our
customers’ products as well as adding an aesthetic value to these products, which enhances their
value and presentation.
EXTRUSION SHEETS
We produce extrusion sheets, namely, APET, PET-G, GAG, HIPS and PP sheets. These extrusion
sheets are semi-raw materials used in the production of thermo-vacuum formed plastic
packaging.
We began producing HIPS and PP sheets back in September 2004. Subsequently in March 2007,
we started producing APET, PET-G and GAG sheets. Our HIPS, PP, APET, PET-G and GAG sheets
are either used as semi-raw materials in our production of thermo-vacuum formed plastic
packaging or sold to our customers.
Back in FY 2006, our sales of extrusion sheets to external customers contributed only
approximately 5.0% to our total revenue but has since increased significantly but will vary
according to demand. Currently, the sales of extrusion sheets contributed approximately 14.8% to
total revenue.
BUSINESS PROCESS108
SCGM BHD | Annual Report 2017
An overview of our production process is shown below :
Once orders are received from our Sales Department, the Production Department would check our
internal schedule and plan the production timeline as well as request for the required materials
and/or moulds. Depending on the production process, materials required are plastic resins, colour
masterbatches and additives, or extrusion sheets.
Plastic resins, colour masterbatches and additives are purchased from our suppliers. Meanwhile,
extrusion sheets are either internally produced or sourced from our suppliers. On the other hand,
moulds used in our thermo-vacuum forming process are designed and prepared internally by our
Moulding Department, based on customers’ requirements.
Once we have all the required materials and/or moulds, we would conduct the extrusion process
and/or thermo-vacuum forming process, depending on the customer requirements.
Receive order from
Sales Department
Check schedule and plan
for production
Material and/or mould
requisition
Mould
preparation
Extrusion processThermo-vacuum
forming process
MOULD PREPARATION AND PRODUCTION PROCESS
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SCGM BHD | Annual Report 2017
BUSINESS PROCESS
BUSINESS PROCESS110
SCGM BHD | Annual Report 2017
MOULD PREPARATION
QC
QC
Receive sample
product / drawing
from customer
Design mould/redraw dimension
Produce prototype mould
and forming sample
Sample
confirmed?
No
Yes
Fabrication of mould
Production/store
Our customers normally provide us with either a sample of the product that needs to be
packaged, or a drawing of the packaging they require. If we receive a product sample, we would
proceed with mould design. Moulds determine the shape and dimension of the thermo-vacuum
formed plastic packaging produced. On the other hand, if we receive a rough sketch of the
packaging required and the dimensions are inaccurate, we would redraw the dimensions for the
mould.
A prototype mould is produced based on the mould design. This prototype mould is fixed onto our
forming machine to form a sample packaging, which is sent for QC checks to ensure that the mould
and the sample packaging formed are as per specifications. The sample packaging is also sent to
customers for their approval. The prototype mould is modified, if necessary, until it meets specified
requirements.
The prototype mould is then used as a master mould, to form a set of identical moulds for the
thermo-vacuum forming process. Each thermo-vacuum formed plastic packaging has one (1)
mould design. However, a set of identical moulds with the same design is usually made to maximise
the number of moulds assembled on a base plate. This allows more thermo-vacuum formed plastic
packaging to be produced at one time and reduce the wastage of extrusion sheets.
Once the moulds are formed, we conduct parts work. Parts work involves drilling small air passages
in the moulds, thereby allowing vacuum to remove air from the area between the sheet and the
mould shape as well as hold the sheet against the mould’s surface during the thermo-vacuum
forming process. All the moulds are then assembled on a base plate, and finishing is conducted to
polish and clean the moulds’ surface.
A final QC check is conducted before the moulds are sent to the production line or to the store. The
moulds are visually checked to see if there are any differences in size. If there are differences, the
moulds are modified or new moulds are fabricated. Once the mould passes the QC check, they are
sent either to the production line or to produce thermo-vacuum formed plastic packaging for our
customers or to the store to be kept until such production process is required.
We have the capabilities to produce four (4) different types of moulds, the details of which are as
follows:
(i) Aluminium
Aluminium moulds are mainly used to form packaging with more precise dimensions, such as
packaging for electronic products. Our aluminium moulds are designed using CAD/CAM software
and formed using CNC milling machine.
The CAD software produces the mould design, while the CAM software controls the CNC milling
machine to ensure that moulds are made as per requirements. Meanwhile, the CNC milling machine
conducts turning and machining processes, to change the shape and surface finishing of the
aluminium into the required mould design.
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SCGM BHD | Annual Report 2017
BUSINESS PROCESS
BUSINESS PROCESS112
SCGM BHD | Annual Report 2017
Our aluminium moulds are durable and can normally last for approximately ten (10) years,
depending on the usage. We do not currently produce all of our aluminium moulds so we have
been to purchasing additional new CNC milling machines to allow us to produce more aluminium
moulds in a shorter time frame.
(ii) Epoxy
Epoxy moulds are produced when aluminium powder is mixed with two (2) types of resins to
harden it, and then cast using a plastic tray. The plastic tray is a duplicate from a master mould.
Although epoxy is softer than aluminium, it is more economical. Furthermore, our epoxy moulds
are durable and can also last for approximately ten (10) years, depending on the usage. We
presently produce our own epoxy moulds.
(iii) Plaster stone
Plaster stone is normally used to make prototype/master moulds. It is cast out by mixing plaster
powder with water, and then left to harden. Moulds made of plaster stone are not as durable as
aluminium or epoxy moulds, but they are more economical and can be easily modified should
customers require changes to be made. We presently produce our own plaster stone moulds.
(iv) Wood
Wood moulds are shaped into the design/pattern as required. Similar to plaster stone, wood
moulds are not as durable as aluminium or epoxy moulds, and are used to make
prototype/master moulds only. We presently produce our own wood moulds.
Plastic resinsColour
masterbatches
Feed materials into
plastic sheet extruder
Set T-die based on width
and thickness required
Extrusion process
Inform supervisor
to rectify problem
Not acceptable
Not acceptable
Acceptable
Acceptable
Inform supervisor
to rectify problem
Roll-up sheet
Pack and label
Store or deliver to customers
Additives
QC
QC
EXTRUSION SHEETS PRODUCTION PROCESS FLOW
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SCGM BHD | Annual Report 2017
BUSINESS PROCESS
114
SCGM BHD | Annual Report 2017
Materials are fed through a top-mounted hopper into the barrel of the extruder. A barrel is a
hollow cylindrical container positioned horizontally in an extruder. Materials fed into the barrel are
as follows:
Besides the barrel, the main components within the extruder are the screw, screen pack, T-die and
cooling rolls. The T-die, which provides the final product with its profile, is adjusted according to
product specifications. The extrusion process commences once the T-die is set.
The materials enter through the feed throat (i.e. an opening near the rear of the barrel) and come
in contact with the screw, which is located within the barrel. The rotating screw forces the
materials forward into the barrel, which is heated to the desired melt temperature of the molten
plastic. The plastic resins melt gradually as they are pushed through the barrel. At the front of the
barrel, the molten plastic leaves the screw and travels through a screen pack to remove any
contaminants in the melt. After passing through the screen pack, the molten plastic enters the
T-die and plastic sheeting is formed. The extrusion sheets are then cooled by pulling them
through a set of cooling rolls.
A QC check is conducted on the thickness of the extrusion sheets. The ideal thickness depends
on customers’ orders and we set a 2% tolerance on thickness variations. If the thickness is not
acceptable, the supervisors would be informed to rectify the problem. If it is acceptable, the
sheets would be rolled-up. Another QC check would be conducted to check on the weight of
each roll of extrusion sheets. The ideal weight depends on customers’ orders and we set a 0.1
kilogram tolerance on weight variations for each roll of extrusion sheets. If it is not acceptable, the
supervisors would be informed to rectify the problem. On the other hand, if it is acceptable, each
roll of extrusion sheets would be packed and properly labelled.
The extrusion sheet rolls are stored until they are required for the thermo-vacuum forming
process, or delivered to customers. The extrusion sheet rolls must be stored in a spacious, dry
area with room temperature of ±30ºC, to prevent damage from heat, humidity and contamination.
Our warehouse meets this requirement.
01ResinsRaw thermoplastic material in the form of small beads
02Colour masterbatchesTo add specific colour to the end-product
03
AdditivesAn anti-blocking additive is added to prevent self-adhesionof plastic film or sheet, making it easier to handle
BUSINESS PROCESS
The Group over the past several years has been researching on the different methods in producing
the trays by providing new and innovation products to meet the new discerning lifestyle of todays’
consumer market. Among them are as follows:
IMPROVEMENT IN CYCLE TIMES
Enhancement of the cycle times have greatly reduce our cost and our production team has gone to
great lengths to study the use of automation in improving our efficiencies, reducing downtime and
increasing our output. The diagram below shows our thermoforming since our inception.
2 COLOR EXTRUSION MACHINE
The group has recently acquired a 2 color extrusion machine whereby a single tray will comprise
two different colors shown in the picture below. The advancement in using this technology was
acquired through several months of testing and enhancing the learning curves of our machinist.
RESEARCH &DEVELOPMENT
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SCGM BHD | Annual Report 2017
GOING GREEN
The calls for concerns by NGOS, Consumers and
Governments in going green has also prompted
SCGM Bhd in meeting this new requirements.
Therefore to further boost its presence as
environment friendly company, SCGM Bhd has
been working with international experts namely
Greenhope from Indonesia in developing
addictive to comply with the new green
ECO-LABEL requirements. After several months
of testing, SCGM Bhd is proud to announce its
new range of products which are environment
friendly. See attached pictures of our new range
of products. The SIRIM certification and our
Certification from OXIUM.
MOULD IMPROVEMENT
In view of the complexity of the moulds
for our businesses, Scgm Bhd is proud to
announce that we have successfully
develop air-cooling moulds which will
greatly improve our efficiency during our
production process.
116
SCGM BHD | Annual Report 2017
RESEARCH & DEVELOPMENT
BENXON Environmentally Friendly Products
SCGM BHD | Annual Report 2017
STATEMENT ONCORPORATE GOVERNANCE
118
SCGM BHD | Annual Report 2017
The Board of SCGM Bhd (“the Group”) will endeavour to comply with all the key Principles and
Best Practices of the Malaysian Code on Corporate Governance 2012 (“the Code”) in its effort to
observe high standards of transparency, accountability and integrity. SCGM is committed to
practice high standard of corporate governance to ensure effective self-regulatory corporate
practices exist to protect the stakeholders’ interests.
The following paragraphs describe how the Group has applied the Principles of the Code and how
the Board has complied with the Recommendations set out in the Code for the financial year
ended 30 April 2017.
A. THE BOARD OF DIRECTORS
1. The Board and its Responsibilities
The Board is responsible for the overall corporate governance, strategic direction, formulation of
policies and overseeing the businesses of the Group. The Board leads and supervises the
management of the business and affairs of the Group in enhancing long term shareholders’ value
and sustaining the stakeholders’ interests.
a) Board Composition
The Board consists of seven (7) members comprising the Executive Chairman, Managing Director,
Deputy Managing Director, one (1) Executive Director and three (3) Independent Non-Executive
Directors. The present Board composition complies with the Listing Requirements of the Bursa
Malaysia.
The profiles of the Directors are set out on pages 98 to 105 in this Annual Report.
The Board comprises of business entrepreneurs and professionals drawn from various
backgrounds, with a diverse range of know-how, experiences and knowledge; provides the
relevant skills, expertise and experience for making sound investment decisions and manage the
Group's business operations. With the diversified and vast experiences of the board members, the
Board is competent to discharge its duties and responsibilities and safeguard shareholders’ value.
The Group does not have a policy on gender diversity, ethnicity and age but the Board
composition is based on merits, experience and their commitment and contribution to the Group.
The Board will continue to provide equal opportunity to competent candidates.
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SCGM BHD | Annual Report 2017
STATEMENT ON CORPORATE GOVERNANCE
b) Goals and Responsibilities
The roles of the Chairman and Managing Director are separate with clear division of responsibilities
between them to ensure balance of power and authority.
The Board recognises the key role it plays in charting the strategic direction of the Company and
has assumed the following principal responsibilities in discharging its fiduciary and leadership
functions:
• reviewing and adopting a strategic plan for the Company, addressing the sustainability of the
Group’s business;
• overseeing the conduct of the Group’s business and to lead its direction.
• identify principal business risks faced by the Group and ensuring the implementation of
appropriate internal controls and mitigating measures to address such risks;
• ensuring that all candidates appointed to senior management positions are of sufficient calibre,
including the orderly succession of senior management personnel;
• overseeing the development and implementation of a shareholder communications policy,
including an investor relations programme for the Group; and
• reviewing the adequacy and integrity of the Group’s internal control and management
information systems.
To assist in the discharge of its stewardship role, the Board has established Board Committees,
namely the Audit Committee, Nomination Committee and Remuneration Committee, to examine
specific issues within their respective terms of reference as approved by the Board and report to
the Board with their recommendations. The ultimate responsibility for decision making, however,
lies with the Board.
The Chairman is responsible for the Group’s future business and strategy plan, setting goal to
achieve the mission and vision. He provides leadership and governance of the Board, ensuring its
effectiveness and assumes the formal role as the leader in chairing all Board meetings and
shareholders’ meetings. He leads the Board in overseeing Management and principally ensures that
the Board fulfills its obligations and as required under the relevant legislations.
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SCGM BHD | Annual Report 2017
Some of the specific responsibilities of the Chairman include to:-
i) Manage Board meetings and boardroom dynamics by promoting a culture of openness and
debate where Directors are encouraged to provide their views;
ii) Work closely with the Managing Director to ensure provision of accurate, timely and clear
information to facilitate the Board to perform effectively, able to make informed decisions
and to monitor the effective implementation of the Board’s decisions;
iii) To provide his view and decision objectively; and
iv) Ensure meetings of the shareholders are conducted in an open and proper manner with
appropriate opportunity for them to ask questions.
v) As Group’s official spokesperson.
The Managing Director is responsible for the management of the Group’s business and marketing
strategy to meet the Group’s budget and target sales, organisational effectiveness and
implementation of Board strategies, policies and decisions.
The Board has also appointed the Independent Non-Executive Director, Wong Tun Boon, as the
Senior Independent Director to whom concerns may be conveyed.
The duties of Executive Directors include implementation of decisions and policies approved by
Board, overseeing and running the Group's day to day business, and also coordinating business
and strategic decisions. Each Executive Director is responsible for the respective business unit
that there is no overlapping of each role and duty.
The Non-Executive Directors are independent from management and are free from any business
or other relationships that could materially interfere with the exercise of independent judgment.
They scrutinize the decision taken by the Board, and provide constructive opinions and objectively
challenge the management’s proposal and decision. While the Board is responsible for creating
the framework and policies within which the Group should be operating, the management is
accountable for the execution of the expressed policies and attainment of the Group’s expressed
corporate objectives. This demarcation reinforces the supervisory role of the Board.
The Board also assumes various functions and responsibilities that are required of them by
regulatory authorities, as specified in guidelines and directives issued from time to time.
STATEMENT ON CORPORATE GOVERNANCE
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SCGM BHD | Annual Report 2017
c) Board Charter
The Board has formalized and uploaded its Board Charter in the Group’s corporate website at
https//www.scgmbhd.com. The Board Charter was last reviewed on 28 June 2017. The Board
Charter sets outs the roles and responsibilities of the Board.
d) Independence
The Group measures the independence of its Directors based on the criteria prescribed under the
Main Market Listing Requirement (“Main LR”) in which a Director should be independent and free
from any business or other relationship that could interfere with the exercise of independent
judgement or the ability to act in the best interests of the Company. Objective assessment of the
independence of Directors based on the provisions of the Main LR is carried out before the
appointment of Directors and re-affirmed annually.
One of the recommendations of the Code states that the tenure of an independent director should
not exceed a cumulative term of over 9 years. As of to date, the three independent directors have
served the Board for a cumulative term of ten years. The Company will seek for shareholders’
approval on the retention of the three independent directors at the forthcoming Annual General
Meeting.
The Board considered the current size and composition of the Board a balanced mix of
professionals and entrepreneurs who have a diverse range of know-how and experiences in
relevant fields. The Board is of the view that with the current Board size, there is a balance of power
and authority on the Board between the Non-Independent and Independent Directors. The Board
is assisted by the Nomination Committee to review the Board size and composition annually.
e) Code of Ethics and Whistleblowing Policy
The Code of Ethics and Whistleblowing policy are published on the Group’s corporate website at
https://www.scgmbhd.com.
f) Schedule of Matters Reserved for Board
Append below is a list of matters reserved for Board Committee, where there is doubt regarding a
matter/an issue, it shall be referred to the Chairman:
i. Business plan and changes thereon;
ii. Introduction of new business or termination of existing business;
iii. Budget and significant capital expenditure;
iv. Quarterly, annual unaudited and audited financial statements;
v. Proposed dividend/Dividend policy;
STATEMENT ON CORPORATE GOVERNANCE
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SCGM BHD | Annual Report 2017
vi. Approval of significant changes in accounting policies and practices;
vii. Remuneration of auditors;
viii. Recommendations for appointment, reappointment and dismissal of auditors;
ix. External and internal audit plans;
x. Report and findings of auditors;
xi. Property, plant and equipment written off and/or disposals;
xii. Bank borrowings;
xiii. Changes in the mode of operations of bank accounts;
xiv. Debt, loan agreements and working capital facilities for the Group;
xv. Financial instruments and derivatives;
xvi. Increase in authorised, issued and paid up share capital, including share buy-back,
capitalisation of reserves;
xvii. Related party transactions;
xviii. Directors’ remunerations and fees;
xix. Changes in organisational and management structure;
xx. Misconduct and disciplinary matters;
xxi. Changes in key positions;
xxii. Appointment of power of attorney;
xxiii. Risk management framework;
xxiv. Internal control systems;
xxv. Board committees’ terms of reference and changes thereto;
xxvi. Convening Annual General Meeting/Extraordinary General Meeting;
xxvii. Key statements of Annual Report;
xxviii. Changes to the Memorandum and Articles of Associations;
xxix. Appointment and termination of Company Secretary and/or Share Registrars;
xxx. Change of registered office;
xxxi. Change of Company’s name.
2. Board Meetings
Board meetings are scheduled in advance at the beginning of the new financial year to enable
Directors to plan ahead and fix the scheduled meetings. The Board meets at least four times a
year. Special Board meetings to deliberate on corporate proposals or urgent issues which require
the Board’s consideration and decision will be held as and when necessary. Financial and
operation plan will be reviewed and discussed at each regular scheduled meeting. Other items
reviewed would include business performance of the Group, against plan previously approved by
the Board, review and approve quarterly and annual financial statements, corporate exercises and
other proposals that require the approval of the Board. Senior management and advisers may be
invited to attend Board meetings, where necessary, to provide additional information and insights
on the relevant agenda items tabled at Board meetings.
STATEMENT ON CORPORATE GOVERNANCE
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SCGM BHD | Annual Report 2017
The Board is satisfied with the level of time commitment given by the Directors towards fulfilling
their roles and responsibilities as Directors. In any given circumstances, in accordance with the
provision of the Main LR, members of the SCGM Board are expected to serve in no more than five
public listed companies.
The Board met four (4) times during the financial year ended 30 April 2017. Details of each
director’s attendance for the financial year ended 30 April 2017 are as follows:-.
3. Supply of Information
The Board meeting agenda and meeting papers are distributed 5 days prior to the meetings of the
Board to ensure that Directors have sufficient time to deliberate the matters and effective
discussion at the meetings. The Board members are supplied with full and timely information to
enable them to discharge their duties.
Presentations to the Board are prepared and delivered in a manner that ensures clear and adequate
presentation of the subject matter. For accessibility and more effective administration of the board
papers, it is made accessible electronically through secured means. All issues raised, discussions,
deliberations, decisions and conclusions including dissenting views made at Board meetings with
clear actions to be taken by responsible parties are recorded in the minutes.
All Directors have unrestricted and complete access to the information and are entitled to obtain
full disclosure from the management. Directors may also interact directly with, or request further
explanation, information or update on any aspects of the Group’s operations from the
management.
In addition, the Board also has access to the advice and services of the Company Secretary who is
responsible for ensuring that Board Meeting procedures are followed and that applicable rules and
regulations are complied with. The proceedings and resolutions reached at each Board meeting are
recorded in the Minutes Book kept at the registered office by Company Secretary. Besides Board
meetings, the Board also exercises control on matters that requires its approval through the
circulation of Directors’ resolutions.
Name
Dato’ Sri Lee Hock Seng
Dato’ Sri Lee Hock Chai
Dato’ Sri Lee Hock Guan
Lee Hock Meng
Amrik Singh Harcharan Singh
Tang Nai Soon
Wong Tun Boon
Attendance
4/4
4/4
3/4
4/4
4/4
3/4
4/4
STATEMENT ON CORPORATE GOVERNANCE
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SCGM BHD | Annual Report 2017
As the Group’s quarterly results is one of the regular annual schedule of matters which is tabled to
the Board for approval at the quarterly Board meetings, notices on the closed period for trading
in SCGM’s securities are also circulated to remind Directors, key management personnel and
principal officers who are privy to any sensitive information and knowledge in advance of
whenever the closed period is applicable based on the targeted date of announcement of the
Group’s quarterly results. This is to comply with the Main LR and the Capital Markets & Services
Act 2007 requirements where key management personnel and principal officers of the Group are
prohibited from trading in securities or any kind of property based on price sensitive information
which has not been publicly announced within 30 calendar days before the targeted date of
announcement of the quarterly results up to the date of announcement. During the financial year
ended 30 April 2017, none of the Directors and principal officers dealt in SCGM’s securities during
the closed period.
The Board will seek for independent professional advice, if necessary, at the Company's expense
from time to time to enable the Board to discharge its duties in relation to matters being
deliberated.
4. Nomination Committee
The present members of the Nomination Committee are as follows:
a. Mr. Tang Nai Soon (Chairman)
b. Mr. Amrik Singh Harcharan Singh
c. Mr. Wong Tun Boon
The Nomination Committee comprise exclusively of Independent Non-Executive Directors. The
terms of reference of Nomination Committee are as follows:
i) Nomination and recommendation for appointment of the Board members;
ii) Consider and recommend Board candidates for directorship;
iii) To develop, maintain and review the criteria to be used in the recruitment process and
annual assessment of directors;
iv) Recommend to the board, candidates for re-election of directors by shareholders under the
annual re-election provisions or retirement;
v) Periodically report to the board on succession planning for the board chairman, directors and
key management personnel;
vi) Annually review the time required of non-executive and independent directors; and
vii) Annually review the required mix of skills, experience, diversity and other qualities, including
core competencies and effectiveness of the board, as a whole, the board committees and the
contribution of each individual director.
STATEMENT ON CORPORATE GOVERNANCE
125
SCGM BHD | Annual Report 2017
The process for Board appointment is as follows:
i) Identify the vacancy;
ii) Identify the candidates;
iii) Evaluate the suitability of candidates;
iv) Meet shortlisted candidates;
v) Find deliberation by the Nomination Committee; and
vi) Recommend to the Board.
The Nomination Committee will hold a meeting at least once a year, additional meetings can be
scheduled if necessary or upon request by any of its members. The minutes of the meeting of the
Nomination Committee are circulated to all the members and it is properly kept at the registered
office by Company Secretary.
Activities of the Nomination Committee for the financial year
The members of the Committee reviewed the composition, mix of skills and independence of the
Board. There is a process in place on the yearly review on the balance Board composition and
Directors’ evaluation. The Board composition comprises of professional such as laws, accountant
and business entrepreneur.
The Nomination Committee assess the individual Directors through the Director Evaluation Form
under the criteria of integrity and ethics, governance, strategic perspective, adding value, judgment
and decision-making, teamwork, communication and commitment. The assessment of the Board is
based on specific criteria, covering areas such as the Board structure, Board operations, roles and
responsibilities of the Board, the Board Committee and the Chairman’s role and responsibilities.
The respective Director will abstain from evaluating their own Board performance. The Nomination
Committee will rate the Board performance evaluation based on the consensus amongst the
Nomination Committee. The Nomination Committee Chairman will make the appropriate
recommendation to the Board. The final decision is with the Board.
5. Directors' Training
The Board members shall appraise and keep abreast with the developments in the regulations and
statutes relevant to the industry and to further enhance their skills and knowledge by attending the
relevant seminars, training programmes, conferences, etc, from time to time.
STATEMENT ON CORPORATE GOVERNANCE
126
SCGM BHD | Annual Report 2017
Description of the type of training attended by the Director for financial year ended 30 April 2017
is as follows:-
Dato’ Sri Lee Hock Seng
Date
Board Chairman Series Part 2: Leadership Excellence
From The Chair” by The Iclif Leadership and Governance
Centre
ISO 9001:2015 Awareness Training & Assessment by
EmreST Training & Consultancy
FSSC22000 Awareness Training & Assessment by
EmreST Training & Consultancy
Drafting The Statement on Corporate Governance, Audit
Committee Report & On Risk Management and Internal
Audit, Management Discussion & Analysis Statement:
What & How To Disclose” by Malaysian Institute of
Corporate Governance
Updates on Companies Act 2016 and Its Implications to
Directors by Malaysian Directors Academy
Seminar/Training Programme
18 August 2016
23 November 2016
24 November 2016
14 March 2017
18 April 2017
Dato’ Sri Lee Hock Chai Board Chairman Series Part 2: Leadership Excellence
From The Chair” by The Iclif Leadership and Governance
Centre
Tax Seminar on Malaysia Budget 2017 by SJ Grant
Thornton
ISO 9001:2015 Awareness Training & Assessment by
EmreST Training & Consultancy
FSSC22000 Awareness Training & Assessment by
EmreST Training & Consultancy
Sustainability Reporting – How To Go About The
Intricacies of Reporting? by Malaysian Institute of
Corporate Governance
Drafting The Statement on Corporate Governance, Audit
Committee Report & On Risk Management and Internal
Audit, Management Discussion & Analysis Statement:
What & How To Disclose” by Malaysian Institute of
Corporate Governance
Updates on Companies Act 2016 and Its Implications to
Directors by Malaysian Directors Academy
18 August 2016
18 November 2016
23 November 2016
24 November 2016
7 December 2016
14 March 2017
18 April 2017
Dato’ Sri Lee Hock Guan ISO 9001:2015 Awareness Training & Assessment by
EmreST Training & Consultancy
FSSC22000 Awareness Training & Assessment by
EmreST Training & Consultancy
Drafting The Statement on Corporate Governance, Audit
Committee Report & On Risk Management and Internal
Audit, Management Discussion & Analysis Statement:
What & How To Disclose” by Malaysian Institute of
Corporate Governance
Updates on Companies Act 2016 and Its Implications to
Directors by Malaysian Directors Academy
23 November 2016
24 November 2016
14 March 2017
18 April 2017
Name of Director
STATEMENT ON CORPORATE GOVERNANCE
127
SCGM BHD | Annual Report 2017
The Board of Directors will continue to evaluate and determine the training needs that will assist
the Directors in discharging their duties.
6. Qualified and competent Company Secretary
The Directors have unrestricted access to the advice and services of the Company Secretary to
enable them to discharge their duties effectively. The Board is regularly updated and advised by the
Company Secretary who is qualified, experienced and competent on statutory and regulatory
requirements, and the resultant implications of any changes therein to the Company and Directors
in relation to their duties and responsibilities. The Company Secretary advises the Board on matters
relating to corporate governance, compliance with the Main LR, Capital Markets and Services Act
2007 and Companies Act 2016, preparation and conduct of the Board, Committee and General
Meetings.
Lee Hock Meng
Amrik Singh Harcharan Singh
Date
ISO 9001:2015 Awareness Training & Assessment by
EmreST Training & Consultancy
FSSC22000 Awareness Training & Assessment by
EmreST Training & Consultancy
Updates on Companies Act 2016 and Its Implications to
Directors by Malaysian Directors Academy
Seminar/Training Programme
Evaluation of Manual & Non Manual Workers by
Kesatuan Pekerja-perkerja Perkilangan Makanan
Perusahaan Malaysia.
23 November 2016
24 November 2016
18 April 2017
20 June 2016
Wong Tun Boon National GST Conference 2016 by Chartered Tax Institute
of Malaysia
National Tax Conference 2016 by Chartered Tax Institute
of Malaysia
Seminar Percukaian Kebangsaan 2016 by Lembaga Hasil
Dalam Negeri Malaysia
GST Updates and Customs Audit Findings by Malaysian
Institute of Accountants
National GST Conference 2017 by Chartered Tax Institute
of Malaysia
Companies Regulations 2017 and Companies Act 2016 –
Related Issues by Institute of Approved Company
Secretaries
31 May & 1 June 2016
9 & 10 August 2016
15 November 2016
5 January 2017
28 February &
1 March 2017
26 March 2017
Tang Nai Soon Seminar Konsep Johor Berkemampuan by Pejabat
Menteri Besar Johor
Taklimat Muafakat Johor: Pelan Pertumbuhan Strategik
Johor (Johor Strategic Growth Plan) by House of Trust
Johor (Bait Al-Amanah, Johor)
22 November 2016
8 February 2017
Name of Director
STATEMENT ON CORPORATE GOVERNANCE
128
SCGM BHD | Annual Report 2017
B. DIRECTORS' REMUNERATION
1. The Level and Make-up
The remuneration policy of the Group for the Executive Chairman and the Executive Directors are
structured to link rewards to corporate and individual performance in order to retain staff with the
relevant skills and experience to meet the challenges of the Group. For Non-Executive Directors,
the level of remuneration shall reflect the experience and level of responsibilities undertaken by
the particular Non-Executive Director concerned.
2. Remuneration Committee
The Remuneration Committee is authorised by Board to establish formal and transparent
remuneration policies and procedures to attract and retain directors.
The present members of the Remuneration Committee are as follows:
a. Mr. Wong Tun Boon (Chairman)
b. Dato’ Sri Lee Hock Seng
c. Mr. Tang Nai Soon
The terms of reference of Remuneration Committee are as follows:
i) Set, review, recommend and advise the policy framework on all elements of the
remuneration such as reward structure, fringe benefits and other terms of employment of
Executive Chairman, Managing Director and Executive Directors having regard to the overall
Group policy guidelines/framework.
ii) Advise the Board on the performance of the Executive Chairman, Managing Director and
Executive Directors and an assessment of his/her entitlement to performance related pay.
iii) Review and propose the remuneration package of the Executive Directors and senior
management staff.
The remuneration policy of the Group for all Executive Directors and senior management shall be
recommended by the Remuneration Committee for the Board’s approval with the Directors
concerned abstaining from deliberations and voting on decisions in respect of their individual
remuneration. The fees payable to the Independent Non-Executive Directors shall be
recommended by the Board subject to the approval of shareholders at Annual General Meeting.
The Committee meets at least once a year, additional meetings can be scheduled if necessary. No
Director shall take part in decisions pertaining to his own remuneration.
STATEMENT ON CORPORATE GOVERNANCE
129
SCGM BHD | Annual Report 2017
3. Disclosure
The details of the Directors' remuneration for the financial year ended 30 April 2017 in respective
bands of RM50,000 are as follows: -
# None of the Directors’ remuneration falls within the bands of RM50,001 to RM700,000 and RM750,001 to RM800,000
The following table outlines the remuneration of the Directors and is categorised below:
STATEMENT ON CORPORATE GOVERNANCE
Range of Remuneration Executive Non-Executive
RM50,000 & below
RM700,001 to RM750,000
RM800,001 to RM850,000
RM850,001 to RM900,000
-
1
2
1
3
-
-
-
NO. NAME OF DIRECTORS
SALARY (RM) BONUS (RM)FEE (RM)
SCGM SUBSIDIARY SCGM SUBSIDIARY SCGM SUBSIDIARY SCGM SUBSIDIARY
ALLOWANCE (RM) TOTAL AMOUNT
(RM)
EXECUTIVE DIRECTORS
Dato’ Sri Lee Hock Seng
Dato’ Sri Lee Hock Chai
Dato’ Sri Lee Hock Guan
Lee Hock Meng
INDEPENDENTNON-EXECUTIVE DIRECTORS
Amrik Singh Harcharan Singh
22,000.00
22,000.00
22,000.00
1,000.00
800.00
1,000.00
23,000.00
22,800.00
23,000.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
2
3
4
5
6
7
-
-
-
-
-
-
-
-
-
-
-
-
762,000.00
723,900.00
723,900.00
635,000.00
112,000.00
112,000.00
112,000.00
112,000.00
874,000.00
835,900.00
835,900.00
747,360.00
-
-
-
-
-
-
-
-
-
-
-
360
Tang Nai Soon
Wong Tun Boon
130
SCGM BHD | Annual Report 2017
STATEMENT ON CORPORATE GOVERNANCE
C. RELATIONSHIP WITH SHAREHOLDERS
The Board maintains an effective communications policy that enables both the Board and the
management to communicate effectively with its shareholders and the public. The policy
effectively interprets the operations of the Group to the shareholders and accommodates
feedback from shareholders, which are factored into the Group's business decision.
The Chairman is officially appointed as the authorised person to speak and release the public
information for and on behalf of the Group.
The Board communicates information on the operations, activities and performance of the Group
to the shareholders, stakeholders and the public through the following:
i) The Annual Report, which contains the financial and operational review of the Company
and the Group's business, corporate information, financial statements and information on
Audit Committee and Board of Directors;
ii) Announcements made to the Bursa Malaysia, which includes announcements on quarterly
financial results, circular and various announcements made via Bursa Link in full compliance
with regulatory authorities’ disclosure requirements;
iii) Annual General Meeting, the primary engagement platform between the Board and
shareholders of the Group;
iv) Quarterly results and Investors’ Briefing, SCGM holds the investors’ briefing which is
chaired by the Chairman immediately after the release of quarterly results to Bursa
Securities to facilitate timely publication and/or dissemination of analysts’ reports to the
investing community;
v) The Corporate’s website - https://www.scgmbhd.com/; and
vi) Media release.
The General Meeting serves as an important means for shareholders' communication. Notice of
the Annual General Meeting and Annual Reports are sent to shareholders twenty one (21) days
prior to the meeting. At each Annual General Meeting, the Board presents the performance and
progress of the Group and provides shareholders with the opportunity to raise questions and seek
clarification on the business activities pertaining to the Group, agenda of the meetings and its
proposed resolutions. The Chairman and the Board will respond to the questions raised by the
shareholders during the Annual General Meeting. The Board ensures each item of special business
included in the notice will be accompanied by an explanatory statement on the effects of the
proposed resolution.
In line with good corporate governance and amendments to the Main LR, all resolutions tabled at
general meetings held on or after 1 July 2016 will be voted by way of poll.
131
SCGM BHD | Annual Report 2017
STATEMENT ON CORPORATE GOVERNANCE
Matters reserved for shareholders’ approval at Annual General Meeting include the following:-
i) Distribution of final dividends; if any;
ii) Re-election of Directors;
iii) Payment of Directors’ fees; and
iv) Appointment/re-appointment of external auditors.
D. ACCOUNTABILITY AND AUDIT
The Board aims to present a balanced and understandable assessment of the Company and the
Group's position and prospect through the annual financial statements and quarterly
announcements of results to the Bursa Malaysia. The Directors are responsible in ensuring that the
annual financial statements are prepared in accordance with the provisions of the Companies Act
2016 and applicable approved accounting standards in Malaysia.
1. Audit Committee
The Board is assisted by the Audit Committee in supporting oversight functions of the Board on the
Group’s financial reporting, risk management and internal control systems and ensuring high
corporate governance practices.
The members of the Audit Committee are as follows:
a. Mr. Wong Tun Boon (Chairman)
b. Mr. Tang Nai Soon
c. Mr. Amrik Singh Harcharan Singh
The terms of reference is published on the Group’s corporate website, https://www.scgmbhd.com
Details of the composition and the summary of work of the Audit Committee during the financial
year are set out in the Audit Committee Report included in this Annual Report.
2. Financial Reporting
The Directors are committed to ensure the Group has adopted appropriate accounting policies,
consistently applied and supported by reasonable and prudent judgments and estimates and all
applicable approved accounting standards for the preparation of the audited financial statements
and quarterly announcement of results. In this respect, the Board through the Audit Committee
oversees the process and the integrity and quality of financial reporting, annually and quarterly. The
Audit Committee, in this respect, assists the Board by reviewing the financial statements and
quarterly announcements of results to ensure completeness, accuracy and adequacy before
recommending the same for the Board’s approval.
The Directors, in preparation of the financial statements, have requested the Auditors to take
whatever steps and to undertake whatever inspections they consider to be appropriate to enable
them to render their audit report. The Directors are responsible to ensure the annual financial
statements are prepared in accordance with the provision of the Companies Act 2016 and
applicable approved accounting standards in Malaysia, so as to give a true and fair view of the state
of affairs of the Group and the Company.
132
SCGM BHD | Annual Report 2017
STATEMENT ON CORPORATE GOVERNANCE
A statement by the Directors of their responsibilities in preparing the financial statements is set out separately on page 135 of this Annual Report. The details of the Company’s and Group’s financial statements for the financial year ended 30 April 2017 can be found on pages 23 to 93 of the Annual Report.
3. Relationship with Auditors
The Audit Committee manages and maintains a transparent and professional relationship with its external auditors and internal auditors on behalf of the Board. The Audit Committee considers the re-appointment, remuneration and terms of engagement of the external auditors and internal auditors annually.
The Audit Committee meets with the external and internal auditors to discuss their audit plans, audit findings and other special matters that require the Board’s attention and the financial statements. The external auditors and internal auditors attend Audit Committee Meetings of the Company whenever requested to do so.
Assessment of Suitability and Independence of External Auditors
The Audit Committee reviews and monitors the suitability and independence of the external auditors. The external auditors have confirmed that they were, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.
The external auditors can be engaged to perform non-audit services if there are clear efficiencies and value-added benefits to the Group and a detailed review of non-audit fees paid to the external auditors is undertaken by the Audit Committee. These procedures are in place to ensure that neither their independence nor their objectivity is put at risk, and steps are taken to ensure that this does not impede the external auditors audit works. The Audit Committee remains confident that the objectivity and independence of the external auditors are not in any way impaired by reason of the non-audit services provided to the Group.
The Audit Committee would meet the external auditors to review the scope of audit process, the audit findings and the audited financial statements, without any presence of the Executive Director and the Management. The external auditors are invited to attend the AGM of the Group and are available to the shareholders’ questions on the conduct of the statutory audit and the preparation and contents of their audit report.
Details of statutory audit, audit-related and non-audit fees paid/payable in the financial year ended 30 April 2017 to the external auditors are set out below:-
Fees paid/payable to SJ Grant Thornton
Audit Fees
Audit Related Fees1
Tax and tax related services2
Corporate Exercise3
61.5
7.0
12.0
15.0
RM’000
1 Fees incurred in connection with performance of review of consolidation accounts and review of Statement of Risk Management and Internal Control.2 Fees incurred for assisting the Group in connection with tax compliance and advisory services.3 Fees incurred in connection with Proposed Bonus Issue of Share and Proposed Bonus Issue of Warrants.
133
SCGM BHD | Annual Report 2017
STATEMENT ON CORPORATE GOVERNANCE
4. Internal Control
The Board recognises the importance of sound internal control for good corporate governance. As
such, an internal audit function is continuously reviewed and strengthened. The internal audit
function was outsourced to an independent professional firm to assist the Audit Committee in
reviewing the state of internal control of the Group and to highlight areas for management and
operational improvement.
The state of internal control of the Group is explained in greater detail on pages 136 to 143 of this
Annual Report.
E. ADDITIONAL INFORMATION
1. Material Contracts involving Directors’ and Major Shareholders’ Interest
There were no material contracts entered into by the Company and its subsidiary involving the
Directors’ and major shareholders’ interest during the financial year.
2. Status of Corporate Proposals
i. Private Placement I
Status of revised utilisation of proceeds raised from Private Placement I as at 30 April 2017:
As disclosed in the Proposal in relation to the Private Placement dated 12 November 2015, any
differences between the illustrated proceeds stated in the Proposal and the actual proceeds raised
from the Proposed Private Placement (which is dependent on the final issue price of the Placement
Shares and the final number of Placement Shares issued) as well as any differences in the actual
expenses in relation to the Proposed Private Placement shall be adjusted to the allocation for
working capital requirements of the Group.
On 10 August 2016, Kenanga Investment Bank Berhad (“Kenanga IB”) announced that the
Company proposed to revise the utilisation of unutilised balance of proceeds raised from the
Private Placement, which was completed on 11 December 2015.
Purposes of proceeds
Proposed Utilisation
AmountRM’000
Actual UtilisedAmountRM’000
Expected timeframe for utilisation from the
date of completion11 December 2015
Balance
RM’000 %
Capital expenditure
Working capital
Estimated expenses
relating to the
Private Placement
22,000
8,920
31,320
20,000
8,920
29,320
Within 12 months
Within 1 month
2,000
-
2,000
9.09%
0%
6.39%
Within 24 months
400400 - 0%
134
SCGM BHD | Annual Report 2017
STATEMENT ON CORPORATE GOVERNANCE
ii. Private Placement II
Status of utilisation of proceeds raised from Private Placement II as at 30 April 2017:
iii. Proposed Bonus Issue of Shares and Proposed Bonus Issue of Warrants
On 28 April 2017, M&A Securities Sdn Bhd (“M&A Securities”) announced that the Company
proposed to undertake the following:-
1. Proposed bonus issue of 48,400,000 new SCGM Shares on the basis of 1 Bonus Share for every
3 existing SCGM Shares held on an entitlement date to be determined later (”Entitlement
Date”); and
2. Proposed bonus issue of 19,360,000 Warrants on the basis of 2 free Warrants for every 15
existing SCGM Shares held on the same Entitlement Date as the Proposed Bonus Issue of
Shares. The new SCGM Shares to be issued arising from the exercise of the 19,360,000
Warrants represent 10% of the enlarged number of issued shares of the Company after the
Proposed Bonus Issue of Shares.
On 23 May 2017, M&A Securities announced that the additional listing application and the draft
circular in relation to the Proposals have been submitted to Bursa Securities.
On 13 June 2017, M&A Securities announced that Bursa Securities had, vide its letter dated 13 June
2017, resolved to approve the following:-
(i) Listing of up to 48,400,000 Bonus Shares to be issued pursuant to the Proposed Bonus Issue
of Shares;
(ii) Admission to the Official List and listing of 19,360,000 Warrants to be issued pursuant to the
Proposed Bonus Issue of Warrants; and
(iii) Listing of up to 19,360,000 new SCGM Shares to be issued arising from the exercise of
Warrants.
The Bonus Shares and Warrants must be listed and quoted simultaneously.
Purposes of proceeds
Proposed Utilisation
AmountRM’000
Actual UtilisedAmountRM’000
Expected timeframefor utilisation from the
date of completion24 February 2017
Balance
RM’000 %
Construction ofnew plant
Estimated expensesrelating to thePrivate Placement
41,792
448
42,240
-
448
448
41,792
41,792
100%
98.94%
Immediate - 0%
Within 24 months
135
SCGM BHD | Annual Report 2017
STATEMENT ON CORPORATE GOVERNANCE
Statement of Compliance with Malaysian Code on Corporate Governance 2012 (“the Code”)
The Company is committed to achieving high standards of corporate governance throughout the
Group and to the highest level of integrity and ethical standards in all its business dealings. The
Board considers that it has complied with all of the main principles and recommendations of the
Code that are applicable to the Company throughout the financial year.
This statement has been made in accordance with the resolution and authority of the Board dated
28 June 2017.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
In accordance with the requirements in Paragraph 15.26 (a) of the Bursa Malaysia Securities Berhad
Main Market Listing Requirements, the Board of Directors are required to issue a statement
explaining their responsibility for preparing the annual audited financial statements.
The Directors of the Company are responsible for the preparation of financial statements so as to
give a true and fair view in accordance with Malaysian Financial Reporting Standards, International
Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.
In ensuring the preparation of these financial statements, the Directors have:
• Selected and applied the appropriate and relevant accounting policies on a consistent basis;
• Made judgments and accounting estimates that are reasonable and prudent in the
circumstances; and
• Prepared the annual audited financial statements on a going concern basis.
The Directors are accountable to keep all the accounting and other statutory records for a requisite
statutory period of time. The Directors have also a general responsibility to safeguard the assets of
the Group and establishment of system of internal control for the prevention and detection of fraud
and other irregularities which is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTROL
136
SCGM BHD | Annual Report 2017
The Board of Directors is pleased to provide the following Statement on Risk Management and
Internal Control, which is made pursuant to paragraph 15.26(b) and Practice Note 9 of the Bursa
Malaysia Securities Berhad Main Market Listing Requirements, Principle 6 of the Code and guided
by the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed
Issuers.
RESPONSIBILITY
The Board of Directors recognises the importance of a sound system of internal control and
effective risk management practices to good corporate governance. During the financial year, the
Board continues to enhance the system of internal control and risk management to safeguard
shareholders’ investments and the assets of the Group.
The Board affirms its overall responsibility for maintaining sound systems of internal control within
the Group covering financial control, operational control, compliance control and risk
management, and reviewing the adequacy and effectiveness of such systems within the Group
regularly. The Board, in the discharge of its stewardship responsibilities, is committed to identify
key risks in which companies within the Group are exposed and will introduce appropriate systems
progressively to manage such risks.
Notwithstanding that, there are, however, limitations inherent in any system of internal control, and
such system is designed to manage rather than eliminate the risk that may impede the
achievement of business objectives. The system of risk management and internal control can only
provide reasonable but not absolute assurance against material misstatement of management or
financial information or financial losses or frauds.
The internal audit adopts a risk-based approach in developing its audit plan which addresses the
core auditable areas of the Group. Scheduled internal audits shall be carried out by the internal
auditors based on the audit plan presented to and approved by the Audit Committee to provide
independent and objective reports on the state of internal control of the operating units. The audit
focuses on areas with risk as well as areas identified with inadequate controls to ensure the
effectiveness of the controls in mitigating those risks. The internal auditors will follow up with the
management in the implementation of action plans recommended to improve areas where control
deficiencies identified during the internal audits.
The Board affirms that it is ultimately responsible for the adequacy and integrity of the Group’s
systems of risk management and internal control, which includes the establishment of an
appropriate control environment and reporting framework.
137
SCGM BHD | Annual Report 2017
STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
INTERNAL CONTROL STRUCTURE
a) Control Environment
The control environment sets the tones for the Group by providing fundamental discipline and
structure. Key elements of the Group include:
• Integrity and ethical values
The Board and Senior Management set the tone at the top corporate behaviour and corporate
governance. All employees of the Group shall adhere to the policies and guidelines which set
out the principles to guide employees in carrying out their duties and responsibilities when
dealing with external parties.
• Board Committees (ie. Audit Committee, Remuneration Committee and Nominating Committee)
Clear roles of the Board are stated under the Statement of Corporate Governance section of
this Annual Report.
The “hands on” management style by the Executive Directors contributed to timely
identification and rectification of risks and issues arising from business operations and other
related issues. Meetings of Board of Directors and respective Board Committees are scheduled
on timely basis to review the performance of the Group, from financial and operational
perspective.
• Organisation structure
An organisational structure with defined line of responsibilities, proper segregation of duties
and delegation of authority limits are in place.
A process of hierarchical reporting has been established, which provides for a documented
and auditable trail of accountability. The procedures include the establishment of limits of
authority and are relevant across the Group’s operations and provide for continuous assurance
to be given at increasingly higher levels of management, and finally to the Board.
Management is committed to employ suitable qualified staff to ensure operation efficiency.
Operation meetings are formal platforms for Management to set its tone on control culture and
emphasise on Group’s strategic directions as agreed upon by the Board.
• Training and development
Trainings are conducted at all levels in order all employees would be able to perform well in
their present jobs and also to develop employees who are potential to perform duties with
wider responsibilities. Management ensure that employees receive continuous training in
various areas of work such as knowledge, compliances of rules and regulations, health and
safety, technical training, leadership and new product development.
b) Risk Assessment
The Board and management are aware of its overall responsibility in managing the Group’s risk
management policy. The risk identification process is done on an ongoing-basis and entails all key
factors within the Group’s business operations.
Identifying, evaluating and managing any significant risks faced by the Group is undertaken by
various parties such as management, internal and external auditors and Audit Committee, which
assesses and analyses any findings of the internal and external audit and reports to the Board.
The Board’s function within the risk management policy is exercised and managed primarily by
Executive Directors through their participation in the operations and regular meetings with
managerial levels to ensure the efficiency of the system of internal control and risk management.
The process of identifying and evaluating the significant risks affecting the business is carried out
by all heads of departments on a continuous basis, and the controls and procedures by which
these risks are managed accordingly.
The Group’s financial risk management policy seeks to ensure that adequate resources are
available to mitigate risks including foreign currency risk, interest rate risk, credit risk and liquidity
risk. The Board assumes overall responsibility for the Group’s risk management policy and
formulates policies and procedures for the management of these risks.
c) Control Activities
Processes are continuously reviewed for relevance to the business processes and activities as well
as for uniformity and standardisation of practices across the Group.
Periodic and annual audit reviews by internal and external quality auditors were conducted to
ensure compliance with and continuous improvement of the ISO Quality Standards certification as
assurance to the quality standards of products and services provided by the Group.
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Budgets are prepared to evaluate the feasibility and viability of the Group’s business and to ensure
that the Group’s business plan is in line.
The Group’s performance is also reported to the Board on quarterly basis to highlight significant
variances. The results are reviewed by the Board to enable them to gauge the Group’s overall
performance and compared to the prior periods.
d) Information and Communication
Management promotes good working relationship at all levels of employees by ensuring
information and communication channels are open and sinuous. Relevant information are shared
both downwards (from Management to employees) and upwards (from employees to
Management) for proper attention and further action.
Regular management meetings are conducted at the Group by all heads of departments to discuss
and resolve issues or challenges faced with regard to operational and administrative matters. The
proceedings of these meetings are minuted for further action and reference.
Board recognises the needs of communication across the Group and investors. Going forward,
more dialogues with investors and analysts as well as with the media will be held. Investor relations
activities are held at least on a quarterly basis.
e) Monitoring
Management maintains close monitoring of the Group’s operations through submission of monthly
reports and constant communication or regular meetings with the heads of department.
Management also constantly monitors the highlighted issues through the conduct of follow-up
audits which show its commitment to improve on current processes and internal controls.
During the financial year, the Board and Audit Committee have diligently continued in its role as
external overseers of internal controls and monitors performances of the Group’s quarterly financial
results.
Internal audit function acts as an ongoing monitoring process, which provides a degree of
assurance as to validity of the system of internal control. Planned corrective actions are
independently monitored for timely completion.
• Training and development
Trainings are conducted at all levels in order all employees would be able to perform well in
their present jobs and also to develop employees who are potential to perform duties with
wider responsibilities. Management ensure that employees receive continuous training in
various areas of work such as knowledge, compliances of rules and regulations, health and
safety, technical training, leadership and new product development.
b) Risk Assessment
The Board and management are aware of its overall responsibility in managing the Group’s risk
management policy. The risk identification process is done on an ongoing-basis and entails all key
factors within the Group’s business operations.
Identifying, evaluating and managing any significant risks faced by the Group is undertaken by
various parties such as management, internal and external auditors and Audit Committee, which
assesses and analyses any findings of the internal and external audit and reports to the Board.
The Board’s function within the risk management policy is exercised and managed primarily by
Executive Directors through their participation in the operations and regular meetings with
managerial levels to ensure the efficiency of the system of internal control and risk management.
The process of identifying and evaluating the significant risks affecting the business is carried out
by all heads of departments on a continuous basis, and the controls and procedures by which
these risks are managed accordingly.
The Group’s financial risk management policy seeks to ensure that adequate resources are
available to mitigate risks including foreign currency risk, interest rate risk, credit risk and liquidity
risk. The Board assumes overall responsibility for the Group’s risk management policy and
formulates policies and procedures for the management of these risks.
c) Control Activities
Processes are continuously reviewed for relevance to the business processes and activities as well
as for uniformity and standardisation of practices across the Group.
Periodic and annual audit reviews by internal and external quality auditors were conducted to
ensure compliance with and continuous improvement of the ISO Quality Standards certification as
assurance to the quality standards of products and services provided by the Group.
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Budgets are prepared to evaluate the feasibility and viability of the Group’s business and to ensure
that the Group’s business plan is in line.
The Group’s performance is also reported to the Board on quarterly basis to highlight significant
variances. The results are reviewed by the Board to enable them to gauge the Group’s overall
performance and compared to the prior periods.
d) Information and Communication
Management promotes good working relationship at all levels of employees by ensuring
information and communication channels are open and sinuous. Relevant information are shared
both downwards (from Management to employees) and upwards (from employees to
Management) for proper attention and further action.
Regular management meetings are conducted at the Group by all heads of departments to discuss
and resolve issues or challenges faced with regard to operational and administrative matters. The
proceedings of these meetings are minuted for further action and reference.
Board recognises the needs of communication across the Group and investors. Going forward,
more dialogues with investors and analysts as well as with the media will be held. Investor relations
activities are held at least on a quarterly basis.
e) Monitoring
Management maintains close monitoring of the Group’s operations through submission of monthly
reports and constant communication or regular meetings with the heads of department.
Management also constantly monitors the highlighted issues through the conduct of follow-up
audits which show its commitment to improve on current processes and internal controls.
During the financial year, the Board and Audit Committee have diligently continued in its role as
external overseers of internal controls and monitors performances of the Group’s quarterly financial
results.
Internal audit function acts as an ongoing monitoring process, which provides a degree of
assurance as to validity of the system of internal control. Planned corrective actions are
independently monitored for timely completion.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
RISK MANAGEMENT POLICY
The Board recognises the need for an effective risk management practice and to maintain a sound
system of internal control as all areas of the business activities of the Group involve certain risks.
Hence, the Board has formalised and established the risk management policy, as an approach to
identifying, assessing, reporting and monitoring risks faced by the Group.
The objectives of the risk management policy are:
• To systemise a continuous process for identifying, evaluating and managing the significant risks
faced by the Group;
• To provide a platform for communication, of risk and control profiles and the management
action plans to manage the risks, between Senior Management and the Board;
• To nominate key management personnel to prepare action plans to address any risk and control
issues;
• To inculcate an organisation-wide culture of risk awareness and management and embed
internal controls and risk management further into the operations of the Group’s business; and
• To establish a documented process of control monitoring and improvement plans.
The Board has assigned the Group’s risk oversight function to Risk Management Committee
(“RMC”), which comprises of Senior Management and Head of Departments of the Group. RMC is
primarily responsible to identify, evaluate, and manage significant risks faced by the Group as well
as report to the Board on a regular basis.
The following depicts the key parties and their principal risk management roles and
responsibilities:
a) Board of Directors
• Maintains a sound system of risk management and internal control;
• Evaluate the adequacy of the system of risk management and internal control; and
• Approve risk management policy and governance structure.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
b) Risk Management Committee
• RMC discuss and meet regularly to identify and manage risks to a manageable level;
• Identify and evaluate the significant risks faced by the Group;
• Assist the Board in implementing the objectives outlined in the risk management policy;
• Establish, formulate, recommend and manage sound and best practice risk management
programs for the Group;
• Continuously monitor and execute appropriate actions to address any change in existing risks
or new risks identified as part of an on-going proactive control measure;
• Report to the Board on any major changes to the identified risk requiring immediate attention/
notification;
• Inculcates risk awareness within the Group.
c) Head of Departments
• Primarily responsible for managing risk on a day-to-day basis; and
• Promote risk awareness within their operations and introduce risk management objectives into
the business and operations.
The Board recognise that risk management can become a strategic competitive advantage if it is
used to identify specific actions that enhance performance and optimise risk. It can also influence
business strategy by identifying potential adjustments related to previously unidentified
opportunities and risks. As much as risks give rise to the need for controls, we consciously look out
for opportunities for improvement arising from risks and uncertainties. Risk management has been
adopted also as a strategic tool in strategy formulation, investment and resource allocation.
During the financial year under review, the Board has identified, evaluated and managed the
significant risks faced by the Group through monitoring of the Group’s operational efficiency and
performance at its Board Meeting. The Board has assigned to the Audit Committee the duty of
reviewing and monitoring the effectiveness of the Group’s risk management processes. At
operation levels, risks were discussed on ad hoc basis during the periodic management operations
meetings.
INTERNAL AUDIT FUNCTION
The Board recognises the need for an internal audit function, and has engaged the services of an
independent professional firm, Messrs Needsbridge Advisory Sdn Bhd (“NASB”) to review the
efficiency and effectiveness as well as the adequacy and integrity of the Group’s internal control
and risk management processes implemented by the management to manage key business risks
and internal control system.
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The internal audit firm adopts a risk-based approach to the implementation and monitoring of
internal controls. The monitoring process will also form the basis for continually improving the risk
management process in the context of the Group's overall goals. Internal audit is performed based
on the internal audit plans approved by the Audit Committee or any amendments thereof
approved by the Audit Committee deemed necessary.
The internal audit firm will provide the Audit Committee with an independent assessment of the
effectiveness, efficiency and adequacy of the internal control systems of the Group. This will be
done by reviewing and reporting on any material deviations and non-compliances of policies and
control procedures implemented by management and the Board. The internal audit plan is
developed based on management’s assessment of business processes and risks, which is
approved by Audit Committee or any amendments thereof approved by the Audit Committee
deemed necessary.
In particular, internal audit firm appraises and contributes towards improving the Group’s risk
management and control systems and reports directly to the Audit Committee. Upon completion
of the internal audit review based on detailed audit program, the internal audit report is presented
to Audit Committee for review and consideration. The internal audit report includes the audit
findings and internal auditors’ recommendations as well as management responses and actions
plans for improvement and to resolve any issue arises. In assessing the adequacy and
effectiveness of the system of internal controls and risk management processes of the Group, the
Audit Committee reports to the Board on its activities, significant audit results or findings and the
necessary recommendations or actions needed to be taken by management to rectify those
issues.
The internal audit work plan, which reflects the risk profile of the Group’s major business sectors
is routinely reviewed and approved by the Audit Committee. The scope of internal audit function
covers the audit and review of governance, risk assessment, compliance, operational and financial
control across all business units.
Internal auditors assist the Audit Committee in discharging its duties and responsibilities. They
continue to monitor the compliance with policies and procedures and the effectiveness of the
internal control systems independently and highlight significant findings and corrective measures
in respect of any non-compliance. They review the controls in the key activities of the Group’s
business based on the annual internal audit plan and report audit findings to the Audit Committee
for review annually. The management is responsible for ensuring that corrective actions on
reported weaknesses are addressed within a specific time frame. The reported findings thus far
were not material in nature and improvements are being carried out.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
REVIEW OF THE STATEMENT BY THE EXTERNAL AUDITORS
As required by paragraph 15.23 of the Bursa Malaysia Securities Berhad Main Market Listing
Requirements, the external auditors have reviewed this Statement on Risk Management and Internal
Control pursuant to the scope set out in Recommended Practice Guide (“RPG”) 5 (Revised):
Guidance for Auditors on Engagements to Report on the Statement on Risk Management and
Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants
(“MIA”) for inclusion in the annual report of the Group for the financial year ended 30 April 2017.
Based on their review, the external auditors have reported to the Board that nothing had come to
their attention that causes them to believe that this statement is inconsistent with their
understanding of the risk management and internal control process implemented by the Group.
CONCLUSION
During the year under review and up to the date of approval of this statement for inclusion in the
annual report, the Board is of the view that the systems of risk management and internal controls is
operating adequately and effectively, in all material aspects and have not resulted in material losses,
contingencies or uncertainties that would require separate disclosure in the annual report. The
monitoring, review and reporting arrangements are in place to give reasonable assurance that the
structure and operation of controls are appropriate for the Group. The Board is of the view that the
process of risk management and internal control system is sound and sufficient to safeguard the
interest of shareholders and the Group’s assets.
This statement has been approved by the Board of SCGM Bhd on 28 June 2017.
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AUDITCOMMITTEE REPORT
Name of CommitteeMembers
Wong Tun Boon
Tang Nai Soon
Amrik Singh Harcharan Singh
Numbers OfCommittee Meeting
Attended Held
4
3
4
4
4
4
Status
Chairman, Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
OVERVIEW
The Audit Committee of SCGM Bhd is committed to its role of supporting oversight functions of
the Board on the Group’s financial reporting, risk management and internal control systems and
ensuring high corporate governance practices.
1. COMPOSITION AND ATTENDANCE OF MEETINGS
The details of the Audit Committee members and meetings held in financial year ended 30 April
2017 are as follows:
1.1 Quorum And Frequency For Meetings
a) Meetings shall be held at least four (4) times a year with a minimum quorum of two (2)
members of whom majority shall be independent Directors.
b) Additional meetings may be called at any time at the discretion of the Committee.
1.2 Attendance Of Meetings
a) Corporate Affairs Manager and Group Financial Controller shall normally be invited to
attend meetings. The Executive Chairman, Managing Director, Deputy Managing Director
and Executive Directors, the Internal Auditors / External Auditors may be invited to
attend the meeting; and
b) The External Auditors shall attend the meeting to deliberate the audited financial
statements and such other meetings determined by the Committee.
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AUDIT COMMITTEE REPORT
1.3 Reporting Procedures
a) The Chairman of the Audit Committee reports to the Board on matters deliberated during
the Audit Committee meetings. Minutes of each meeting are circulated to each member of
the Board;
b) The books containing the minutes of the proceedings of meetings of the committee are
kept in the registered office of the Company and are available for inspection.
2. MEMBERSHIP
a) The Committee shall be appointed by the Board from amongst its members and shall
comprise not less than three (3) members.
b) All the audit committee members must be non-executive directors, with a majority of them
being independent directors.
c) The Chairman of the Committee shall be an Independent Director appointed by the Board.
d) No alternate director shall be appointed as a member of the Committee.
e) At least one member of the Committee:-
i) shall be a member of the Malaysian Institute of Accountants (“MIA”); or
ii) if he is not a member of the MIA, he shall have at least three (3) years’ working
experience and:-
a. he must have passed the examinations specified in Part 1 of the 1st Schedule of
the Accountants Act 1967; or
b. he must be a member of one of the associations of accountants specified in Part
II of the 1st Schedule of the Accountants Acts 1967; or
iii) fulfils such other requirement as prescribed or approved by the Exchange.
f) The term of office and performance of the Committee and each of its members must be
reviewed by the Board annually; and
g) If a member of the Committee resigns or for any other reason ceases to be a member with
the result that the number of members is reduced to below three (3), the Board shall within
three (3) months of that event, appoint such number of new members as may be required
to make up a minimum number of three (3) members.
AUDIT COMMITTEE REPORT
3. SUMMARY OF TERMS OF REFERENCE
3.1 Authority
The Audit Committee is authorised by the Board, in accordance with the procedures to be
determined by the Board (if any) to carry out the following:
a) Investigate any matter within its terms of reference;
b) Have full and unrestricted access to information and documents, to the external auditors
and to all employees of the Company and the Group;
c) Have direct communication channels with the external auditors and internal auditors;
d) Convene meetings with external auditors, internal auditors or both, excluding the
attendance of the other directors and employees, whenever deemed necessary;
e) Obtain independent professional or other advice at the Company’s expense and to invite
outsiders with relevant experience and expertise to attend meetings if it considers this
necessary; and
f) Where the Committee is of the view that a matter reported by it to the Board has not
been satisfactorily resolved resulting in a breach of the Listing Requirements of the Bursa
Malaysia Securities Berhad, the Committee shall promptly report such matter to the
Exchange.
3.2 Duties and Responsibilities
The duties and responsibilities of the Audit Committee are as follows:-
Internal controls / risk management / governance
a) To review inspection and examination reports issued by any regulatory authority and to
ensure prompt and appropriate actions are taken in respect of any findings.
Internal Audit
a) To review the adequacy of the competency of the internal auditors,
b) To review the adequacy and relevance of the scope, functions and resources of the
internal audit function and that it has the necessary authority to carry out its work.
c) To review the internal audit plan and processes, where necessary, ensure that appropriate
actions are taken on the recommendations of the internal audit function.
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SCGM BHD | Annual Report 2017
d) To ensure the internal audit function is well placed to undertake review or investigation on
behalf of the Audit Committee; and
e) To consider all proposals by management regarding the appointment, transfer or dismissal
of the internal auditors and recommend to the Board for approval;
External Audit
a) To review the external audit plan, the nature and scope of their audit plan, their evaluation
of the system of internal controls and their management letter and discuss any matter that
the external auditors may wish to raise in the absence of management, where necessary;
b) To recommend to the Board on the appointment and the annual reappointment of the
external auditors and their audit fee, after taking into consideration the independence and
objectivity of the external auditors and the cost effectiveness of their audit;
c) To approve the provision of non-audit services by the external auditors to the Company,
evaluating whether such non-audit services would impair their independence;
d) To discuss problems and reservations arising from audit, and review with the external
auditors if there is any issue of concern that they may encounter during the course of
audit; and
e) To meet with the external auditors without the presence of Management or Executive
Directors to discuss any key concerns and obtain feedback.
Others
a) To review the quarterly results and annual financial statements of the Company and the
Group and recommend to the Board for approval, focusing on the following:
- changes in or implementation of major accounting policy changes;
- significant matters highlighted including financial reporting issues, significant judgments
made by management, significant and unusual events or transactions, and how these
matters are addressed; and
- compliance with accounting standards and other legal requirements.
b) To review any related party transactions that are conducted in the best interest of the
Company or the Group and conflict of interest that may arise within the Company or the
Group;
c) To convene meetings with internal auditors, external auditors or both whenever deemed
necessary; and
d) To perform any other functions as authorised by the Board.
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AUDIT COMMITTEE REPORT
AUDIT COMMITTEE REPORT
4. SUMMARY OF WORK OF THE AUDIT COMMITTEE DURING THE FINANCIAL YEAR
The Audit Committee has carried out the following activities in accordance with the Terms
of Reference during the financial year ended 30 April 2017:
a) Reviewed the Group’s unaudited quarterly financial results before recommending the
same for the Board’s approval and subsequently releasing it to Bursa Securities;
b) Reviewed the related party transactions that were entered into by the Group to ensure
that they are properly conducted as well as the adequate and proper disclosure of these
procedures and items of the related party transactions;
c) In considering the external audit plan for annual audit with the external auditors, the Audit
Committee received written confirmation through their Audit Approach Memorandum
that they are independent and the external auditors had conducted themselves in
accordance with the terms of all relevant professional and regulatory bodies;
d) Reviewed the external audit plan, nature and scope of work, evaluation of the system of
internal controls and audited financial statements with external auditors for the financial
year ended 30 April 2017 before recommending the same to the Board for approval;
e) Discussed and obtained feedback from external auditors without presence of
management and Executive Directors;
f) Assessed the suitability and competency of the outsourced internal audit professional
firm and made recommendations to the Board for their appointment;
g) Reviewed and discussed with the internal auditors on the internal audit plan, its scope of
work and procedures;
h) Reviewed and discussed with the internal auditors, the results of their internal audit and
internal control recommendations in respect of improvements in the internal control
procedures noted in the course of their audit;
i) Ensured that the transactions entered into by the Company and the Group are in
compliance with requirements of Bursa Securities, Securities Commission and other
regulatory bodies; and
j) To review and ensure the Group adopts and adhere to the Malaysian Financial Reporting
Standards.
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5. INTERNAL AUDIT FUNCTION
The internal audit function is independent of the activities or operations it audits. The principal role
of the internal audit is to undertake regular and systematic reviews of the systems of internal
control in order to provide reasonable assurance that such systems continue to operate
satisfactorily and effectively. It is ultimately the responsibility of the internal audit function to
provide the Audit Committee with independent and objective reports on the state of internal
controls of the various operating units within the Group and the extent of compliance of the units
with the Group’s established policies and procedures as well as relevant statutory requirements.
During the financial year under review, the Group outsourced its internal audit function to an
independent professional firm, Messrs Needsbridge Advisory Sdn Bhd, to undertake the internal
audit functions that would enable the Audit Committee to discharge its duties.
A summary of work of the internal audit function carried out includes:
• Developed internal audit plan based on management’s assessment of business processes
and risks, and proposed the plan to Audit Committee for approval;
• Conducted scheduled internal audit engagement, focusing primarily on the effectiveness of
internal control and recommended improvements where necessary. The main areas being
audited during the financial year ended 30 April 2017 were procurement management and
inventory management; and
• Presentation of the internal audit findings and recommendations to the Audit Committee
for their recommendation to the Board.
The Statement on Risk Management and Internal Control which provides an overview of the state
of internal controls within the Group is set out on pages 136 to 143 of this Annual Report.
The total cost incurred for the internal audit service for the financial year ended 30 April 2017 was
RM18,000.00 (2016 : RM35,000)
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AUDIT COMMITTEE REPORT
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CORPORATE SOCIAL RESPONSIBILITY
1. SCHOOL EDUCATION PROGRAM KL SEA GAMES 2017
Corporate responsibility is a belief that lies at the very
heart of SCGM Bhd. It is not something we pay lip
service to, but rather, something that we encourage our
people to live and breathe. We believe that taking care
of the people and communities we serve is of great
importance. A happy, prosperous community is a good
partner for us.
As part of its on-going program to outreach more
people within the community, this year we have
partnered with the local council Majlis Perbandaraan
Kulai to bring children from the Kiwanis and Kulai
Orphanage homes to bring them to experience in-flight
experience at the Senai airport.
Other notable programs this year would include bringing
awareness to the schools nationwide on educating the
public on awareness on waste separation. This program
is part of our pilot project and we shall be embarking on
more of the concept of 4R WASTE PROGRAM
throughout the country in upcoming years.
SCGM BHD | Annual Report 2017SCGM BHD | Annual Report 2017
Kedah
General Waste
Glass, Fabric,Electronic,Electrical &Aerosol
Paper
Plastic &Aluminium Cans
Kitchen waste, foodwaste, contaminatedmaterials like foodwrapper, disposablediapers
Soft drink bottles, foodcontainers, vitaminbottles, and cosmeticbottles.
Newspapers, magazines,books, catalogue sheets,brochures, calendars,cars, envelopes, and cardboard boxes.
Aluminium and steel tinssuch as soft drink tinsand food tins. Plasticsuch as shoppingbags, bottle drinks,food containers,detergent bottles,and vitamin bottles.
Sek Men Pendidikan Khas (Zone Utara)
SMK Padang Terap
Pulau Pinang
Kolej Vokasional Nibong Tebal
SMK Perempuan Methodist
SMK Mutiara Impian
Perak
SK Toh Tan Dewa Sakti
Majlis Sukan Sekolah Malaysia
(SM Sains Raja Tun Azlan Shah, Taiping Perak)
Selangor
Sek Seri Puteri
SK Seksyen 6, Kota Damansara
SK TTDI (2)
SJK (T) Simpang Lima
SK Tasek Puteri 2
SK Dato' Maharaja Lela
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CORPORATE SOCIAL RESPONSIBILITY
1. SCHOOL EDUCATION PROGRAM KL SEA GAMES 2017
Wilayah Persekutuan KL
SMK Convent Jalan Peel
Sekolah Bimbingan Jalinan Kasih
SM Sains Alam Shah
Wilayah Persekutuan Putrajaya
SMK Putrajaya Presint 8(1)
Sek Sultan Alam Shah
Negeri Sembilan
SK Chembung
Terengganu
SMK Bukit Nenas
Terengganu
SJKC Chung Cheng
Sabah
Kolej Vokasional Likas
SJK (C) Chung Hwa Likas
Sarawak
SMK Bandar Samariang
SJK (C) Siong Boon
Melaka
Kolej Vokasional Jasin
Sekolah Rendah Arab (JAIM) Al-Falah
Johor
SK Pendidikan Khas Batu Pahat
SJK (T) Ladang Tebrau
Sek Men Agama Mahat Muar
Pahang
SJK (C) Yoke Shian
SMK Pendidikan Khas Vokasional Kuantan
SK Runchang
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CORPORATE SOCIAL RESPONSIBILITY
2. PROGRAM JALINAN MESRA
3. LITTER-FREE CHINGAY 2017
Program Jalinan Mesra is a community project
that brings in-flight experience to Kiwanis and
orphanage children based in Kulai. SCGM Bhd
is a proud partner in conjunction with MPKu
makes this program a successful one. The
children were happy and goodies bag were
given during this program.
SCGM Bhd participated in the Litter-free
Campaign doings in promoting cleanliness
during the Chingay event held in Johor Bahru.
Program Jalinan Mesra
Litter-free Chingay 2017
As part of its on-going process to promote biodiversity and
cultural within the organization, SCGM Bhd will embark on a 3
year transformation plan to transform its employees to be
more results driven and implementing a HOLISTIC REWARDS
SYSTEM for the employees.
TRAINING PROGRAMMES
As part of its transformation programme, SCGM Bhd will
embark on a blueprint to present a HOLISTIC REWARDS
SYSTEM for our employees. Our comprehensive rewards
system ensures that our people are competitively-remunerated
while enjoying opportunities for learning and progression. As
an organisation that places a premium on high performance,
our rewards are performance-based. Variable bonus is paid
based on how well the company, business units and individuals
perform.
We keep SCGM Bhd competitive with regular benchmarking
exercises of our pay and benefits across the region. SCGM Bhd
offers broad-ranging employee benefits that enhance our
people’s personal and professional well-being. These benefits
include, amongst others, hospitalisation, medical and
programme, encouragement for children to enjoy subsidies on
their education through rewarding system.
Staff enjoy sporting and recreational activities regularly
organised by our Sports & Recreation Department will be
enhanced to be provided avenues for staff to play sports such
as futsal, badminton etc.
DIVERSITY IN HUMAN CAPITAL GROWTH
Strength in diversity is one of SCGM Bhd ’s values. We respect
different cultures, value varied perspectives, and recognise
diversity as a source of strength across our network of
employees.
SCGM practises a people policy that harnesses local talents
while treating diversity as an asset. As such, SCGM Bhd strives
for an employee ratio of 70% locals, 30% foreign within the next
few years. We will be embarking in having more skilled workers,
enhancing the roles of our foreign workers by providing the
appropriate trainings for betterment of their skills etc.
154
SCGM BHD | Annual Report 2017
BIODIVERSITY ANDCULTURAL REPORT
Append below are the diversities of SCGM Bhd ended financial year 2017.
Operator &others workers
Leader/QA/Supervisor
Office Staff
HOD [AssistantManager & above]
Total
Male Female
300
65
12
14
391
70
20
49
6
145
18-25
26-45
46-65
<65
Total
LocalForeignWorkerAge Range
41
79
47
1
168
116
247
5
0
368
ChineseIndianMalayBangladeshIndonesiaMyanmarNepalVietnam
Total
Male Female
274
4229
034
20946
391
250
700100
49
145
Head ofDepartment
Executives
Operators
In HouseTraining
Training Course
1) FSSC understanding
2) FG Handling
3) 5S understanding
4) Safety Awareness
5) HACCP & Personal Hygiene
Policy & Rejection Criteria
6) Routine OJT
ExternalTraining
40
360
4140
64
-
-
NOTABLEACHIEVEMENTS
HIGHLIGHTS &ACHIEVEMENTS 2017
155
SCGM BHD | Annual Report 2017
BESTUNDERBILLIONAWARDS
2016
SIRIMECO-LABEL
SIRIMECO-LABEL
156
SCGM BHD | Annual Report 2017
NOTABLEACHIEVEMENTS
BEST UNDER BILLION AWARDS 2016
GOLDEN EAGLE AWARD 2016
BESTRETURN ON
ASSETS
BESTENTERPRISE
VALUE GROWTH
BEST INTRANSPARENCYTRANSPARENCY
GOLDEN EAGLE AWARD 2016
SCGM BHD | Annual Report 2017
CORPORATE EVENTHIGHLIGHTS
SEA GAMES SPONSORSHIP SIGNING CEREMONY
157
SEA GAMES SPONSORSHIP SIGNING CEREMONY
O F F I C I A L G R E E N P A R T N E R
ENXON
158
SCGM BHD | Annual Report 2017
CORPORATE EVENT HIGHLIGHTS
BEST UNDER BILLION AWARDS
DELIVERING OF TWO COLOREXTRUSION MACHINE
DELIVERINGOF TWO COLOREXTRUSIONMACHINE
BESTUNDERBILLIONAWARDS
2016
159
SCGM BHD | Annual Report 2017
PROGRAM JALINAN MESRA
SCHOOL EDUCATIONPROGRAM KL SEA GAMES 2017
OXIUM CERTIFICATE
CORPORATE EVENT HIGHLIGHTS
OXIUMCERTIFICATE
162
SCGM BHD | Annual Report 2017
ADDITIONALINFORMATION
ANALYSIS BY SIZE OF HOLDING
ANALYSIS OF SHAREHOLDINGS AS AT 15 JUNE 2017
Total Number of Issued Shares
Class of Shares
Voting Right
No. ofShareholders
%No. ofShares held
Less than 100 shares
100 to 1,000 shares
1,001 to 10,000 shares
10,001 to 100,000 shares
100,001 to less than 5% of Issued Shares
5% and above of Issued Shares
Total
32
268
872
326
129
5
1,632
0.00
0.12
2.53
7.43
48.90
41.02
100.00
969
179,652
3,668,550
10,793,250
70,995,788
59,561,791
145,200,000
145,200,000
Ordinary shares
One vote per Ordinary share
DIRECTORS’ SHAREHOLDINGS AS AT 15 JUNE 2017
No. Name
No. of Shares Held
Direct % Indirect %
* deemed interested via his direct interest in SCGM Lee Sdn Bhd.@ deemed interested by virtue of the shareholding of his spouse pursuant to Section 59(11)(c) of the Companies Act 2016.
1. Dato’ Sri Lee Hock Seng
2. Dato’ Sri Lee Hock Chai
3. Dato’ Sri Lee Hock Guan
4. Lee Hock Meng
5. Tang Nai Soon
6. Wong Tun Boon
7. Amrik Singh A/L Harcharan Singh
13,114,311
9,353,429
9,353,433
8,893,429
110,000
180,000
63,000
9.03
6.44
6.44
6.12
0.08
0.12
0.04
22,961,500*
22,961,500*
22,961,500*
22,961,500*
-
-
24,000@
15.81
15.81
15.81
15.81
-
-
0.02
163
SCGM BHD | Annual Report 2017
SUBSTANTIAL SHAREHOLDERS AS AT 15 JUNE 2017
THIRTY LARGEST SHAREHOLDERS AS AT 15 JUNE 2017
No. of Shares Held
Direct % Indirect %Name
* deemed interested via his direct interest in SCGM Lee Sdn Bhd.# deemed interested via KWAP’s Fund Manager
SCGM Lee Sdn Bhd
Dato’ Sri Lee Hock Seng
Dato’ Sri Lee Hock Chai
Dato’ Sri Lee Hock Guan
Lee Hock Meng
Kumpulan Wang Persaraan(Diperbadankan)
22,961,500
13,114,311
9,353,429
9,353,433
8,893,429
6,024,650
15.81
9.03
6.44
6.44
6.12
4.15
-
22,961,500*
22,961,500*
22,961,500*
22,961,500*
1,771,100#
-
15.81
15.81
15.81
15.81
1.22
NO. SHAREHOLDERS NO OF SHARES PERCENTAGE (%)
1. SCGM LEE SDN BHD
2. DATO’ SRI LEE HOCK GUAN
3. DATO’ SRI LEE HOCK CHAI
4. DATO’ SRI LEE HOCK SENG
5. LEE HOCK MENG
6. KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
7. DATO’ SRI LEE HOCK SENG
8. CITIGROUP NOMINEES (ASING) SDN BHD -EXEMPT AN FOR CITIBANK NEW YORK
9. HSBC NOMINEES (TEMPATAN) SDN BHD -HSBC (M) TRUSTEE BHD FOR MANULIFE INVESTMENT PROGRESS FUND
10. CIMB GROUP NOMINEES (TEMPATAN) SDN BHD -CIMB COMMERCE TRUSTEE BERHAD -KENANGA GROWTH FUND
11. ALLIANCE GROUP NOMINEES (TEMPATAN) SDN BHD - PLEDGED SECURITIES ACCOUNT FOR TING SIEW PIN
12. HSBC NOMINEES (TEMPATAN) SDN BHD -HSBC (M) TRUSTEE BHD FOR RHB KIDSAVE TRUST
22,961,500
9,353,433
9,353,429
9,000,000
8,893,429
6,024,650
4,114,311
3,247,100
2,654,150
2,606,800
2,542,250
1,980,000
15.81
6.44
6.44
6.20
6.12
4.15
2.83
2.24
1.83
1.80
1.75
1.36
164
SCGM BHD | Annual Report 2017
THIRTY LARGEST SHAREHOLDERS AS AT 15 JUNE 2017
NO. SHAREHOLDERS NO OF SHARES OF PERCENTAGE (%)
13. CHAI SIEW MOOI
14. HSBC NOMINEES (TEMPATAN) SDN BHD -HSBC (M) TRUSTEE BHD FOR RHB SMART TREASURE FUND
15. CITIGROUP NOMINEES (TEMPATAN) SDN BHD – EMPLOYEES PROVIDENT FUND BOARD
16. CITIGROUP NOMINEES (TEMPATAN) SDN BHD – EMPLOYEES PROVIDENDT FUND BOARD
17. HSBC NOMINEES (TEMPATAN) SDN BHD -HSBC (M) TRUSTEE BHD FOR RHB GROWTH AND INCOME FOCUS TRUST
18. MALACCA EQUITY NOMINEES (TEMPATAN) SDN BHD – EXEMPT AN FOR PHILLIP CAPITAL MANAGEMENT SDN BHD
19. CITIGROUP NOMINEES (TEMPATAN) SDN BHD – KUMPULAN WANG PERSARAAN (DIPERBADANKAN)
20. CITIGROUP NOMINEES (ASING) SDN BHD – CEP FOR PHIEM SICAV-SIF
21. AMANAH RAYA BERHAD – KUMPULAN WANG BERSAMA
22. CITIGROUP NOMINEES (TEMPATAN) SDN BHD –UNIVERSAL TRUSTEE (MALAYSIA) BERHAD FOR CIMB ISLAMIC SMALL CAP FUND
23. MAYBANK NOMINEES (TEMPATAN) SDN BHD - NATIONAL TRUST FUND
24. RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD – PLEDGED SECURITIES ACCOUNT FOR TING SIEW PIN
25. LOH HON ANN
26. MAYBANK NOMINEES (TEMPATAN) SDN BHD – MAYBANK TRUSTEES BERHAD FOR CIMB-PRINCIPAL SMALL CAP FUND
27. HSBC NOMINEES (TEMPATAN) SDN BHD – HSBC (M) TRUSTEE BHD FOR RHB SMALL CAP OPPORTUNITY UNIT TRUST
28. CITIGROUP NOMINEES (TEMPATAN) SDN BHD – UNIVERSAL TRUSTEE (MALAYSIA) BERHAD FOR CIMB ISLAMIC DALI EQUITY FUND
29. CHEN JIA YI
30. CIMSEC NOMINEES (TEMPATAN) SDN BHD – CIMB BANK FOR MAK TIAN MENG
1,598,750
1,556,300
1,403,700
1,399,700
1,373,850
1,303,727
1,234,600
1,230,000
1,200,000
1,099,900
1,043,800
944,550
923,000
832,000
803,800
751,800
748,000
697,050
1.10
1.07
0.97
0.96
0.95
0.90
0.85
0.85
0.83
0.76
0.72
0.65
0.64
0.57
0.55
0.52
0.52
0.48
NOTICE OF TENTH ANNUALGENERAL MEETING
165
SCGM BHD | Annual Report 2017
NOTICE IS HEREBY GIVEN THAT the Tenth Annual General Meeting (“AGM”) of the Company will
be held at the Creator Hotel, Ballroom, 3rd Floor, Kulai Centre Point, Lot. 1566, Batu 20, Jalan
Kulai-Air Hitam, 81000, Kulai, Johor Darul Takzim on Thursday, 10 August 2017 at 2.00 p.m for the
purpose of transacting the following businesses: -
AGENDA
1. To receive the Audited Financial Statements of the Company for the financial year ended 30
April 2017 together with the Directors’ and Auditors’ Reports thereon.
2. To approve the payment of Directors’ fees for the financial year ended 30 April 2017.
Ordinary Resolution 13. To re-elect the following Directors retiring pursuant to Article 85 of the Company’s Articles
of Association and being eligible, have offered themselves for re-election: -
(i) Lee Hock Meng Ordinary Resolution 2(ii) Tang Nai Soon Ordinary Resolution 3
4. To re-appoint Messrs SJ Grant Thornton as Auditors of the Company to hold office until the
conclusion of the next AGM and to authorise the Directors to fix their remuneration.
Ordinary Resolution 4AS SPECIAL BUSINESS
To consider, and if thought fit, to pass the following resolutions: -
5. RETENTION OF INDEPENDENT DIRECTORS
To retain the following Directors who have served as Independent Non-Executive Directors for a
cumulative period of more than 9 years:-
(i) Amrik Singh Harcharan Singh Ordinary Resolution 5(ii) Tang Nai Soon Ordinary Resolution 6(iii) Wong Tun Boon Ordinary Resolution 7
Ordinary Resolution 8
“THAT pursuant to Section 75 and 76 of the Companies Act 2016 and subject to the approvals
from the relevant governmental and/or regulatory authorities, the Directors be and are hereby
empowered to issue shares in the Company from time to time and upon such terms and
conditions and for such purposes as the Directors may in their absolute discretion deem fit,
provided that the aggregate number of shares issued pursuant to this resolution does not
exceed ten (10) per cent of the total number of issued shares of the Company at the time of
submission to the authority AND THAT the Directors be and are also hereby empowered to
obtain the approval from the Bursa Malaysia Securities Berhad for the listing of and quotation for
the additional shares so issued AND THAT such authority shall continue in force until the
conclusion of the next AGM of the Company.”
6. AUTHORITY TO ISSUE SHARES
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SCGM BHD | Annual Report 2017
NOTICE OF TENTH ANNUAL GENERAL MEETING
Ordinary Resolution 9
“THAT subject to compliance with all applicable rules, regulations and orders made pursuant
to the Companies Act 2016 (“Act”), provisions in the Company’s Memorandum and Articles of
Association, the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”)
and any other relevant authorities, the Company be and is hereby authorised to purchase such
number of ordinary shares of the Company (“Proposed Renewal of Share Buy-Back”) as may
be determined by the Directors of the Company from time to time through Bursa Securities
upon such terms and conditions as the Directors may deem fit and expedient in the interest of
the Company PROVIDED THAT:-
(i) the aggregate number of shares purchased or held does not exceed ten per centum (10%)
of the total number of issued shares of the Company as quoted on Bursa Securities as at
the point of purchase;
(ii) the maximum fund to be allocated by the Company for the purpose of purchasing such
number of ordinary shares shall not exceed the unappropriated profit of the Company. As
at the latest financial year ended 30 April 2017, the audited unappropriated profit of the
Company stood at RM2,221,405;
(iii) the authority conferred by this resolution will commence immediately upon passing of this
resolution and will continue to be in force until:-
(a) at the conclusion of the next Annual General Meeting (“AGM”) of the Company following
the general meeting in which the authorisation is obtained, at which time it shall lapse
unless by ordinary resolution passed at that meeting, the authority is renewed either
unconditionally or subject to conditions; or
(b) the expiration of the period within which the next AGM of the Company is required by law
to be held; or
(c) revoked or varied by ordinary resolution passed by the shareholders of the Company in a
general meeting.
whichever occurs first;
AND THAT upon completion of the purchase(s) of the ordinary shares of the Company, the
Directors of the Company be and are hereby authorised to deal with the ordinary shares so
purchased in the following manners:-
(a) to cancel the ordinary shares so purchased; or
(b) to retain the ordinary shares so purchased as treasury shares for distribution as dividend
to shareholders and/or resell on Bursa Securities or subsequently cancelled; or
(c) to retain part of the ordinary shares so purchased as treasury shares and cancel the
remainder; or
7. PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY
167
SCGM BHD | Annual Report 2017
(d) in any other manner prescribed by the Act, rules, regulations and orders made to the Act,
the Listing Requirements of Bursa Securities and any other relevant authorities for the
time being in force.
AND THAT the Board of the Company be and are hereby authorised to take all such steps as are
necessary or expedient to implement, finalise or to effect the aforesaid share buy-back with full
powers to assent to any conditions, modifications, variations, and/or amendments as may be
required or imposed by the relevant authorities and to do all such acts and things (including
executing all documents) as the Board may deem fit and expedient in the best interest of the
Company.”
8. To transact any other business which may properly be transacted at an AGM for which due
Notice shall have been given.
By Order of the Board
LIM SECK WAH (MAICSA 0799845)
M. CHANDRASEGARAN A/L S. MURUGASU (MAICSA 0781031)
NG CHYE HUAT (MIA 14186)
Company Secretaries
Kuala Lumpur
19 July 2017
NOTES:-
1. For the purpose of determining a member who shall be entitled to attend, speak and vote at the
Tenth AGM, the Company shall be requesting the Record of Depositors as at 4 August 2017. Only
a depositor whose name appears on the Record of Depositors as at 4 August 2017 shall be
entitled to attend the said meeting or appoint proxies to attend, speak and vote on his/her
behalf.
2. A member entitled to attend and vote at the meeting is entitled to appoint up to two proxies to
attend and vote in his/her stead. A proxy need not be a member of the Company.
3. Where a member appoints two proxies, the appointment shall be invalid unless he/she specifies
the proportions of his/her holdings to be represented by each proxy.
4. If the appointer is a corporation, this form must be executed under its Common Seal or under
the hand of its attorney duly authorized.
5. Where a member of the Company is an authorized nominee as defined in accordance with the
Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy but not
more than two proxies for each securities account which it holds and the shares of the Company
standing to the credit of the said securities account.
NOTICE OF TENTH ANNUAL GENERAL MEETING
168
SCGM BHD | Annual Report 2017
6. Where a member of the Company is an exempt authorised nominee which holds ordinary
shares in the Company for multiple beneficial owners in one securities account (“omnibus
account”), there is no limit to the number of proxies which the exempt authorized nominee
may appoint in respect of each omnibus account it holds.
7. The Form of Proxy must be deposited at the Registered Office of the Company at Level 15-2,
Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur not less than 48
hours before the time appointed for holding the meeting or any adjournment thereof.
Explanatory Notes on Special Business
Ordinary Resolution 5 to 7 - Retention of Independent Directors
The Board of Directors has vide the Nomination Committee conducted an assessment of
independence of the following directors who have served as Independent Non-Executive
Directors for a cumulative term of more than nine years and recommended them to continue
to act as Independent Non-Executive Directors based on the following justification:
i) Amrik Singh Harcharan Singh
ii) Tang Nai Soon
iii) Wong Tun Boon
Justifications:-
The Board holds the view that the Independent Directors remain objective and independent in
carrying out his roles and responsibilities as members of the Board and Board Committees.
The length of service does not impair their ability and exercise of independent judgment as
Independent Directors. Therefore, the Board has recommended and supported that the
approval of the shareholders be sought for them to continue to act as the Independent
Non-Executive Director of the Company.
Ordinary Resolution 8 – Authority to issue shares
The Company wishes to renew the mandate on the authority to issue shares pursuant to
Section 75 and 76 of the Companies Act 2016 at the Tenth AGM of the Company.
The Company continues to consider opportunities to broaden its earnings potential. If any of
the expansion/diversification proposals involves the issue of new shares, the Directors,
under certain circumstance when the opportunity arises, would have to convene a general
meeting to approve the issue of new shares even though the number involved may be less
than 10% of the issued share capital.
In order to avoid any delay and costs involved in convening a general meeting to approve such
issue of shares, it is thus considered appropriate that the Directors be empowered to issue and
allot shares at any time to such persons/corporations in their absolute discretion for the
purpose of funding future investment(s), working capital and/or acquisitions.
NOTICE OF TENTH ANNUAL GENERAL MEETING
169
SCGM BHD | Annual Report 2017
During the financial year ended 30 April 2017, 13,200,000 ordinary shares were issued by way
of private placement at an issue price of RM3.20 per share (“Private Placement”) pursuant to
the mandate granted to the Directors at the Extraordinary General Meeting held on 7 October
2016. The total proceeds of RM42,240,000.00 raised from the Private Placement is mainly to
part finance the cost of construction of new plant for the Group.
Ordinary Resolution 9 - Proposed Renewal of Share Buy-Back
The Company has at the Ninth AGM on 2 September 2016, seek for shareholders’ mandate
but has never exercised the power to buy-back shares during the financial year. The mandate
will be expired at the conclusion of the Tenth AGM.
The Board would like to seek for shareholders’ mandate at the Tenth AGM.
This resolution will empower the Directors of the Company to purchase the Company’s shares
up to ten per centum (10%) of the total number of issued shares of the Company by utilising
the funds allocated which shall not exceed the total unappropriated profits of the Company.
This authority, unless revoked or varied at a general meeting, will expire at the conclusion of
the next AGM of the Company.
Further information on the Proposed Renewal of Share Buy-Back are set out in the Share
Buy-Back Statement on pages 170 to 177 in the Annual Report 2017.
NOTICE OF TENTH ANNUAL GENERAL MEETING
170 SHAREBUY-BACK STATEMENT
SCGM BHD | Annual Report 2017
1. DISCLAIMER STATEMENT
Bursa Malaysia Securities Berhad (“Bursa Securities”) has not perused this Share Buy-Back
Statement (“Statement”) prior to its issuance as it is an exempt statement. Bursa Securities
takes no responsibility for the contents of this Statement, makes no representation as to its
accuracy or completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the contents of this
Statement.
2. INTRODUCTION
On 3 July 2017, SCGM Bhd (“SCGM” or “the Company”) announced that the Company
proposes to seek shareholders’ approval for the Proposed Renewal of Share Buy-Back at the
forthcoming Tenth Annual General Meeting (“10th AGM”) of the Company.
The purpose of this Statement is to provide you with the relevant information on the Proposed
Renewal of Share Buy-Back and to seek your approval for the Ordinary Resolution to be tabled
at the forthcoming 10th AGM of the Company to be held at Creator Hotel, Ballroom, 3rd Floor,
Kulai Centre Point, Lot 1566, Batu 20, Jalan Kulai – Air Hitam, 81000 Kulai, Johor Darul Takzim
on Thursday, 10 August 2017 at 2.00 p.m..
SHAREHOLDERS OF SCGM ARE ADVISED TO READ THE CONTENTS OF THIS STATEMENT
CAREFULLY BEFORE VOTING ON THE RESOLUTION TO GIVE EFFECT TO THE PROPOSED
RENEWAL OF SHARE BUY-BACK.
3. DETAILS OF THE PROPOSED RENEWAL OF SHARE BUY-BACK
3.1 At the Ninth Annual General Meeting (“9th AGM”) of the Company held on 2 September
2016, the Company had obtained shareholders’ approval for the authority to purchase
up to ten per centum (10%) of the total number of issued shares of the Company as
quoted on Bursa Securities at any point in time and it is subject to Section 127 of the
Companies Act 2016, the Listing Requirements and any prevailing laws, guidelines, rules
and regulations issued by the relevant authorities at the time of purchase (“the Mandate”).
3.2 The Board proposes to seek approval from the shareholders for renewal of the Mandate at
the forthcoming 10th AGM of the Company.
3.3 The Proposed Renewal of Share Buy-Back will allow the Board to exercise the power of
the Company to purchase its own shares not exceeding 10% of the issued and paid-up
share capital of the Company at any time and it would be effective immediately upon the
passing of the Ordinary Resolution for the Proposed Renewal of Share Buy-Back at the
forthcoming 10th AGM and shall be valid until:-
SCGM BHD | Annual Report 2017
171SHARE BUY-BACK STATEMENT
(a) the conclusion of the next annual general meeting (“AGM”) of the Company
following the general meeting in which the authorisation is obtained, at which time
it shall lapse unless by ordinary resolution passed at the meeting, the authority is
renewed either unconditionally or subject to conditions; or
(b) the expiration of the period within which the next AGM of the Company is required
by law to be held; or
(c) revoked or varied by ordinary resolution passed by the shareholders in a general
meeting;
whichever occurs first.
3.4 As at 15 June 2017, being the latest practicable date, the issued share capital of the
Company is RM108,240,000 comprising 145,200,000 ordinary shares (“SCGM Shares” or
“Shares”). As an illustration, the maximum number of Shares which may be purchased by
the Company will be no more than 14,520,000 Shares based on the issued share capital of
SCGM. There are no treasury shares held as at 15 June 2017.
3.5 Pursuant to the provisions of Paragraph 12.17 of the Main Market Listing Requirements of
Bursa Securities (“Listing Requirements”), the Company may only purchase its own
Shares at a price which is not more than fifteen per centum (15%) above the weighted
average market price of SCGM Shares for the five (5) market days immediately preceding
the date of the purchase.
3.6 Pursuant to the provisions of Paragraph 12.18 of the Listing Requirements, the Company
may only resell the purchased Shares held as treasury shares on the Bursa Securities at:-
(a) a price which is not less than the weighted average market price of SCGM Shares
for the five (5) market days immediately prior to the date of resale; or
(b) a discounted price of not more than five per centum (5%) to the weighted average
market price of SCGM Shares for the five (5) market days immediately prior to the
resale provided that:-
(i) the resale takes place not earlier than thirty (30) days from the date of
purchase; and
(ii) the resale price is not less than the cost of purchase of the shares being
resold.
172
SCGM BHD | Annual Report 2017
SHARE BUY-BACK STATEMENT
4. RATIONALE, POTENTIAL ADVANTAGES AND DISADVANTAGES
The Proposed Renewal of Share Buy-Back will enable the Company to utilise any of its surplus
financial resources to purchase its own Shares from the market.
(1) Potential advantages of the Proposed Renewal of Share Buy-Back are:-
(a) The Company may able to stabilise the supply and demand, as well as the price of
the Shares, thereby support the fundamental value of SCGM Shares.
(b) The purchased Shares could be retained as treasury shares or resold on Bursa
Securities at a higher price with the intention of realising potential capital gain for
the Company without affecting the total issued and paid-up share capital of the
Company. In the event that the treasury shares are distributed as share dividends,
it will serve to reward the shareholders of the Company.
(c) The Proposed Renewal of Share Buy-Back would effectively reduce the number of
Shares carrying voting and participation rights and such, the Earnings Per Share
(“EPS”) of the Company would be increased.
If the Shares so purchased are subsequently cancelled, the Company expects to strengthen
the EPS of the Company and benefit the shareholders of the Company. Shareholders may
enjoy an increase in the value of their investment in the Company arising from the consequent
increase in EPS; and
(2) Potential disadvantages of the Proposed Renewal of Share Buy-Back are:-
(a) It will reduce the financial resources of the Company and its subsidiary (“SCGM
Group” or “the Group”), and hereby may result in the Company foregoing future
investment opportunities that may emerge in the future or deprive the Company
of interest income that can be derived from funds utilised for the Proposed
Renewal of Share Buy-Back; and
(b) The Proposed Renewal of Share Buy-Back if implemented may result in a lower
amount of cash reserves available for distribution in the form of cash dividends to
shareholders.
Nevertheless, the Board will be mindful of the interest of the Company and its shareholders in
undertaking the Proposed Renewal of Share Buy-Back and the subsequent resale of treasury
shares on Bursa Securities.
SCGM BHD | Annual Report 2017
173SHARE BUY-BACK STATEMENT
5. FUNDING
(1) Paragraph 12.10(1) of the Listing Requirements stipulates that purchase by the Company
of its own Shares is restricted to the amount of its unappropriated profit.
The unappropriated profit of the Company was RM2,221,405 based on the latest audited
financial statements as at 30 April 2017 and RM2,185,792 based on the Company’s latest
unaudited management account made up to 31 May 2017. The Board will ensure that the
unappropriated profit of the Company will be sufficient to effect the Proposed Renewal of
Share Buy-Back.
(2) The Proposed Renewal of Share Buy-Back will be funded from internally generated funds
and/or external borrowings, the proportion of which will depend on the quantum of SCGM
Shares to be purchased, the purchase consideration as well as the availability of funds of
SCGM Group at the time of purchase(s).
In the event that the Proposed Renewal of Share Buy-Back is to be financed by external
borrowings, the Company shall ensure that it has sufficient financial capability to repay the
bank borrowings and that the bank borrowings will not have any material impact on the
cash flow of SCGM Group.
(3) The actual number of Shares to be purchased, the aggregate funds to be utilised, impact
on cash flow and the timing of the purchase(s) will depend on amongst others, the
prevailing equity market conditions, sentiments of the stock market, the available financial
resources of the Company and other relevant cost factors at the time of the purchase(s).
6. FINANCIAL EFFECTS OF THE PROPOSED RENEWAL OF SHARE BUY-BACK
Based on the assumption that the Proposed Renewal of Share Buy-Back is carried out in full,
the effect of the Proposed Renewal of Share Buy-Back on the share capital, net assets per
share, working capital, earnings and dividends are set out below:-
6.1 Share Capital
The Proposed Renewal of Share Buy-Back will not have any effect on share capital of the
Company if all the Shares purchased are retained as treasury shares.
In the event that the maximum number of shares authorised under the Proposed Renewal
of Share Buy-Back are purchased and cancelled, the effects on the share capital are
illustrated as follows:-
174
SCGM BHD | Annual Report 2017
SHARE BUY-BACK STATEMENT
However, if all the SCGM Shares so purchased are retained as treasury shares, issued share
capital of SCGM will not be reduced but the rights attached to the treasury shares as to voting,
dividends, and participation in other distributions or otherwise will be suspended.
The said treasury shares shall not be taken into account in calculating the number or
percentage of shares in the Company for any purpose nor for substantial shareholdings or
takeovers, notice of general meeting and the right to requisite meetings, to be counted for
quorum purposes and the result of a vote on a resolution at a general meeting.
6.2 Net Assets (“NA”)
The effects of Proposed Renewal of Share Buy-Back on the consolidated NA per share of the
Group will depend on the purchase price in comparison to the NA per share of the Group at
the time that the purchase is made.
In the event that the SCGM Shares purchased under the Proposed Renewal of Share Buy-Back
are cancelled by the Company, the consolidated NA per share of SCGM would improve if the
purchase price of such SCGM Shares is below the NA per share of the Company and
vice-versa.
If the treasury shares are resold in the open market, the consolidated NA per share of SCGM
may increase if the Company realises a gain from the resale, and vice-versa. If the treasury
shares are distributed as share dividends, the NA of SCGM Group would be accordingly
decreased by the cost of acquisition of the treasury shares.
6.3 Working Capital
The Proposed Renewal of Share Buy-Back, if exercised, will result in an outflow of cash and
thereby reduce the working capital of SCGM Group, the quantum of which is dependent on the
purchase price of SCGM Shares and the number of SCGM Shares to be purchased and the
funding cost, if any. However, the working capital and cash flow of the Company will increase
upon reselling the Purchased Shares which are retained as treasury shares. Again, the quantum
of the increase in the working capital and cash flow will depend on the actual selling price of
the treasury shares and the number of treasury shares resold.
No. of ordinary shares
Existing as at 15 June 2017
Less: Treasury Shares as at 15 June 2017
Less: Proposed Share Buy-Back
Resultant issued share capital afterthe Proposed Share Buy-Back
145,200,000
-
(14,520,000)
130,680,000
175SHARE BUY-BACK STATEMENT
6.4 Earnings
The effect of the Proposed Renewal of Share Buy-Back on the earnings of the SCGM Group will
depend on the purchase price and the number of Shares purchased. If the Shares so purchased
are treated as treasury shares, the extent of the effect on the earnings of the SCGM Group will
depend on the actual selling price, the number of treasury shares resold and the effective gain
or interest savings arising therefrom.
6.5 Dividends
The Proposed Renewal of Share Buy-Back is not expected to have any effect on the policy for
the Board in recommending dividends for the year ending 30 April 2018. The decision to declare
and pay dividends in the future would depend on, amongst others, the profitability and cash
flow position of the Company.
7. SHAREHOLDINGS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS
Based on the Records of Depositors as at 15 June 2017 and assuming that the Company acquires
the full amount of SCGM Shares authorised under the Proposed Renewal of Share Buy-Back and
there is no change in the number of shares held by the Directors and/or substantial shareholders
of SCGM as at 15 June 2017 and with the assumption that the Company does not purchase the
Directors’ and/or major shareholders’ shares, for the purpose of illustration only, the effect will
be as follows:-
No. of ordinary shares
Name ofSubstantialShareholders
SCGM Lee Sdn Bhd
Kumpulan Wang
Persaraan
(Diperbadankan)
Dato' Sri
Lee Hock Seng
Dato' Sri
Lee Hock Chai
Dato' Sri
Lee Hock Guan
Lee Hock Meng
22,961,500
6,024,650
13,114,311
9,353,429
9,353,433
8,893,429
22,961,500
6,024,650
13,114,311
9,353,429
9,353,433
8,893,429
-
1,771,100(2)
22,961,500(1)
22,961,500(1)
22,961,500(1)
22,961,500(1)
-
1,771,100(2)
22,961,500(1)
22,961,500(1)
22,961,500(1)
22,961,500(1)
15.81
4.15
9.03
6.44
6.44
6.12
17.57
4.61
10.04
7.16
7.16
6.81
-
1.22
15.81
15.81
15.81
15.81
-
1.36
17.57
17.57
17.57
17.57
Before the Proposed Renewal ofShare Buy-Back Authority
Direct Interest
No. ofShares
No. ofShares% %
Deemed Interest Direct Interest
No. ofShares
No. ofShares% %
Deemed Interest
After the Proposed Renewal of ShareBuy-Back Authority assuming 10%of the share capital was bought backand cancelled
SCGM BHD | Annual Report 2017
176
SCGM BHD | Annual Report 2017
SHARE BUY-BACK STATEMENT
8. PUBLIC SHAREHOLDINGS SPREAD
As at 15 June 2017, the public shareholdings spread of the Company has 55.89% in the hand of
1,622 shareholders. Assuming that the proposed Share Buy-Back is carried out in full and
SCGM Shares so purchased were all cancelled, the public shareholdings of the Company would
be reduced to approximately 50.98%. The Board is mindful and will endeavour to ensure that
it will not purchase its own Shares which will result in SCGM’s public shareholdings spread
falling below the minimum requirement of twenty five per centum (25%) of its total listed
Shares.
9. PURCHASE OR RESALE OR CANCELLATION OF TREASURY SHARES DURING THE
FINANCIAL YEAR ENDED 30 APRIL 2017
During the financial year, the Company did not purchase its own Shares from the open market.
The Company has not exercised the power to buy-back shares since the mandate from the last
year AGM.
Note:
(1) Deemed interested via his direct interest in SCGM Lee Sdn Bhd. (2) Deemed interested via KWAP’s Fund Manager (3) Deemed interested by virtue of the shareholding of his spouse pursuant to Section 59(11)(c) of the Companies Act 2016. (4) Sat Bir Kaur Ginder Singh is the spouse of Amrik Singh Harcharan Singh.
No. of ordinary shares
Name of Directors Dato' Sri
Lee Hock Seng
Dato' Sri
Lee Hock Chai
Dato' Sri
Lee Hock Guan
Lee Hock Meng
Amrik Singh
Harcharan Singh
Tang Nai Soon
Wong Tun Boon
Name of personconnected
Sat Bir Kaur GinderSingh
13,114,311
9,353,429
9,353,433
8,893,42963,000
110,000180,000
24,000(4) 24,000(4)0.02 0.02
13,114,311
9,353,429
9,353,433
8,893,42963,000
110,000180,000
22,961,500(1)
22,961,500(1)
22,961,500(1)
22,961,500(1)
24,000(3)
- -
22,961,500(1)
22,961,500(1)
22,961,500(1)
22,961,500(1)
24,000(3)
- -
9.03
6.44
6.44
6.120.04
0.080.12
10.04
7.16
7.16
6.810.05
0.080.14
15.81
15.81
15.81
15.81 0.02
--
17.57
17.57
17.57
17.57 0.02
- -
Before the Proposed Renewal ofShare Buy-Back Authority
Direct Interest
No. ofShares
No. ofShares% %
Deemed Interest Direct Interest
No. ofShares
No. ofShares% %
Deemed Interest
After the Proposed Renewal of ShareBuy-Back Authority assuming 10%of the share capital was bought backand cancelled
- - - -
SCGM BHD | Annual Report 2017
177SHARE BUY-BACK STATEMENT
10. IMPLICATIONS RELATING TO THE CODE
The Malaysian Code on Take-Over and Mergers, 2016, as amended from time to time including
any re-enactment thereof (“Code”) requires a person, together with persons acting in concert
with him, holding more than 33% but less than 50% of the voting shares of a company and who
as a result of a purchase by the company of its own shares, increase his holding in any period of
6 months by an additional 2% or more of the voting shares of the company to undertake a
mandatory offer on the balance of the shares not already owned.
SCGM does not intend to undertake the Proposed Renewal of Share Buy-Back such that it will
trigger any obligation to undertake a mandatory offer pursuant to the Code, assuming the
Proposed Renewal of Share Buy-Back is implemented in full within a period of 6 months.
11. APPROVALS REQUIRED FOR THE PROPOSED RENEWAL OF SHARE BUY-BACK
The Proposed Renewal of Share Buy-Back is subject to the approval of the shareholders of
SCGM at the forthcoming 10th AGM.
12. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS
Save for the inadvertent increase in percentage of shareholdings and/or voting rights of
shareholders of the Company as a result of the Proposed Renewal of Share Buy-Back, none of
the Directors, substantial shareholders of SCGM and/or persons connected to them have any
interest, direct or indirect, in the Proposed Renewal of Share Buy-Back or the resale of treasury
shares, if any.
13. DIRECTORS’ RECOMMENDATION
The Board, having considered all aspects of the Proposed Renewal of Share Buy-Back, are of the
opinion that the Proposed Renewal of Share Buy-Back is fair, reasonable and in the best interest
of the Company and its shareholders. Therefore, the Board recommends that you vote in favour
of the Ordinary Resolution pertaining to the Proposed Renewal of Share Buy-Back at the
forthcoming 10th AGM of the Company.
14. DIRECTORS’ RESPONSIBILITY STATEMENT
This Statement has been seen and approved by the Board and they collectively and individually
accept full responsibility for the accuracy of the information given and confirm that after having
made all reasonable enquiries and to the best of their knowledge and belief, there are no other
facts, the omission of which would make any information, data or statement herein misleading.
This Share Buy-Back Statement is dated 19 July 2017.
178
SCGM BHD | Annual Report 2017SCGM BHD | Annual Report 2017
LIST OFPROPERTIES
LSSPI
LSSPI
LSSPI
LSSPI
LSSPI
LSSPI
02-09-1991
16-01-2004
06-08-2009
18-04-2016
18-04-2016
18-04-2016
3,096
4,365
10,254
3,760
4,473
4,695
136,397/
70,000
138,026/
94,613
132,041
227,334
270,616
337,050
Leasehold
(99 years
expiring on
9.8.2090)
Freehold
Freehold
Freehold
Freehold
Freehold
14 years/
Certificate of
Fitness for
Occupation
dated
10.7.2002
9 year/
Certificate of
Fitness for
Occupation
dated
28.03.2007
6 years
Not applicable
Not applicable
Not applicable
Manufacturing /
Industrial Land /
Factory
Manufacturing /
Industrial Land /
Single Storey
Factory & Double
Storey Office, Store
& TNB substation
Freehold
agricultural land
(Conversion to
Industrial land) /
Factory, Office &
TNB substation
Freehold agricultural
land (Conversion to
Industrial land) /
Proposed New
Factory
Freehold agricultural
land (Conversion to
Industrial land) /
Proposed New
Factory
Freehold agricultural
land (Conversion to
Industrial land) /
Proposed New
Factory
Registered
Owners
Title/Location/
Postal Address
Date of
Acquisition
Land area /
Built up area
(sq ft)
Description /
Existing Use
Tenure
(years)
Approximate
age of buildings /
Date of Issuance
of Certificate
of Fitness
Audited net
book value
as at 30
April 2017
RM’000
LANDED PROPERTIES OWNED BY OUR GROUP
H.S. (M) 2452, Lot
3304, Batu 24, Jalan
Air Hitam-Johor Bahru,
Mukim Senai-Kulai,
Daerah Kulai, Negeri
Johor Darul Takzim
Geran 694, Lot 3316,
Batu 24, Jalan Johor
Bahru-Ayer Hitam,
Mukim Senai-Kulai,
Daerah Kulai, Negeri
Johor Darul Takzim
Geran Mukim 795,
Lot 3303, Mukim Senai,
Daerah Kulai, Negeri
Johor Darul Takzim
Geran Mukim 487
Lot 852, Mukim Senai,
Daerah Kulai, Negeri
Johor Darul Takzim
Geran Mukim 497
Lot 853, Mukim Senai,
Daerah Kulai, Negeri
Johor Darul Takzim
Geran Mukim 486
Lot 869, Mukim Senai,
Daerah Kulai, Negeri
Johor Darul Takzim
The summary of the information on landed properties owned by our Group as at 30 April 2017 are set
out below:
SCGM BHD(Company No. 779028 H)
(Incorporated in Malaysia)
I/We I.C No./Co.No./CDS No.:(Full name in block letters)
Of (Full address)being a member/members of SCGM BHD hereby appoint the following person(s):-
1.
2.
FORM OF PROXY
(please refer to the notes below)
No. of ordinary shares held
Name of proxy, NRIC No. & Address
FIRST PROXY SECOND PROXY
For AgainstFor Against
% of shares to berepresented by proxy
or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Tenth
Annual General Meeting of the Company to be held at Creator Hotel, Ballroom, 3rd Floor, Kulai Centre Point, Lot.1566,
Batu 20, Jalan Kulai-Air Hitam, 81000, Kulai, Johor on Thursday, 10 August 2017 at 2.00 p.m. My/our proxy is to vote as
indicated below:-
(Please indicate with a “ ” or “ ” in the space provided how you wish your vote to be cast. If no instruction as to
voting is given, the proxy will vote or abstain from voting at his/her discretion. All votings will be conducted by way of
poll.
NOTES:-
1. For the purpose of determining a member who shall be entitled to attend, speak and vote at the Tenth AGM, the Company shall be requesting the Record of Depositors as at 4 August 2017. Only a depositor whose name appears on the Record of Depositors as at 4 August 2017 shall be entitled to attend the said meeting or appoint proxies to attend, speak and vote on his/her behalf.
2. A member entitled to attend and vote at the meeting is entitled to appoint up to two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.
3. Where a member appoints two proxies, the appointment shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy.
4. If the appointer is a corporation, this form must be executed under its Common Seal or under the hand of its attorney duly authorized.
5. Where a member of the Company is an authorized nominee as defined in accordance with the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.
6. Where a member of the company is an exempt authorised nominee which holds ordinary shares in the company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorized nominee may appoint in respect of each omnibus account it holds.
7. The Form of Proxy must be deposited at the Registered Office of the Company at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
Dated this ……………....….........….. day of ……………....….........….. 2017 ………....….…………………..………………………….......Signature/Common Seal
Ordinary Resolution 1 – Directors’ fees
Ordinary Resolution 2 – Re-election of Lee Hock Meng
Ordinary Resolution 3 – Re-election of Tang Nai Soon
Ordinary Resolution 4 – Re-appointment of Messrs SJ GrantThornton as Auditors
Ordinary Resolution 5 – To retain Amrik Singh HarcharanSingh as Independent Non-Executive Director
Ordinary Resolution 6 – To retain Tang Nai Soon asIndependent Non-Executive Director
Ordinary Resolution 7 – To retain Wong Tun Boon asIndependent Non-Executive Director
Ordinary Resolution 8 – Authority to issue shares
Ordinary Resolution 9 – Proposed Renewal of Share Buy-Back
1st fold here
2nd Fold here
AffixStamp
Fold this flap for sealing
Level 15-2, Bangunan Faber Imperial Court,Jalan Sultan Ismail,50250 Kuala Lumpur.
THE COMPANY SECRETARY
SCGM BHD (779028-H)