Annual Report 2019ir.chartnexus.com/perisai/docs/AR/2019.pdfAbout PerisAi 02 Corporate Information 03 Corporate Structure 04 5-Year Financial Highlights leAdershiP 06 Board of Directors

Annual Report 2019

About PerisAi

02 Corporate Information

03 Corporate Structure

04 5-Year Financial Highlights

leAdershiP

06 Board of Directors

12 Management Team

PersPective

14 Chairman’s Statement

16 Management Discussion and Analysis

About usPerisai Petroleum Teknologi Bhd. (“Perisai”) is a Malaysia-based upstream oil & gas service provider and is listed on the Main Market of Bursa Malaysia Securities Berhad. The Perisai Group focuses on the two (2) core segments, namely offshore drilling and offshore production. During the current financial year, certain non core assets have been disposed of as part of our restructuring plan.

The Enterprise 3, built in 2008, is an ABS Class A1 derrick lay barge capable of installing offshore structures and pipelines. The Enterprise 3 was disposed of in July 2019.

Perisai’s jack-up rig, Perisai Pacific 101 is designed and equipped to drill high pressure and high temperature wells as deep as 30,000 feet. It is also capable of operating in water depths of up to 400 feet, performing offline activity while drilling, and can be jacked-up with full pre-loading tanks. It is equipped with full service accommodation for 150 personnel.

offshore drilling division

Perisai’s floating, production, storage & offloading (“FPSO”) vessel, Perisai Kamelia, is a gas export FPSO that can support gas export of 175MMscfd @ 2000psi with 275,000 bbls storage capacity.

The Rubicone is a BV class mobile offshore production unit (“MOPU”), converted in 2011 from a BMC-250 Mat Supported Jack-Up Platform. Weighing 5,113 tonnes, it has a daily production capacity of 165 MMscfd of gas and 7,306 barrels of fluid. The Rubicone was disposed of in June 2019.

offshore production division

Perisai owns a fleet of nine offshore support vessels (“OSV”) supporting the offshore development and production of oil and gas fields. Our fleet comprises three anchor handling tug supply vessels, three anchor handling tugs and three crew boats.

offshore support division

offshore construction division

contentssustAinAbility & governAnce

22 Sustainability Statement

38 Corporate Governance Overview Statement

53 Nomination Committee Report

56 Statement on Risk Management and Internal Control

61 Audit Committee Report

64 Additional Compliance Information

65 Statement of Directors’ Responsibility

finAnciAls

67 Directors’ Report

74 Statements of Profit or Loss and Other Comprehensive Income

76 Statements of Financial Position

78 Statements of Changes in Equity

81 Statements of Cash Flows

85 Notes to the Financial Statements

182 Statement by Directors

182 Statutory Declaration

183 Independent Auditors’ Report

other informAtion

187 Analysis of Shareholdings

189 Thirty (30) Largest Shareholders

191 Notice of Sixteenth Annual General Meeting

• Form of Proxy

02

PERISAI PETROLEUM TEKNOLOGI BHD. (632811-X)

corPorAte informAtion

Audit committeeDato’ Yogesvaran A/L T. Arianayagam (Chairman)Dato’ Anwarrudin Bin Ahamad OsmanChan Feoi Chun

remunerAtion committeeChan Feoi Chun (Chairman)Dato’ Yogesvaran A/L T. ArianayagamDato’ Anwarrudin Bin Ahamad Osman

nominAtion committeeDato’ Yogesvaran A/L T. Arianayagam (Chairman)Dato’ Anwarrudin Bin Ahamad OsmanDato’ Dr. Mohamed Ariffin Bin Hj. Aton

emPloyees’ shAre oPtion scheme (esos) committeeDato’ Anwarrudin Bin Ahamad Osman (Chairman)Datuk Zainol Izzet Bin Mohamed IshakDato’ Yogesvaran A/L T. ArianayagamDato’ Dr. Mohamed Ariffin Bin Hj. AtonChan Feoi Chun

senior indePendent director in chArge of shAreholder communicAtionDato’ Yogesvaran A/L T. ArianayagamE-Mail : [email protected]

comPAny secretAriesTai Yit Chan (MAICSA 7009143)Tan Ai Ning (MAICSA 7015852)

registered office12th floor Menara Symphony No. 5, Jalan Professor Khoo Kay Kim Seksyen 13 46200 Petaling Jaya Selangor Darul EhsanTel : 03-7890 4800Fax : 03-7890 4650Website : www.boardroomlimited.com

PrinciPAl PlAce of businessSuite 3A-17, Level 17, Block 3APlaza Sentral, Jalan Stesen Sentral 550470 Kuala LumpurTel : 03-2278 1133Fax : 03-2278 1155Website : www.perisai.bizE-Mail : [email protected]

shAre registrArMega Corporate Services Sdn. Bhd.Level 15-2Bangunan Faber Imperial CourtJalan Sultan Ismail50250 Kuala LumpurTel : 03-2692 4271Fax : 03-2732 5388

AuditorsBaker Tilly Monteiro Heng PLT (LLP0019411-LCA & AF 0117)Baker Tilly MH TowerLevel 10, Tower 1, Avenue 5Bangsar South City59200 Kuala LumpurTel : 03-2297 1000Fax : 03-2282 9980

stocK eXchAnge listingMain Market of Bursa MalaysiaSecurities BerhadStock Name : PERISAIStock Code : 0047

boArd of directors

dato’ Anwarrudin bin Ahamad osman Independent Non-Executive Chairman

datuk Zainol izzet bin mohamed ishak Managing Director

dato’ yogesvaran A/l t. Arianayagam Independent Non-Executive Director

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton Non-Independent Non-Executive Director

chan feoi chun Non-Independent Non-Executive Director

03

ANNUAL REPORT 2019

corPorAte structure

PerisAi Petroleum teKnologi bhd.

100% Perisai Drilling Holdings Sdn Bhd

100% Perisai Production Holdings Sdn Bhd

100% Perisai Capital (L) Inc

100% Alpha Perisai Sdn Bhd*

100% Corro-Pro (L) Inc

100% Corro-Shield (SEA) Sdn Bhd

100% Romilly (M) Sdn Bhd

51% Intan Offshore Sdn Bhd

51% SJR Marine (L) Ltd

51% Perisai Offshore Sdn Bhd

51% Larizz Energy Services Sdn Bhd

40% Larizz Petroleum Services Sdn Bhd

32% Phoenix Energy Sdn Bhd

100% Perisai Drilling Services Sdn Bhd

100% Perisai Drilling Operations Sdn Bhd

100% Perisai Drilling Sdn Bhd

100% Perisai Pacific 101 (L) Inc

100% Perisai Pacific 103 (L) Inc

100% Intan Offshore (L) Ltd

100% Lewek Swift Shipping Pte Ltd

100% Sarah Pearl Shipping Pte Ltd

100% Lewek Mallard Offshore Sdn Bhd

100% Jade Offshore Sdn Bhd

100% Lewek Eagle Offshore Sdn Bhd

100% Perisai Production Services Sdn Bhd

100% Perisai Production Operations Sdn Bhd

100% Garuda Energy (L) Inc

51% Emas Victoria (L) Bhd

51% Victoria Production Services Sdn Bhd

* In the process of winding up by court

04


Audited2014 2015 2017 2018 2019

RM'000 RM'000 RM'000 RM'000 RM'000

Revenue 122,133 214,784 275,587 127,180 116,906

Profit/(loss) after tax 27,258 (688,985) (606,953) (469,253) (237,053)

Profit/(loss) attributable to the owners of Company 13,726 (706,318) (560,431) (455,623) (226,603)

Total assets 2,514,788 2,273,780 1,718,670 1,129,142 929,880

Total borrowings 1,158,077 1,341,495 1,317,964 1,229,496 1,225,582

Total equity/(capital deficiencies) 1,291,716 845,214 250,903 (258,582) (504,891)

Equity attributable to owners of the Company 1,170,082 677,614 132,061 (356,825) (593,540)

Share capital^ 119,312 120,461 770,888 770,888 770,888

Number of ordinary shares in issue*('000) 1,192,725 1,204,207 1,260,472 1,260,472 1,260,472

Weighted average number of ordinary shares in issue*('000) 1,163,891 1,193,120 1,241,525 1,260,472 1,260,472

Basic earnings per share/(loss per share) (sen)** 1.18 (59.20) (45.14) (36.15) (17.98)

Net assets/(liabilities) per share (RM)*** 0.98 0.56 0.10 (0.28) (0.47)

Gearing ratio (times)**** 0.99 1.98 9.98 N/A N/A

^ the new Companies Act 2016 ("the Act"), which came into effect on 31 January 2017, abolished the concept of authorised share capital and par value of share capital. Consequently, the amount standing to the credit of the share premium account of RM640,107,567 became part of the Company's share capital pursuant to the transitional provisions set out in Section 618(2) of the Act

* less treasury shares of 400,000** computed based on weighted average number of ordinary shares in issue as at financial year end*** computed based on number of ordinary shares in issue as at financial year end**** computed based on borrowings to equity attributable to owners of the Company**** N/A due to equity attributable to owners of the Company being negative

5-yeAr finAnciAl highlights

05

ANNUAL REPORT 2019

(226,603)Profit/(loss) attributable tothe owners of company (rm’000)

(504,891)Total equity/(capital deficiencies)(rm’000)

13,726

(706,318)(560,431)

(226,603)

(455,623)

2014 2015 2017 2018 2019 2014 2015 2017 2018 2019

116,906 929,880revenue (rm’000) total assets (rm’000)

2014 2015 2017 2018 2019

122,133

214,784

275,587

127,180116,906

2014 2015 2017 2018 2019

2,514,788

2,273,780

1,718,670

1,129,142

929,880

1,291,716

250,903

845,214

(258,582)

(504,891)

5-YEAR FINANCIAL HIGHLIGHTS

06


Working experience and OccupationDato’ Anwarrudin Bin Ahamad Osman (“Dato’ Anwarrudin”) joined the Malaysian Civil Service in 1966 and served in the Ministry of Defence. In May 1975, he joined Petronas and served in various capacities until his retirement in 1998 as Managing Director/Chief Executive Officer of Petronas Dagangan Berhad.

Dato’ Anwarrudin held various senior positions during his 23 year career in Petronas. He was the General Manager of Corporate Planning Division in 1984, General Manager, Human Resources Management Division in 1985 before heading the International Marketing Division of Petronas responsible for sales of crude and products and processing of crude.

Dato’ Anwarrudin was a member of the Asean Council on Petroleum (ASCOPE) technical committee for several years and spoke at ASCOPE oil marketing management seminars and local seminars on prospects and challenges in the marketing and distribution industry. He represented Malaysia in the OPEC/NON-OPEC dialogues from 1989-1991 and sat on the Petronas Management Committee from 1992 to 1998.

directorship of other Public CompaniesNone

Family relationship with any director and/or any Major Shareholder of the CompanyDato’ Anwarrudin has no family relationship with other Directors or major shareholders of the Company.

Conflict of interest with the CompanyThere is no conflict of interest between Dato’ Anwarrudin and the Company.

Conviction for any offences within the past 5 years other than traffic offencesDato’ Anwarrudin has had no conviction for any offences within the past five years and no public sanctions by any regulatory bodies during the financial year ended 30 June 2019 other than for traffic offences, if any.

Number of Board Meetings Attended from 1 July 2018 to 30 June 2019During the financial year, Dato’ Anwarrudin attended all eight meetings of the Board.

Shareholdings in the CompanyHe does not hold any shares in the Company.

Independent Non-Executive Chairman

dAtO’ ANWARRudiN BiN AHAMAd OSMAN

Age Gender Nationality76 male malaysian

Qualification• Bachelor of Arts, University of Malaya

Position on the Board• Independent Non-Executive Chairman

date Appointed to the Board• 1 July 2012• Re-designated to Independent Non-Executive

Chairman on 15 April 2015

Membership of Board Committees• Chairman of the ESOS Committee • Member of the Nomination Committee• Member of the Remuneration Committee• Member of the Audit Committee

boArd of directors

07

ANNUAL REPORT 2019

Working experience and OccupationDatuk Zainol Izzet Bin Mohamed Ishak (“Datuk Izzet”) began his career in 1982 as a Consultant with Hymans Robertson & Co., Consulting Actuaries, London. Upon returning to Malaysia in 1985, Datuk Izzet joined Messrs Kassim Chan & Co. as a management consultant. He left the field of consultancy in 1988 to join Seccolor (M) Industries as its General Manager, a position he held until 1992.

Datuk Izzet joined the Sapura Group of Companies in 1992 as General Manager of Corporate Planning, responsible for the strategic planning and business development activities of the Group. In 1994, he became Chief Executive Officer of Sapura Digital Sdn Bhd, one of the pioneer operators of digital cellular phone (ADAM) in the country. Following the sale of Sapura Digital Sdn Bhd by Sapura Group, he was appointed Senior Vice-President of the Energy Division within the Sapura Group before assuming the position of Chief Executive Officer of SapuraCrest Petroleum Berhad on 7 July 2003, a position he held until 31 January 2010.


Family relationship with any director and/or any Major Shareholder of the CompanyDatuk Izzet has no family relationship with other Directors or major shareholders of the Company.

Conflict of interest with the CompanyThere is no conflict of interest between Datuk Izzet and the Company.

Conviction for any offences within the past 5 years other than traffic offencesDatuk Izzet has had no conviction for any offences within the past five years and no public sanctions by any regulatory bodies during the financial year ended 30 June 2019 other than for traffic offences, if any.

Number of Board Meetings Attended from 1 July 2018 to 30 June 2019During the financial year, Datuk Izzet attended all eight meetings of the Board.

Shareholdings in the CompanyHis shareholdings is disclosed at page 188 of the Annual Report.

Managing Director

dAtuK ZAiNOL iZZet BiN MOHAMed iSHAK


Qualifications• BA in Actuarial Studies, Macquarie University,

Sydney, Australia• Master in Business Administration, The Cranfield

Institute of Technology, United Kingdom

Position on the Board• Managing Director

date Appointed to the Board• 13 April 2010• Re-designated to Managing Director on 21 April

2010

Membership of Board Committees• Member of the ESOS Committee

BOARD OF DIRECTORS

08


Working experience and OccupationDato’ Dr. Mohamed Ariffin Bin Hj. Aton (“Dato’ Ariffin”) started his professional career in 1970 as a Process Engineer with Esso Refinery based in Port Dickson and later joined the academia as a Lecturer with Universiti Kebangsaan Malaysia (“UKM”). After numerous appointments, Dato’ Ariffin left UKM in 1989 to be part of Petronas Research & Scientific Services Sdn. Bhd. (“PRSS”) as the Deputy Director, Downstream. Upon the corporatisation of PRSS in 1994, he was appointed as PRSS’s Managing Director/Chief Executive Officer. He was the President and Chief Executive Officer of SIRIM Berhad from 1996 till his retirement on 1 September 2007.


Family relationship with any director and/or any Major Shareholder of the CompanyDato’ Ariffin has no family relationship with other Directors or major shareholders of the Company.

Conflict of interest with the CompanyThere is no conflict of interest between Dato’ Ariffin and the Company.

Conviction for any offences within the past 5 years other than traffic offencesDato’ Ariffin has had no conviction for any offences within the past five years and no public sanctions by any regulatory bodies during the financial year ended 30 June 2019 other than for traffic offences, if any.

Number of Board Meetings Attended from 1 July 2018 to 30 June 2019During the financial year, Dato’ Ariffin attended six out of eight meetings of the Board.


Non-Independent Non-Executive Director

dAtO’ dR. MOHAMed ARiFFiN BiN HJ. AtON


Qualifications• BEng (Hons) Chemical Engineering, University of

Surrey, United Kingdom• PhD in Chemical Engineering, University of

Leeds, United Kingdom

Membership of Associations• Fellow of the Institute of Engineers Malaysia• Chartered Member of Institute of Chemistry

Malaysia• Fellow of the Malaysian Scientific Association

Position on the Board• Non-Independent Non-Executive Director

date Appointed to the Board• 1 June 2004

Membership of Board Committees• Member of the Nomination Committee• Member of the ESOS Committee

BOARD OF DIRECTORS

09

ANNUAL REPORT 2019

Working experience and OccupationDato’ Yogesvaran A/L T. Arianayagam (“Dato’ Yogesvaran”) started his career as a Management Accountant with British Steel Corporation, England in 1974. Upon his return to Malaysia in 1976, he joined Aseambankers Malaysia Berhad and was the Senior Manager and Head of the Corporate Finance Division. In 1984, he left Aseambankers Malaysia Berhad and joined Sampoorna Holdings Berhad as its Chief Executive Officer. In November 1989, he joined Murnivest Sdn. Bhd. as Managing Director and currently he is the Managing Director of Asian Pac Management Sdn. Bhd., a position he holds since January 2003. Dato’ Yogesvaran brings along 30 years of experience in Corporate Finance, Financial Management and in Mergers and Acquisitions.

Dato’ Yogesvaran has vast experience in corporate advisory work and corporate restructuring exercises.


Family relationship with any director and/or any Major Shareholder of the CompanyDato’ Yogesvaran has no family relationship with other Directors or major shareholders of the Company.

Conflict of interest with the CompanyThere is no conflict of interest between Dato’ Yogesvaran and the Company.

Conviction for any offences within the past 5 years other than traffic offencesDato’ Yogesvaran has had no conviction for any offences within the past five years and no public sanctions by any regulatory bodies during the financial year ended 30 June 2019 other than for traffic offences, if any.

Number of Board Meetings Attended from 1 July 2018 to 30 June 2019During the financial year, Dato’ Yogesvaran attended all eight meetings of the Board.


Independent Non-Executive DirectordAtO’ YOGeSVARAN A/L t. ARiANAYAGAM


Qualification• Chartered Institute of Management Accountants,

UK (CIMA)

Membership of Associations• Fellow of the Chartered Institute of Management

Accountants, UK (FCMA)• Chartered Accountant with Malaysian Institute of

Accountants (CA)• Associate Member of the Chartered Management

Institute, UK (MCMI)• Member of the Chartered Global Management

Accountants, USA (CGMA)

Position on the Board• Independent Non-Executive Director

date Appointed to the Board• 30 October 2003• Re-designated to Independent Non-Executive

Director on 29 March 2011

Membership of Board Committees• Chairman of the Audit Committee• Chairman of the Nomination Committee• Member of the Remuneration Committee• Member of the ESOS Committee

BOARD OF DIRECTORS

10


Working experience and OccupationMr. Chan Feoi Chun (“Mr. Chan”) has retired end of November 2017 as the Executive Director of SGI Vacation Club Berhad. He held various senior positions in PJD Holdings Berhad Group of Companies (“PJD Group”). Prior to joining the PJD Group in 1994, he held senior management positions in financial services group of MBF Holdings. He has international working experiences in Britain and Thailand and has more than 34 years of experience in areas of financial management and business re-engineering. Mr. Chan was a past President of CIMA Malaysia Division and also a past Council Member of MIA. Presently he is also an elected Council Member of CIMA UK.


Family relationship with any director and/or any Major Shareholder of the CompanyMr. Chan has no family relationship with other Directors or major shareholders of the Company.

Conflict of interest with the CompanyThere is no conflict of interest between Mr. Chan and the Company.

Conviction for any offences within the past 5 years other than traffic offencesMr. Chan has had no conviction for any offences within the past five years and no public sanctions by any regulatory bodies during the financial year ended 30 June 2019 other than for traffic offences, if any.

Number of Board Meetings Attended from 1 July 2018 to 30 June 2019During the financial year, Mr. Chan attended all eight meetings of the Board.


Non-Independent Non-Executive DirectorMR. CHAN FeOi CHuN


Qualifications• Chartered Institute of Management Accountants,

UK (CIMA)• Institute of Chartered Secretaries and

Administrators, UK (ICSA)• Master of Business Studies (Banking & Finance),

University College Dublin, Ireland

Membership of Associations• Fellow of the Chartered Institute of Management

Accountants, UK (FCMA)• Chartered Accountant with Malaysian Institute of

Accountants (MIA)• Chartered Global Management Accountants

Position on the Board• Non-Independent Non-Executive Director

date Appointed to the Board• 6 June 2005

Membership of Board Committees• Chairman of the Remuneration Committee• Member of the Audit Committee• Member of the ESOS Committee

BOARD OF DIRECTORS

11

ANNUAL REPORT 2019

12


dAtuK ZAinol iZZet bin mohAmed ishAK Managing Director

Age 58 Malaysian Male

Date of Appointment : 21 April 2010

Qualifications & ExperienceDatuk Zainol Izzet Bin Mohamed Ishak (“Datuk Izzet”) is our Managing Director and had joined Perisai in 2010. Datuk Izzet began his career in 1982 as a consultant with Hymans Robertson & Co before moving on to Messrs. Kassim Chan & Co in 1985 and subsequently to Seccolor (M) Industries in 1988. Datuk Izzet joined the Sapura Group in 1992 and spent eighteen years in various senior leadership roles there. His last held position before leaving the Sapura Group in 2010 was as the Chief Executive Officer of SapuraCrest Petroleum Berhad. Datuk Izzet is a graduate of Macquarie University, holding a BA in Actuarial Studies. He also holds a MBA from The Cranfield Institute of Technology, United Kingdom.

berAmKhAn bin tAmbiKhAn Chief Operating Officer


Date of Appointment : 1 January 2015

Qualifications & ExperienceEncik Beramkhan Bin Tambikhan (“Beram”) is our Chief Operating Officer and Head of Drilling of Perisai. He joined Perisai in 2012. Beram started his career in 1989 with Sarawak Shell Berhad/Sabah Shell Petroleum Company as Wellsite Petroleum Engineer & Assistant Drilling Supervisor rising to the role of Senior Production Technologist & Assistant Field Coordinator. After a six-year tenure, Beram moved to Crest Petroleum Berhad where he held various positions both domestically and internationally such as Senior Production Technologist of Uzmal Oil, Manager of Drilling & Production of PT Petronusa Bumibakti, Senior Manager of Project Services and Senior Manager of Special Projects (2003-2005). In 2005, Beram left SapuraCrest Petroleum Berhad to join UMW Standard Drilling Sdn Bhd/UMW JDC Drilling Sdn Bhd as Senior General Manager. Beram’s last held position in UMW was as Senior General Manager, Group Corporate Development Division. Beram holds a BSc in Petroleum Engineering from University Technology of Malaysia.

yeo PecK chin

Chief Financial Officer


Date of Appointment : 1 July 2008

Qualifications & ExperienceMr. Yeo Peck Chin (“Yeo”) is our Chief Financial Officer. Yeo started his career in 1992 with an established local audit firm, Messrs Azman, Wong, Salleh & Co. In 1994, Yeo moved to Hong Leong Property Management Co Sdn Bhd, a property management arm of Hong Leong Properties Berhad, as an Assistant Accountant rising to the position of Finance Manager. In 1997, he joined Corroless (M) Sdn Bhd where he took up the post of Assistant General Manager – Finance. He joined Perisai in 2004. Yeo is a fellow member of Association of Chartered Certified Accountants (FCCA) and a member of the Malaysian Institute of Accountants (MIA).

mAnAgement teAm

13

ANNUAL REPORT 2019

choW hAu mun, dAniel Head, Legal and Corporate Secretarial


Date of Appointment : 16 January 2017

Qualifications & ExperienceMr. Daniel, Chow Hau Mun (“Daniel”) is our Head, Legal and Corporate Secretarial. He graduated with LLB (Hons) Malaya from the University of Malaya in 1987 and was admitted to the Malaysian Bar in 1988. Daniel has extensive experience in legal practice and also held the position as in-house legal counsel in several corporations e.g. Hong Leong Management Co. Sdn Bhd, Abric Berhad and M3nergy Berhad. Prior to joining Perisai, he served as the Division Head, Corporate Services in Nam Cheong Limited. Daniel has wide ranging experience in legal matters pertaining to international trade, oil & gas and offshore marine services.

AbdulAh bin yunus Head, Human Resources & Administration


Date of Appointment : 1 July 2012

Qualifications & ExperienceEncik Abdulah Bin Yunus (“Abdulah”) is our Head of Human Resources & Administration. He joined Perisai in 2012. Abdulah started his career in 1978 as an Assistant Manager in a confectionery business before moving on to Caltex in 1984 where he spent five years marketing lubricants, diesel and other petroleum products. In 1990, Abdulah started his employment with the Sapura Group where he spent the next 22 years undertaking a variety of roles and responsibilities spanning sales and marketing, business planning, product development, human resource and administration. His last held position in the Sapura Group was as General Manager, Business HR Management in SapuraCrest Petroleum Berhad. Abdulah is a graduate of Southern Illinois University holding a BSc in Marketing and a MBA from Morehead State University, Kentucky, USA earned in 1984.

ismAritA binti ismAr

Head, Corporate Planning

Age 44 Malaysian Female

Date of Appointment : 1 June 2018

Qualifications & ExperienceMs. Ismarita Binti Ismar (“Ismarita”) is our Head of Corporate Planning. She joined Perisai in 2013. She started her career in 1997 as an auditor in one of the big 4 accounting firms, Arthur Andersen & Co. before gaining experience in the investment banking sector after joining Aseambankers (M) Berhad (“Aseambankers”) in 2003. She spent 3 years in Aseambankers in the Corporate Finance department where she was primarily involved in assisting clients to undertake various equity fundraising exercises, initial public offerings and mergers & acquisition transactions and where her last position held was as Assistant Vice President. Thereafter, she joined SapuraCrest Petroleum Berhad in 2006 as Manager in the Business Planning department. She spent 5 years in SapuraCrest where her last held position was Senior Manager. Ismarita holds a Bsc in Accounting and Finance from University of Wales Cardiff, UK and is a member of the Institute of Chartered Accountants in England & Wales.

declArAtion by mAnAgement teAmDirectorship of other Public Companies – NoneFamily relationship with any director and/or any major shareholder of the Company – None Conflict of interest with the Company – None Conviction for any offences within the past 5 years and public sanction or penalty imposed by the relevant bodies during the financial year ended 30 June 2019 other than traffic offences – None

MANAGEMENT TEAM

14


chAirmAn’s STATEMENT

dAto’ AnWArrudin bin AhAmAd osmAnChairman

“We entered the financial year under review on a positive note, with the

approval from the scheme creditors on our proposed debt restructuring scheme

in June 2018, followed by the submission of the proposed regularisation

plan to Bursa Malaysia Securities Berhad (“Bursa

Securities”) in August 2018. However, our

endeavour is still far from over and as we progressed in our restructuring efforts, we continue to overcome challenges and hurdles.“

15

ANNUAL REPORT 2019

million, which was an improvement from the previous financial year by RM232.34 million. Strict compliance to budget and cost-consciousness have been embedded into our work culture and has been able to ensure that we operate at the leanest cost structure as possible, thereby enabling us to remain competitive. We also adopt strict cash management practices in order to ensure that cash flows are being monitored closely.

As industry recovery continues, there are lingering uncertainties as we continue to face global economic and geopolitical risks. Certain offshore activities such as offshore drilling has seen recovery in the segment gaining more momentum, as we witnessed increased number of enquiries and tenders being issued. We are assured of this positive development as we note similar message in Petronas Activity Outlook 2019-2021 report.

Our views on the FPSO market has not changed, that pockets of oppurtunities are out there for our Perisai Kamelia, despite the current challenges.

I sincerely believe that everyone in Perisai, be it my fellow Board members, management and staff, as well as our advisers, have devoted their time, effort, hard work and commitment fully in our resolve to steer Perisai towards stability and eventual turnaround.

To this end, I would first, like to express my appreciation to my fellow Board members for their continued support and guidance. A special mention to Dato’ Dr. Mohamed Ariffin bin Hj. Aton, who will not be seeking for re-election at the forthcoming Annual General Meeting. My utmost appreciation for all of his invaluable guidance, contribution and wisdom imparted during his tenure on the Board of Perisai over the past 15 years. My sincere gratitude to our Managing Director, Datuk Izzet Ishak, his team of management and the staff of Perisai, for their continuing loyalty and hard work throughout this difficult period.

I would also like to extend my appreciation to our client, Petronas and Petronas Carigali for the continuing support and trust in Perisai. Not forgetting, sincere gratitude to the Corporate Debt Restructuring Committee (“CDRC”) and our lenders for their guidance and understanding in assisting us to progress with our restructuring efforts.

Last but not least, my gratitude and appreciation to all other stakeholders for the support and faith entrusted with the Company as we navigate through this challenging chapter. The level of commitment and resolve being shown by all those involved has been overwhelming and although the journey ahead continues to be challenging, I remain positive that this resolve will not waver.

dato’ Anwarrudin bin Ahamad osmanChairman

We ushered in 2019 with the resolve to ensure that we will be able to progress with our proposed regularisation plan. To this end, we were fortunate that Bursa Securities decided to grant us with an extension of time until 31 December 2019 to submit a new regularisation plan and this has enabled us to continue focusing our efforts on the securing of a new contract for our floating production, storage and offloading vessel (“FPSO”), the Perisai Kamelia.

Simultaneous to the on-going efforts on our restructuring exercise, our emphasis on delivering quality service at the highest level of safety standards has not been compromised. Our jack-up drilling rig, Perisai Pacific 101 successfully concluded her maiden contract with Petronas Carigali Sdn Bhd (“Petronas Carigali”) in May 2019, at the same time establishing an impeccable performance and quality, health, safety, environment and security (“QHSES”) track record. Perisai Pacific 101 was awarded the “Best Performing Rig in Malaysia Operations” for Q2 and Q3 2018, in addition to the “2018 Best Rig, Best Drilling QHSE Performance Award” from Petronas Carigali and Petroliam Nasional Berhad’s (“Petronas”) Malaysia Petroleum Management respectively. Perisai Pacific 101 also earned due recognition from the International Association of Drilling Contractors (“IADC”) for achieving 3 years without lost time incident from November 2015 until November 2018.

These achievements definitely served as a motivating factor to spur us further in our pursuit of operational excellence.

Upon completion of her maiden contract, Perisai Pacific 101 underwent the 5-yearly special periodic survey (“SPS”), which is a mandatory requirement by the classification body, the American Bureau of Shipping (“ABS”). During this period, we also took the opportunity to undertake major equipment overhaul and service. This major undertaking was completed smoothly as planned and within budget.

The SPS does not only ensure that we comply with the necessary requirements, but also to ensure that our rig is maintained in the most optimum condition in order to maximise its’ operational efficiencies and hence, minimise disruptions to our operations. Our performance track record has also enabled Perisai Pacific 101 to secure the new contract from Petronas Carigali in May 2019 for the Samarang drilling campaign. This certainly provided us with the positivity to push ahead in our restructuring plans.

Pursuing all potential prospects for our FPSO, Perisai Kamelia has been and continue to be an on-going endeavour, as we persist tirelessly to this end. We remain mindful of the criticality of securing a new contract for the FPSO, which is crucial in determining the success of our proposed regularisation plan.

On the back of revenue of RM116.91 million for the financial year under review, the Group recorded losses before tax of RM236.38

CHAIRMAN’S STATEMENT

16


mAnAgement discussion AND ANALYSIS

dAtuK iZZet ishAKManaging Director

“The pace of recovery in the sector has, to a certain extent, stabilised over the

past 12 months, which saw the Brent crude oil

price peaked at USD86/bbl in October 2018, only to gradually decline to its’

lowest of USD49/bbl in December 2018, before stabilising at an average of USD66/bbl during the

first half of 2019. Offshore activities have picked up although industry players remained cautious, given the on-going geopolitical

concerns and global economic uncertainties.”

17

ANNUAL REPORT 2019

ready to take advantage of the eventual turnaround in the industry. One crucial aspect of our restructuring plan is the continuous deployment of our core assets, namely Perisai Pacific 101 and Perisai Kamelia. To this end, we have spared no effort, and have been actively marketing both assets. We have not only been pursuing any opportunities on the horizon for these assets, but also exploring possibilities, in particular for our Perisai Kamelia.

I cannot stress this enough, the importance and criticality of securing these contracts in determining the success of our restructuring plan and restoring Perisai as a listed company, as well as the extent of hardwork, determination and perseverance demonstrated by our team, together with our advisers in working towards achieving this throughout this difficult period.

As we continue to navigate through the challenges, we remain focused on ensuring that our operations are unaffected and in meeting the expectations of our client, continue to deliver high quality service and performance, with upmost emphasis on safety. As embedded in our organisation and work culture, various cost management initiatives have been undertaken as we strive to remain competitive.

Apart from our physical assets, our people are also key assets to our organisation, which has enabled us to achieve continuous operational efficiencies and high performance. As such, the continuous development of our people remains at the top of our agenda.

Debt Restructuring Exercise and Proposed Regularisation Plan

Following through from the last major milestone achieved, being the submission of the proposed regularisation plan to Bursa Securities in June 2018, the second half of 2018 was mainly focused on addressing various queries from, and engaging with, Bursa Securities on our submission.

To recap, the securing of a new contract for the FPSO was the main determinant for us to progress with the proposed regularisation plan. However, given the very niche nature of our FPSO, the scarcity of projects to which she is suited and the uncertainty of securing a contract within the anticipated period, our proposed regularisation plan was rejected by Bursa Securities vide its letter dated 11 January 2019 and consequently, Perisai shares were suspended from 22 January 2019.

Despite the setback, we persisted and submitted our appeal against Bursa Securities’s decision on 8 February 2019. The next couple of months entailed more interactions with Bursa Securities, mostly to provide more clarity on our proposed plan.

MANAGEMENT DISCUSSION AND ANALYSIS

On the local front, offshore activities in most segments have also been on an increasing trend, as indicated in Petroliam Nasional Berhad (“Petronas”) Activity Outlook 2019-2021 published in December 2018, which was indeed experienced by most industry players.

Regardless of the developments in the global and domestic market, our focus and efforts have remained steadfast on our restructuring plan, for which we continue to face and overcome challenges. This has been a continuous endeavour since the last 3 years and we, together with our advisers, have been working hard to overcome these challenges. Over the past 12 months under review, we continue to focus all of our time and resources into our restructuring efforts as we engaged with Bursa Malaysia Securities Berhad (“Bursa Securities”), our bankers and the Corporate Debt Restructuring Committee (“CDRC”), with the ultimate objective of ensuring the sustainability of Perisai Petroleum Teknologi Bhd (“Perisai” or “the Company”) as a listed company.

It is on the back of these events that I would now present a review on Perisai for the financial year ended 30 June 2019.

business overvieW

Perisai’s business activities are divided into four (4) segments, namely offshore drilling, offshore production, offshore support vessels and offshore construction. Under our restructuring plan moving forward, the offshore drilling and offshore production will be our core segments, under which we currently own and operate one (1) jack-up drilling rig, the Perisai Pacific 101 (“Perisai Pacific 101”), and one (1) floating production storage and offloading vessel (“FPSO”) the Perisai Kamelia. Previously, under the offshore production segment, we also owned one (1) mobile offshore production unit (“MOPU”), the Rubicone, which, as part of our restructuring plan, was disposed of in June 2019.

The offshore support vessels (“OSVs”) division currently owns a fleet of nine (9) vessels, comprising anchor handling tugs, anchor handling tugs & supply vessel and fast crew boats. The offshore construction division previously owned a derrick lay barge, the Enterprise 3, which was disposed of in July 2019. Our plan to exit from both non-core businesses i.e. the OSVs and offshore construction, remains and forms part of our restructuring plans.

Objectives and Strategies

Our main agenda for the past 3 years has been to ensure a viable and successful debt restructuring plan, with the aim of restoring the Company back to financial stability and focus,

18


to lower impairment losses on plant & equipment and trade receivables as well as lower operating costs arising from the on-going cost savings initiatives.

Capital deficiencies as at 30 June 2019 increased to RM504.89 million, from RM258.58 million as at 30 June 2018. This was mainly due to the losses further incurred for the financial year ended 30 June 2019 and lower foreign translation reserve as a result of weakening of Ringgit Malaysia on net liabilities of certain subsidiaries. The capital deficiencies will be dealt with as part of the proposed regularisation plan.

Total borrowings of the Group continue to decrease as at 30 June 2019 at RM1,225.60 million from RM1,229.50 billion as at 30 June 2018 due to repayment of term loan for Perisai Pacific 101.

revieW of oPerAtions

drilling

The Perisai Pacific 101 successfully completed her maiden contract with Petronas Carigali in May 2019, which commenced in August 2014. Since the commencement of the contract until completion, Perisai Pacific 101 has drilled, more than 40 wells within Malaysian waters, serving not only Petronas Carigali, but also other production sharing contractors (“PSCs”) such as Hess Exploration and Production Malaysia B.V, ROC Oil (Sarawak) Sdn Bhd, Vestigo Petroleum Sdn Bhd and Coastal Energy Malaysia Sdn Bhd with an average utilisation rate of 93%.

Delivering quality service and meeting client’s expectations remain our top priority, whilst at the same time, ensuring that we achieve the highest level of health and safety standards. On the back of this, I am pleased to report that Perisai Pacific 101 was awarded the “Best Performing Rig in Malaysia Operations” for Q2 and Q3 of 2018 by Petronas Carigali, the “2018 Best Rig, Best Drilling HSE Performance Award” by Petronas Malaysia Petroleum Management and received due recognition from the International Association

Based on the merits and bases of our appeal, Bursa Securities decided to grant an extension of time until 31 December 2019 for Perisai to submit a new regularisation plan. To this end, rest assured that Perisai and its advisers have been, and will continue to focus all efforts to see this through successfully despite the challenges.

legal development

In relation to the disagreement over the exercise of the put option for the disposal of our 51% interests in SJR Marine (L) Ltd (“SJR Marine”) with EMAS Offshore Limited (“EOL”) and the termination of the Shareholders’ Agreement between Perisai Production Holdings Sdn Bhd (“PPHSB”), a wholly-owned subsidiary of Perisai, EOL and Emas Victoria (L) Bhd (“EVLB”), there has been no further development for the past year.

Most recently, a notice on judicial management application dated 28 August 2019 was received from EOL, stating that EOL had filed an application to the High Court of the Republic of Singapore to seek, amongst other things, an order to be placed under judicial management and the appointment of judicial managers.

We endeavour to keep abreast of any progress or development as we continue to maintain our position on this matter.

Separately in relation to the OSV division, on 19 September 2019, Intan Offshore (L) Ltd (“IOLL”) issued a letter of termination of charter agreement to Emas Offshore (M) Sdn Bhd (“EOM“) as a result of long outstanding charter payment due from the charter of Lewek Robin.

financial Performance

Total revenue for the Group of RM116.91 million for the financial year ended 30 June 2019 represented a decrease of RM10.27 million from the previous financial year of RM127.18 million. Lower revenue for the financial year under review was due to the completion of Perisai Pacific 101’s contract with Petronas Carigali Sdn Bhd (“Petronas Carigali”) in May 2019. In addition, during the previous financial year end, there was still revenue from the charter contracts for the eight (8) offshore support vessels, which had then expired in August 2017.

Despite a decrease in revenue, the Group recorded a lower loss before taxation of RM236.38 million, as compared to RM468.72 million for the financial year ended 30 June 2018. The lower losses for the current financial year was mainly due

the Group’s cash position as at 30 June 2019 stood at RM33.27 million, an increase of RM10.25 million from the position as at30 June 2018, attributable mainly to a continuously prudent cash management as well as close monitoring of receivables


19

ANNUAL REPORT 2019

of Drilling Contractors (“IADC”) for achieving 3 years without a lost time incident between November 2015 to November 2018. These awards and recognition stood as a testament to our uncompromising approach towards quality, health, safety, environment and security (‘QHSES’) aspects in our daily operations.

Our impeccable operating and QHSES track record would not have been possible without our people, as they form the backbones of our organisation. As such, we continue to place upmost importance on their continuous development and capability-building through various in-house programmes and on-the-job trainings. We also remain committed towards developing local talents and as at the end of the current financial year, our Drilling division were made up of almost all Malaysians at 95% of the division’s headcount.

Recovery in the offshore drilling market has been gaining momentum as we entered 2019 with the increase in contract awards for jack-ups worldwide. This is also being felt on the local front, as Petronas increased its’ forecast on the requirements for jack-up rigs over the next 2 years (2019 – 2020) of between 16 to 19 units, a substantial increase from the previous forecast of between 7 to 10 units for the same period. Offshore drilling contractors have certainly benefited from this and our drilling Perisai Pacific 101 was successful in securing a contract from Petronas Carigali, with the receipt of a Letter of Award for the Samarang drilling campaign in May 2019.

The new contract with Petronas Carigali had recently commenced in September 2019 upon the successful completion of the special periodic survey (“SPS”) undertaken by Perisai Pacific 101 end of August 2019. The SPS is a 5-yearly mandatory requirement by the classification body of Perisai Pacific 101, the American Bureau of Shipping, as well as one of the contract requirements by Petronas Carigali. Through the efforts and hardwork of our Operations team, we managed to undertake and complete Perisai Pacific 101 first SPS within the expected duration and budget.

Our efforts will continue on ensuring safe and efficient operations as well as securing either an extension or new contract for Perisai Pacific 101 before the end of the new contract estimated around May 2020. This remains a continuous endeavour as we strive to maximise the utilisation of our asset.

Production

The FPSO, Perisai Kamelia, the key asset under our Production division remains laid up in Tompok Utara, Johor since end December 2017. As the securing of a new contract for the Perisai Kamelia is a crucial factor in our regularisation plan, we

have been tirelessly pursuing various options and prospects for her.

The global FPSO market has seen significant improvements for the past 2 years, with the expected increase in contract awards. However, these anticipated awards are mainly for large to mid scale, high capital expenditure oil projects within South America and Africa regions. Given that the Perisai Kamelia is a gas-export FPSO with relatively smaller capacity, identifying opportunities with requirements to which her specifications are suited to, will involve more time and discussions with the relevant parties. Nevertheless, we have not wavered in our efforts and will continue to pursue any prospects or possibilities for the Perisai Kamelia.

The MOPU, Rubicone previously laid-up in Batam, Indonesia, was disposed of in June 2019, by way of the bank exercising its rights under the mortgage agreement between the bank and, Garuda Energy (L) Inc. (“Garuda”), a wholly-owned subsidiary of Perisai and owner of Rubicone. The mortgage agreement was executed in 2013 as security for the financing facilities granted by the bank to Garuda. The disposal of the MOPU is consistent with our plans as set out in our proposed debt restructuring scheme which was approved by the scheme creditors in June 2018.

The disposal of the MOPU, apart from easing the constraints on our cash position, also enables us to direct more focus and resources on our core assets and restructuring efforts.


20


offshore support vessels

Under this division, there are nine (9) OSVs which are currently idle. There has not been much development with regards to the OSV division as although there has been some level of recovery in the OSV market, the effects are probably felt more amongst the larger OSV players which have been aggressively taking advantage of this gradual turnaround and leveraging on their economies of scale.

Moreover, our intention as laid out in our restructuring plan, has always been to exit this non-core segment and this will remain so as part of our restructuring exercise.

offshore construction

The asset under this division, being the derrick pipe-lay barge, Enterprise 3 was owned by SJR Marine and charged to the bank as security for a financing facility extended to SJR Marine. She has also been laid-up in Johor port since late

2013. Whilst the disagreement with EOL as earlier mentioned remains unresolved, the bank had proceeded to dispose of the Enterprise 3, by exercising its’ rights under the mortgage (similar to the MOPU) in July 2019.

Nevertheless, despite the disposal of the Enterprise 3 and EOL’s recent application to be placed under judicial management, the pursuit of our rights for the put option proceeds continues and our stand on this matter remains unchanged.

Key risK AreAs

We continue to closely monitor, review and assess the various risks which the Group is exposed to, as part of our risk management exercise. Key risk areas, together with the relevant mitigating factors or measures are identified, evaluated and discussed by Management prior to being presented to the Board of Directors for review and approval. These steps will ensure that we are able to identify and take proactive measures to address any potential risks.

The key risks areas below remains applicable and relevant to the Group as we navigate through the challenges:-

Key risk Area description mitigation measures

Business continuity • Inability to secure new contract for the FPSO and Perisai Pacific 101.

• Failure to achieve the above could also lead to failure/non completion of debt restructuring exercise.

• Continue regular engagement with existing and potential clients.

• Actively seeking for re-deployment opportunities, within and outside of the region.

• Exploring other alternatives.

Legal • Winding up threat by major creditor. • Ensuring that the Restraining Order remains in place until the completion of the debt restructuring exercise.

Financial • Cash flow depletion in view of single source of revenue unable in meeting demands from creditors and corporate overheads.

• Continue to exercise financial discipline and strict adherence to budgets.

• Continue efforts in managing and rationalising costs.

Operational/QHSES • Catastrophic accident on board the Perisai Pacific 101, such as well blow out, fire.

• Continue to maintain strong QHSES culture and practices amongst the workforce, with continuous training and awareness campaigns. Properly documented HSE manuals, processes and procedures are in place and are reviewed and enhanced regularly.


21

ANNUAL REPORT 2019

outlooK And Key focus

Following from the initial highs in the Brent crude oil price seen in the earlier part of 2018, oil price had since, been on a downward trend, going below USD70/bbl and reaching USD50/bbl, before stabilising between USD50/bbl – USD70/bbl through the first half of 2019. The initially buoyant market outlook is now replaced by a more subdued outlook for the rest of 2019, mainly due to the uncertainties over market demand brought about by the on-going geopolitical concerns, lower forecasted global economic growth as well as potential oversupply from non-OPEC countries.

This sentiment is also being echoed domestically, as Petronas continue to emphasise on the importance of local industry players to exercise financial discipline and be adaptive to change, in order to remain competitive in a rapidly-changing market environment.

Nevertheless, we remain positive on the near-term outlook, in particular for the offshore drilling segment, as we continue to see an uptick in the number of enquiries received and tender activities which we have participated in as compared to previous years. This has, so far, been consistent with the anticipated level of requirement for jack-up rigs as forecasted by Petronas in its’ Activity Outlook 2019 – 2021 report.

Notwithstanding the generally positive sentiment in the FPSO market globally, we remain cognisant of the challenges that we are facing with regards to our Perisai Kamelia. However, we believe that there are opportunities ahead and we will persevere in our efforts to make them happen.

Despite the overall sense of heightened optimism amongst industry players as compared to the previous year, there is no

room for complacency as we continue to face challenges in our current pursuit especially in crucial months ahead. All of our efforts and resources would focus on ensuring that our key assets continue to be deployed and contracted, thus enabling us to progress with a successful restructuring exercise and ultimately, to deliver the best possible outcome for all of our stakeholders.

note of APPreciAtion

During the current financial year under review, we continue to face and overcome hurdles in our restructuring efforts, and despite this, our commitment in steering the Company towards recovery has not faltered. In pursuing our current endeavour, I am humbled by the level of commitment and support received from all of our stakeholders.

On this note, I would like to first, express my utmost appreciation to my fellow Board members for their continuous support, guidance and stewardship throughout this challenging period. I would also like to extend my thanks to the management, staff of Perisai and advisers, for their endless hard work and commitment in seeing our restructuring efforts through.

My sincere gratitude to our client, Petronas and Petronas Carigali for their endless support, and we look forward to being able to deliver and meet their expectations in the future. Finally, my heartfelt appreciation and thanks to CDRC, our lenders and all of our stakeholders, for their support as we forge ahead in our turnaround efforts.

datuk izzet ishakManaging Director


22


About this stAtement

Our second sustainability statement highlights our continual contributions to the Economic, Environmental and Social EES sustainability aspects that are impacted by our business and operations.

sustAinAbility stAtement

mAteriAlity

Materiality is our principal tool for gathering insights which can drive our sustainability strategies and facilitate meaningful reporting. To identify the material topics that exert the greatest impacts to Perisai and our stakeholders, we conducted our first materiality assessment during the financial year ended 2018. This initiative guaranteed that the contents of our Sustainability Statement actually reflected the EES issues that are most significant to our Group and our stakeholders.

For the current year under review, we have decided not to update our materiality assessment, as the scope of our business and operations underwent no significant change this year.

scope and boundaryThis statement covers all operations of Perisai Petroleum Teknologi Bhd. (“Perisai”) and wholly owned subsidiaries that are directly controlled by Perisai through a majority stake. This report excludes joint ventures over which the Company holds no direct responsibility.

guidelinePrimary: Bursa Malaysia Sustainability Reporting Guide

Reference: Global Reporting Initiative (GRI) G4 Oil and Gas Sector Disclosures

reporting PeriodThe reporting period is from 1 July 2018 to 30 June 2019. Historical information collected from previous years is included to present clear comparative data. Also reported are the Company’s Quality, Health, Safety Environment and Security (QHSES) performances in the calendar year from January to December 2018.

reporting cycleThe reporting cycle coincides with our Annual Report.

FeedbackWe welcome your comments or feedback regarding this report at: [email protected]

23

ANNUAL REPORT 2019

materiality review

Given that the material issues that were identified in the previous year still accurately reflect our business at present, our materiality matrix in the current report remains unchanged.

Nonetheless, matrix reaffirmation was performed to assess the validity of the preceding year’s themes and make adjustments if necessary. The reassessment ultimately confirmed that no changes were necessary because our priority sustainability issues have remained the same.

Materiality Matrix

The 13 EES issues that were identified to be the most relevant to Perisai and the stakeholders are plotted in our materiality matrix. The X-axis represents the importance of the EES issues to the organisation, and the Y-axis denotes their significance to the assessment and decision making of the stakeholders.

The points found on the top right-hand quadrant are considered to exert the greatest influence to both the Group and our stakeholder’s decision making.

SUSTAINABILITY STATEMENT

Materiality MatrixThe three (3) themes recognised with the highest priority are: (1) Compliance and Ethics, (2) Health and Safety (H&S) and (3) Quality. Our operations are subject to stringent oil regulation laws and best practices in the oil and gas sector. Our business activities are also influenced by our customers, who have outlined strict Health, Safety and Quality requirements in the supply chain.

Three matters that received low priority are philanthropic activities, waste disposal and energy consumption. Although these items are not high in our priorities, we still carry out initiatives for waste and electricity reduction, and we will revisit our charitable contribution and CSR activities upon completion of our restructuring exercise.

SocialEnvironmentEconomic

X : importance to Perisai

y :

impo

rtan

ce to

the

stak

ehol

ders

+

+-

Work-Life Balance

Training & Career Enhancement

Client Requirement & On-Time Delivery

Service Quality

Health & Safety

Philanthrophic Activities

Compensation & Benefit

Local Employment

Supply Chain Management

Compliance & Ethics

Spillage

Waste DisposalEnergy Consumption

stakeholder engagement

We practice regular stakeholder engagement, which provide helpful insight that allows us to better understand stakeholders. Through this action, we gain critical information which meaningfully aids our strategic planning. We value the feedback received from our stakeholders. Thus, we make an appropriate response to each of our stakeholder group’s concerns.

24


Listed in the table below are the stakeholder concerns and our corresponding responses for the year under review.

stAKeholders concern resPonse

customer Quality, Health, Safety, Environment and Security

• Established the QHSES framework• Monitored the contractors’ QHSES• Performed regular review and updating of QHSES • The QHSES management standards adopted the best

practices as prescribed under the ISO Certification

investor Precise and Timely Information • Timely announcement of material events/developments • Updating of information on the website• Responding to queries via emails/calls

community Local Employment • Transfer of knowledge to the local people• Local employment

suppliers/ contractors

Ethical Purchasing Quality Information

• Code of Conduct and Whistleblowing Policy • Bid tender information and meetings • Vendor Performance Evaluation

employees Health and Safety Career Development

• Implemented a strict health and safety framework • Monitored and reviewed health and safety issues • Promoted work–life balance • Conducted H&S trainings • Establishment of the Succession Planning Policy

government Compliance • Compliance training for relevant employees • Informing employees of new regulations• Renewal of relevant license • No non-compliance Issues

mAnAgement APProAch to sustAinAbility

Sustainability Policy

For Perisai, sustainability signifies our commitment to execute our business in a socially responsible and holistic manner. Making sustainability an integral part of our business means focusing our attention on the following:

• Social awareness and improvements;• Environmental preservation; and• Sound and effective corporate governance.

All of these factors are undertaken in a balanced manner amongst the interests of our various stakeholders.

Sustainability Governance

Though we remain committed in adhering to the prescribed laws and regulations, we do endeavour to go beyond this as much as possible.


25

ANNUAL REPORT 2019

Achieved: Zero hse Performance

• As a testament to our unceasing quest for excellence, we have consistently satisfied our customers’ stringent requirements for QHSES standards, and we are extremely proud to have received the following awards/recognition for:

the board

As the highest governing body of our sustainability direction, the Board plays a central and vital strategic leadership role in steering Perisai towards a sustainable future. The Board acts vigilantly in driving and discerning whether the Group is heading towards the right direction.

the management

Led by our Managing Director, the Perisai management team is tasked with managing the sustainability issues. Our QHSES management team conducts due diligence and risk assessment, and they are also in charge of drafting prevention and intervention plans. Our risk management and internal control encompasses sustainable issues relating to Human Capital Management and Emergency Response Plan. The management regularly keeps the Board well-informed of the latest developments in sustainability issues.

ethics and compliance

We espouse the ethical behaviour of the Group by taking the right course and by acting ethically in all areas of the Company as well as in everything that we do.

Our Code of Conduct includes policies against corruption, anti-discrimination, health and safety, and environmental protection, amongst others. Our Whistleblowing Policy provides a platform that all employees and the general public can use to report any instance of improper conduct.

Compliance has always been fundamental in our business and operations. It is a key pillar that supports and guides our strategic decisions. Thus, we have implemented measures that will ensure our compliance with all applicable laws and regulations. For the year under review, we encountered no issues concerning instances of either non-compliance or suspected non-compliance with applicable laws and regulations.

QuAlity, heAlth, sAfety, environment And security (Qhses)


2018 Best Rig Contractor, Best Drilling HSE Performance from Petronas MPM

Three (3) years without a lost time incident from International Association of Drilling Contractors (IADC)

Best Performing Rig for Malaysia Operations in Q2 and Q3 2018, from Petronas Carigali

Qhses highlights

26


Note 1 : Our Key QHSES Plan spans from January to December. Similarly, our performance is also based on the same calendar year, unless specified otherwise.

Note 2 : All QHSES data pertain to our offshore drilling division Perisai Pacific 101, which this is the core operation of our Group.

PP101 underwent a Special Periodic Survey (SPS) at Johor Port for a span of 98 days starting from 28 May to 2 September 2019. We regard it as a huge accomplishment that Perisai managed to complete the PP101 SPS without a major incident (only one recorded case of first aid).


Qhses management

The QHSES Management System is the foundation of our sustainability framework and is established upon the Company’s core values, namely, SAFETY, ACCOUNTABILITY, SUSTAINABILITY AND INTEGRITY. These core values also set the foundation of our QHSES Drilling Management Standard, which consists of 21 elements/components that are integral to our business and operations. These components serve as our springboard in elevating us to a better position to achieve our targets and realise the Group’s Vision.

PerisAi drilling - Qhses committee orgAnisAtion chArt

rig manager Asset integrity management

operations support manager finance

secretAry1. QHSES Manager

2. QHSES Senior Engineer

Chief Operating Officer

emPloyerrePresentAtive

emPloyee rePresentAtive

In the calendar year ended 31 December 2018:

Maintained ‘’0’’ near-missed cases and “0” fatalities

Recorded “0” rig’s non-productivity

time (NPT)

Completed 92% of H&S mandatory and regulatory trainings

Total recordable case frequency (TRCF) reduced to 0.60

0.60

Another milestone: for 3 years we have achieved “0” lost time injury frequency (LTIF) in all of our operations

769

1,135

1,315

Highest number of days without

Lost Time Injuries (LTI) at 1,315

201620172018

27

ANNUAL REPORT 2019


Qhses drilling management standard

The QHSES Management System enables the Company to manage any potential QHSES risks in a reliable manner across its entire operations. The System is composed of both employer and employee representatives to guarantee fairness and, more importantly, to ensure that appropriate infrastructure and resources are provided and that roles and responsibilities are precisely defined.

The System is structured on an integrated framework that comprises the Quality, Health, Safety, Environmental and Security requirements of ISO 9001 (Q), OHSAS 18001 (OH&S) ISM/MODU CODE (S), ISO 14001 (E) and Maritime Security - ISPS Code (S), respectively.

REALISATION AND PRESERVATION

OF SERVICES

SECURITY

NONCONFORMITY, INCIDENT INVESTIGATION, PREVENTITIV

E AND

CO

RREC

TIO

N A

CTIO

N

POLICY, LEADERSHIP & ACCOUNTABILITY

PLAN

NIN

G, G

OALS AND TARGETS

DOCUMENT CONTROL AND RECORDS MANAGEMENT

OCCUPATI

ONAL

HEA

LTH

AN

D S

AFE

TYCO

MM

UNICATIO

N, PARTICIPATION & CONSULTATION SUPPLIER AND CONTRACTOR MANAGEM

ENT

AUDITING

ENVIRONMENT PROTECTION AND CO

NSERVATIO

NSTAKEH

OLD

ER AND CUSTOMERS

RISK

MAN

AGEM

ENT

SELE

CTIO

N, T

RAIN

ING, C

OMPETENCE & PEOPLE DEVELOPMENT

ORGANISATIONAL RESOURCES, RESPONSIBILITIES AND ACCOUNTABILITIES

LEGAL & OTH

ER MAN

DATO

RY REQU

IREMEN

TS

MANAGEMENT REVIEW

EMERGENCY PREPAREDNESS & RESPONSE

PRO

CESS

CO

NTR

OL

AND

OPE

RATI

ONS

ASSET INTEGRITY & RELIABILITY

MEASURING, M

ONITORIN

G AND

ANAL

YSIS

CORE VALUESSAFETY

ACCOUNTABILITYSUSTAINABILITY

INTEGRITY

Quality health safety environment security

Ensuring that the Company meets the needs of clients and continually improves

the level of satisfaction provided to customers during service delivery.

Promoting and improving the health of

employees.

Ensuring that safety values are

not compromised, personnel are protected and that a safe working environment is provided where people can work without being injured.

Promoting the efficient use of resources,

reducing and preventing pollution

and enhancing biodiversity protection.

Prevention of harm to and protection of

personnel, physical and financial assets and

intellectual property.

We address our customers’ needs by offering efficient high-quality solutions and delivering impeccable quality service.

More importantly, the quality performances of our vendors, contractors and employees are strictly monitored to make certain that all parameters are consistent with achieving the Company’s Quality objectives.

The oil and gas sector operates in an inherently dangerous working environment. For this reason, the Company is committed in providing its employees with a safe and injury-free working environment by protecting them from occupational health and safety hazards that may occur at the Company’s worksite.

Quality health and safety (h&s)

28


mandatory: Based on client requirements, such as the Petronas Technical Standard (PTS) and their Mandatory Control Framework (MCF) and the IADCcompliance and regulatory: Based on OSHA Occupational Safety and Health Act 1994, Factories and Machineries Act 1967, Petroleum Act 1984, the Department of Civil Aviation (DCA) and the Factory Machinery Act (FMA)

2019 Key Qhses Plans

To maintain LTIF < 0 and TRCF < 0.5

To emphasise the benefits of Behaviour Based Safety by using

Accident Control Technique (“ACT”) card observation programme

To Incorporate Hearts and Mind elements and leadership trainings into

Perisai procedures

Continuous Improvements for Integrated Management

System (“IMS”)

To evaluate our H&S performance, we have developed four (4) quantitative 2019 QHSES Plans. All incidents and accidents are recorded and tracked by corrective action and tracking records (CATR). The management reviews and follows up on the investigation results of near-accidents. In addition, the QHSES committee conducts monthly reviews to monitor H&S progress and facilitate continual improvements.

Qhses trainings

Perisai is committed in upholding sustainable health and safety practices in the workplace. To foster QHSES competence, in addition to legally required QHSES induction trainings, we organise tailored training programmes based on two (2) main subjects.


crew technical competency

BOSIET (OPITO)

117Number of Attendees

3Number of

training days for each attendee

Helicopter Landing Officer (HLO)


2Number of


Helideck Assistant (HDA)


1Number of


Forklift Operator


2Number of


Offshore Crane Operator


2Number of


Helideck Radio Operator


3Number of


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ANNUAL REPORT 2019

Well Control Driller (IADC/IWCF)


5Number of


Well Control Supervisory (IADC/IWCF)


5Number of


Stuck Pipe


2Number of


crew technical competency

Advance Cardiac Life Support (ACLS)


2Number of


Advance Trauma Life Support (ATLS)


2Number of


Basic Food Handling


1Number of


Authorised Gas Tester (AGT)


3Number of


Confined Space Entry


1Number of


Advance First Aid


2Number of


hse competency


Personal Survival Techniques


1Number of


Proficiency in Survival Crafts and Rescue Boats


2Number of


Damage Control Team (DCT)


3Number of


operations and hse Procedure

30


environment

Perisai supports the exploration, development and production of offshore oil and gas fields in Malaysia. Our operations supports the preservation of marine life in waters where we operate. Thus, we rigorously implement initiatives for sustaining a cleaner marine environment. Our operations comply with the International Convention for the Prevention of Pollution from Ships (MARPOL 1973), the Environment Quality Act 1974 and the Petroleum Act 1984.

Waste recording

In addition to the MARPOL log book for waste oil, we have a scheduled waste log book and notification for scheduled waste

disposal.

hazard hunting

We identify potential environmental hazards

and assess whether previous identified risks have been completely

managed.

incident reporting

On-site personnel must report any incident of pollution regardless of

extent.

investigation

All incidents are investigated to prevent

reoccurrence.

Audit

We identify environmental

compliance and implementation gaps,

as well as relevant corrective measures.

environment-related training

Spill Response Plan

Our oil spill contingency response contains many detailed response processes, including exercise and equipment testing procedures, spill response strategies and tactics, spill command and control procedures, and emergency contact information. All of these plans are documented based on:

D-HSE-209 Emergency Response Plan (Offshore), Section 17, Chemical Spill;

PP 101 SOPEP (Ship Oil Pollution and Environmental Protection); and

PP101 HSE Case. PDR-PP101-HSE-07-A1, Part 5 Emergency Response, Oil/Chemical Spill and Marine Pollution.


Banksman and Slinger Training


2Number of


Managing Major Emergency (MME)


1Number of


GMDSS General Operator’s Certificate (GOC)


1Number of


operations and hse Procedure

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ANNUAL REPORT 2019

Quarterly Spill Drill

Although our paramount goal is to avoid oil spills completely, we also place equal importance in honing the capability to adequately respond to spills. To prepare our first responders, Perisai regularly conducts environmental spill drills in all of our sites. Spill containment is the first response performed for any spill on water. Therefore, all first responders must undergo the proper training for efficient spill equipment deployment and response so that an oil spill will exert only the minimum impact on the water. A review is conducted after every drill to assess the actions, response time, communication, teamwork procedures and equipment and to solicit recommendations for improvement.

Waste management

Effluent

• Sewage treatment: We take utmost responsibility for our discharges and comply with all prescribed regulations for sewage discharge. The sewage on the sea is generally composed of the waste produced from toilets, urinals, and WC scuppers. Our assets are installed with sewage treatment plants. Our sewage is treated before being discharged into the seawater, and our vessel is located four nautical miles away from the nearest land.

• Oily Water Separator: Our rig and production assets separate oil from bilge water in accordance with the international standard for oil content. The separated water is discharged overboard, whereas the oil is contained until it is collected by our scheduled waste contractor for proper disposal.

Waste Segregation and Recycling: We practice waste segregation in our rig, and our recycling is collected by a licensed waste contractor once it reaches onshore.

Waste Indicators from January to December 2018

Non-Hazardous Waste (MT) Hazardous (MT)

130 100

Water and energy management

As an alternative to the onshore fresh water supply, our assets are installed with a water maker (Reverse Osmosis Systems).

Raising awareness on water and energy consumption is an ongoing effort, and these practices are incorporated in our daily operations and house rules for the observance by everyone.

year energy consumption (diesel: mt)

Water consumption (mt)

refrigerant gas (Kg)

2018 4609 10,000 441

2017 3,645 9,275 299

security

We manage security risks with the highest priority to ensure that our employees, properties and the environment are not exposed to any threats or harm. We have adopted and strictly implemented a security management manual and a rig security plan in our operations to safeguard Perisai’s assets against security threats, thereby reducing the losses caused by terrorism, piracy and other criminal activities.

In addition, we closely coordinate with the office building management security as regards our safety around office premises and our offshore wellsite securities, which are provided by our clients.

Security Training

The Company makes certain that all of its employees, whether onshore or offshore, undergo security trainings that are appropriate to the nature of their responsibilities and in conformance to the guidance as indicated in Part B of the ISPS Code. To this end, the Company carries out security drills and exercises as prescribed in Part B of the ISPS Code. Details of these security drills can be found in the Company Security Plan and the Ship Security Plan.


32


Professional development

We instil a culture of continuous learning and development so that employees can grow and excel, and more importantly, so that our Company can maintain its competitive edge.

Apart from our offshore employees, our onshore employees and non-technical employees are also provided with relevant trainings to better equip them in their daily tasks. The following are the trainings provided for the financial year under review.


person

When HR Teams Lead Transformation in a Digitalised World hours

8 The Companies Act 2016: Company Secretarial Practice Part 7 person hours

8

MBRS for Preparers: Financial Statements

person hours

16

Introduction to MBRSperson hours

8

The Companies Act 2016: Company Secretarial Practice Part 6

person hours

8

IHI Road Tour 2018: Zon Tengah “Shaping the Future With Industrial Harmony” people hours

8

MBRS for Preparers: Financial Statements

people hours

16

emPloyee

At Perisai, we are committed in fostering a working environment where the potential of employees for holistic growth is cultivated. We take pride in creating a culture that promotes inspiration and quality employee experience that is a notch higher than that of our peers.

33

ANNUAL REPORT 2019

succession Planning

The Company recognises the value of developing future leaders. As such, we established the Group Succession Planning Policy, which is designed to mentor a talent pool of employees that will succeed our key business leaders upon their retirement. The succession planning process builds the core competencies required to lead the Group in attaining its Mission and Vision as well as in fulfilling the Company’s strategic planning and future investment.

Performance review

We conduct annual performance appraisals aimed at improving the employees’ potential and development. For offshore employees, we utilise the Competency Assurance Management System (CAMS), which is a tool for evaluating crew performance and improvement.

During the financial year under review, we promoted three (3) onshore employees. Benefits and Compensation

Our compensation package is composed of both compulsory and non-compulsory benefits.

Non-compulsory benefits include provision of meal allowances, offshore allowances (for offshore employees), extended illness leaves, paternity leaves, marriage leaves, compassionate leaves, Hajj leaves, examination leaves, leaves of absence, replacement for work on off days, rest days and public holidays, and unpaid leaves.

harmonious Work–life balance

At present, the most common human resource challenge is establishing an ideal balance between work and personal life, as the inability to have a satisfying one affects the employees’ effectiveness and productivity. To lay the foundation for a positive working environment where employees can work with vigour, confidence and enthusiasm, we have initiated work–life balance measures for both offshore and onshore employees.

On 29 June 2019, the Company organised a day trip for onshore employees to visit our PP101 rig where she was berthed, in preparation for the SPS work.

Onshore employees have the option of the flexible working hour programme. During Ramadan, employees of Muslim faith enjoy shorter working hours. Also, offshore allowances and replacement leaves are provided to onshore employees who are assigned with offshore assignments that fall on weekends or public holidays.

diversity

At Perisai, we believe that nurturing a diverse set of employees sparks a lively exchange of thoughts, knowledge, skills and culture, which in turn facilitates innovation and high-quality work. To encourage employees to make meaningful contributions, employees should be empowered whilst being respected and appreciated for what makes them unique regardless of age, gender, ethnicity, religion, education and family status.


34


Male employees comprise the majority of our workforce, which is the norm in the petroleum industry because of the physically taxing jobs that must be performed and the remote locations of offshore sites. For FYE2019, male employees accounted for 61% of our workforce, whereas the female staff accounted for 39% of total direct hire employees.


gender rAtio

Male Female

82% (132)

18% (28)

79% (85)

21% (22)39% (22)

61% (35)

2019 2018 2017

breAKdoWn by Positions

Male Female

Non-ExecutivesManagers Executives

71%(15)

29%(6)

73%(11)

27%(4)

72%(26)

28%(10)

2019 2018 2017

64%(25)

56%(20)

36%(14)

24%(16)

72%(39)

28%(15)

2019 2018 2017

96%(44)

4%(2)

67%(4)

33%(2)

96%(66)

4%(3)

2019 2018 2017

35

ANNUAL REPORT 2019


Employee Movement Number of New Hires

Number of Resignations

*FYE2017 105 **168

FYE2018 43 77

FYE2019 25 84

* FYE17 covers a period of 18 months from 1 January 2016 to 30 June 2017.** Due to completion of FPSO project

Age grouP of emPloyees

7% (4)

33% (19)

60% (34)

2019

12% (19)

46% (74)

42% (67)

2017

6% (6)

48% (52)

46% (49)

2018

41 years old and above 31 40 years old 20 30 years old

mAlAysiAn & other nAtionAlities

Malaysian Other Nationalities

93% (148)

95% (54)

7% (12)5% (3)

94% (100)

6% (7)

201720182019

* The above data represented direct hire employees only.

36


customer

Our constant support and partner to excel in sustainability matters are our customers. Aligned with customer requirements, we have streamlined processes to improve sustainability and aspire to exceed their expectation. We have established policies, manuals, procedures, forms and checklists that apply to the rig operation, and these are reviewed regularly to comply with the customer specifications.

Our regular engagement with customers allows us to achieve operational excellence and improve our best practices in the oil and gas industry. In turn, our learning experience from our customers is handed down to our own supply chain, thereby institutionalising and benefiting our value chain.

data Protection

We strictly comply with the Personal Data Protection Act of Malaysia. As such, internal control systems are enforced to limit access to such information. We implement administrative security protocols to avoid any accidental loss of data and prevent the attempts of ill-willed parties to deliberately obtain such confidential information.

suPPly chAin mAnAgement

Perisai shares a common objective with the supply chain to provide a seamless quality of service. To this end, we have initiated affirmative programmes together with our vendors not only to attain the best value but also to establish a sustainable relationship.

Our adherence to an uncompromising level of integrity is embodied in our Code of Conduct (COC), Procurement Standards and Procurement Procedures & Processes (PSPPP). All employees in the supply division are directed to ensure that everyone abides by the letter and the spirit of our COC and Procurement Practices. The definitions for gifts, gratuities, entertainment, payments and bribery are clearly outlined. Moreover, our Whistleblowing Policy is enforced and consistently communicated to our employees, suppliers and contractors.

tender committee (tc)

To mitigate risks associated with supply chain activities, Perisai established the Tender Committee (TC), which is composed of all heads of departments. A Technical Evaluation Report (TER) and a Commercial Evaluation Report (CER) are submitted to the TC. The TER covers the technical and QHSES aspects, whereas the CER contains the financial obligations of both parties in fulfilling the contract.

vendor Performance review (vPr)

VPR is our tool for driving continuous vendor improvement and motivating them to upgrade their service. Twice yearly, the TC reviews the vendors’ performance and implements corrective or improvement measures on vendors who do not perform in accordance with the required standard and its obligation.

Areas of assessment consists of the following:

• Quality • Cost • Responsiveness • Assurance of Supply • Health, Safety and Environment• Technology


37

ANNUAL REPORT 2019

Vendors who do not perform well according to the assessed area shall be in the alert list, and their performance shall be monitored. Similarly, vendors who consistently perform poorly will be disqualified from the Approved Vendor List.

community

operating with respect

At Perisai, we ensure that all of our activities are conducted with respect to the rights of our stakeholders and the community. Our continuing support and relationship with our stakeholders play a central role in granting us a strong social conscience in our operations.

harassment

We advocate decent living and working conditions for all our stakeholders. We believe that everyone in the Company should be treated with dignity. Sexual harassment, abuse of power and any form of harassment are strictly not tolerated. Our Code of Conduct is further proof of this commitment. Employees and suppliers who violate our Code will be subject to disciplinary action.

Knowledge Transfer from Expats to Local

In the current era of globalisation, effective knowledge transfer amongst expatriates and Malaysian workers is imperative to ensure that oil and gas companies are able to compete at the global scale. To this end, we continue to focus on our Malaysianisation programme, where we train and develop local talents and appoint them to positions that were previously held by expatriates.

Expatriates serve as bridges for the knowledge transfer, and our trainings are conducted formally and informally through a mentor–mentee programme.

The employment of expats in the Company has been kept to a minimum number as shown below.

year % of Expats Employed 2017 7%

2018 6%

2019 7%

Philanthropic Activities

MyKasih

Since 2014, Perisai has performed philanthropic contributions through a collaborative effort with the MyKasih Foundation. In partnership with the MyKasih Foundation, we have provided financial aid to 60 low-income families in Kemaman, Terengganu.However, our contribution to the programme was temporarily discontinued in view of our current financial constraints. We hope to be able to revisit this initiative upon completion of our restructuring plan.


38


the board of directors (“the board”) of Perisai Petroleum teknologi bhd (“Perisai” or “the company”) is committed to ensure that good corporate governance is practised throughout the Company and its subsidiaries (“the Group”) in discharging its responsibilities with integrity, transparency and professionalism to protect and enhance shareholders’ value and the financial position of the Group. The Board in discharging its responsibilities has always been vigilant of the fiduciary duties entrusted upon the Board.

The Board is pleased to present this Corporate Governance Overview Statement (“Statement”) to provide investors with an overview of the extent of compliance with the three (3) Principles as set out in the Malaysian Code on Corporate Governance (“MCCG”) under the stewardship of the Board. This Statement also serves as a compliance with the Main Market Listing Requirements (“Listing Requirements”) of Bursa Malaysia Securities Berhad (“Bursa Securities”). In addition, the Corporate Governance Report which sets out the application of each Practice is available for viewing at the Company’s corporate website at www.perisai.biz or Bursa Securities’ website.

comPliAnce With the mccg

As a Main Market listed company, the Company is pleased to present this statement in accordance with the MCCG which sets out the standards of good practice in relation to:

a) Principle A : Board Leadership and Effectiveness; b) Principle b : Effective Audit and Risk Management; and c) Principle c : Integrity in Corporate Reporting and Meaningful Relationship with stakeholders.

This Statement outlines the principles and recommendations which the Company has adopted and applied, and where there are gaps in the Company’s observation of any of the recommendations, they were disclosed herein with explanations.

PrinciPle A: boArd leAdershiP And effectiveness

1. Board Roles and Responsibilities

The Company is led by an experienced and dynamic Board. It has a balanced board composition with effective independent directors. The Board plays a pivotal role in the stewardship of the Group and ultimately enhancing shareholders’ value. To fulfill this role, the Board assumes the duties and responsibilities as set out in the Board Charter. In addition, the Board has revised and put in place clear and formal policies as follows:-

(a) Board Diversity Policy;(b) Code of Conduct and Ethics;(c) Succession Planning Policy;(d) Directors and Senior Management’s Remuneration Policy;(e) External Auditors Assessment Policy;(f) Whistleblowing Policy; and(g) Corporate Disclosure Policies and Procedures.

2. Chairman and Managing Director/Chief Executive Officer

The Chairman of the Board is Dato’ Anwarrudin Bin Ahamad Osman, an Independent Non-Executive Director, whilst the Managing Director (“MD”) is Datuk Zainol Izzet Bin Mohamed Ishak.

There is clear division of responsibilities between the Chairman and MD to ensure that there is balance of power and authority between them. In this regard, no individual can influence Board’s discussions and decision-making. The roles of Chairman as well as the roles of the MD have been clearly outlined in the Board Charter.

corPorAte governAnce overvieW stAtement

39

ANNUAL REPORT 2019

The Chairman of the Company is responsible for the leaderships, effectiveness, conduct and governance of the Board as well as setting the Board agenda including ensuring accurate and complete Board papers are provided to Board members and Committees in advance. The Chairman encourages active participation among the Directors. During the meetings, the Chairman shared his views on key matters so that all the Directors contribute to the debates while overseeing no director dominates the discussions. The Chairman maintains regular contacts with all Directors. Where appropriate, the Chairman invites Director(s) to attend meetings with the Management on key matters of business. The Chairman and/or the MD also communicate on behalf of the Company to shareholders and other stakeholders.

The MD is entrusted by the Board on the daily running of the business and implementation of the Group’s policies and strategic plans established by the Board within a set of authorities delegated by the Board. The MD also leads the Management to ensure effective working relationship with the Chairman and the Board by meeting or communicating with the Chairman/Director(s) on regular basis to review key developments and issues.

3. company secretary

The Board is supported by qualified and competent Company Secretaries and their main roles and responsibilities are as follows:-

• Advising the Board on the governance matters and keeping the Board abreast with the developments of corporate

and securities law, listing rules, Company’s Constitution, Board policies and procedures, and its compliance with regulatory requirements, and advocate adoption of corporate governance best practices;

• Managing the provision of information within the Board; and • Facilitating the induction of new directors and continuing development of Directors.

The Board has direct access to the advice and services of the Company Secretaries who are responsible to the Board for ensuring that all governance matters and Board procedures are in compliance with the applicable laws and regulations. This includes updating the Board on the Listing Requirements, circulars from Bursa Malaysia Securities Berhad and other legal and regulatory developments and their impact on the Group and its business.

The Company Secretary attends all Board and Committee meetings and ensure that meetings are properly convened, and that accurate and proper records of the proceedings and resolutions passed are taken and maintained accordingly.

Deliberations during the Board and Board Committees meetings were properly minuted and documented by the Company Secretary. Upon conclusion of the meetings, minutes are circulated to all the Board members to ensure that the minutes reflect accurate records of the deliberations and decisions at the meetings.

4. information and support for directors

The Board is supplied with relevant information and reports on financial, operational, corporate, regulatory, business development and audit matters, by way of Board papers or upon specific requests, for informed decision making and effective discharge of the Board’s responsibilities.

The Board meets at least once every quarterly to review and approve the quarterly results of the Group for announcement. The Board also attended quite a number of additional meetings on ad-hoc basis as and when necessary to discuss corporate proposals or business issues that require the urgent decisions of the Board. The Advisors and Senior Management staff were invited to attend the Board meetings where necessary to provide the Board with detailed explanations and clarifications on issues that are being considered during the Board meetings.

CORPORATE GOVERNANCE OVERVIEW STATEMENT

40


The notices of Board of Directors’ meetings were given in writing at least seven (7) days prior to the meeting. The Board’s deliberation, in terms of the pertinent issues discussed at the meetings in arriving at the decisions and conclusions thereof in discharging the Board’s duties and responsibilities are properly recorded by the Company Secretary. The Board papers and agenda items were circulated within a reasonable due notice prior to the meeting or such other period as deemed appropriate by the Board.

The Directors may seek advice from the Management on issues pertaining to their respective jurisdictions. The Directors may also interact directly with, or request further explanation, information or updates on any aspect of the Company’s operations or business concerns from the Management.

The Board has access to the advice and services of the Company Secretaries, who are experienced and capable of carrying out the duties to which the post entails and may upon a written request to the Chairman to obtain independent professional advice at the Company’s expense as and when necessary.

5. clear functions of the board and management

The Group acknowledges the pivotal role played by the Board in the stewardship of its directions and operations, and ultimately the enhancement of long-term shareholders’ value. To fulfill this role, the Board is responsible for the overall corporate governance of the Group, including its strategic direction, establishing goals for management and monitoring the achievement of these goals.

The Board is guided by a Board Charter which sets out the duties and responsibilities of the Board, the Board Committees, and the Management, matters reserved for the Board’s decision and those which the Board may delegate to the Board Committees, MD and Management. The Board Charter further defines the respective roles of the Chairman of the Board, MD, Senior Independent Non-Executive Director and Directors. The Board Charter is available for reference at the Company’s website at www.perisai.biz.

The Board Charter has been revised and approved on 27 September 2018 to promote high standards of corporate governance and is designed to provide guidance and clarity for Directors and Management with regard to the role of the Board and its Committees. The Board Charter does not overrule or pre-empt the statutory requirements and other relevant statutes.

The Board will review this Charter from time to time and make necessary amendments as and when necessary to ensure it remains consistent with its objectives and existing regulatory requirements.

6. board committees

The Board, comprising members with diverse skills, experience and qualifications, recognises the clear distinction of the roles and responsibilities between the Board and the Management. The Board is responsible for the overall strategic direction and leadership of the Group, the adequacy and effectiveness of the Group’s risk management and internal control system, and compliance with the relevant laws and regulations. The Management, on the other hand, is responsible for assisting the Board in implementing the policies and procedures adopted by the Board to achieve the Group’s objective and in running the Group’s day-to-day business operation.

To assist in the discharge of its responsibilities, the Board has established the following Board Committees to perform certain of its functions and to provide recommendations and advice:

• Audit Committee (“AC”) • Nomination Committee (“NC”) • Remuneration Committee (“RC”); and • Employees’ Share Option Scheme (“ESOS”)


41

ANNUAL REPORT 2019

The following diagram shows a brief overview of the four main Board Committees of the Company, each of which is explained in further details as below:

ESOS Committee

Board of Directors

Nomination Committee

Responsibilities

• Board size and composition

• Selection & recruitment of directors

• Board performance evaluation

• Committee performance evaluation

• Directors’ training

Remuneration Committee

Responsibilities

• Remuneration policy

• Directors’ fees and benefits

• Performance related pay schemes

Audit Committee

Responsibilities

• Internal audit

• External audit

• Risk management

• Financial reporting

• Audit reports

• Related party transactions

• Internal controls

• Conflict of interest

Responsibilities

• Determining eligibility under the ESOS Scheme

• Determine number of shares offered

• Determine and regulate procedures on issuance and exercise of option

• Listen to disputes raised

Each Committee operates its functions within their approved terms of reference by the Board which are reviewed by the Board from time to time and the Board appoints the Chairman and members of each Committee.

The respective Committees report to the Board on matters considered and their recommendations thereon. The ultimate responsibility for the final decision on all matters, however, lies with the Board.

The Board may form other Committees delegated with specific authorities to act on their behalf and to that effect, an Executive Risk Management Committee (“ERMC”) was formed to assist the Board to oversee the overall risk management process.

All Board Committees have written terms of reference which were approved by the Board. The respective Chairman of the AC, NC and RC report their proceedings to the Board accordingly subsequent to the respective Committee meetings.

Authority for the operational management of the Group’s business has been delegated to the MD. The MD further delegates its day to day operations to the Management. The Management of each department within its authority limits reports directly to the Managing Director.

The Terms of Reference of the Board Committees are published on the Company’s website at www.perisai.biz.

7. code of conduct and ethics

The Board has formalised and adopted a Code of Conduct and Ethics (“COCE”) which sets out certain values, principles and standards of good conduct expected from the Directors and employees at work. A copy of the COCE can be viewed at the Company’s website. The COCE will be reviewed from time to time for changes and new developments in the external and internal environment.

This COCE was reviewed on 29 August 2019 to promote the corporate culture which engenders ethical conduct that permeates throughout the Company and its’ subsidiaries. The COCE reflects the Company’s commitment to integrity, transparency, accountability and self-regulation.

The detailed information can be found in the Company’s website at www.perisai.biz.


42


8. Sustainability

The Board recognises the importance of sustainability and its increasing significance in the business. The Board is committed to understanding and implementing sustainable practices and to exploring the benefits to the business whilst attempting to achieve the right balance between the needs of the wider community, the requirements of shareholders and stakeholders and economic success.

The Company has formalised a Sustainability Statement which aims to integrate the principles of sustainability into the Company’s strategies, policies and procedures practices. Senior Management is entrusted in implementing this process, with the direction and guidance from the Board. Sustainability efforts are reviewed and the Board and Senior Management are committed to create a culture of awareness on sustainability within the Company. The Sustainability Statement is set out on pages 22 to 37 of the Annual Report 2019.

9. board composition

The composition of the Board is as follows:-

Chairman (Independent Non-Executive Chairman) Dato’ Anwarrudin Bin Ahamad Osman

managing director Datuk Zainol Izzet Bin Mohamed Ishak

Independent Non-Executive Director Dato’ Yogesvaran A/L T. Arianayagam

Non-Independent Non-Executive Directors Dato’ Dr. Mohamed Ariffin Bin Hj. Aton Chan Feoi Chun

The profile of the Directors is set out on pages 6 to 10 of this Annual Report.

The composition of the Board has complied with the Listing Requirements of Bursa Malaysia Securities Berhad which requires at least two Directors or one-third (1/3) of the Board members of the Company, whichever is higher, are independent.

With the current composition, the Board believes that its members have the necessary knowledge, experience, requisite range of skills and competence to enable them to discharge their duties and responsibilities effectively, objectively and independently as follows:-

i) The Board believes the current composition of directors is sufficient as they contribute to Board’s deliberations objectively and independently.

ii) There are robust deliberations during Board and Committee meetings as they do not shy away from asking hard questions or request more information where necessary.

iii) All Directors on the Board have gained extensive experience with their many years of experience on boards of other companies and/or also as professionals in their respective fields of expertise.

The Directors also bring external perspectives to the Board’s deliberations through their diverse backgrounds and experiences, enabling them to put in place necessary checks and balances, contributing to Board’s decision making.


43

ANNUAL REPORT 2019

The Board concluded that the members have appropriate background, experience, skills and knowledge to lead the Company. Furthermore, the Board believes that the current composition is appropriate. Nevertheless, the Board, through the NC, reviews the composition of the Board, continues to search for candidate(s) and core competencies of Directors.

The Board takes cognisant that Practice 4.3 of MCCG, which was outlined in the Board Charter, that limits the tenure of its Independent Directors up to nine (9) years. Upon completion of the nine (9) years, an Independent Director may continue to serve the Board subject to the Director’s re-designation as a Non-Independent Director. Furthermore, if the Board intends to retain an Independent Director more than nine (9) years, the Board must justify and seek shareholders’ approval. If the Board continues to retain the Independent Director after the twelve (12) years, the Board should seek annual shareholders’ approval through a two-tier voting process. Currently, none of the Independent Non-Executive Directors of the Company have exceeded the cumulative terms of nine (9) years.

10. nomination committee

The composition of the NC is as follows:-

chairman Dato’ Yogesvaran A/L T. Arianayagam (Independent Non-Executive Director)

Members Dato’ Anwarrudin Bin Ahamad Osman (Independent Non-Executive Chairman) Dato’ Dr. Mohamed Ariffin Bin Hj. Aton (Non-Independent Non-Executive Director)

The responsibilities of the NC in overseeing the selection and assessment of Directors are stipulated in its Terms of Reference. The Terms of Reference of the NC is available for reference on the Company’s website at www.perisai.biz.

During the financial year under review, the NC met twice, of which were attended by two (2) members. The NC undertook the following:

• Reviewed, considered and recommended to the Board for approval, the re-election of Directors who retire by rotation pursuant to Company’s Constitution;

• Reviewed and recommended to the Board for approval, the revised NC’s terms of reference in compliance with the latest amendments to the Listing Requirements and the MCCG;

• Assessed the independence of Independent Directors;• Evaluated the performance and effectiveness of the Board and each individual Director; and• Reviewed and assessed the AC’s activities, performance and terms of office of AC and each of the AC members.

In accordance with the Company’s Constitution, an election of Directors shall take place each year at an Annual General Meeting (“AGM”) and one-third (1/3) of the Directors are subject to retirement by rotation, in any event, each Director shall retire from office once in every three (3) years. The Directors to retire in each year are the Directors who have been longest in office since their last appointment or re-election. The Directors appointed by the Board during the financial year are subject to retirement at the next AGM held following their appointments in accordance with the Company’s Constitution. All retiring Directors are eligible for re-election. The re-election of each Director is voted on separate resolution during the AGM of the Company.

In accordance with the Article 93 of the Company’s Constitution, at the forthcoming Sixteenth AGM (“16th AGM”), the following Directors are subject to retirement by rotation:-

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton Dato’ Yogesvaran A/L T.Arianayagam


44


Dato’ Yogesvaran A/L T.Arianayagam has expressed his intention to seek for re-election at the forthcoming 16th AGM but Dato’ Dr. Mohamed Ariffin bin Hj. Aton has expressed his intention that he does not wish to seek re-election and as such, he will retire as a Director of the Company at the conclusion of the forthcoming 16th AGM.

11. board Appointment Process The NC reviews the Board Composition, AC and NC to ensure that the Board and the individual Directors have the range of

skills, experience, independence, competence and diversity to adhere the sustainability of the Group and good corporate governance practice.

The NC is also responsible for assessing the nominees and making recommendations for new appointments to the Board considering the following:

• Skills, knowledge, expertise and experience; • Professionalism; • Boardroom diversity (including gender diversity); • Background, Character, competence, time commitment and integrity; and In identifying candidates for appointment of Directors, the Board relies on recommendations from NC, existing Board members,

Management or major shareholders. The Board may consider seeking independent sources (e.g. directors’ registry, advertisement or recruitment agency) to identify suitably qualified candidates from the independent sources in addition from the Directors, Management or major Shareholders of the Company, when necessary.

12. diversity Policy

The Board is committed to provide fair and equal opportunities and to nurture diversity (including gender, age and ethnicity) within the Group. The candidates for future Board appointments will be considered, taking into account, a range of diversity perspectives, including gender, cultural, competency, skills, character, time commitment, integrity and experience of which the selected candidates will bring to the Board. The actual decision as to who should be nominated will be the responsibility of the full Board after considering the recommendations of the NC. The Company Secretaries will ensure that all appointments are properly made; all the necessary information is obtained as well as all legal and regulatory obligations are met.

Diversity plays an important aspect in ensuring more efficient decision makings for the Board. This is clear from the Board’s diverse skill sets, backgrounds, experience as well as differences in cultural and gender. With the current composition, the Board believes that its members have the necessary knowledge, experience, requisite range of skills and competence to enable them to discharge their duties and responsibilities effectively. All Directors on the Board have gained extensive experience with their many years of experience on Boards of other companies and/or also as professionals in their respective fields of expertise, such as architecture, project management, engineering, finance, accounting, human resource, marketing and sales.

During the year under review, there were no woman director in the Board. Nevertheless, the NC may consider taking necessary steps to include, where appropriate, women candidates as part of the Board’s recruitment exercise after implementation of the regularisation plan.

The Board will report annually in the Annual Report on Board’s diversity and monitor the implementation of this Policy.

13. board evaluation

The NC is responsible for carrying out assessment of the performance and effectiveness of the Board as a whole, its committee and based on self-review and peer assessment on an annual basis. The annual assessment includes specific assessment of independence of Independent Directors.


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ANNUAL REPORT 2019

An evaluation form to assess the performance of the Board, its committees and the individual directors is provided with the aim of improving the effectiveness of the Board and its members. The evaluation forms were drafted based on the recommended form prescribed by Bursa Malaysia Securities Berhad and MCCG that relates to the Board structure, operations, roles and responsibilities, Board composition and assessment of character, experience, integrity, competence and time commitment of each Directors. The review was led by the NC Chairman.

For the financial year under review 2019, the Board’s evaluations was conducted by NC and led by the NC Chairman, and observed by two of the NC members, Dato’ Anwarrudin Bin Ahamad Osman and Dato’ Dr. Mohamed Ariffin Bin Hj. Aton.

The NC reviewed the results of the Board annual performance evaluation for the financial year under review and held a meeting

for discussion on such matter. Following the meeting, the results together with the recommendations arising from the evaluations were discussed at the Board meeting.

Based on the results of the 2019 evaluation, the overall Directors’ view was that the Board was functioning effectively. Each of the Directors was found to have made contributions and commitments including time in their respective roles.

All Directors have complied with the restrictions on the number of directorships in public listed companies as prescribed under the Listing Requirements.

14. time commitment

The Board members have devoted sufficient time and effort in attending Board meetings for the financial year 2019. During the financial year ended 30 June 2019, the Board met eight (8) times, with details of the attendance as follows:

name of directors no. of board meetings Attended

Dato’ Anwarrudin Bin Ahamad Osman 8/8

Datuk Zainol Izzet Bin Mohamed Ishak 8/8

Dato’ Yogesvaran A/L T. Arianayagam 8/8

Chan Feoi Chun 8/8

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton 6/8

15. board training and development

The Board, via the NC, assesses the training needs of each of its Directors on an ongoing basis, by determining areas that would best strengthen their contributions to the Board.

All the Directors of the Company have attended the Mandatory Accreditation Programme (“MAP”). New Directors will be briefed on the Company’s history, operations and financial control system to enable them to have in-depth understanding of the Company’s operations. The Senior Management had also briefed the Directors on general economic, industry and technical developments from time to time.


46


The Directors are encouraged to attend continuous education programme and seminars to keep abreast of relevant changes in laws and regulations and the development in the industry. During the financial year ended 30 June 2019, the training programmes and seminars attended by the Directors are as follows:-

directors Programme date

Dato’ Anwarrudin Bin Ahamad Osman Corporate Governance Updates for PN17 Companies 29 May 2019

Datuk Zainol Izzet Bin Mohamed Ishak Corporate Governance Updates for PN17 Companies 29 May 2019

Dato’ Yogesvaran A/L T. Arianayagam Corporate Governance Updates for PN17 Companies 29 May 2019

Chan Feoi Chun Corporate Governance Updates for PN17 Companies 29 May 2019

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton Corporate Governance Updates for PN17 Companies 29 May 2019

The Directors will continue to attend any relevant training courses to further enhance their skills and knowledge to enable them to discharge their duties and responsibilities more effectively.

The Company Secretaries facilitate the organisation of internal training programmes and keep Directors informed of relevant external training programmes. The Company Secretaries also circulate the relevant guidelines on statutory and regulatory requirements from time to time for the Board’s reference and brief the Board on these updates at Board meetings.

16. remuneration committee and remuneration Policies and Procedures

The objective of the Group is to ensure that the Group attracts and retains Directors and Senior Management of calibre to provide the necessary skills and experience as required and commensurate with the responsibilities for the effective management and operations of the Group. The Company has adopted a formalised policy in 2018 to determine the remuneration of Directors and Senior Management.

The composition of the RC is as follows:-

chairman Chan Feoi Chun (Non-Independent Non-Executive Director)

Members Dato’ Yogesvaran A/L T. Arianayagam (Independent Non-Executive Director) Dato’ Anwarrudin Bin Ahamad Osman (Independent Non-Executive Chairman) (Appointed on 29 August 2018) Datuk Zainol Izzet Bin Mohamed Ishak (Ceased on 29 August 2018) Dato’ Dr. Mohamed Ariffin Bin Hj. Aton (Ceased on 29 August 2018)

The duties and responsibilities of the RC are as follows:-

(a) To recommend to the Board the remuneration of the Executive Directors and Non-Executive Directors in all its forms. The determination of remuneration packages of Executive Directors and Non-Executive Directors, should be a matter for the Board as a whole where the individuals concerned shall abstain from discussion of their own remuneration;

(b) To assist the Board in assessing the responsibility and commitment undertaken by the Board membership; and

(c) To assist the Board in ensuring the remuneration of the directors reflects the responsibility and commitment of the director concerned.

During the financial year under review, the RC met twice, of which all members attended.


47

ANNUAL REPORT 2019

The remuneration packages for the Executive Directors comprise of basic salary and benefits-in-kind. The basic salaries are reviewed annually taking into account a number of factors, including individual responsibilities, performance and experience, and practices at other companies of similar size. The Managing Director receives a Company’s car with full maintenance and fuel but without leave passage and car allowance.

Each of the Director receives directors’ fee and meeting allowances for each Board and general meetings that they attend. The

level of Directors’ fee reflects their experience and level of responsibilities. Chairman of the AC, RC, NC receives higher fees in respect of their services as Chairman of respective committee. The Directors will receive an additional fee if they are members of the Board Committees. The fees for Directors are determined by the Board with approval from shareholders at AGM.

In respect of the financial year under review, the RC had reviewed the remuneration for the Executive Directors, which reflects the level of risk, responsibility as well as the performance of the Company and considered the packages are well within the industry norm. The RC had also reviewed the fees and benefits–in-kinds (“BIK”) for Executive Directors and Non-Executive Directors, which reflects the experience and level of responsibilities undertaken by the individual Executive Directors and Non-Executive Director concerned.

Details of the remuneration of Directors (both the Company and the Group) who served during the financial year ended 30 June 2019 are as follows:-

the group

fees (rm)

meeting Allowance

(rm)

salaries/bonus (rm)

share options granted

under esos (rm)

Benefits-in-kind (rm)

other emoluments

(rm)total (rm)

Executive Director

Datuk Zainol Izzet Bin Mohamed Ishak*

- - 1,019,955 - 36,088 178,037 1,234,080

Non-Executive directors

Dato’ Anwarrudin Bin Ahamad Osman

90,329 12,500 - - - - 102,829

Dato’ Yogesvaran A/L T. Arianayagam

75,600 13,000 - - - - 88,600

Chan Feoi Chun 71,100 12,000 - - - - 83,100

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton

67,171 7,000 - - - - 74,171


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the company

fees (rm)

meeting Allowance

(rm)

salaries/bonus (rm)

share options granted

under esos (rm)

Benefits-in-kind (rm)

other emoluments

(rm)total (rm)

Executive Director

Datuk Zainol Izzet Bin Mohamed Ishak*

- - 948,000 - 36,088 168,683 1,152,771

Non-Executive directors

Dato’ Anwarrudin Bin Ahamad Osman

90,329 12,500 - - - - 102,829

Dato’ Yogesvaran A/L T. Arianayagam

75,600 13,000 - - - - 88,600

Chan Feoi Chun 71,100 12,000 - - - - 83,100

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton

67,171 7,000 - - - - 74,171

* The Senior Management of the Company consists of only Datuk Zainol Izzet Bin Mohamed Ishak, who is also the Managing Director of the Company and his remuneration as Senior Management is disclosed under Directors’ remuneration. As such, the remuneration of Senior Management was not disclosed separately.

PrinciPle b: effective Audit And risK mAnAgement

1. Audit committee (“Ac”)

The AC currently comprises of two (2) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director. Further details of the AC members’ experience and qualifications are set out in profile on the Board of Directors on pages 6 to 10. The varied backgrounds of the AC members and their broad experience, knowledge and expertise from various industries allows them to discharge their duties effectively.

Both the AC Chairman and an AC member are qualified MIA members with relevant financial experiences in accounting and auditing. Collectively, all the AC members are financially literate and have knowledge and understanding of the matters under the purview of the AC including the principles and developments of financial reporting.

All the AC members receive trainings and continuous professional developments set out in this CG Overview Statement on page 46.

The composition of the AC, including its roles and responsibilities are set out in pages 61 to 63 under the AC Report in this Annual Report.


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ANNUAL REPORT 2019

2. External Auditors

independence and effectiveness

The Board upholds the integrity of financial reporting. The AC is entrusted to provide advice and assistance to the Board in fulfilling its statutory and fiduciary responsibilities relating to the Company’s internal and external audit functions, risk management and compliance systems and practice, financial statements, accounting and control systems and matters that may significantly impact the financial condition or affairs of the business. The AC is also responsible in ensuring that the financial statements of the Company comply with the applicable financial standards in Malaysia.

The AC members reviewed the Company’s financial statements in the presence of external auditors prior to recommending them for the Board’s approval and issuance to stakeholders.

The Board recognised the value of an effective AC in ensuring that the Company’s financial statements are reliable source of financial information by establishing procedures, via the AC.

The AC is responsible to monitor the performance, objectivity and independence of the external auditor. The AC acknowledges that it is important to maintain an open communication between the Board, the internal auditors and external auditors to ensure audit independence and effectiveness.

The AC reviewed the scope of the audit set out in the audit planning memorandum, work plan, areas of audit emphasis, fee proposal, issues arising from the audit and their resolution, audit judgements, level of errors identified during the audit and recommendations made by the external auditors in order to fulfil its responsibility for assessing the external audit process.

For the financial year under review, the AC met with the external auditors once a year without presence of the executive Board members and Management to discuss key issues within their responsibilities. In addition, the external auditors are invited to attend the Company’s AGM and are available to attend questions from the shareholders.

The Board recognized the value of an effective AC in ensuring that the Company’s financial statements are reliable source of financial information by establishing procedures, via the AC.

In safeguarding and supporting External Auditors’ independence and objectivity, the Company has adopted a formalised External Auditors’ Assessment Policy in 2018 which sets out the selection process of new external auditors, basic principles on the prohibition of non-audits services and the approval process for the provision of non-audit services.

The non-audit fee incurred for the financial year 2019 was RM12,660.00. The Board was satisfied that the non-audit services during the year under review by external auditors did not affect the auditor’s independence.

The AC reviews annually the appointment of the auditor taking into account the effectiveness and independence of external auditors and ensure that other non-audit works will not be in conflict with the functions of the auditors. To review and assess the independence and effectiveness of the external auditors, the AC completes an external auditor evaluation form on the performance of the assigned audit team on an annual basis. Following the review, the AC, together with the feedback from the management, makes recommendation to the Board.

The External Auditors has confirmed in writing that they are, and have been, independent throughout the conduct of the audit engagement with the Company in accordance with the independence criteria set out by the Malaysian Institute of Accountants (“MIA”).


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3. risk management and internal control framework

The Board acknowledges the significance of a sound system of risk management and internal control to manage the overall risk exposure of the Group.

The Group has an outsourced internal audit function and reports directly to the AC. The resources and scope of work covered by the internal audit function during the financial year under review, including its observation and recommendations, is provided in the Audit Committee Report of this Annual Report.

The AC meets regularly to review the risks identified and discuss on mitigation lack in place and report to the Board on quarterly basis. The Board affirms its overall responsibility with established and clear functional responsibilities and accountabilities which are carried out and monitored by the ERMC which is led by the MD and top management together with the AC would review the adequacy and effectiveness of Internal Control and Risk Management Framework and to ensure that all the requirements are complied. Upon the completion of the regularisation plan, the Company may consider looking into the formation of a Risk Management Committee comprising majority of Independent Directors as guided by the MCCG.

Details on the risk management and internal control system of the Group are set out in the Statement on Risk Management and Internal Control of this Annual Report.

4. internal Audit function

The Group has outsourced the internal audit function to a professional service firm which is independent of the activities and operations of the Group. The outsourced internal auditors report directly to the AC. Details on the internal audit function are set out in the AC Report and the Statement on Risk Management and Internal Control of this Annual Report.

PrinciPle c: integrity in corPorAte rePorting And meAningful relAtionshiP With stAKeholders

integrity in corPorAte rePorting

1. Directors’ Responsibility Statement

The Board is required to present the financial statements for each financial year which have been made out in accordance with the applicable approved accounting standards and give a true and fair view of the state of affairs, the results and cash flows of the Group and the Company.

The Board satisfied that the Group has used the appropriate accounting policies and applied them consistently and supported by reasonable prudent judgement and estimates, adopted to include new and revised MFRSs where applicable, in preparing the financial statements of the Group and of the Company for the financial year ended 30 June 2019. The Board is also of the view that relevant approved accounting standards have been followed in the preparation of these financial statements.

The Board has also taken all such necessary steps to ensure that proper internal controls are in place to safeguard the assets of the Group and to detect and prevent fraud and other irregularities.

2. Appropriate corporate disclosure Policies and Procedures

The Group is committed to a policy which provides accurate, balanced, clear, timely and complete disclosure of corporate information to enable informed orderly market decisions by investors.


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ANNUAL REPORT 2019

Importance is also placed on timely and equal dissemination of material information to the stakeholders, media and regulators. In this respect, the Group has adopted a formalised Corporate Disclosure Policy and Procedures in 2018 to ensure comprehensive, accurate and timely disclosures are provided to shareholders and stakeholders.

The detailed information can be found in the Company’s website at www.perisai.biz.

3. communications with stakeholders

The Board recognises the importance of maintaining transparency and accountability to its shareholders as a key element of good corporate governance and thus, maintains a high level of disclosure and communication with its shareholders through various means.

The Company meets with analysts, institutional fund managers, shareholders and potential investors to allow shareholders and other stakeholders to better understand the Company’s operations, performance and strategy direction and future prospects.

Significant matters relating to development of the business, reporting requirements etc are disseminated by way of announcements via Bursa Malaysia Securities Berhad and press releases. Interim results are announced quarterly and full results in August 2019, followed by the annual report.

The Company’s website, www.perisai.biz provide equal access to the shareholders, investors and the public to obtain information on the Company’s press releases, corporate information, operation activities, financial results and other information regarding the Group. The website also provides investor relations contact to facilitate submission of queries from stakeholders or general public.

4. general meetings

Shareholders’ meetings are important events for the Board to meet the shareholders. The Chairman will allocate sufficient time to encourage the shareholders, proxies and the corporate representatives to ask questions pertaining to the matters tabled at general meetings or voice any concerns. The Board, Management team, the Company’s advisors if required and external auditors will be present at the meeting to answer questions raised and provide clarifications as required by the shareholders, proxies and corporate representatives.

The Fifteenth AGM (“15th AGM”) was held on 29 November 2018 at 10.00 a.m. in Kuala Lumpur. The 15th AGM is the principal forum for dialogue with shareholders. AGM provides an opportunity for shareholders to understand the financial and operational performance of the Company and to ask questions.

The notice of the 15th AGM together with the Annual Report are were dispatched to shareholders at least twenty-eight (28) days prior to the meeting date, well in advance of the twenty-one (21) days requirement under the CA 2016 and Main Market Listing Requirements of Bursa Securities. The additional time given to shareholders is was to allow them to make the necessary arrangements to attend and participate in person or through corporate representatives, proxies or attorneys.

During the 15th AGM, the advisors presented an update on the Company’s Proposed Debt Restructuring Exercise (“Proposed Restructuring”) and highlighted the salient items to the shareholders. The Board also encourages participation from shareholders by having a question and answer session during the AGM which the Directors (inclusive of the Chairman of the Board, AC, NC and RC) were available to provide meaningful responses to the questions raised by the shareholders.

All the resolutions set out in the Notice of the AGM were put to vote by poll voting and duly passed except for Ordinary Resolution No.6 on the Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature which was not carried. The shareholders were informed of their rights to demand for a poll. The outcome of the AGM was announced to Bursa Malaysia Securities Berhad on the same meeting day. The Company had appointed an independent scrutineer to verify the poll results.


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The Minutes of the AGM, as soon as practicable after the conclusion of the AGM has been published on the Company’s website upon being reviewed by the Board members and approved by the Chairman.

5. Poll voting

The Board noted that pursuant to Paragraph 8.29A of Listing Requirements, the Company must ensure that any resolution set out in the Notice of any general meeting is to be voted by poll. The Company has implemented poll voting for all resolutions via electronic means since 2017.

The Board will continue to adopt poll voting for all resolutions set out in the Notice of the 16th AGM of which the votes casting will be validated by an independent scrutineer. The outcome of all resolutions to be proposed at the 16th AGM will be announced to Bursa Malaysia Securities Berhad at the end of the meeting while a summary of the key matters discussed at the 16th AGM shall be published on the Company’s website as soon as practicable after the conclusion of the 16th AGM.

The Company continues to observe the development of the respective technology that facilitate voting in absentia and remote shareholders’ participation. and will recommend to the Board for such technology adoption should the needs arise and fit for the Company’s capacity. To encourage the shareholders’ attendance, the AGM is always held at an easily accessible location in the Klang Valley.

focus AreAs on corPorAte governAnce

Corporate governance was clearly imperative for the Group in the year 2019 against the backdrop of regulatory changes in corporate governance and a relatively challenging economic environment that is characterised by volatile market conditions and commodity prices. Against the aforementioned setting, during the year under review, the Board directed its focus on the core duties of the Board which is grounded on the creation of long-term value for stakeholders.

This CG Overview Statement was approved by the Board of Directors of the Company on 26 September 2019.


53

ANNUAL REPORT 2019

comPosition

The Nomination Committee (“NC”) was established on 15 June 2004 and comprises exclusively of Non-Executive Directors, the majority of whom are Independent, which complies with the requirements of the Malaysian Code on Corporate Governance 2017 (“MCCG”). The current members are as follows:-

Name of Member Designation

Dato’ Yogesvaran A/L T. Arianayagam ChairmanIndependent Non-Executive Director

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton MemberNon-Independent Non-Executive Director

Dato’ Anwarrudin Bin Ahamad Osman MemberIndependent Non-Executive Chairman

Note: Dato’ Dr. Mohamed Ariffin bin Hj. Aton has expressed his intention that he does not wish to seek re-election at the forthcoming Company’s 16th Annual General Meeting (“16th AGM”) and as such, he will retire as a Director of the Company at the conclusion of the forthcoming 16th AGM.

terms of reference

The NC is governed by the Terms of Reference (“TOR”) and the TOR is consistent with the requirements of MMLR and the MCCG. On 27 September 2018, the NC TOR was revised to reflect the new recommended practices in the MCCG. The TOR of the NC is available on the Company’s website at www.perisai.biz.

meetings

The NC met twice during the financial year ended 30 June 2019 and the details of the meeting attendance are set out as follows:-

Name of Member Meeting Attended

Dato’ Yogesvaran A/L T. Arianayagam 2/2Independent Non-Executive Director

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton 1/2Non-Independent Non-Executive Director

Dato’ Anwarrudin Bin Ahamad Osman 2/2Independent Non-Executive Chairman

The Company Secretaries act as the Secretaries to the NC. All proceedings of the NC meeting are duly recorded in the minutes and are properly kept by the Company Secretaries.

nominAtion committee rePort

54


Summary of Activities undertaken by the NC

(a) Conducted the annual assessment and the performance evaluation of the Board, Board Committees and individual Directors. Summarised the results of the annual assessment and the performance evaluation and reported to the Board on the outcome of such assessment.

(b) Reviewed the level of independence of the Independent Non-Executive Directors.

(c) Assessed the Directors’ training needs to ensure all Directors receive appropriate continuously training.

(d) Made recommendations to the Board for the re-election and re-appointment of the Directors who are subject to re-appointment and retirement at the forthcoming AGM.

(e) Reviewed and made recommendation to the Board for the adoption of the revised Terms of Reference of the NC.

(f) Reviewed the size of composition of the Board.

The NC’s recommendations were tabled in the Board for the Board’s consideration and approval.

board diversity

The Board acknowledges the importance of boardroom diversity and is supportive of the recommendation of the MCCG in relation to the establishment of boardroom diversity policy. Hence, the Board has reviewed and approved the Board Diversity Policy in 2018. Nevertheless, the Board has not set any diversity target on the composition of its Board members as the Board believes that the selection of a Director shall be guided by the competency, skills, experience and knowledge of the individual candidate.

The Board also acknowledges the recommendation of MCCG pertaining to the establishment of boardroom gender diversity policy. Currently the Board is not represented by any female Director. The Board will look for opportunities to achieve the diversity target which includes gender diversity in line with MCCG. The critical attributes of suitable Board candidate include skills, knowledge, expertise and experience, professionalism, character, competence, commitment (including time commitment) and integrity that the candidate shall bring to the Board.

Annual Assessment of directors

The Board, through the NC, conducts an annual assessment on its effectiveness as whole, each individual Director and the Board Committees established by the Board.

The Board is assessed in the areas of the Board’s roles and responsibilities, structure and composition, conduct, meeting process, interaction and communication with the Management and other stakeholders, as well as the effectiveness of the Chairman.

The Board Committees are assessed in terms of accountabilities and responsibilities and the success of the Committees in achieving its objectives. During the year, the NC and Board also reviewed the terms of reference of NC.

The board assessment was carried out during the financial year ended 30 June 2019 through questionnaires sent to each individual director and encompasses an assessment of the performance of the Board as a whole, the Board Committees and individual Directors (via self and peer assessment) as well as the independence of Independence Directors.

NOMINATION COMMITTEE REPORT

55

ANNUAL REPORT 2019

re-election of directors at the Agm

The Company’s Constitution provides that an election of Directors shall take place at an annual general meeting of the Company. All Directors shall retire from office once at least in every three (3) years, but shall be eligible for re-election.

The Directors to retire in every year shall be those who, being subject to retirement by rotation, have been longest in office since their last election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. A retiring Director shall be eligible for re-election.

Where a person has been appointed as Director either to fill a casual vacancy or as an additional Director, he shall hold office only until the next annual general meeting and shall then be eligible for re-election.

The NC also makes recommendations to the Board on the re-election of the Directors.

NOMINATION COMMITTEE REPORT

56


introduction

The Directors acknowledge their responsibilities over the risk management and internal control system in the Group, which includes the establishment of an appropriate control environment and framework as well as reviewing its adequacy and integrity, in order to safeguard shareholders’ investment and the Company’s assets. In compliance with Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Board is pleased to set out the Group’s Statement on Risk Management and Internal Control for the financial year ended 30 June 2019 which has been prepared in accordance with the “Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers”.

For the purpose of this Statement on Risk Management and Internal Control, the joint ventures and/or associate companies of the Group have not been taken into account. The Group’s interests in these joint ventures and/or associate companies are served through representation on the board of the joint ventures and/or associate companies as well as through the review of management financial statements.

boArd resPonsibility

The Board of Directors is fully committed to ensure the existence of an effective system of internal control and risk management system within the Group and that the effectiveness, adequacy and integrity of those systems are reviewed on an on-going basis. However, the Board recognises that such systems are designed to manage the risks identified to acceptable levels rather than to eliminate them. Therefore, the systems implemented can provide only reasonable but not absolute assurance against the occurrence of any material misstatement or loss.

The Group has in place an on-going process for identifying, evaluating, monitoring and managing significant risks that may affect the achievement of corporate and business objectives. The risk management and internal control system covers operational, financial, management and compliance with applicable laws.

Whilst the Board has overall responsibility for the establishment of the Group’s risk management and internal control system, it has delegated the implementation and monitoring of this system to the Management who will report on identified risks and actions taken to mitigate and/or minimise the risks. The Management is responsible to identify and manage risks. Management meetings are held, where necessary to address significant issues as faced by the Group to ensure that such risks are closely monitored and appropriately addressed, managed, mitigated or eliminated. All significant risks of the Group are reported to the Board. Twice a year, the Management prepares a report detailing the significant risks, the status of risk reviews and the status of implementation of action plans, for review by the Board.

The Audit Committee with the support of the internal auditors, assist the Board in reviewing the adequacy, integrity and effectiveness of the risk management and internal control system within the Group. The internal auditor conducts an annual review of this system including the extent of compliance with the Group’s operating policies and procedures. The findings of the review are reported directly to the Audit Committee.

The composition and terms of reference and activities of the Audit Committee are set out on pages 61 to 63 of this Annual Report.

risK mAnAgement frAmeWorK

Risk management is a process that is carried out within the Group on an on-going basis and has been in place for the entire year under review and up to the date of approval of this statement for inclusion in the Annual Report. Risk Management practices are inculcated in the activities of the Group, which requires amongst others, establishing risk tolerance thresholds to identify, assess and monitor key risks faced by the Group. The monitoring and management of identified risks are undertaken by the Management and reported to the Board.

The Audit Committee working together with the Management continues to take measures to further strengthen the Group’s risk management system.

stAtement on risK mAnAgement And internAl control

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ANNUAL REPORT 2019

In providing the oversight of risk management framework, an Executive Risk Management Committee (“ERMC”), chaired by the Managing Director and comprising heads of department of the finance, corporate planning, legal and operational functions of the Group was established to assist the Board to oversee the overall risk management process. As part of the risk management framework, the following risk management approach has been adopted and applied by ERMC to facilitate the identification, assessment, monitoring, reporting and mitigation of risks within the Group:-

(a) Areas of concern including both internal and external factors that could adversely impact the achievement of the Group’s business objectives are identified and categorised into strategic, financial, operational, legal and compliance risks;

(b) The risks are then assessed using quantitative and qualitative aspects to determine their potential impact on the relevant business objectives and their likelihood of occurrence;

(c) All identified key risks are captured on a Principal Risk Map mapping of the level of significance of the risks to the Group and determine the required prioritisation and focus for risk mitigation; and

(d) Identified key risks together with the mitigation plans are reported to the Board through a Principal Risk Register Report.

The Principal Risk Register serves as a tool for the heads of department/business unit in managing key risks applicable to their respective operations. The ERMC meets at least twice a financial year to assess whether any conditions associated with a particular risk have changed or any new areas are introduced requiring an assessment of risk. The status of mitigation plans and new identified risks are formally reported to the Board to ensure risk exposures are managed and required actions undertake in a timely manner.

During the financial year under review, the ERMC convened two discussions to review and deliberate on the Group’s significant risks as well as to update the risk exposure of the Group. Appropriate report was prepared accordingly. The above risk management process facilitates and enhances the ability of the Board and the Management to manage risks within defined risk parameters and risk standards.

internAl control frAmeWorK

The Group’s internal control environment comprises, amongst others, various procedures and frameworks which are as follows:-

organisation structure

The business of the Group is overseen by the board which provides direction and oversight to the Managing Director who is supported by Management. The Board is supported by a number of established Board committees, namely the Audit, Nomination, Remuneration and Employees Share Option Scheme, all of which facilitate the Board in the discharge of its duties. Each Committee has clearly defined terms of reference and responsibilities, and the activities of each Committee are reported back to the Board for information or decision where relevant (please refer to the Corporate Governance Overview Statement).

The daily running of business is entrusted to the Managing Director and the Management team. This close-to-operations management style enables timely identification and reporting of significant matters.

internal Audit function

The Audit Committee evaluates the internal audit function to assess its effectiveness in discharge of its responsibilities. The Group’s internal audit function is outsourced to Messrs. HL Hong & Co, an external consultant to assist the Board and Audit committee in providing independent assessment on the adequacy, efficiency and effectiveness of the Group’s internal control system. The Group internal audit function reports directly to the Audit Committee.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

58


During the financial year ended 30 June 2019, risk-based approach internal audits were carried out in accordance to the internal plan that has been reviewed and approved by the Audit Committee. Observations from these audits and presented, together with Management’s response and proposed action plans, to the Audit Committee for review. Further details of the activities of the internal audit are provided in the Audit Committee Report.

strategic business Plan, budget and Performance review

Annual Business Plan and Budget are prepared on a yearly basis and are deliberated and approved by the Board. The Group’s Strategic Business Plan maps out the strategic objectives and business direction of the Group. The Group’s businesses and financial performance are monitored and measured against the business plan and approved budget. Any major variance will be reviewed and corrective actions are undertaken.

Quarterly financial results are presented to and reviewed by the Audit Committee and the Board to enable them to monitor and evaluate the business and financial performance of the Group.

limits of Authority (“loA”) and operating Procedures

The Board’s authority in the approval of certain matters are delegated to the Board Committees and members of Management through a clear and formally defined LOA which is the primary instrument that governs and manages the operational and business decision process of the Group. Whilst the objective of the LOA is to empower, the key principle adhered to in its formulation is to ensure that a system of internal control of checks and balances are incorporated therein. The LOA is reviewed as and when necessary and updated to ensure relevance to the Group’s operations.

Other internal policies and operating procedures adopted by the Group will be properly documented and communicated so as to ensure clear accountabilities.

human capital management

A formal staff performance appraisal system, guided by key performance indicators to evaluate and measure employee performance and their competency is performed once a year to link performance with appropriate remuneration in order to create a high performance work culture. In additional, training and development programmes are provided to the employees to enhance their knowledge and competency in carrying out their duties and responsibilities towards achieving the Group’s objectives as well as to develop internal talents to meet the Group’s future talent needs.

information and communication Processes

Comprehensive information covering financial performance, business operations, utilisation of funds and cashflow position are provided by the Management to the Board on a quarterly basis.

independent Assurance mechanism

Annual assessments are carried out through internal audits to assess the adequacy and integrity of the internal controls and risk management and also to monitor compliance with the policies and procedures of the Group. The Group has outsourced the function of internal audit to a professional service provider as it is more cost effective. The outsourcing of this function further enhances the professionalism and objectivity of this function as there is complete independence from the activities on which the audits are conducted over.

The Audit Committee has an active oversight on the internal audit’s independence, scope of work and resources. It also reviews the internal audit function, particularly the scope of the annual audit plan and frequency of internal audit activities.


59

ANNUAL REPORT 2019

Internal audit reports are presented to the Audit Committee upon its conclusion. Audit findings together with recommendations thereon are presented to Management and follow up audits are performed to track the status of implementation of corrective actions until completion to ensure Management action plans are carried out effectively.

code of conduct

The Group has established and adopted a Code of Conduct and Ethics (“COCE”) which encapsulates the core principles of the Group. The COCE is expected to guide, motivate and inspire conduct which is ethical and principled in the everyday dealings of the Group’s business. With an application that extends not just to the Directors, officers and employees of the Group but also to third parties such as contractors, representatives and agents of the Group, the COCE is used as part of the Group’s risk management mechanism to effectively control against the occurrence of any fraud, dishonest practices or conflict of interests.

Whistleblowing Policy

The Group has also established and put in place a Whistleblowing Policy. This provides an avenue for the Board, officers and employees as well as members of the public a safe channel of reporting of incidents which are against the regulations and policies of the Company. The policy is a manifestation of the control and risk management objectives that the COCE seeks to achieve.

emergency response Plan

The Group has set in place the emergency response measures under an Emergency Response Plan, in the event of a crisis or emergency. The Emergency Response Plan has been prepared to maximise human safety, protect the Company’s reputation and image, preserve assets and property, minimise or eliminate danger and assure responsive communication to all appropriate parties, all of which with the objectives to restore normal operations of the Group.

The responsibilities in the event of an emergency are delegated among the Response Team, Incident Management Team and Crisis Management Team. The Response Team will activate the other teams in their areas of responsibility.

insurance and Physical safeguard

The Group maintains an appropriate insurance programme in order to provide sufficient insurance coverage on major assets of the Group and lawsuits that could result in material losses to the Group.

control And monitoring Process

The Board is responsible for setting the Group’s long-term business objectives and monitors the conduct of the Group’s operations through various Board Committees. The processes adopted by the Board to monitor the effectiveness of the Group’s internal control system are as follows:-

• The board and the Audit Committee meet to discuss matters raised by Management, internal auditors and external auditors on business and operational matters.

• The Board has delegated the responsibilities to Management of the Group to implement and monitor the Board’s policies on control.

• Delegation of authority is designed to ensure accountability and responsibility.

• Internal procedures and policies are documented.


60


The monitoring, review and reporting arrangements in place give reasonable assurance that the structure of controls and its operations are appropriate to the Group’s operations that risks are at an acceptable level throughout the Group’s businesses. Such arrangement, however, do not eliminate the possibility of human error or deliberate circumvention of control procedures by employees and others.

Periodic reviews of adequacy and integrity of selected areas of internal control systems are carried out by the internal audit function and results of such reviews are reported to the Audit Committee. The internal audit function thereby provides independent assurance on the areas reviewed by the internal audit function to the board on the effectiveness of the Group’s internal control system.

conclusion

Based on the processes set out above, the Board, having received assurance from the Managing Director and Chief Financial Officer that the Company’s risk management and internal control system are operating adequately and effectively, is of the view that the Group’s system of internal control and risk management in place for the year under review are generally adequate and effective to safeguard the assets of the Group and interest of the shareholders and have not resulted in any material losses, contingencies or uncertainties that would require disclosure in the Company’s Annual Report. Moving forward, the Group will continue to improve and enhance the existing system of internal control and risk management.

revieW of the stAtement by eXternAl Auditors

As required by Paragraph 15.23 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the external auditors have reviewed this Statement on Risk Management and Internal Control. Their limited assurance review was performed with Audit and Assurance Practice Guide (AAPG) 3: Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report, issued by the Malaysia Institute of Accountants. AAPG 3 does not require the external auditors to form an opinion on the adequacy and effectiveness of the risk management and internal control systems of the Group.

This Statement on Risk Management and Internal Control is made in accordance with the resolution of the Board of Directors dated 26 September 2019.


61

ANNUAL REPORT 2019

membershiP

The Audit Committee (“AC”) was established by the Board on 15 June 2004. The AC presently comprises three Non-Executive Directors, a majority of them are Independent Directors:-

Chairman : Dato’ Yogesvaran A/L T. Arianayagam Independent Non-Executive Director

Members : Dato’ Anwarrudin bin Ahamad Osman Independent Non-Executive Chairman

Chan Feoi ChunNon-Independent Non-Executive Director

This is in line with Paragraph 15.09 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) which prescribes that the AC must consist of at least three members with the Chairman and a majority of the members being independent non-executive directors and at least one member to be a member of the Malaysian Institute of Accountants (“MIA”).

terms of reference

The AC is governed by its Terms of Reference (“TOR”), which was amended according to the requirements of the MMLR and Malaysian Code on Corporate Governance 2017 (“MCCG 2017”) and was reviewed and approved by the Board effective on 27 September 2018. The TOR of the AC is available on the Company’s website at www.perisai.biz

meetings And AttendAnce

A total of six (6) meetings were held during the financial year ended 30 June 2019 and the details of the meeting attendance are set out as follows:-

Members Number of Meetings Attended

Dato’ Yogesvaran A/L T. Arianayagam 6/6

Dato’ Anwarrudin bin Ahamad Osman 6/6

Chan Feoi Chun 6/6

The Managing Director, Senior Management, external auditors and internal auditors were invited, when appropriate, to attend the meetings and presented their reports on financial results, audit and other matters for the information and/or approval of the AC.

The AC members were provided with the agenda and relevant committee papers before each meeting. The Company Secretaries act as the Secretaries to the AC.

Minutes of the AC meetings were distributed to the Board for notation. Significant issues are highlighted by the AC Chairman at each Board meeting for notation or further discussion and deliberation, and where applicable, for the Board’s approval thereof.

Audit committee rePort

62


summAry of Activities undertAKen by the Ac

During the financial year ended 30 June 2019, the activities carried out by the AC in discharging its functions and duties were as follows:-

1. financial reporting and Annual reporting

(a) Reviewed the unaudited quarterly financial results and the annual audited financial statements of the Group before recommending them to the Board for the Board’s consideration and approval, ensuring that the financial reporting and disclosure requirements of relevant authorities have been complied with, focusing particularly on:-

• any changes in or implementation of major accounting policies and practices;

• significant matters highlighted including financial reporting issues, significant judgments made by management, significant and unusual events or transactions and how these matters are addressed;

• compliance with accounting standards and other legal requirements;

• adequacy of disclosure of all information in the financial statements essential to a true and fair representation of the financial affair of the Company and its subsidiary companies; and

• compliance with applicable approved accounting standards, financial reporting standards and business practices.

(b) Reviewed the AC Report, Corporate Governance Overview Statement and the Statement on Risk Management and Internal Control for inclusion in the Annual Report and the CG Report.

2. internal Audit

(a) Reviewed and approved the Annual Internal Audit Plan to ensure adequate scope and coverage over the activities of the Group and the resource requirements of internal audit to carry out its functions.

(b) Reviewed the Internal Audit Reports with recommendations from the internal auditors, Management’s response and follow up actions taken by the Management.

(c) Reviewed the status report on the corrective actions taken on the outstanding audit issues, submitted by the internal auditors, to ensure that all the key risks and controls have been addressed.

(d) Reviewed the internal audit function with particular emphasis on determining the adequacy of the scope, functions, competency, resources levels as well as the process and results of the internal audit functions.

3. External Audit

(a) Reviewed the Audit Planning Memorandum with the external auditors together with their scope of work for the financial year prior to the commencement of audit.

(b) Discussed the External Auditor Reports and their findings and recommendations arising from the audit.

(c) Reviewed the scope of audit and the external auditors’ performance, their independence and objectivity and their services rendered including non-audit services.

(d) Considered and recommended to the Board for approval the audit fees payable to the external auditors and their re-appointment of services.

AUDIT COMMITTEE REPORT

63

ANNUAL REPORT 2019

4. related Party transactions and recurrent related Party transactions

(a) Reviewed the related party transactions and recurrent related party transactions as well as conflict of interest situations that may arise within the Company or the Group and ensure that any transaction, procedure or course of conduct occurring in the course of the financial year which raises questions of management integrity were conducted on the Group’s normal commercial terms, done in the ordinary course of business and were not detrimental to the interest of minority shareholders.

(b) Reviewed the Circular to Shareholders relating to the renewal of shareholders’ mandate and new shareholders’ mandate for recurrent related party transactions prior to recommending them for the Board’s approval.

5. others

(a) Reviewed the adequacy of insurance coverage, payment procedures and cash flow planning.

(b) Reviewed and verified the allocation of options under the Company’s Employees’ Share Option Scheme.

(c) Met with the external auditors once during the financial period in the absence of the Management.

internAl Audit function

The Company has outsourced its internal audit function to an independent professional consultancy firm. The internal audit function is carried out by HL Hong & Co. (“HL Hong”).

HL Hong reports directly to the AC and assists the AC in discharging its duties and responsibilities.

HL Hong undertakes the internal audit function in conformance with the International Standards for the Professional Practice of Internal Auditing issued by the Institute of Internal Auditors.

The internal audit function is independent of the activities or operations of other operating units. Its principal role is to undertake independent, regular and systematic reviews of the system of internal control so as to provide reasonable assurance that such a system continue to operate satisfactorily and effectively. It is the responsibility of the internal auditors to provide the AC with independent and objective reports of the state of internal control on 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.

The following were the activities undertaken by the Internal Auditors during the financial year under review:

(a) assessed the effectiveness of the enterprise risk management framework including risk communication and structure in place and risk management policy adopted by the Group and all audit findings were reported to the AC;

(b) conducted internal auditing and review in accordance with the approved internal audit plan;

(c) conducted additional special periodic review in the area of human resources; and

(d) tabled the Internal Audit Reports and Annual Internal Audit Plan for the financial year ended 30 June 2019 for the AC’s review and approval

The costs incurred for the internal audit function for the financial year ended 30 June 2019 was RM26,000.00.

AUDIT COMMITTEE REPORT

64


1. utilisAtion of Proceeds from corPorAte ProPosAl

There were no proceeds from corporate proposals during the financial year.

2. Audit And non-Audit fees

During the financial year, the total audit and non-audit fees incurred by the Company and the Group are as follows:-

grouprm

companyrm

Audit FeesNon-Audit Fees

186,000 12,660

78,00012,660

198,660 90,660

The non-audit services comprised the following assignments:-

(a) Reporting Accountants in relation to the proposed restructuring and regularization plan; (b) Special audit review at the subsidiaries level for year ended 30 June 2018 for consolidated purpose; and (c) Review of statement of risk management and internal controls for the financial year ended 30 June 2018.

3. mAteriAl contrActs involving directors And substAntiAl shAreholders

During the financial period under review, there were no material contracts entered into by the Company and its subsidiaries which involved Directors’ or major shareholders’ interests (not being contracts entered into in the ordinary course of business).

4. recurrent relAted PArty trAnsActions (“rrPts”) of A revenue And trAding nAture

Details on the RRPTs entered by the Group during the financial year ended 30 June 2019 are disclosed in the Audited Financial Statements in this Annual Report.

AdditionAl comPliAnce informAtion

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ANNUAL REPORT 2019

The Directors are responsible in ensuring that the annual audited financial statements of the Group and of the Company are drawn up in accordance with the provisions of the Companies Act, 2016, the Main Market Listing Requirements of the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board.

The directors are also responsible to ensure that the annual audited financial statements of the Group and of the Company present a true and fair view of the state of affairs of the Group and of the Company as at the financial year end and of their financial performance and cash flows for the financial year then ended.

In preparing the annual audited financial statements of the Group and of the Company for the year ended 30 June 2019, the directors have ensured that, appropriate and relevant accounting policies are adopted and consistently applied, reasonable and prudent estimates are made and going concern basis was adopted.

The directors are responsible to ensure that the Group and the Company keep accounting records which disclose with reasonable accuracy the financial position of the Group and the Company which enable that the financial statements comply with the Companies Act, 2016, the Main Market Listing Requirements and the requirements of the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board.

The directors have the overall responsibilities for taking such steps that are reasonable available to them to safeguard the assets of the Group and the Company to prevent and detect fraud and other irregularities.

stAtement of directors’ resPonsibility

67 Directors’ Report

74 Statements of Profit or Loss and Other Comprehensive Income

76 Statements of Financial Position

78 Statements of Changes in Equity

81 Statements of Cash Flows

85 Notes to the Financial Statements

182 Statement by Directors

182 Statutory Declaration

183 Independent Auditors’ Report

finAnciAl stAtements

67

ANNUAL REPORT 2019

DIRECTORS’ REPORT

DIRECTORS’ REPORT

The directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial year ended 30 June 2019.

PRINCIPAL ACTIVITIES

The principal activities of the Company are that of investment holding and provision of management, administrative and financial support services to the subsidiaries. The principal activities of the subsidiaries, associates and joint ventures are set out in Notes 14, 15, and 16 to the financial statements.

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

RESULTS

Group Company

RM RM

Loss for the financial year (237,052,638) (80,547,023)

Attributable to:

Owners of the Company (226,603,430) (80,547,023)

Non-controlling interests (10,449,208) -

(237,052,638) (80,547,023)

DIVIDENDS

No dividend has been paid or declared by the Company since the end of the previous financial year.

The directors do not recommend the payment of any dividends in respect of the financial year ended 30 June 2019.

RESERVES OR PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year other than those as disclosed in the financial statements.

68


BAD AND DOUBTFUL DEBTS

Before the financial statements of the Group and of the Company were prepared, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and have satisfied themselves that there were no known bad debts and that adequate allowance had been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances which would render it necessary to write off any bad debts or render the amount of allowance for doubtful debts in the financial statements of the Group and the Company inadequate to any substantial extent.

CURRENT ASSETS

Before the financial statements of the Group and of the Company were prepared, the directors took reasonable steps to ensure that any current assets which were unlikely to be realised in the ordinary course of business including their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise.

At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

VALUATION METHODS

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

CONTINGENT AND OTHER LIABILITIES

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

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; and

(ii) any contingent liabilities in respect of the Group or of the Company which has arisen since the end of the financial year.

In the opinion of the directors, no contingent or other liability of the Group or of the Company has become enforceable, or is likely to become enforceable, within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations as and when they fall due except for those disclosed in Note 2 to the financial statements.

CHANGE OF CIRCUMSTANCES

At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

DIRECTORS’ REPORT

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ANNUAL REPORT 2019

ITEMS OF MATERIAL AND UNUSUAL NATURE

In the opinion of the directors:

(i) the results of the operations of the Group and of the Company for the financial year were not substantially affected by any item, transaction or event of a material and unusual nature other than those as disclosed in Note 6 to the financial statements; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report was made.

ISSUE OF SHARES AND DEBENTURES

During the financial year, no new issue of shares and debentures were made by the Company.

TREASURY SHARES

Treasury shares relate to ordinary shares of the Company that are repurchased and held by the Company in accordance with the requirement of Section 127 of the Companies Act 2016 in Malaysia.

There was no repurchase of the Company’s issued ordinary shares, nor any resale, cancellation or distribution of treasury shares during the financial year.

As at 30 June 2019, the Company held as treasury shares a total of 400,000 ordinary shares of its 1,260,872,078 issued ordinary shares. Such treasury shares are held at a carrying amount of RM230,795. Further relevant details are disclosed in Note 20(b) to the financial statements.

OPTIONS GRANTED UNDER UNISSUED SHARES

No options were granted to any person to take up the unissued shares of the Company during the financial year, other than the issue of option pursuant to the Employees’ Share Option Scheme (“ESOS”).

EMPLOYEES’ SHARE OPTION SCHEME (“ESOS”)

At an Extraordinary General Meeting held on 27 June 2012, shareholders of the Company approved the ESOS for the granting of non-transferable options that are settled by physical delivery of the ordinary shares of the Company, to eligible senior executives and employees respectively.

The committee administering the ESOS comprises five directors, Dato’ Anwarrudin Bin Ahamad Osman, Datuk Zainol Izzet Bin Mohamed Ishak, Dato’ Yogesvaran A/L T. Arianayagam, Dato’ Dr. Mohamed Ariffin Bin Hj. Aton and Chan Feoi Chun.

The salient features and other terms of the ESOS and movements of share option during the financial year are disclosed in Note 28 to the financial statements.

The Company did not grant any additional share options under the ESOS to eligible directors and employees of the Group during the financial year.

DIRECTORS’ REPORT

70


EMPLOYEES’ SHARE OPTION SCHEME (“ESOS”) (CONTINUED)

The movements in the number of share options pursuant to the ESOS during the financial year are as follows:

Number of share options (‘000)

Grant date Expiry dateExercise price

per share optionAt

1 July 2018 Forfeited At

30 June 2019

4 July 2012 1 July 2022 RM0.785 14,095 - 14,095

25 June 2013 1 July 2022 RM1.440 8,692 - 8,692

19 June 2014 1 July 2022 RM1.400 7,288 (55) 7,233

17 June 2015 1 July 2022 RM0.400 22,015 (549) 21,466

52,090 (604) 51,486

DIRECTORS

The directors in office during the financial year and during the period from the end of the financial year to the date of this report are:

Dato’ Anwarrudin Bin Ahamad Osman * Datuk Zainol Izzet Bin Mohamed Ishak * Dato’ Yogesvaran A/L T. Arianayagam Dato’ Dr. Mohamed Ariffin Bin Hj. Aton * (Resigned from certain subsidiaries w.e.f 4 September 2019)Chan Feoi Chun

* Directors of the Company and certain subsidiaries

Other than as stated above, the names of the directors of the subsidiaries of the Company in office during the financial year and during the period from the end of the financial year to the date of the report are:

Beramkhan Bin Tambikhan Lee Kian Soo

DIRECTORS’ REPORT

71

ANNUAL REPORT 2019

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings required to be kept by the Company under Section 59 of the Companies Act 2016 in Malaysia, the interests of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows:

(a) Shareholdings in the Company

Number of ordinary shares

At 1 July 2018

Exercise of ESOS/Bought Sold

At 30 June 2019

Direct interest

Dato’ Yogesvaran A/L T. Arianayagam 3,006,207 - - 3,006,207

Datuk Zainol Izzet Bin Mohamed Ishak 29,473,900 - - 29,473,900

Chan Feoi Chun 500,000 - - 500,000

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton 85,000 - - 85,000

(b) Shareholdings in the subsidiaries

- Perisai Offshore Sdn. Bhd.


At 1 July 2018 Bought Sold

At 30 June 2019

Direct interest

Datuk Zainol Izzet Bin Mohamed Ishak 49,000 - - 49,000

- Larizz Energy Services Sdn. Bhd.


At 1 July 2018 Bought Sold

At 30 June 2019

Direct interest

Datuk Zainol Izzet Bin Mohamed Ishak 60,000 - - 60,000

DIRECTORS’ REPORT

72


DIRECTORS’ INTEREST (CONTINUED)

(c) Employees’ Share Option Scheme (“ESOS”)

Number of share options

NameAt

1 July 2018 Granted Exercised At

30 June 2019

Dato’ Dr. Mohamed Ariffin Bin Hj. Aton 1,640,000 - - 1,640,000

Dato’ Yogesvaran A/L T. Arianayagam 2,340,000 - - 2,340,000

Chan Feoi Chun 1,440,000 - - 1,440,000

Datuk Zainol Izzet Bin Mohamed Ishak 11,200,000 - - 11,200,000

Dato’ Anwarrudin Bin Ahamad Osman 2,340,000 - - 2,340,000

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable, by the directors as disclosed in Note 9 to the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest except for any deemed benefits which may arise from transactions as disclosed in Note 31(c) to the financial statements.

Neither during, nor at the end of the financial year, was the Company a party to any arrangements where the object is to enable the directors to acquire benefits by means of the acquisition of shares in, or debentures of the Company or any other body corporate, other than those arising from the share options granted under the ESOS.

INDEMNITY TO DIRECTORS AND OFFICERS

During the financial year, the indemnity coverage for the directors and certain officers of the Company was RM5,000,000 and the insurance premium paid was RM27,500.

SUBSIDIARIES

The details of the Company’s subsidiaries are disclosed in Note 14 to the financial statements.

DIRECTORS’ REPORT

73

ANNUAL REPORT 2019

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

Details of significant events during the financial year are disclosed in Note 36 to the financial statements.

SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Details of significant events subsequent to the end of the financial year are disclosed in Note 37 to the financial statements.

AUDITORS

The auditors, Messrs. Baker Tilly Monteiro Heng PLT (converted from a conventional partnership, Baker Tilly Monteiro Heng on 5 March 2019), have expressed their willingness to continue in office.

The details of the Group’s and the Company’s auditors’ remuneration are disclosed in Note 6 to the financial statements.

The indemnity to auditors of the Company is provided pursuant to Section 289 of the Companies Act 2016 in Malaysia.

This report was approved and signed on behalf of the Board of Directors in accordance with a resolution of the directors:

DATO’ ANWARRUDIN BIN AHAMAD OSMAN DATUK ZAINOL IZZET BIN MOHAMED ISHAKDirector Director

Date: 26 September 2019

DIRECTORS’ REPORT

74


Group Company

2019 2018 2019 2018

Note RM RM RM RM

Revenue 4 116,906,231 127,179,778 3,280,594 2,690,614

Direct costs 5 (69,711,054) (93,318,819) - -

Gross profit 47,195,177 33,860,959 3,280,594 2,690,614

Other income 8,535,615 70,055,175 24,416,405 29,443,621

Administrative expenses (18,170,719) (21,191,137) (12,447,531) (14,255,277)

Net impairment losses on financial instruments (3,381,475) (70,337,670) (19,145,251) (23,759,436)

Other expenses (21,172,299) (283,444,006) (37,235,528) (325,683,865)

(42,724,493) (374,972,813) (68,828,310) (363,698,578)

Operating profit/(loss) 6 13,006,299 (271,056,679) (41,131,311) (331,564,343)

Finance costs 7 (90,466,962) (78,287,281) (39,415,712) (38,288,852)

Share of results of associates, net of tax 115,115 64,413 - -

Share of results of joint ventures, net of tax (159,029,844) (119,436,890) - -

Loss before tax (236,375,392) (468,716,437) (80,547,023) (369,853,195)

Income tax expense 10 (677,246) (536,318) - -

Loss for the financial year (237,052,638) (469,252,755) (80,547,023) (369,853,195)

For The Financial Year Ended 30 June 2019

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

75

ANNUAL REPORT 2019

Group Company

2019 2018 2019 2018

Note RM RM RM RM

Other comprehensive (loss)/income, net of taxItems that may be reclassified subsequently to

profit or loss

Exchange differences on translation of foreign operations (15,399,427) (40,461,084) - -

Share of other comprehensive income of joint ventures 8,451,970 (28,886,233) - -

Share of other comprehensive income of associates 27,264 (94,112) - -

Reclassification of foreign currency translation reserve to profit or loss on repayment of intercompany balances (881,852) 84,343 - -

Realisation to profit or loss on liquidation - 28,530,955 - -

Other comprehensive loss for the financial year, net of tax (7,802,045) (40,826,131) - -

Total comprehensive loss for the financial year (244,854,683) (510,078,886) (80,547,023) (369,853,195)

Loss attributable to:

Owners of the Company (226,603,430) (455,622,618) (80,547,023) (369,853,195)

Non-controlling interests (10,449,208) (13,630,137) - -

(237,052,638) (469,252,755) (80,547,023) (369,853,195)

Total comprehensive loss attributable to:

Owners of the Company (236,715,096) (489,480,072) (80,547,023) (369,853,195)

Non-controlling interests (8,139,587) (20,598,814) - -

(244,854,683) (510,078,886) (80,547,023) (369,853,195)

Loss per share attributable to owners of the Company (sen per share) 11

- Basic (17.98) (36.15)

- Diluted (17.98) (36.15)

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

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For The Financial Year Ended 30 June 2019 (continued)

76


Group Company

2019 2018 2019 2018

Note RM RM RM RM

ASSETS

Non-current assets

Plant and equipment 12 620,244,660 662,558,359 60,008 105,015

Intangible asset 13 75,000 75,000 75,000 75,000

Investments in subsidiaries 14 - - 388,821,207 388,846,714

Investments in associates 15 1,279,985 1,137,606 300,000 300,000

Investments in joint ventures 16 246,964,335 396,855,051 29,587,162 28,900,003

Other receivables 18 - - - -

Total non-current assets 868,563,980 1,060,626,016 418,843,377 418,226,732

Current assets

Trade receivables 17 18,002,530 28,642,458 - -

Other receivables and deposits 18 2,792,798 10,253,628 148,589 326,423

Prepayments 19 1,141,199 763,474 80,338 61,236

Tax recoverable 173,976 471,308 66,000 66,000

Deposits, cash and bank balances 39,205,921 28,385,391 1,416,133 1,318,598

Total current assets 61,316,424 68,516,259 1,711,060 1,772,257

TOTAL ASSETS 929,880,404 1,129,142,275 420,554,437 419,998,989

STATEMENTS OF FINANCIAL POSITION As At 30 June 2019

77

ANNUAL REPORT 2019

Group Company

2019 2018 2019 2018

Note RM RM RM RM

EQUITY AND LIABILITIES

Equity attributable to owners of the Company

Share capital 20 770,888,300 770,888,300 770,888,300 770,888,300

Treasury shares 20 (230,795) (230,795) (230,795) (230,795)

Other reserves 21 272,503,640 282,787,142 23,493,664 23,587,923

Accumulated losses (1,636,701,154) (1,410,269,560) (1,291,805,634) (1,211,352,870)

(593,540,009) (356,824,913) (497,654,465) (417,107,442)

Non-controlling interests 88,648,962 98,242,790 - -

CAPITAL DEFICIENCIES (504,891,047) (258,582,123) (497,654,465) (417,107,442)

Non-current liabilities

Other payables 23 10,127,075 9,891,875 - -

Current liabilities

Trade payables 22 13,725,480 14,740,678 - -

Other payables and accruals 23 185,277,121 126,800,672 857,501,571 779,342,631

Provision 24 - 6,794,773 - -

Loans and borrowings 25 1,225,581,744 1,229,496,400 60,707,331 57,763,800

Tax payable 60,031 - - -

Total current liabilities 1,424,644,376 1,377,832,523 918,208,902 837,106,431

TOTAL LIABILITIES 1,434,771,451 1,387,724,398 918,208,902 837,106,431

TOTAL EQUITY AND LIABILITIES 929,880,404 1,129,142,275 420,554,437 419,998,989


STATEMENTS OF FINANCIAL POSITION

As At 30 June 2019 (continued)

78


Att

ribut

able

to o

wne

rs o

f the

Com

pany

Shar

e ca

pita

lTr

easu

ry

shar

esO

ther

re

serv

esA

ccum

ulat

edlo

sses

Sub-

tota

lN

on-c

ontr

ollin

gin

tere

sts

Tota

l eq

uity

Gro

upRM

RMRM

RMRM

RMRM

At 1

Jul

y 20

1877

0,88

8,30

0(2

30,7

95)

282,

787,

142

(1,4

10,2

69,5

60)

(356

,824

,913

)98

,242

,790

(258

,582

,123

)

Tota

l com

preh

ensi

ve lo

ss fo

r the

fina

ncia

l ye

ar

Loss

for t

he fi

nanc

ial y

ear

--

-(2

26,6

03,4

30)

(226

,603

,430

)(1

0,44

9,20

8)(2

37,0

52,6

38)

Oth

er c

ompr

ehen

sive

(los

s)/in

com

e fo

r the

fin

anci

al y

ear

Fore

ign

curr

ency

tran

slat

ion

diffe

renc

es-

-(1

0,11

1,66

6)-

(10,

111,

666)

2,30

9,62

1(7

,802

,045

)

Tota

l com

preh

ensi

ve lo

ss-

-(1

0,11

1,66

6)(2

26,6

03,4

30)

(236

,715

,096

)(8

,139

,587

)(2

44,8

54,6

83)

Tran

sact

ions

with

ow

ners

ESO

S fo

rfei

ted

--

(171

,836

)17

1,83

6-

--

Div

iden

d pa

id to

non

-con

trol

ling

inte

rest

s-

--

--

(1,4

54,2

41)

(1,4

54,2

41)

Tota

l tra

nsac

tions

with

ow

ners

--

(171

,836

)17

1,83

6-

(1,4

54,2

41)

(1,4

54,2

41)

At 3

0 Ju

ne 2

019

770,

888,

300

(230

,795

)27

2,50

3,64

0(1

,636

,701

,154

)(5

93,5

40,0

09)

88,6

48,9

62(5

04,8

91,0

47)

STAT

EMEN

TS O

F CH

AN

GES

IN E

QU

ITY

For T

he F

inan

cial

Yea

r End

ed 3

0 Ju

ne 2

019

79

ANNUAL REPORT 2019

Att

ribut

able

to o

wne

rs o

f the

Com

pany

Shar

e ca

pita

lTr

easu

ry

shar

esO

ther

re

serv

esA

ccum

ulat

edlo

sses

Sub-

tota

lN

on-c

ontr

ollin

gin

tere

sts

Tota

l eq

uity

Gro

upRM

RMRM

RMRM

RMRM

At 1

Jul

y 20

1777

0,88

8,30

0(2

30,7

95)

324,

234,

203

(962

,830

,348

)13

2,06

1,36

011

8,84

1,60

425

0,90

2,96

4

Tota

l com

preh

ensi

ve lo

ss fo

r the

fina

ncia

l ye

ar

Loss

for t

he fi

nanc

ial y

ear

--

-(4

55,6

22,6

18)

(455

,622

,618

)(1

3,63

0,13

7)(4

69,2

52,7

55)

Oth

er c

ompr

ehen

sive

loss

for t

he fi

nanc

ial

year

Fore

ign

curr

ency

tran

slat

ion

diffe

renc

es-

-(3

3,85

7,45

4)-

(33,

857,

454)

(6,9

68,6

77)

(40,

826,

131)

Tota

l com

preh

ensi

ve lo

ss-

-(3

3,85

7,45

4)(4

55,6

22,6

18)

(489

,480

,072

)(2

0,59

8,81

4)(5

10,0

78,8

86)

Tran

sact

ions

with

ow

ners

Shar

e op

tions

gra

nted

und

er E

SOS

--

593,

799

-59

3,79

9-

593,

799

ESO

S fo

rfei

ted

--

(8,1

83,4

06)

8,18

3,40

6-

--

Tota

l tra

nsac

tions

with

ow

ners

--

(7,5

89,6

07)

8,18

3,40

659

3,79

9-

593,

799

At 3

0 Ju

ne 2

018

770,

888,

300

(230

,795

)28

2,78

7,14

2(1

,410

,269

,560

)(3

56,8

24,9

13)

98,2

42,7

90(2

58,5

82,1

23)

STA

TEM

ENTS

OF

CH

AN

GES

IN E

QU

ITY

For T

he F

inan

cial

Yea

r End

ed 3

0 Ju

ne 2

019

(con

tinue

d)

80


Shar

eca

pita

l Tr

easu

rysh

ares

Oth

erre

serv

esA

ccum

ulat

edlo

sses

Tota

leq

uity

Com

pany

RMRM

RMRM

RM

At 1

Jul

y 20

1877

0,88

8,30

0(2

30,7

95)

23,5

87,9

23(1

,211

,352

,870

)(4

17,1

07,4

42)

Tota

l com

preh

ensi

ve lo

ss fo

r the

fina

ncia

l yea

r

Loss

for t

he fi

nanc

ial y

ear

--

-(8

0,54

7,02

3)(8

0,54

7,02

3)

Tota

l com

preh

ensi

ve lo

ss-

--

(80,

547,

023)

(80,

547,

023)

Tran

sact

ion

with

ow

ners

ESO

S fo

rfei

ted

--

(94,

259)

94,2

59-

Tota

l tra

nsac

tions

with

ow

ners

--

(94,

259)

94,2

59-

At 3

0 Ju

ne 2

019

770,

888,

300

(230

,795

)23

,493

,664

(1,2

91,8

05,6

34)

(497

,654

,465

)

At 1

Jul

y 20

1777

0,88

8,30

0(2

30,7

95)

31,1

15,1

45(8

49,6

21,0

97)

(47,

848,

447)

Tota

l com

preh

ensi

ve lo

ss fo

r the

fina

ncia

l yea

r

Loss

for t

he fi

nanc

ial y

ear

--

-(3

69,8

53,1

95)

(369

,853

,195

)

Tota

l com

preh

ensi

ve lo

ss-

--

(369

,853

,195

)(3

69,8

53,1

95)

Tran

sact

ions

with

ow

ners

Shar

e op

tions

gra

nted

und

er E

SOS

--

594,

200

-59

4,20

0

ESO

S fo

rfei

ted

--

(8,1

21,4

22)

8,12

1,42

2-

Tota

l tra

nsac

tions

with

ow

ners

--

(7,5

27,2

22)

8,12

1,42

259

4,20

0

At 3

0 Ju

ne 2

018

770,

888,

300

(230

,795

)23

,587

,923

(1,2

11,3

52,8

70)

(417

,107

,442

)

STAT

EMEN

T O

F CH

AN

GES

IN E

QU

ITY

For T

he F

inan

cial

Yea

r End

ed 3

0 Ju

ne 2

019

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of t

hese

fina

ncia

l sta

tem

ents

.

81

ANNUAL REPORT 2019

Group Company

2019 2018 2019 2018

Note RM RM RM RM

Cash flows from operating activities

Loss before tax (236,375,392) (468,716,437) (80,547,023) (369,853,195)

Adjustments for:

Depreciation of plant and equipment 35,651,814 54,240,413 45,939 221,980

Financial guarantee contracts - - 25,433,443 52,573,106

Gain on disposal of plant and equipment (2,540,029) - - -

Interest expense 90,466,962 78,287,281 39,415,712 38,288,852

Impairment loss on:

- investments in subsidiaries - - 61,256 220,097,038

- investments in joint ventures - - - 41,283,118

- amounts due from subsidiaries - - 33,625,499 20,470,352

- amounts due from joint ventures 1,335,737 55,983,974 1,335,737 55,816,467

- plant and equipment 17,139,152 276,648,810 - -

- trade receivables 1,641,243 13,933,481 8,671 42,156

- other receivables 669,097 933,135 - 19,000

Net unrealised (gain)/loss on foreign exchange (1,655,194) 6,724,953 7,761,722 11,730,603

Plant and equipment written off - 70,243 - -

Share of results of joint ventures 159,029,844 119,436,890 - -

Share options granted under ESOS - 593,799 - 560,370

Bad debts written off 70,024 (4,437,568) 10,800 -

Dividend income - - (1,530,000) (810,000)

Interest income (654,631) (338,448) (21,749,762) (24,771,939)

Reversal of impairment loss on:

- investments in subsidiaries - - - (1,353,500)

- amounts due from subsidiaries - - (15,824,656) (51,907,858)

- trade receivables (264,602) - - (680,681)

Operating profit/(loss) before changes in working capital, balance carried down 64,514,025 133,360,526 (11,952,662) (8,274,131)

STATEMENTS OF CASH FLOWSFor The Financial Year Ended 30 June 2019

82


Group Company

2019 2018 2019 2018

Note RM RM RM RM

Operating profit/(loss) before changes in working capital, balance brought down 64,514,025 133,360,526 (11,952,662) (8,274,131)

Surplus on liquidation (2,349,754) (60,170,367) - -

Share of results of associates (115,115) (64,413) - -

62,049,156 73,125,746 (11,952,662) (8,274,131)

Changes in working capital:

Receivables 9,189,767 (14,790,543) 148,715 457,329

Payables (2,382,365) 3,673,963 (356,972) 443,487

Net cash generated from/(used in) operations 68,856,558 62,009,166 (12,160,919) (7,373,315)

Interest paid (31,680,298) (29,356,539) (1,983,510) (1,768,280)

Interest received 655,095 337,572 33,230 24,318

Dividend received - 810,000 1,530,000 810,000

Income tax paid (764,871) (683,021) - -

Income tax refunded 423,580 93,500 - 93,500

Net cash from/(used in) operating activities 37,490,064 33,210,678 (12,581,199) (8,213,777)

Cash flows from investing activities

Advances to joint ventures (8,406) (39,272) (8,406) (39,272)

Advances from subsidiaries - - 15,778,935 11,714,376

Proceeds from disposal of plant and equipment 20,490,360 - - -

Purchase of plant and equipment 12 (11,822,958) (8,460) (932) (8,460)

Cash outflow from liquidation (235,314) (210) - -

Net cash from/(used in) investing activities 8,423,682 (47,942) 15,769,597 11,666,644


STATEMENTS OF CASH FLOWS

83

ANNUAL REPORT 2019

Group Company

2019 2018 2019 2018

Note RM RM RM RM

Cash flows from financing activities (a)

Payments of hire purchase - (95,000) - (95,000)

Repayment to subsidiaries - - (6,604,394) (1,958,249)

Dividend paid to non-controlling interests (1,454,241) - - -

Drawdown of bank borrowings 1,413,453 1,239,960 1,413,453 1,239,960

Repayments of bank borrowings (38,643,880) (17,445,885) - -

Net cash used in financing activities (38,684,668) (16,300,925) (5,190,941) (813,289)

Net increase/(decrease) in cash and cash equivalents 7,229,078 16,861,811 (2,002,543) 2,639,578

Cash and cash equivalents at beginning of the financial year 23,014,796 11,626,280 (4,051,997) (3,536,575)

Effects of exchange rate changes on cash and cash equivalents 3,021,374 (5,473,295) 1,530,000 (3,155,000)

Cash and cash equivalents at end of the financial year 27 33,265,248 23,014,796 (4,524,540) (4,051,997)

(a) Reconciliation of liabilities arising from financing activities:

At1 July 2018

Share of loss bynon-controlling

interest Cash flows

Non-cash foreign

exchangemovement

At30 June 2019

Group RM RM RM RM RM

Bank borrowings 1,224,125,805 - (37,230,427) 32,745,693 1,219,641,071

Company

Dividend paid to non-controlling interests 98,242,790 (10,449,208) (1,454,241) 2,309,621 88,648,962

Subsidiaries 543,876,587 - (6,604,394) 15,749,141 553,021,334

Bank borrowings 52,393,205 - 1,413,453 960,000 54,766,658

694,512,582 (10,449,208) (6,645,182) 19,018,762 696,436,954



84


(a) Reconciliation of liabilities arising from financing activities (continued):

At1 July 2017 Cash flows

Non-cash foreign

exchangemovement

At30 June 2018

Group RM RM RM RM

Hire purchase payable 95,000 (95,000) - -

Bank borrowings 1,313,103,237 (16,205,925) (72,771,507) 1,224,125,805

1,313,198,237 (16,300,925) (72,771,507) 1,224,125,805

Company

Hire purchase payable 95,000 (95,000) - -

Subsidiaries 576,521,476 (1,958,249) (30,686,640) 543,876,587

Bank borrowings 53,718,245 1,239,960 (2,565,000) 52,393,205

630,334,721 (813,289) (33,251,640) 596,269,792




85

ANNUAL REPORT 2019

1. CORPORATE INFORMATION

Perisai Petroleum Teknologi Bhd. (“the Company”) is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad.

The registered office of the Company is located at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan. The principal place of business of the Company is located at Suite 3A-17, Level 17, Block 3A, Plaza Sentral, Jalan Stesen Sentral 5, 50470 Kuala Lumpur.

The principal activities of the Company are investment holding and provision of management, administrative and financial support services to its subsidiaries. The principal activities of the subsidiaries, associates and joint ventures are disclosed in Notes 14, 15 and 16. There have been no significant changes in the nature of these activities during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 26 September 2019.

2. BASIS OF PREPARATION

2.1 Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with the Malaysian Financial Reporting Standards (“MFRSs”), the International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

2.2 Going concern assumption

During the financial year ended 30 June 2019, the Group and the Company incurred net losses of RM237,052,638 and RM80,547,023 respectively. As at that date, the Group and the Company had recorded net current liabilities of RM1,363,327,952 and RM916,497,842 and capital deficiencies of RM504,891,047 and RM497,654,465 respectively. In October 2016, the Company and its wholly-owned subsidiary, Perisai Capital (L) Inc. (“PCLI”) received a notice from the Trustee of the Medium Term Notes (“MTN”) that an event of default for the payment of principal and interest of the MTN had occurred as PCLI failed to pay the principal and interest due on 3 October 2016. Consequently, this gave rise to a cross default of the financing facilities with all other lenders of the Group and of the Company, including the joint ventures. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern.

On 8 June 2018, in the court convened meeting, the scheme creditors of the Company approved the scheme with requisite majority.

On 1 August 2018, the Company submitted the Proposed Regularisation Plan to Bursa Malaysia Securities Berhad (“Bursa Securities”) for approval.

On 11 January 2019, the Proposed Regularisation Plan was rejected by Bursa Securities.

On 8 February 2019, the Company has submitted an appeal to Bursa Securities on its decision to reject the Company’s Proposed Regularisation Plan.

On 5 April 2019, Bursa Securities has vide its letter dated on the same day, stated that after due deliberation and having considered all facts and circumstances of the matter including the Company’s written and oral representations, the Listing Committee (“LC”) had decided to dismiss the Company’s appeal against the rejection by Bursa Securities of the Company’s Proposed Regularisation Plan. Notwithstanding the above decision, the LC decided to grant the Company an extension of time until 31 December 2019 to submit a new regularisation plan to the relevant authorities for approval. As at reporting date, the Company is in the midst of formulating a new regularisation plan.

NOTES TO THE FINANCIAL STATEMENTS

86



2. BASIS OF PREPARATION (CONTINUED)

2.2 Going concern assumption (continued)

On 9 August 2019, the Company obtained a Restraining Order under Section 368 of the Companies Act 2016 from the High Court of Malaya at Kuala Lumpur for a period of nine (9) months effective from 9 August 2019 restraining all proceedings and actions to be brought against the Company.

The basis for the preparation of the financial statements of the Group and of the Company is therefore dependent upon the successful formulation and implementation of the restructuring and regularisation plan, profitable operations of the Group and of the Company to generate sufficient cash flows in the future to fulfill their obligations as and when they fall due and financial support from its lenders and shareholders.

In the event that these are not forthcoming, the Group and the Company may be unable to realise their assets and discharge their liabilities in the normal course of business. Accordingly, the financial statements may require adjustments relating to the amount and classification of recorded assets and to provide for further liabilities that may be necessary should the Group and the Company be unable to continue as a going concern.

The directors of the Company are of the opinion that the preparation of the financial statements of the Group and of the Company on a going concern basis remains appropriate as they believe the proposed restructuring and regularisation plan will obtain the support of the lenders and shareholders which will enable the Group and the Company to operate profitably in the foreseeable future, and accordingly, realise their assets and discharge their liabilities in the normal course of business.

2.3 Adoption of new MFRSs, amendments/improvements to MFRSs and new IC Interpretation (“IC Int”)

The Group and the Company have adopted the following new MFRSs, amendments/improvements to MFRSs and new IC Int that are mandatory for the current financial year:

New MFRSsMFRS 9 Financial InstrumentsMFRS 15 Revenue from Contracts with Customers Amendments/Improvements to MFRSsMFRS 1 First-time Adoption of MFRSsMFRS 2 Share-based PaymentMFRS 4 Insurance ContractsMFRS 128 Investments in Associates and Joint VenturesMFRS 140 Investment Property

New IC Int IC Int 22 Foreign Currency Transactions and Advance Consideration

The adoption of the above amendments/improvements to MFRSs did not have any significant effect on the financial statements of the Group and of the Company, and did not result in significant changes to the Group’s and the Company’s existing accounting policies, except for those as discussed below.

87

ANNUAL REPORT 2019



2.3 Adoption of new MFRSs, amendments/improvements to MFRSs and new IC Interpretation (“IC Int”) (continued)

(a) MFRS 9 Financial Instruments

MFRS 9 replaced the guidance of MFRS 139, Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets and liabilities, on impairment of financial assets, and on hedge accounting.

Key requirements of MFRS 9:

• MFRS 9 introduces an approach for classification and measurement of financial assets which is driven by cash flow characteristics and the business model in which an asset is held.

In essence, if a financial asset is a simple debt instrument and the objective of the entity’s business model within which it is held is to collect its contractual cash flows, the financial asset is measured at amortised cost. In contrast, if that asset is held in a business model the objective of which is achieved by both collecting contractual cash flows and selling financial assets, then the financial asset is measured at fair value in the statement of financial position, and amortised cost information is provided through profit or loss. If the business model is neither of these, then fair value information is increasingly important, so it is provided both in the profit or loss and in the statement of financial position.

• MFRS 9 introduces a new, expected-loss impairment model that will require more timely recognition of expected credit losses which replaced the “incurred loss” model in MFRS 139. Specifically, this Standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis. The model requires an entity to recognise expected credit losses at all times and to update the amount of expected credit losses recognised at each reporting date to reflect changes in the credit risk of financial instruments. This model eliminates the threshold for the recognition of expected credit losses, so that it is no longer necessary for a trigger event to have occurred before credit losses are recognised. Trade receivables that do not contain a significant financing component shall always measure the loss allowance at an amount equal lifetime expected credit losses.

• MFRS 9 introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities, enabling entities to better reflect these activities in their financial statements. In addition, as a result of these changes, users of the financial statements will be provided with better information about risk management and the effect of hedge accounting on the financial statements.

The retrospective application of MFRS 9 does not require restatement of 2018 comparative financial statements. As such, the Group and the Company have not restated the comparative information, which continues to be reported under MFRS 139. The Company recognised any difference between the carrying amount of financial instruments under MFRS 139 and the restated carrying amount under MFRS 9 in the opening balance of retained earnings (or other equity components) of the annual reporting period including the date of initial application i.e. 1 July 2018.

Impact of the adoption of MFRS 9

The adoption of MFRS 9 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. Other than the enhanced new disclosures relating to financial instruments, which the Group and the Company have complied with in the current financial year, the adoption of this standard does not have any significant effect on the financial statements of the Group and the Company, except for those as discussed below.

88





(a) MFRS 9 Financial Instruments (continued)

Impact of the adoption of MFRS 9 (continued)

(i) Classification and measurement

The following are the changes in the classification of the Group’s and the Company’s financial assets:

Trade, loans and receivables classified as amortised cost and other receivables, and other financial assets, including refundable deposits previously classified as Loans and Receivables under MFRS 139 as at 30 June 2018 are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. Accordingly, these financial assets are classified and measured as debt instruments at amortised cost beginning 1 July 2018.

In summary, upon the adoption of MFRS 9, the Group and the Company had the following reclassifications as at 1 July 2018:

MFRS 9 measurement category

Amortised cost

MFRS 139 measurement category RM RM

Financial assets

Group

Loans and receivables

Trade receivables 28,642,458 28,642,458

Other receivables and deposits * 5,604,850 5,604,850

Deposits, cash and bank balances 28,385,391 28,385,391

62,632,699 62,632,699

Company


Other receivables and deposits * 169,196 169,196


1,487,794 1,487,794

* Excluded GST refundable

(ii) Impairment

In previous financial years, trade and other receivables are impaired if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after initial recognition of the receivables (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the receivables (“incurred loss model”). Upon adoption of MFRS 9, the Group and the Company are recording expected credit losses on all its trade and other receivables, either on a 12-month or lifetime basis.

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(a) MFRS 9 Financial Instruments (continued)

Impact of the adoption of MFRS 9 (continued)

(ii) Impairment (continued)

The Group and the Company applied MFRS 9 from 1 July 2018, and the comparatives for 2018 have not been restated. Based on the Group and the Company’s assessment, the application of MFRS 9 did not have a material financial impact to the financial position, financial performance and cash flows of the Group and the Company.

(b) MFRS 15 Revenue from Contracts with Customers

The core principle of MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with the core principle by applying the following steps:

(i) identify the contracts with a customer;(ii) identify the performance obligation in the contract;(iii) determine the transaction price;(iv) allocate the transaction price to the performance obligations in the contract; and(v) recognise revenue when (or as) the entity satisfies a performance obligation.

MFRS 15 also includes new disclosures that would result in an entity providing users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers.

The following MFRSs and IC Interpretations will be withdrawn on the application of MFRS 15:

MFRS 111 Construction Contracts MFRS 118 Revenue IC Interpretation 13 Customer Loyalty Programmes IC Interpretation 15 Agreements for the Construction of Real Estate IC Interpretation 18 Transfers of Assets from Customers IC Interpretation 131 Revenue – Barter Transactions Involving Advertising Services

The Group and the Company have applied MFRS 15 retrospectively with the cumulative effect of initial application recognised as an adjustment to the opening balance of retained earnings (or other components of equity) at the date of initial application of 1 July 2018. As such, the comparative information was not restated and continues to be reported under MFRS 118 and related interpretations. The Group and the Company have elected the practical expedient to apply the standard only to contracts that are not completed as at 1 July 2018. The Group and the Company also elected the practical expedient of not to retrospectively restate the contract for those modifications before the date of initial application, but instead, to reflect the aggregate effect of all past contract modifications when identifying the performance obligations, and determining and allocating the transaction price to the satisfied and unsatisfied performance obligations.

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(b) MFRS 15 Revenue from Contracts with Customers (continued)

Impact of the adoption of MFRS 15

The adoption of MFRS 15 resulted in changes in accounting policies and the enhanced new disclosures relating to contracts with customers, which the Group and the Company have complied with in the current financial year. The adoption of this standard does not have any significant effect on the financial statements of the Group and of the Company.

2.4 New MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int that have been issued, but yet to be effective

The Group and the Company have not adopted the following new MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int that have been issued, but yet to be effective:

Effective for financial periods beginning on or

after

New MFRSs

MFRS 16 Leases 1 January 2019

MFRS 17 Insurance Contracts 1 January 2021

Amendments/Improvements to MFRSs

MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards 1 January 2021#

MFRS 2 Share-based Payment 1 January 2020*

MFRS 3 Business Combinations 1 January 2019/

1 January 2020*/

1 January 2021#

MFRS 5 Non-current Assets Held for Sale and Discontinued Operations 1 January 2021#

MFRS 6 Exploration for and Evaluation of Mineral Resources 1 January 2020*

MFRS 7 Financial Instruments: Disclosures 1 January 2021#

MFRS 9 Financial Instruments 1 January 2019/

1 January 2021#

MFRS 10 Consolidated Financial Statements Deferred

MFRS 11 Joint Arrangements 1 January 2019

MFRS 14 Regulatory Deferral Accounts 1 January 2020*

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2.4 New MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int that have been issued, but yet to be effective (continued)

The Group and the Company have not adopted the following new MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int that have been issued, but yet to be effective (continued):

Effective forfinancial periodsbeginning on or

after

Amendments/Improvements to MFRSs (continued)

MFRS 15 Revenue from Contracts with Customers 1 January 2021#

MFRS 101 Presentation of Financial Statements 1 January 2020*/

1 January 2021#

MFRS 107 Statements of Cash Flows 1 January 2021#

MFRS 108 Accounting Policies, Changes in Accounting Estimates and Error 1 January 2020*

MFRS 112 Income Taxes 1 January 2019

MFRS 116 Property, Plant and Equipment 1 January 2021#

MFRS 119 Employee Benefits 1 January 2019/

1 January 2021#

MFRS 123 Borrowing Costs 1 January 2019

MFRS 128 Investments in Associates and Joint Ventures 1 January 2019/

Deferred/

1 January 2021#

MFRS 132 Financial instruments: Presentation 1 January 2021#

MFRS 134 Interim Financial Reporting 1 January 2020*

MFRS 136 Impairment of Assets 1 January 2021#

MFRS 137 Provisions, Contingent Liabilities and Contingent Assets 1 January 2020*/

1 January 2021#

MFRS 138 Intangible Assets 1 January 2020*/

1 January 2021#

MFRS 140 Investment Property 1 January 2021#

New IC Int

IC Int 23 Uncertainty over Income Tax Treatments 1 January 2019

Amendments to IC Int

IC Int 12 Service Concession Arrangements 1 January 2020*

IC Int 19 Extinguishing Financial Liabilities with Equity Instruments 1 January 2020*

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The Group and the Company have not adopted the following new MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int that have been issued, but yet to be effective (continued):

Effective forfinancial periodsbeginning on or

after

Amendments to IC Int (continued)

IC Int 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2020*

IC Int 22 Foreign Currency Transactions and Advance Consideration 1 January 2020*

IC Int 132 Intangible Assets – Web Site Costs 1 January 2020*

* Amendments to References to the Conceptual Framework in MFRS Standards# Amendments as to the consequence of effective of MFRS 17 Insurance Contracts

(a) The Group and the Company plan to adopt the above applicable new MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int when they become effective. A brief discussion on the above significant new MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int are summarised below.

MFRS 16 Leases

Currently under MFRS 117 Leases, leases are classified either as finance leases or operating leases. A lessee recognises on its statement of financial position assets and liabilities arising from the finance leases.

MFRS 16 eliminates the distinction between finance and operating leases for lessees. All leases will be brought onto its statement of financial position except for short-term and low value asset leases.

On initial adoption of MFRS 16, there may be impact on the accounting treatment for leases, which the Group as a lessee currently accounts for as operating leases. On adoption of this standard, the Group will be required to capitalise its rented premises, on the statement of financial position by recognising them as “rights-of-use” assets and their corresponding lease liabilities for the present value of future lease payments.

The Group and the Company plan to adopt this standard when it becomes effective in the financial year beginning 1 July 2019 by applying the transitional provisions and include the required additional disclosures in their financial statements of that year. The Group is likely electing the practical expedient not to reassess whether a contract contains a lease at the date of initial application. Accordingly, existing lease contracts that are still effective on 1 July 2019 will be accounted for as lease contracts under MFRS 16.

Amendments to MFRS 3 Business Combinations and MFRS 11 Joint Arrangements

Amendments to MFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. Amendments to MFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.

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Amendments to MFRS 9 Financial Instruments

Amendments to MFRS 9 allow companies to measure prepayable financial assets with negative compensation at amortised cost or at fair value through other comprehensive income if certain conditions are met.

The amendments also clarify that when a financial liability measured at amortised cost is modified without this resulting in derecognition, a gain or loss should be recognised in profit or loss.

Amendments to MFRS 10 Consolidated Financial Statements and MFRS 128 Investments in Associates and Joint Ventures

These amendments address an acknowledged inconsistency between the requirements in MFRS 10 and those in MFRS 128, in dealing with the sale or contribution of assets between an investor and its associate or joint venture.

The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business, as defined in MFRS 3. A partial gain or loss is recognised when a transaction involves assets that do not constitute a business.

Amendments to MFRS 112 Income Taxes

Amendments to MFRS 112 clarify that an entity recognises the income tax consequences of dividends in profit or loss because income tax consequences of dividends are linked more directly to past transactions than to distributions to owners, except if the tax arises from a transaction which is a business combination or is recognised in other comprehensive income or directly in equity.

Amendments to MFRS 119 Employee Benefits

Amendments to MFRS 119 require an entity to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after the plan amendment, curtailment or settlement when the entity remeasures its net defined benefit liability (asset).

Amendments to MFRS 123 Borrowing Costs

Amendments to MFRS 123 clarify that when a qualifying asset is ready for its intended use or sale, an entity treats any outstanding borrowing made specifically to obtain that qualifying asset as part of general borrowings.

Amendments to MFRS 128 Investments in Associates and Joint Ventures

Amendments to MFRS 128 clarify that companies shall apply MFRS 9, including its impairment requirements, to account for long-term interests in an associate or joint venture that, in substance, form part of the net investment in the associate or joint to which the equity method is not applied.

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IC Int 23 Uncertainty over Income Tax Treatments

IC Int 23 clarifies that where there is uncertainty over income tax treatments, an entity shall:

(i) assume that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations.

(ii) reflect the effect of uncertainty in determining the related tax position (using either the most likely amount or the expected value method) if it concludes it is not probable that the taxation authority will accept an uncertain tax treatment.

Amendments to References to the Conceptual Framework in MFRS Standards

The Malaysian Accounting Standards Board has issued a revised Conceptual Framework for Financial Reporting and amendments to fourteen Standards under the Malaysian Financial Reporting Standards Framework on 30 April 2018.

The revised Conceptual Framework comprises a comprehensive set of concepts of financial reporting. It is built on the previous version of the Conceptual Framework issued in 2011. The changes to the chapters on the objective of financial reporting and qualitative characteristics of useful financial information are limited, but with improved wordings to give more prominence to the importance of providing information need to assess management’s stewardship of the entity’s economic resources.

Other improvements of the revised Conceptual Framework include a new chapter on measurement, guidance on reporting financial performance, improved definitions and guidance – in particular the definition of a liability – and clarifications in important areas, such as the role of prudence and measurement uncertainty in financial reporting.

The amendments to the fourteen Standards are to update the references and quotations in these Standards which include MFRS 2, MFRS 3, MFRS 6, MFRS 14, MFRS 101, MFRS 108, MFRS 134, MFRS 137, MFRS 138, IC Int 12, IC Int 19, IC Int 20, IC Int 22 and IC Int 132.

(b) The Group is currently performing an analysis to determine the financial effects arising from the adoption of the new MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int.

2.5 Functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which they operate (“the functional currency”) which includes United States Dollar (“USD”), Singapore Dollar (“SGD”) and Ringgit Malaysia (“RM”). The consolidated financial statements are presented in RM, which is also the Company’s functional currency, and has been rounded to the nearest RM, unless otherwise stated.

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2.6 Basis of measurement

The financial statements of the Group and of the Company have been prepared on the historical cost basis, except as otherwise disclosed in Note 3.

2.7 Use of estimates and judgement

The preparation of financial statements in conformity with MFRSs requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of the revenue and expenses during the reporting period. It also requires directors to exercise their judgement in the process of applying the Group and the Company’s accounting policies. Although these estimates and judgement are based on the directors’ best knowledge of current events and actions, actual results may differ.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates that are significant to the Group’s and the Company’s financial statements are disclosed in Note 2.8 to the financial statements.

2.8 Significant accounting judgements, estimates and assumptions

Significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have significant effect in determining the amount recognised in the financial year include the following:

(a) Impairment of plant and equipment (Note 12) – The Group assesses impairment of assets whenever the events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, i.e. the carrying amount of the asset is more than the recoverable amount. The management relies on the professional valuer to determine the recoverable amount. Judgement is also required in the estimation of recoverable amount based on the combination of market, cost and income approach in order to determine the newbuilt cost, useful lives and salvage value of similar asset.

(b) Financial guarantee contracts (Note 23) – Financial guarantee contracts are measured at fair value on initial recognition after accounting for the probability of the guarantee will be called upon. Subsequent to initial recognition, financial guarantee contracts are 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. In assessing the amount subsequently recognised, significant judgement is required in estimating the expenditure which is the expected cash outflows required to settle the defaulted borrowings and interest payables of the subsidiaries and joint ventures, including the value of assets pledged for the borrowings.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, the following accounting policies have been applied consistently to all the financial years presented in the financial statements of the Group and of the Company.

3.1 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. The financial statements of the subsidiaries, associates, and joint ventures used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1 Basis of consolidation (continued)

(a) Subsidiaries

Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the entities and has the ability to affect those returns through its power over the entities. The Group reassess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of controls as mentioned above.

When the Group has less than majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power, including:

• The size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other holders;

• Potential voting rights, if such rights are substantive, held by the Group, other vote holders or other parties;• Rights arising from other contractual arrangements;• The nature of the Group’s relationship with other parties and whether those other parties are acting on its

behalf (i.e. they are ‘de facto agents’); and• Any additional facts and circumstances that indicate the Group has, or does not have, the current ability to

direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, if any.

The accounting policies of subsidiaries are changed when necessary to align them with the policies adopted by the Group.

(b) Accounting for business combinations

Business combinations are accounted for using acquisition method from the acquisition date, which is the date on which control is transferred to Group.

The Group measures goodwill at the acquisition date as:

(i) The fair value of the consideration transferred; plus(ii) The recognised amount of any non-controlling interests in the acquiree; plus(iii) If the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree;

less(iv) The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at the acquisition date either at fair value or at the proportionate share of the acquiree’s identifiable net assets.

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(b) Accounting for business combinations (continued)

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

(c) Accounting for acquisitions of non-controlling interests

The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any differences between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

(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 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.

(e) Non-controlling interests

Non-controlling interests at the reporting date, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the financial year between non-controlling interests and the owners of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(f) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

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(g) Associates and joint ventures

Associates are entities, including unincorporated entities, in which the Group has significant influence, but not in control, over the financial and operating policies.

Joint ventures are joint arrangements whereby the parties that have joint control of the arrangements have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Associates or joint ventures are accounted for in the consolidated financial statements using the equity method and joint ventures of accounting unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, an investment in an associate or joint venture is initially recognised at cost. Thereafter, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the associates or joint ventures, after adjustments to align the accounting policies with those of the Group, from the date that the investee becomes an associate or joint venture.

Goodwill relating to associates or joint ventures is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from carrying amount of the investment and is instead included as income in the determination of the Group’s shares of the associate’s profit or loss for the period in which the investment is acquired.

When the Group’s share of losses exceeds its interest in an associate or joint venture, the carrying amount of that interest (including any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has a legal or constructive obligation or has made payments on behalf of the investee. Should the associate or joint venture subsequently report profits, the Group will only resume to recognise its share of profits after its share of profits equals to the share of losses previously not recognised.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investments in its associates or joint ventures. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate and joint venture is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognises the amount in profit or loss. Any reversal of impairment loss is recognised in profit or loss to the extent that the recoverable amount of the investment subsequently increases.

Investments in associates or joint ventures are stated in the Company’s statement of financial position at cost less impairment losses, unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale).

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(g) Associates and joint ventures (continued)

The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with MFRS 139. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassified the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued.

The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interest.

When the Group reduces its ownership interest in an associate or joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.

When a group entity transacts with an associate or joint venture of the Group, profits and losses resulting from the transactions with associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interest in the associate or joint ventures that are not related to the Group.

3.2 Separate financial statements

In the Company’s statement of financial position, investment in subsidiaries, joint ventures and associates are measured at cost less any accumulated impairment losses, unless the investment is classified as held for sale or distribution. The policy for the recognition and measurement of impairment losses shall be applied on the same basis as would be required for impairment of non-financial assets as disclosed in Note 3.19(b) to the financial statements.

Contributions to subsidiaries are amounts which the company does not expect repayment in the foreseeable future and are considered as part of the Company’s investment in the subsidiaries.

3.3 Foreign currency transaction and operations

(a) Foreign currency transactions

In preparing the financial statements of the individual entities, transactions in currencies other than the Group entities’ functional currency (foreign currencies) are translated into the Group entities’ functional currency at the rates of exchange ruling at the time of the transaction date. Monetary items denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary items denominated in foreign currencies are not retranslated at the reporting date except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

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3.3 Foreign currency transaction and operations (continued)

(a) Foreign currency transactions (continued)

Foreign currency differences arising on settlement of monetary items and on retranslation of monetary items at the reporting date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation. These are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operations are recognised in profit or loss in the Company’s separate financial statements or the individual financial statements of the foreign operation, as appropriate.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(b) Operations denominated in functional currencies other than Ringgit Malaysia (“RM”)

The results and financial position of foreign operations that have a functional currency different from the presentation currency (RM) of the consolidated financial statements are translated into RM as follows:

(i) Assets and liabilities for each reporting date presented are translated at the closing rate prevailing at the reporting date;

(ii) Income and expenses are translated at average exchange rate for the financial year, which approximates the exchange rates at the date of the transactions; and

(iii) All resulting exchange differences are taken to other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date.

Upon disposal of a foreign operation, the cumulative amount of translation differences at the date of disposal of the foreign operation is taken to the consolidated statement of profit or loss and other comprehensive income.

3.4 Revenue recognition

Accounting policies applied from 1 July 2018

The Group and the Company recognise revenue that depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Group and the Company expect to be entitled in exchange for those goods or services.

Revenue recognition of the Group and the Company are applied for each contract with a customer or a combination of contracts with the same customer (or related parties of the customer).

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3.4 Revenue recognition (continued)

Accounting policies applied from 1 July 2018 (continued)

The Group and the Company measure revenue from sale of good or service at its transaction price, being the amount of consideration to which the Group and the Company expect to be entitled in exchange for transferring promised good or service to a customer, excluding amounts collected on behalf of third parties such as goods and service tax, adjusted for the effects of any variable consideration, constraining estimates of variable consideration, significant financing components, non-cash consideration and consideration payable to customer. If the transaction price includes variable consideration, the Group and the Company use the expected value method by estimating the sum of probability-weighted amounts in a range or possible consideration amounts, or the most likely outcome method, depending on which method the Group and the Company expect to better predict the amount of consideration to which it is entitled.

For contract with separate performance obligations, the transaction price is allocated to the separate performance

obligations on the relative stand-alone selling price basis. If the stand alone selling price is not directly observable, the Group and the Company estimate it by using the costs plus margin approach.

Revenue from contracts with customers is recognised by reference to each distinct performance obligation in the

contract with customer, i.e. when or as a performance obligation in the contract with customer is satisfied. A performance obligation is satisfied when or as the customer obtains control of the good or service underlying the particular performance obligation, which the performance obligation may be satisfied at a point in time or over time.

A contract modification is a change in the scope or price (or both) of a contract that is approved by the parties to the

contract. A modification exists when the change either creates new or changes existing enforceable rights and obligations of the parties to the contract. The Group and the Company have assessed the type of modification and accounted for as either creates a separate new contract, terminates the existing contract and creation of a new contract; or forms a part of the existing contracts.

Financing components

The Group and the Company have applied the practical expedient for not to adjust the promised amount of consideration for the effects of a significant financing components if the Group and the Company expect that the period between the transfer of the promised goods or services to the customer and payment by the customer will be one year or less.

(a) Charter income

Charter hire income from MOPU and vessels is recognised on a time proportionate basis over the term of the charter hire contract.

(b) Drilling revenue

Drilling revenue is recognised when services are rendered.

(c) Interest income

Interest income is recognised using the effective interest method.

(d) Management fee

Management fee is recognised when services are rendered.

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3.4 Revenue recognition (continued)


Financing components (continued)

(e) Rental income

Rental income is recognised on a straight-line basis over the lease terms. Lease incentive granted is recognised as an integral part of the total rental income, over the term of the lease.

(f) Dividend income

Dividend income is recognised when the right to receive payment is established.

Accounting policies applied until 30 June 2018

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.

(a) Charter income

Charter hire income from MOPU and vessels is recognised on a time proportionate basis over the term of the charter hire contract.

(b) Drilling revenue

Drilling revenue is recognised when services are rendered.

(c) Interest income

Interest income is recognised using the effective interest method.

(d) Management fee

Management fee is recognised when services are rendered.

(e) Rental income

Rental income is recognised on a straight-line basis over the lease terms.

(f) Dividend income

Dividend income is recognised when the right to receive payment is established.

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3.5 Employee benefits

(a) Short-term employee benefits

Short-term employee benefit obligation in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans, if any, if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

The Group’s contributions to the Employees Provident Fund or other defined contributable plans are charged to profit or loss in the financial year to which they relate. Once the contributions have been paid, the Group has no further payment.

(b) Employees’ share option scheme (“ESOS”)

Employees of the Group receive remuneration in the form of share options as consideration for services rendered. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the options at the date on which the options are granted. This cost is recognised in profit or loss, with a corresponding increase in the employee share option reserve over the vesting period. The cumulative expense recognised at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of options that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised at the beginning and end of that period.

No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a market or non-vesting condition, which are treated as vested irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. The employee share option reserve is transferred to retained earnings upon expiry of the share options. When the options are exercised, the employee share option reserve is transferred to share capital if new shares are issued, or to treasury shares if the options are satisfied by the reissuance of treasury shares.

(c) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits as liability and an expense when it is demonstrably committed to either terminate the employment of current employees according to a detailed plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. In the case of an offer made to encourage redundancy, the measurement of termination benefits is based on the number of employee expected to accept the offer. Benefits falling due more than twelve months after financial position date are discounted to present value.

3.6 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowings costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Group incurred in connection with the borrowing of funds.

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3.7 Leases

(a) Finance lease or hire purchase – the Group as lessee

Assets acquired by way of finance leases or hire purchase where the Group assumes substantially all the benefits and risks of ownership are classified as plant and equipment.

Finance lease or hire purchase is capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding finance lease obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Plant and equipment acquired under finance lease is depreciated in accordance with the depreciation policy for plant and equipment.

(b) Operating lease – the Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentive provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

(c) Operating lease – the Group as lessor

Assets leased out under operating leases are presented on the statements of financial position according to the nature of the assets. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

3.8 Income tax

Income tax expense in profit or loss comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

(a) Current tax

Tax expense in profit or loss represents the aggregate amount of current and deferred tax. Current tax is the expected amount payable in respect of taxable income for the year, using tax rates enacted or substantially enacted by the reporting date, and any adjustments recognised for prior years’ tax. When an item is recognised outside profit or loss, the related tax effect is recognised either in other comprehensive income or directly in equity.

(b) Deferred tax

Deferred tax is recognised using the liability method, on all temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition of an asset or liability in a transaction, which is not a business combination and at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to apply in the period in which the assets are realised or the liabilities are settled, based on tax rates and tax laws that have been enacted or substantially enacted by the reporting date.

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3.8 Income tax (continued)

(b) Deferred tax (continued)

Deferred tax assets are recognised only to the extent that there are sufficient taxable temporary differences relating to the same taxable entity and the same taxation authority to offset or when it is probable that future taxable profits will be available against which the assets can be utilised.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will be available for the assets to be utilised.

Deferred tax assets relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transactions either in other comprehensive income or directly in equity and deferred tax arising from business combination is adjusted against goodwill on acquisition or the amount of any excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the acquisition cost.

(c) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”) except:

• where the GST incurred in a purchase of assets or services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• 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 statement of financial position.

The GST in Malaysia was abolished and replaced by the sales and services tax effective from 1 September 2018.

(d) Sales and services tax

Revenues, expenses and assets are recognised net of the amount of sales and services tax except:

• where the sales and services tax incurred in a purchase of assets or services is not recoverable from the taxation authority, in which case the sales and services tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables that are stated with the amount of sales tax included.

The net amount of sales and services tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statements of financial position.

3.9 Plant and equipment

All items of plant and equipment are initially recorded at cost. The cost of an item of plant and equipment is recognised as an asset of, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

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3.9 Plant and equipment (continued)

Subsequent to initial recognition, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses if any. When significant parts of plant and equipment are required to be replaced in intervals, the Group recognises such part as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

The principal annual rates for the current and comparative financial years are as follows:

Office equipment, furniture and fittings 10%

Renovation, air conditioners and site equipment 10%

Tools and equipment 20%

Motor vehicles 20%

Computers and software 33.33%

Jack-up rig, MOPU, marine vessels and equipment 3 – 30 years

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The policy of recognition of impairment losses is in accordance with Note 3.19(b).

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

3.10 Goodwill on business combination

Goodwill arises on the acquisition of subsidiaries.

The goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.

Goodwill is measured at cost and is not amortised but tested for impairment at least annually or more frequently when there is objective evidence of impairment.

Goodwill is allocated to cash generating units and is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired.

In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment. The entire carrying amount of the investment is tested for impairment when there is objective evidence of impairment.

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3.11 Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if any.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the assets is derecognised.

3.12 Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. The criteria for held for sale classification is regarded as met only when:

• the asset is available for immediate sale in its present condition;• the directors committed to a plan to sell the asset and the asset is actively marketed for sale at a price that is

reasonable in relation to its current fair value; and• the sale is expected to be completed within one year from the date of classification and actions required to

complete the plan indicates that it is unlikely that significant changes to the plan will be made or that the sale will be withdrawn.

Immediately before classification as held for sale, the assets are measured in accordance with the Group’s accounting policies. Thereafter, generally the assets are measured at the lower of carrying amount and fair value less costs to sell.

Impairment loss on initial classification as held for sale and subsequent gains or losses on remeasurement are recognized in profit or loss. A gain for any subsequent increase in fair value less costs to sell of an asset is recognised but not in excess of the cumulative impairment loss that has been recognised.

Intangible assets and property, plant and equipment once classified as held for sale are not amortised or depreciated. In addition, equity accounting of equity-accounted associates and joint venture ceases once classified as held for sale.

Assets and liabilities classified as held for sale are presented separately as current items in the statements of financial position.

3.13 Financial instruments

Financial instruments are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.

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3.13 Financial instruments (continued)


Except for the trade receivables that do not contain a significant financing component or for which the Group and the Company have applied the practical expedient, the financial instruments are recognised initially at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset and financial liability. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Trade receivables that do not contain a significant financing component or for which the Group and the Company have applied the practical expedient are measured at the transaction price determined under MFRS 15.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract; it is a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured as fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with the policy applicable to the nature of the host contract.

A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.

(a) Subsequent measurement

The Group and the Company categorise the financial instruments as follows:

(i) Financial assets

For the purposes of subsequent measurement, financial assets are classified in four categories:

• Financial assets at amortised cost • Financial assets at fair value through other comprehensive income with recycling of cumulative gains

and losses upon derecognition• Financial assets designated at fair value through other comprehensive income with no recycling of

cumulative gains and losses upon derecognition• Financial assets at fair value through profit or loss

The classification depends on the entity’s business model for managing the financial assets and the contractual cash flows characteristics of the financial assets.

The Group and the Company reclassifies financial assets when and only when its business models for managing those assets change.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s and the Company’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group and the Company classify their debt instruments:

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(a) Subsequent measurement (continued)

(i) Financial assets (continued)

Debt instruments (continued)

• Amortised cost

Financial assets that are held for collection of contractual cash flows and those cash flows represent solely payments of principal and interest are measured at amortised cost. Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. The policy for the recognition and measurement of impairment losses is in accordance with Note 3.19(a). Gains and losses are recognised in profit or loss when the financial asset is derecognised, modified or impaired.

• Fair Value through Other Comprehensive Income (FVOCI)

Financial assets that are held for collection of contractual cash flows and for selling the financial assets, and the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. For debt instruments at FVOCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in other comprehensive income. The policy for the recognition and measurement of impairment losses is in accordance with Note 3.19(a). Upon derecognition, the cumulative fair value change recognised in other comprehensive income is recycled to profit or loss.

• Fair Value through Profit or Loss (FVPL)

Financial assets at FVPL include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at FVOCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the profit or loss.

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(a) Subsequent measurement (continued)

(i) Financial assets (continued)

Equity instruments

The Group and the Company subsequently measure all equity investments at fair value. Upon initial recognition, the Group and the Company can make an irrevocable election to classify its equity investments that is not held for trading as equity instruments designated at FVOCI. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are not recycled to profit or loss. Dividends are recognised as other income in the profit or loss when the right of payment has been established, except when the Group and the Company benefit from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in other comprehensive income. Equity instruments designated at FVOCI are not subject to impairment assessment.

(ii) Financial liabilities

The Group and the Company classify their financial liabilities in the following measurement categories:

• Financial liabilities at fair value through profit or loss• Financial liabilities at amortised cost

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities designated into this category upon initial recognition.

Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value with the gain or loss recognised in profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in MFRS 9 are satisfied. The Group and the Company have not designated any financial liability as at fair value through profit or loss.

Financial liabilities at amortised cost

Subsequent to initial recognition, other financial liabilities are measured at amortised cost using effective interest method. Gains and losses are recognised in profit or loss when the financial liabilities are derecognised and through the amortisation process.

(b) 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 in accordance with the original or modified terms of a debt instrument.

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(b) Financial guarantee contracts (continued)

Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, the liability is measured at the higher of the amount of the loss allowance determined in accordance with Section 5.5 of MFRS 9 and the amount initially recognised, when appropriate, the cumulative amount of income recognised in accordance with the principles of MFRS 15.

(c) Regular way purchase or sale of financial assets

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

A regular way purchase or sale of financial assets shall be recognised and derecognised, as applicable, using trade date accounting (i.e. the date the Group and the Company commit themselves to purchase or sell an asset).

Trade date accounting refers to:(i) the recognition of an asset to be received and the liability to pay for it on the trade date; and (ii) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a

receivable from the buyer for payment on the trade date.

Generally, interest does not start to accrue on the asset and corresponding liability until the settlement date when title passes.

(d) Derecognition

A financial asset or a part of it is derecognised when, and only when:

(i) the contractual rights to receive cash flows from the financial asset expire, or(ii) the Group and the Company have transferred their rights to receive cash flows from the asset or have assumed

an obligation to pay the received cash flows in full without material delay to a third party; and either (a) the Group and the Company have transferred substantially all the risks and rewards of the asset, or (b) the Group and the Company have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset.

The Group and the Company evaluate if, and to what extent, they have retained the risks and rewards of ownership. When they have neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group and the Company continue to recognise the transferred asset to the extent of their continuing involvement. In that case, the Group and the Company also recognise an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group and the Company have retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group and the Company could be required to repay.

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(d) Derecognition (continued)

On derecognition of a financial asset, the difference between the carrying amount (measured at the date of derecognition) and the consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expired. On derecognition of a financial liability, the difference between the carrying amount and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

(e) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is presented in the statements of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

In accounting for a transfer of a financial asset that does not qualify for derecognition, the entity shall not offset the transferred asset and the associated liability.


(a) Financial assets

Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

The Group and the Company determine the classification of their financial assets at initial recognition and have

categorised financial assets in loans and receivables.

(i) Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

Loans and receivables are classified as current, except for those having maturity date later than 12 months after the reporting date which are classified as non-current.

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Accounting policies applied until 30 June 2018 (continued)

(a) Financial assets (continued)

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument, or where appropriate, a shorter period to the net carrying amount on initial recognition.

(b) Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

Financial liabilities, within the scope of MFRS 139, are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

(i) Other financial liabilities

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

Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Loans and borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

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3.14 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. For the purpose of the statements of cash flows, cash and cash equivalents are presented net of bank overdraft.

3.15 Share capital and share issuance expenses

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.

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

3.16 Treasury shares

When shares of the Company, that have not been cancelled, recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classified as treasury shares and presented as a deduction from total equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of treasury shares. When treasure shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity.

3.17 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

3.18 Contingencies

(a) Contingent liabilities

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(b) Contingent assets

When an inflow of economic benefit of an asset is probable where it arises from past events and where existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, the asset is not recognised in the statements of financial position but is being disclosed as a contingent asset. When the inflow of economic benefit is virtually certain, then the related asset is recognised.

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3.19 Impairment of assets

(a) Impairment of financial assets


Financial assets measured at amortised cost, financial assets measured at FVOCI, lease receivables or a loan commitment and financial guarantee contracts will be subject to the impairment requirement in MFRS 9 which is related to the accounting for expected credit losses on the financial assets. Expected credit loss is the weighted average of credit losses with the respective risks of a default occurring as the weights.

The Group and the Company measure loss allowance at an amount equal to lifetime expected credit loss, except for the following, which are measured as 12-month expected credit loss:

• debt securities that are determined to have low credit risk at the reporting date; and • other debt securities and bank balances for which credit risk (i.e. risk of default occurring over the expected

life of the financial instrument) has not increased significantly since initial recognition.

For trade receivables, the Group and the Company apply the simplified approach permitted by MFRS 9 to measure the loss allowance at an amount equal to lifetime expected credit losses.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit loss, the Group and the Company consider reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s and the Company’s historical experience and informed credit assessment and including forward-looking information.

The Group and the Company assume that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Group and the Company consider a financial asset to be in default when:

• the borrower is unable to pay its credit obligations to the Group and the Company in full, without taking into account any credit enhancements held by the Company; or

• the contractual payment of the financial asset is more than 90 days past due unless the Group and the Company have reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.

12-month expected credit losses are the portion of lifetime expected credit losses that represent the expected credit losses that result from default events on a financial instrument that are possible within the 12 months after the reporting date.

The maximum period considered when estimating expected credit losses is the maximum contractual period over which the Group and the Company are exposed to credit risk.

Expected credit losses are a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected life of the financial instrument. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.

Expected credit losses are discounted at the effective interest rate of the financial assets.

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3.19 Impairment of assets (continued)

(a) Impairment of financial assets (continued)


At each reporting date, the Group and the Company assess whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:

• significant financial difficulty of the issuer or the borrower; • a breach of contract, such as a default of past due event; • the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty,

having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; • it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; • the disappearance of an active market for that financial asset because of financial difficulties; or • the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.

The amount of impairment losses (or reversal) shall be recognised in profit or loss, as an impairment gain or loss. For financial assets measured at FVOCI, the loss allowance shall be recognised in other comprehensive income and shall not reduce the carrying amount of the financial asset in the statement of financial position.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group and the Company determine that the debtor does not have assets or source of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s and the Company’s procedure for recovery of amounts due.


The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.

(a) Trade and other receivables and other financial assets carried at amortised cost

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.

117

ANNUAL REPORT 2019



3.19 Impairment of assets (continued)

(a) Impairment of financial assets (continued)

Accounting policies applied until 30 June 2018 (continued)

(a) Trade and other receivables and other financial assets carried at amortised cost (continued)

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

(b) Impairment of non-financial assets

The carrying amounts of non-financial assets other than deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the asset’s recoverable amount is estimated. The recoverable amount is the higher of fair value less costs of disposal and the value in use, which is measured by reference to discounted future cash flows and is determined on an individual asset basis, unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit to which the asset belongs to.

An impairment loss is recognised whenever the carrying amount of an item of asset exceeds its recoverable amount. An impairment loss is recognised as expense in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis.

Any subsequent increase in recoverable amount of an asset, other than goodwill, due to a reversal of impairment loss is restricted to the carrying amount that would have been determined (net of accumulated depreciation, where applicable) had no impairment loss been recognised in prior years. The reversal of impairment loss is recognised in profit or loss.

3.20 Segment reporting

For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 39, including the factors used to identify the reportable segments and the measurement basis of segment information.

118




3.21 Fair value measurement

Fair value of an asset or a liability, is determined as 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. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

4. REVENUE

Group Company

2019 2018 2019 2018

RM RM RM RM

Revenue from contract with customers:

Management fee - - 1,750,594 1,880,614

Charter income 1,641,243 13,124,321 - -

Drilling revenue 115,264,988 114,055,457 - -

116,906,231 127,179,778 1,750,594 1,880,614

Revenue from other sources:

Dividend income from:

- subsidiary - - 1,530,000 -

- associate - - - 810,000

- - 1,530,000 810,000

116,906,231 127,179,778 3,280,594 2,690,614

Timing of revenue recognition:

Over time 116,906,231 127,179,778 1,750,594 1,880,614

119

ANNUAL REPORT 2019


4. REVENUE (CONTINUED)

(a) Disaggregation of revenue

The Group and the Company reports the following major segments: drilling units, production units, marine vessels and others in accordance with MFRS 8 Operating Segments. For the purpose of disclosure for disaggregation of revenue, it disaggregates revenue into primary geographical markets, major services and timing of revenue recognition (i.e. services transferred over time).

DrillingUnits

MarineVessels Total

RM RM RM

Group - 2019

Primary geographical markets

Malaysia 115,264,988 1,641,243 116,906,231

Republic of Singapore - - -

115,264,988 1,641,243 116,906,231

Major services

Charter Income - 1,641,243 1,641,243

Drilling Revenue 115,264,988 - 115,264,988

115,264,988 1,641,243 116,906,231


Over time 115,264,988 1,641,243 116,906,231

Group - 2018

Primary geographical markets

Malaysia 114,055,457 10,349,679 124,405,136

Republic of Singapore - 2,774,642 2,774,642

114,055,457 13,124,321 127,179,778

Major services

Charter Income - 13,124,321 13,124,321

Drilling Revenue 114,055,457 - 114,055,457

114,055,457 13,124,321 127,179,778


Over time 114,055,457 13,124,321 127,179,778

120



4. REVENUE (CONTINUED)

(b) Transaction price allocated to the remaining performance obligation

The Group and the Company do not have performance obligation that are unsatisfied for contracts that have an original duration of more than one year at the reporting date.

The Group and the Company apply the practical expedient in paragraph 121(a) of MFRS 15 and accordingly, do not disclose information about remaining performance obligations that have original expected durations of one year or less.

5. DIRECT COSTS

Group

2019 2018

RM RM

Cost of services rendered 69,711,054 93,318,819

6. OPERATING PROFIT/(LOSS)

Other than disclosed elsewhere in the financial statements, the following items have been charged/(credited) in arriving at operating profit/(loss):

Group Company

2019 2018 2019 2018

RM RM RM RM

Auditors’ remuneration:

- statutory audit:

- current financial year 186,000 178,600 78,000 72,000

- overprovision (7,284) - (600) -

- other services 12,660 35,500 12,660 35,500

Depreciation of plant and equipment 35,651,814 54,240,413 45,939 221,980

Employee benefits expenses (including key management personnel) (Note 8) 18,141,108 20,940,409 6,256,064 7,125,497


Impairment loss on:

- plant and equipment 17,139,152 276,648,810 - -

- trade receivables 1,641,243 13,933,481 8,671 42,156

- other receivables 669,097 933,135 - 19,000

- investments in subsidiaries - - 61,256 220,097,038

- investments in joint ventures - - - 41,283,118

- amounts due from subsidiaries - - 33,625,499 20,470,352

- amounts due from joint ventures 1,335,737 55,983,974 1,335,737 55,816,467

121

ANNUAL REPORT 2019


6. OPERATING PROFIT/(LOSS) (CONTINUED)

Other than disclosed elsewhere in the financial statements, the following items have been charged/(credited) in arriving at operating profit/(loss) (continued):

Group Company

2019 2018 2019 2018

RM RM RM RM

Gain on disposal of plant and equipment (2,540,029) - - -

Plant and equipment written off - 70,243 - -

Rental of office and warehouse 789,829 2,761,543 777,146 773,760

Rental of office equipment 24,497 25,361 24,497 25,361

Bad debts written off 70,024 (4,437,568) 10,800 -

Reversal of impairment loss on:

- investments in subsidiaries - - - (1,353,500)

- trade receivable (264,602) (512,920) - (680,681)

- amounts due from subsidiaries - - (15,824,656) (51,907,858)

Surplus on liquidation (2,349,754) (60,170,367) - -

Late payment interest income (669,097) (544,128) - -

Interest income from:

- subsidiaries - - (21,717,057) (24,746,745)

- third parties (654,631) (338,448) (32,705) (25,194)

Net (gain)/loss on foreign exchange:

- unrealised (1,655,194) 6,724,953 7,761,722 11,730,603

- realised 4,033,148 (4,445,505) 1,630,196 (3,174,020)

Sub-rental income on office - (25,382) (305,196) (71,382)

7. FINANCE COSTS

Group Company

2019 2018 2019 2018

RM RM RM RM

Interest expense on:

- Bank overdraft 1,883,510 1,685,835 1,883,510 1,685,835

- Hire purchase - 1,602 - 1,602

- Loans from subsidiaries - - 34,146,399 34,075,871

- Medium term notes 36,817,688 34,168,451 231,255 193,986

- Revolving credit 3,154,548 2,331,558 3,154,548 2,331,558

- Term loans 48,611,216 40,099,835 - -

90,466,962 78,287,281 39,415,712 38,288,852

122



8. EMPLOYEES BENEFITS EXPENSE

Group Company

2019 2018 2019 2018

RM RM RM RM

Wages and salaries 15,612,911 17,716,732 5,493,200 5,647,058

Defined contribution plan and social security contribution 1,919,673 2,166,540 659,879 726,960


Other benefits 608,524 463,338 102,985 191,109

18,141,108 20,940,409 6,256,064 7,125,497

Included in employees benefits expense are executive directors’ remuneration of the Group and of the Company amounting to RM1,197,993 (2018: RM1,312,239) and RM1,116,683 (2018: RM1,196,796) respectively.

9. DIRECTORS’ REMUNERATION

Group Company

2019 2018 2019 2018

RM RM RM RM

Executive directors’ remuneration:

- Salaries and bonus 1,019,955 1,020,162 948,000 918,000

- Other emoluments 178,038 178,317 168,683 165,036

- Share options granted under ESOS - 113,760 - 113,760

1,197,993 1,312,239 1,116,683 1,196,796

Non-executive directors’ remuneration:

- Fee 304,200 388,561 304,200 388,561



348,700 504,169 348,700 504,169

Total directors’ remuneration 1,546,693 1,816,408 1,465,383 1,700,965

The estimated monetary value of benefits-in-kind received and receivable by directors of the Company from the Group and the Company amounted to RM36,088 (2018: RM28,788).

123

ANNUAL REPORT 2019


10. INCOME TAX EXPENSE

Group Company

2019 2018 2019 2018

RM RM RM RM

Current tax:

- current financial year 666,124 563,751 - -

- under/(over) provision in prior financial year 11,122 (27,433) - -

Income tax expense recognised in profit or loss 677,246 536,318 - -

The reconciliations from the tax amount at statutory income tax rate to the Group’s and the Company’s tax expense are as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Loss before tax (236,375,392) (468,716,437) (80,547,023) (369,853,195)

Tax at the Malaysian statutory income tax rate of 24% (2018: 24%) (56,730,094) (112,491,945) (19,331,286) (88,764,767)

Effect of share of results of associates (27,628) (15,459) - -

Effect of share of results of joint ventures 38,167,163 28,664,854 - -

Tax effect of non-deductible expenses 17,332,787 94,020,740 21,938,287 98,345,847

Tax effect of non-taxable income (933,671) (14,635,288) (4,170,207) (11,349,444)

Deferred tax asset not recognised during the financial year 2,857,567 5,020,849 1,563,206 1,768,364

Under/(over) provision in prior financial year:

- current tax 11,122 (27,433) - -

Income tax expense 677,246 536,318 - -

* In previous financial year, the income tax expense for certain subsidiaries incorporated in the Federal Territory of Labuan is based on the Labuan Business Activity Tax Act, 1990 which is computed at 3% of profit before tax or fixed sum of RM20,000 upon election.

Domestic income tax is calculated at the Malaysian statutory income tax rate of 24% (2018: 24%) of the estimated assessable profit for the financial year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

124



11. LOSS PER SHARE

Basic loss per share

Basic loss per share are based on the loss for the financial year attributable to owners of the Company and the weighted average number of ordinary shares outstanding (excluding treasury shares) during the financial year.

Diluted loss per share

Diluted loss per share amounts are based on the loss for the financial year attributable to owners of the Company and the weighted average number of ordinary shares outstanding (excluding treasury shares) during the financial year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

Basic loss per share and diluted loss per share are calculated based on the following information:

Group

2019 2018

RM RM

Loss attributable to owners of Company (226,603,430) (455,622,618)

Group/Company

2019 2018

Number of shares (‘000)

Weighted average number of ordinary shares for basic loss per share 1,260,472 1,260,472

Weighted average number of ordinary shares for diluted loss per share 1,260,472 1,260,472

During the current financial year, the diluted loss per share is the same as basic loss per share as the assumed potential new ordinary shares are anti-dilutive.

125

ANNUAL REPORT 2019

12.

PLA

NT

AN

D E

QU

IPM

ENT

Gro

upM

otor

ve

hicl

es

Offi

ceeq

uipm

ent,

furn

iture

and

fittin

gs

Reno

vatio

n, ai

rco

nditi

oner

s,an

d sit

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uipm

ent

Tool

s an

deq

uipm

ent

Com

pute

rsan

d so

ftw

are

Ass

ets

onbo

ard

Jack

-up

rig,

MO

PU, M

arine

vess

els an

deq

uipm

ent

Tota

l

2019

RMRM

RMRM

RMRM

RMRM

Cost

s

At 1

Jul

y 20

1862

0,10

621

7,48

013

7,96

168

,281

3,58

2,29

0-

1,75

6,62

6,12

91,

761,

252,

247

Add

ition

s-

932

--

112,

236

40,7

9112

,666

,363

12,8

20,3

22

Dis

posa

l-

--

--

-(4

64,4

20,0

05)

(464

,420

,005

)

Dec

onso

lidat

ion

-(1

2,76

8)-

--

--

(12,

768)

Exch

ange

diff

eren

ces

-23

2-

1,62

469

,034

7630

,718

,286

30,7

89,2

52

At 3

0 Ju

ne 2

019

620,

106

205,

876

137,

961

69,9

053,

763,

560

40,8

671,

335,

590,

773

1,34

0,42

9,04

8

Acc

umul

ated

dep

reci

atio

n an

d im

pairm

ent l

oss

At 1

Jul

y 20

1862

0,10

514

5,33

311

7,88

068

,177

2,92

4,20

9-

1,09

4,81

8,18

41,

098,

693,

888

Dep

reci

atio

n ch

arge

for t

he fi

nanc

ial y

ear

-16

,664

7,44

670

620,

418

2,72

435

,004

,492

35,6

51,8

14

Dis

posa

l-

--

--

-(4

46,9

02,3

43)

(446

,902

,343

)

Dec

onso

lidat

ion

-(7

,247

)-

--

--

(7,2

47)

Impa

irmen

t los

s-

--

--

-17

,139

,152

17,1

39,1

52

Exch

ange

diff

eren

ce-

119

-1,

620

54,8

615

15,5

52,5

1915

,609

,124

At 3

0 Ju

ne 2

019

620,

105

154,

869

125,

326

69,8

673,

599,

488

2,72

971

5,61

2,00

472

0,18

4,38

8

Acc

umul

ated

dep

reci

atio

n

and

impa

irmen

t los

s A

naly

sed

as:

At 3

0 Ju

ne 2

019

- A

ccum

ulat

ed d

epre

ciat

ion

620,

105

154,

869

125,

326

69,8

673,

599,

488

2,72

923

5,05

9,50

023

9,63

1,88

4

- A

ccum

ulat

ed im

pairm

ent l

oss

--

--

--

480,

552,

504

480,

552,

504

620,

105

154,

869

125,

326

69,8

673,

599,

488

2,72

971

5,61

2,00

472

0,18

4,38

8

Net

car

ryin

g am

ount

At 3

0 Ju

ne 2

019

151

,007

12,6

3538

164,

072

38,1

3861

9,97

8,76

962

0,24

4,66

0

NO

TES

TO T

HE

FIN

AN

CIA

L ST

ATE

MEN

TS

126


12.

PLA

NT

AN

D E

QU

IPM

ENT

(CO

NTI

NU

ED)

Gro

upM

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ve

hicl

es

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ceeq

uipm

ent,

furn

iture

and

fittin

gs

Reno

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n, ai

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nditi

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uipm

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Com

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Jack

-up

rig, M

OPU

,M

arin

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ssel

san

d eq

uipm

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Tota

l

2018

RMRM

RMRM

RMRM

RM

Cost

s

At 1

Jul

y 20

1762

0,10

626

0,58

222

7,86

172

,619

3,76

5,28

31,

868,

223,

554

1,87

3,17

0,00

5

Add

ition

s-

3,80

03,

760

-90

0-

8,46

0

Writ

ten

off

-(4

6,28

1)(9

3,66

0)-

--

(139

,941

)

Exch

ange

diff

eren

ces

-(6

21)

-(4

,338

)(1

83,8

93)

(111

,597

,425

)(1

11,7

86,2

77)

At 3

0 Ju

ne 2

018

620,

106

217,

480

137,

961

68,2

813,

582,

290

1,75

6,62

6,12

91,

761,

252,

247

Acc

umul

ated

dep

reci

atio

n

and

impa

irmen

t los

s

At 1

Jul

y 20

1753

7,42

514

3,34

814

2,46

472

,298

2,05

5,01

781

6,92

3,54

081

9,87

4,09

2

Dep

reci

atio

n ch

arge

for t

he fi

nanc

ial y

ear

82,6

8024

,930

22,4

3419

996

6,77

053

,143

,400

54,2

40,4

13

Writ

ten

off

-(2

2,68

0)(4

7,01

8)-

--

(69,

698)

Impa

irmen

t los

s-

--

--

276,

648,

810

276,

648,

810

Exch

ange

diff

eren

ces

-(2

65)

-(4

,320

)(9

7,57

8)(5

1,89

7,56

6)(5

1,99

9,72

9)

At 3

0 Ju

ne 2

018

620,

105

145,

333

117,

880

68,1

772,

924,

209

1,09

4,81

8,18

41,

098,

693,

888

Acc

umul

ated

dep

reci

atio

n an

d im

pairm

ent l

oss

Ana

lyse

d as

:

At 3

0 Ju

ne 2

018

- A

ccum

ulat

ed d

epre

ciat

ion

620,

105

145,

333

117,

880

68,1

772,

924,

209

366,

307,

301

370,

183,

005

- A

ccum

ulat

ed im

pairm

ent l

oss

--

--

-72

8,51

0,88

372

8,51

0,88

3

620,

105

145,

333

117,

880

68,1

772,

924,

209

1,09

4,81

8,18

41,

098,

693,

888

Net

car

ryin

g am

ount

At 3

0 Ju

ne 2

018

172

,147

20,0

8110

465

8,08

166

1,80

7,94

566

2,55

8,35

9

NO

TES

TO T

HE

FIN

AN

CIA

L ST

ATE

MEN

TS

127

ANNUAL REPORT 2019


12. PLANT AND EQUIPMENT (CONTINUED)

CompanyMotor

vehicles Renovation

Officeequipment,

furniture andfittings

Computer andsoftware Total

2019 RM RM RM RM RM

Costs

At 1 July 2018 620,106 137,961 194,933 687,687 1,640,687

Additions - - 932 - 932

At 30 June 2019 620,106 137,961 195,865 687,687 1,641,619

Accumulated depreciation

At 1 July 2018 620,105 117,880 133,921 663,766 1,535,672

Depreciation charge for the financial year - 7,446 15,037 23,456 45,939

At 30 June 2019 620,105 125,326 148,958 687,222 1,581,611

Net carrying amount

At 30 June 2019 1 12,635 46,907 465 60,008

2018

Costs

At 1 July 2017 620,106 134,201 191,133 686,787 1,632,227

Additions - 3,760 3,800 900 8,460

At 30 June 2018 620,106 137,961 194,933 687,687 1,640,687

Accumulated depreciation

At 1 July 2017 537,425 104,032 115,501 556,734 1,313,692

Depreciation charge for the financial year 82,680 13,848 18,420 107,032 221,980

At 30 June 2018 620,105 117,880 133,921 663,766 1,535,672

Net carrying amount

At 30 June 2018 1 20,081 61,012 23,921 105,015

128



12. PLANT AND EQUIPMENT (CONTINUED)

(a) The carrying amount of plant and equipment of the Group that have been pledged as securities for bank guarantee and credit facilities granted to certain subsidiaries as disclosed in Note 25 are as follows:

Group

2019 2018

RM RM

Jack-up rig, MOPU and Marine vessels

Net carrying amount 619,978,769 661,807,945

(b) Impairment loss

During the financial year, the Group assessed the recoverable amount of its Jack-up rig, marine vessels and equipment as these assets were previously impaired. The assessment was performed by the management with reference to an independent valuation carried out by a professional valuer which led to the recognition of an impairment loss of RM17,139,152 (2018: RM276,648,810) included in other expenses in the consolidated statement of profit or loss.

The estimated recoverable amount of RM537,731,148 (2018: RM589,269,088) of the assets in the production units, marine vessels and drilling units segments is determined using fair value less costs of disposal, which is based on combination of market, cost and income approach, by reference to independent valuation carried out by professional valuer. The fair value is within Level 3 of the fair value hierarchy. The key assumptions used in estimating the fair value are the historical disposal price of similar asset, cost of rebuilding the same specification of the assets and day rates.

(c) During the financial year, the Group acquired property, plant and equipment with an aggregate cost of RM12,820,322 (2018: RM8,460) which are satisfied by the following:

Group

2019 2018

RM RM

Cash payments 11,822,958 8,460

Other payables 997,364 -

12,820,322 8,460

129

ANNUAL REPORT 2019


13. INTANGIBLE ASSET

Group/Company Golf club membership

2019 2018

RM RM

Cost

At 1 July/30 June 75,000 75,000

Net carrying amount

At 30 June 75,000 75,000

14. INVESTMENTS IN SUBSIDIARIES

Company

2019 2018

RM RM

At cost

Unquoted shares 72,245,804 81,861,393

Share options granted under ESOS 504,955 504,955

Quasi loans 564,295,147 564,259,398

637,045,906 646,625,746

Less: Allowance for impairment losses (248,224,699) (257,779,032)

388,821,207 388,846,714

Quasi loans represent advances and payments made on behalf of which the settlement is neither planned nor likely occur in the foreseeable future. These amounts are, in substance, a part of the Company’s net investment in the subsidiaries. The quasi loans are stated at cost less accumulated impairment losses, if any.

Details of the subsidiaries are as follows:

Name of company

Principal place of business/Country of incorporation Principal activities

Effective ownership interest/Voting rights

2019 2018

Romilly (M) Sdn. Bhd. Malaysia Dormant 100% 100%

+ Alpha Perisai Sdn. Bhd.

Malaysia Provision of administrative support services

- 100%

# Corro-Pro (L) Inc. Labuan, Malaysia Dormant 100% 100%

130



14. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

Details of the subsidiaries are as follows (continued):

Name of company



2019 2018

Perisai Offshore Sdn.Bhd.

Malaysia Provision of offshore oil and gas services in upstream oil sectors

51% 51%

Corro-Shield (SEA) Sdn. Bhd. Malaysia Dormant 100% 100%

# Perisai Capital (L) Inc. Labuan, Malaysia A special purpose vehicle for the procurement of funds

100% 100%

Perisai Production Holdings Sdn. Bhd.

Malaysia Investment holding 100% 100%

Perisai Drilling Holdings Sdn. Bhd.


Intan Offshore Sdn. Bhd.


Larizz Energy Services Sdn. Bhd.

Malaysia Provision of upstream oil and gas services and other services in the oil and gas sectors

51% 51%

Subsidiaries of Perisai Production Holdings Sdn. Bhd.

# Garuda Energy (L) Inc. Labuan, Malaysia Chartering of offshore assets which are primarily for oil and gas industry

100% 100%

Perisai Production Operations Sdn. Bhd.

Malaysia Dormant 100% 100%

Perisai Production Services Sdn. Bhd.


Subsidiaries of Perisai Drilling Holdings Sdn. Bhd.

Perisai Drilling Sdn. Bhd. Malaysia Operations and maintenance for jack-up rig

100% 100%

# Perisai Pacific 101 (L) Inc. Labuan, Malaysia Chartering of offshore assets which are primarily for oil and gas industry

100% 100%

# Perisai Pacific 103 (L) Inc. Labuan, Malaysia Chartering of offshore assets which are primarily for oil and gas industry

100% 100%

Perisai Drilling Operations Sdn. Bhd.


Perisai Drilling Services Sdn. Bhd.


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ANNUAL REPORT 2019



Details of the subsidiaries are as follows (continued):

Name of company



2019 2018

Subsidiaries of Intan Offshore Sdn. Bhd.

Lewek Eagle Offshore Sdn. Bhd. Malaysia Dormant 51% 51%

Jade Offshore Sdn. Bhd. Malaysia Dormant 51% 51%

* Lewek Swift Shipping Pte. Ltd.

Republic of Singapore

Dormant 51% 51%

# Intan Offshore (L) Ltd. Labuan, Malaysia Provision of vessels and equipment on vessels chartering services

51% 51%

Lewek Mallard Offshore Sdn. Bhd.


* Sarah Pearl Shipping Pte. Ltd.

Republic of Singapore

Dormant 51% 51%

# Audited by a firm of chartered accountant affiliated with Messrs. Baker Tilly Monteiro Heng PLT.

* Audited by Messrs. Baker Tilly Monteiro Heng PLT for the purpose of consolidation in the financial statements of the Group.

+ The company wound up and deconsolidated during the financial year.

(a) Winding up of Alpha Perisai Sdn.Bhd. (“APSB”)

On 1 March 2019, the Shah Alam High Court (“Court”) had ordered that APSB to be wound up by the Court under the provisions of the Companies Act 2016 with the Official Receiver to be appointed as the Liquidator. The costs of and incidental to this exercise to be paid out from the assets of APSB.

132




(b) Non-controlling interests (“NCI”) in subsidiaries

The financial information of the Group’s subsidiaries that have material NCI are as follows:

Intan OffshoreSdn. Bhd.

and itssubsidiaries

Individuallyimmaterial

subsidiaries Total

2019 RM RM RM

NCI percentage of ownership interest and voting interest 49%

Carrying amount of NCI 87,536,414 1,112,548 88,648,962

(Loss)/Profit allocated to NCI (11,158,783) 709,575 (10,449,208)

Total comprehensive (loss)/income allocated to NCI (8,890,189) 750,602 (8,139,587)

2018

NCI percentage of ownership interest and voting interest 49%

Carrying amount of NCI 96,426,603 1,816,187 98,242,790

(Loss)/Profit allocated to NCI (14,577,111) 946,974 (13,630,137)

Total comprehensive (loss)/income allocated to NCI (21,482,714) 883,900 (20,598,814)

(c) Summarised financial information of material NCI

The summarised financial information (before intra-group elimination) of Intan Offshore Sdn. Bhd. and its subsidiaries (“Intan Offshore Group”) that have material NCI are as follows:

Intan Offshore Group

2019 2018

RM RM

Summarised statement of financial position

Non-current assets 161,473,095 174,562,442

Current assets 165,723,337 156,222,141

Non-current liabilities (10,127,075) (9,891,875)

Current liabilities (138,396,279) (124,076,388)

Net assets 178,673,078 196,816,320

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ANNUAL REPORT 2019



(c) Summarised financial information of material NCI (continued)

The summarised financial information (before intra-group elimination) of Intan Offshore Sdn. Bhd. and its subsidiaries (“Intan Offshore Group”) that have material NCI are as follows (continued):

Intan Offshore Group

2019 2018

RM RM

Summarised statement of comprehensive income

Revenue 1,641,243 13,124,321

Loss for the financial year (22,773,025) (29,749,204)

Total comprehensive loss (18,143,243) (43,845,053)

Summarised cash flow information

Cash flows from/(used in) operating activities 13,474 (26,951)

Cash flows from investing activities 125,714 153,256

Cash flows used in financing activities - -

Net increase in cash and cash equivalents 139,188 126,305

Dividends paid to NCI - -

(d) Significant restrictions

The covenants of the bank term loans taken by Perisai Pacific 101 (L) Inc., Garuda Energy (L) Inc. and Intan Offshore (L) Ltd., the subsidiaries of the Company, restrict the ability of the subsidiaries to provide advances to other companies within the Group and to declare dividends to their shareholders until full settlement of the loans unless prior written consent are obtained. The assets to which such restrictions apply are the cash and cash equivalents of those subsidiaries included in the consolidated financial statements amounting to RM9,395,702 (2018: RM9,033,107).

134



15. INVESTMENTS IN ASSOCIATES

Group Company

2019 2018 2019 2018

RM RM RM RM

Unquoted shares at cost 17,676,000 17,676,000 17,676,000 17,676,000

Share of post-acquisition loss, net of dividend received (16,774,637) (16,889,752) - -

Share of exchange differences 378,622 351,358 - -

1,279,985 1,137,606 17,676,000 17,676,000

Less: Accumulated impairment loss - - (17,376,000) (17,376,000)

1,279,985 1,137,606 300,000 300,000

Details of the associates are as follows:

Name of company

Principal place of business/Country of incorporation

Principal activities/Nature of the relationship

Effective ownership interest/Voting rights Financial

year end2019 2018Held by the

Company

Phoenix Energy Sdn. Bhd.

Malaysia Dormant 32% 32% 31 December

* Larizz Petroleum Services Sdn.Bhd.

Malaysia Provision of upstream oil and gas services and is an agent for the Group

40% 40% 31 December

* Audited by Messrs. Baker Tilly Monteiro Heng PLT for purpose of consolidation in the financial statements of the Group.

All associates are accounted for using the equity method in the consolidated financial statements.

The Group has not recognised losses related to Phoenix Energy Sdn. Bhd. amounting to RM2,038 (2018: RM575) for the current financial year and RM310,313 (2018: RM308,850) cumulatively, since the Group has no obligation in respect of these losses.

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ANNUAL REPORT 2019


15. INVESTMENTS IN ASSOCIATES (CONTINUED)

(a) Summarised financial information of material associate

The summarised financial information of the Group’s material associate is as follows:

Larizz Petroleum

Services Sdn. Bhd.

Group RM

2019

Assets and liabilities:

Non-current assets 196,236

Current assets 6,385,663

Current liabilities (3,381,935)

Net assets 3,199,964

Results:

Revenue 184,044

Profit for the financial year 287,788

Total comprehensive income 355,948

2018

Assets and liabilities:

Non-current assets 266,577

Current assets 24,039,742

Current liabilities (21,462,304)

Net assets 2,844,015

Results:

Revenue 767,931

Profit for the financial year 161,033

Total comprehensive loss ( 74,248)

136



15. INVESTMENTS IN ASSOCIATES (CONTINUED)

(b) Reconciliation of net assets to carrying amount of the material associate

The reconciliation of net assets to carrying amount of the Group’s material associate is as follows:

Larizz Petroleum

Services Sdn. Bhd.

RM

2019

Group’s share of net assets 1,279,986

Carrying amount in the consolidated statement of financial position 1,279,986

Group’s share of results:

Group’s share of profit or loss 115,115

Group’s share of other comprehensive income 27,264

Group’s share of total comprehensive income 142,379

Dividend received from associates -

2018

Group’s share of net assets 1,137,606

Carrying amount in the consolidated statement of financial position 1,137,606


Group’s share of profit or loss 64,413

Group’s share of other comprehensive loss (94,112)

Group’s share of total comprehensive loss (29,699)

Dividend received from associates 810,000

137

ANNUAL REPORT 2019


16. INVESTMENTS IN JOINT VENTURES

Group Company

2019 2018 2019 2018

RM RM RM RM

Unquoted shares at cost 485,302,776 485,302,776 93,918,740 93,918,740

Share of post-acquisition losses (350,685,042) (191,655,198) - -

Share of exchange differences 141,968,631 133,516,661 - -

276,586,365 427,164,239 93,918,740 93,918,740

Quasi loan 29,587,162 28,900,004 29,587,162 28,900,003

306,173,527 456,064,243 123,505,902 122,818,743

Less: Allowance for impairment loss (59,209,192) (59,209,192) (93,918,740) (93,918,740)

246,964,335 396,855,051 29,587,162 28,900,003

Quasi loan represents advances and payments made on behalf of which the settlement is neither planned nor likely occur in the foreseeable future. This amount is, in substance, a part of the Company’s net investment in the joint ventures. The quasi loan is stated at cost less accumulated impairment losses, if any.

All joint ventures are accounted for using the equity method in the consolidated financial statements.

Details of the joint ventures are as follows:

Name of company

Principal place of business/Country of incorporation

Principal activities/Nature of the relationship

Effective ownership interest/Voting rights Financial

year end2019 2018

Held by the Company

# SJR Marine (L) Ltd. Labuan, Malaysia Provision of vessels, barges and equipment on vessels charter services

51% 51% 30 June

Held by Perisai Production Holdings Sdn. Bhd.

# Emas Victoria (L) Bhd.

Labuan, Malaysia Ship owners and provision of ship chartering services

51% 51% 30 June

* Victoria Production Services Sdn. Bhd.

Malaysia Operations and maintenance service for Floating, Production, Storage and Offloading (“FPSO”)

51% 51% 31 December

# Audited by a firm of chartered accountant affiliated with Messrs. Baker Tilly Monteiro Heng PLT.

* Audited by Messrs. Baker Tilly Monteiro Heng PLT for purpose of consolidation in the financial statements of the Group.

138



16. INVESTMENTS IN JOINT VENTURES (CONTINUED)

(a) Investment in SJR Marine (L) Ltd.

Simultaneous with the disposal of 49% equity interest in SJR Marine (L) Ltd. (“SJR Marine”), on 5 December 2012, the Company and EMAS Offshore Limited (“EOL”) entered into the following supplementary agreement to the Share Sale Agreement (‘SSA’):

(i) the Company grants EOL the right to acquire all of the Company’s remaining equity interest in SJR Marine (the “Call Option Shares”) from the Company, and EOL may exercise the Call Option at the Call Option Price at any time during the two (2)-year period from the completion date of the disposal of 49% equity interest in SJR Marine (“Completion Date”) (“Call Option Period”). The Call Option Price is fixed at the price equivalent to 51% of the net assets value of SJR Marine at the Completion Date;

(ii) in the event the Call Option is not exercised during the Call Option Period, the parties shall use their best endeavours to procure SJR Marine to sell SJR Marine’s Enterprise 3 vessel to an interested third party within a period of twelve (12) months from the expiry of the Call Option Period (“Enterprise 3 Disposal Period”) on terms to be agreed upon by the parties. Where SJR Marine is unable to dispose of Enterprise 3 within the Enterprise 3 Disposal Period, the Company shall be entitled to exercise its right under the Put Option; and

(iii) EOL granted the Company the right (“Put Option”) to sell all of its remaining equity interest in SJR Marine (“Put Option Shares”) to EOL, and EOL shall acquire the Put Option Shares, at the Put Option Price which is equivalent to the Call Option Price. The Company may exercise the Put Option at the Put Option Price at any time within the period of one (1) month prior to the expiry of the Enterprise 3 Disposal Period (“Put Option Period”). In the event the Put Option is not exercised within the Put Option Period, the Company’s Put Option Rights shall lapse.

The Call Option has lapsed on 26 December 2015.

The Company had on 8 December 2016 issued a notice of the exercise of its Put Option with the Put Option Price of USD43,031,406.55. However, the Company received a letter from EOL dated 8 December 2016 notifying the Company that following the occurrence of certain events as alleged by EOL, EOL is terminating the Shareholder’s Agreement entered into between the Company and EOL and EOL also intends to terminate the SSA in accordance with the terms of the SSA.

On 23 December 2016, the Company had entered into a Settlement Agreement with EOL (“Proposed Settlement Agreement”) to achieve a full and final settlement of the disputes, differences, claims, and counterclaims against each other arising from or in connection with the SSA and the Put Option at an agreed consideration of USD43,031,406.55 for the Put Option Shares. The settlement of the Put Option is subject to the terms and conditions stated in the Proposed Settlement Agreement.

On 14 August 2017, the Company requested for a confirmation from EOL on the status of the Conditions Precedents to be fulfilled by EOL. EOL had on 15 August 2017 confirmed that EOL has not received any representation from its bankers which would allow EOL to conclude whether or not the Conditions Precedents would be satisfied. EOL further confirmed that the extension period be extended only up to 23 July 2017. As the extension period has since lapsed, the Proposed Settlement Agreement became ineffective.

Pursuant to the terms of the Proposed Settlement Agreement and the lapse of the Proposed Settlement Agreement, the Put Option granted by EOL to the Company pursuant to the SSA is revived accordingly.

139

ANNUAL REPORT 2019



(a) Investment in SJR Marine (L) Ltd. (continued)

On 27 September 2017, EOL had written to the Company stating that due to the lapse of the Settlement Agreement, the Company is required to comply with the Shareholders’ Agreement dated 26 December 2013, which was terminated by EOL’s notice dated 8 December 2016 (“Termination Notice”), and the Company is obliged to complete the sale of the 51% shares in SJR Marine to EOL at the stated price of USD1.00. EOL claims that it had effected payment of USD1.00 to the Company and is awaiting for the Company’s completion documents to be delivered to them. The Company had already disputed the Termination Notice by its letter to EOL dated 8 December 2016 and maintains that the alleged termination is invalid and ineffective.

On 4 July 2018, the Company serves a Notice of Assignment to EOL in relation to the Assigned Rights (as defined herein below):

(i) By a Deed of Assignment dated 2 February 2018 made by the Company in favour of Perisai Production Holdings Sdn. Bhd. (“PPHSB”), the Company has assigned to PPHSB the proceeds of the Put Option (equivalent to the sum of USD43,031,406.55) and the rights and entitlement to claim for such proceeds which are now owing and due from EOL to the Company pursuant to the Company’s exercise of the right to sell of the remaining equity interest in SJR Marine, representing 51% of the equity interest in SJR Marine, vide the Put Option Notice dated 8 December 2016 (“Put Option”)(“Assigned Rights”).

(ii) that EOL is irrevocably authorised and instructed to pay to PPHSB all sums which are due to pay by EOL to the Company pursuant to exercise of the Put Option.

There is no further development on the above since the previous financial year up to the date of authorisation of the financial statements.

The Group has not recognised losses related to SJR Marine (L) Ltd totalling RM58,787,863 (2018: RM21,665,504) in the current financial year and RM80,453,367 (2018: RM21,665,504) cumulatively, since the Group has no obligation in respect of these losses.

(b) Investment in Emas Victoria (L) Bhd. (“EVLB”)

On 15 January 2018, Perisai Production Holdings Sdn. Bhd. (“PPHSB”), a wholly-owned subsidiary of the Company has written to the Company secretary of Emas Victoria (L) Bhd. (“EVLB”) to serve a notice that a termination event has occurred enabling PPHSB to terminate the shareholder agreement dated 21 August 2013.

In light of the default, pursuant to PPHSB’s rights under shareholder agreement with EOL and EVLB (“EVLB SHA”), PPHSB required EOL to sell 37,333,604 ordinary shares held by EOL in EVLB to PPHSB at the price of USD1.00, which completion shall take place at the registered office of EVLB. On 29 January 2018, EOL denies having committed any event of default and asserted that it remains as a shareholder in EVLB. The claim by PPHSB under the EVLB SHA is therefore disputed by EOL.

EOL requires the Company Secretary of EVLB to appoint a Valuer to procure the Valuation Price for the Default Shares as the Option Price of USD1 is also disputed by EOL.

The Company Secretary of EVLB had confirmed that a Valuer will be appointed accordingly for such purpose. There is no further development on the above since the previous financial year up to the date of authorisation of the financial statements.

140




(c) Summarised financial information of material joint ventures

The following table illustrates the summarised financial information of the Group’s material joint ventures, adjusted for any differences in accounting policies and reconciles the information to the carrying amount of the Group’s interest in the joint ventures:

Emas Victoria (L) Bhd.

VictoriaProduction

Services Sdn. Bhd.

SJRMarine (L)

Ltd. Total2019 RM RM RM RM

Asset and liabilities:Non-current assets 891,885,295 17 - 891,885,312

Current assets 32,121,511 2,356,775 31,616,220 66,094,506

Current liabilities (499,991,901) (141,944) (194,097,070) (694,230,915)

Net assets/(liabilities) 424,014,905 2,214,848 (162,480,850) 263,748,903

Included in the assets and liabilities are:Cash and cash equivalents 31,013,977 1,310,311 8,106 32,332,394

Current financial liabilities (excluding trade, other payables and provisions) 441,733,773 1 184,798,153 626,531,927

Results:Loss for the financial year (311,415,173) (408,050) (115,362,084) (427,185,307)

Other comprehensive income 16,512,569 59,922 - 16,572,491

Total comprehensive loss (294,902,604) (348,128) (115,362,084) (410,612,816)

Included in the total comprehensive income is:Revenue - - - -

Depreciation 60,717,336 5,966 12,343,387 73,066,689

Interest expense 33,957,665 - 2,755,680 36,713,345

Income tax (credit)/expense (61,516) 124,805 - 63,289

Reconciliation of net assets to carrying amount:Group’s share of net assets 216,247,602 1,129,572 - 217,377,174

Carrying amount in the consolidated statement of financial position 216,247,602 1,129,572 - 217,377,174

Group’s share of results:Loss (158,821,738) (208,106) - (159,029,844)

Other comprehensive income 8,421,410 30,560 - 8,451,970

Total comprehensive loss (150,400,328) (177,546) - (150,577,874)

141

ANNUAL REPORT 2019



(c) Summarised financial information of material joint ventures (continued)

The following table illustrates the summarised financial information of the Group’s material joint ventures, adjusted for any differences in accounting policies and reconciles the information to the carrying amount of the Group’s interest in the joint ventures (continued):


VictoriaProduction

Services Sdn. Bhd.

SJRMarine (L)

Ltd. Total2018 RM RM RM RM

Asset and liabilities:

Non-current assets 1,138,978,750 53,961 138,098,654 1,277,131,365

Current assets 41,979,846 2,693,090 722,280 45,395,216

Current liabilities (462,041,087) (184,330) (184,635,076) (646,860,493)

Net assets/(liabilities) 718,917,509 2,562,721 (45,814,142) 675,666,088

Included in the assets and liabilities are:

Cash and cash equivalents 33,248,066 1,399,200 11,341 34,658,607

Current financial liabilities (excluding trade, other payables and provisions) 431,534,763 816 178,443,389 609,978,968

Results:

Loss for the financial year (116,068,733) (39,643,029) (120,959,599) (276,671,361)

Other comprehensive loss (51,886,204) (2,284,394) (2,469,075) (56,639,673)

Total comprehensive loss (167,954,937) (41,927,423) (123,428,674) (333,311,034)

Included in the total comprehensive income is:

Revenue 6,784,882 200,586 - 6,985,468

Depreciation 51,736,852 15,158 14,942,816 66,694,826

Interest expense 28,666,124 - 1,370,577 30,036,701

Income tax expense 24,455 1,305,341 - 1,329,796

142




(c) Summarised financial information of material joint ventures (continued)

The following table illustrates the summarised financial information of the Group’s material joint ventures, adjusted for any differences in accounting policies and reconciles the information to the carrying amount of the Group’s interest in the joint ventures (continued):


VictoriaProduction

Services Sdn. Bhd.

SJRMarine (L)

Ltd. Total

2018 RM RM RM RM

Reconciliation of net assets to carrying amount:

Group’s share of net assets 366,647,930 1,306,988 - 367,954,918

Fair value adjustments - 129 - 129

Carrying amount in the consolidated statement of financial position 366,647,930 1,307,117 - 367,955,047


Profit or loss (59,195,054) (20,217,945) (40,023,891) (119,436,890)

Other comprehensive loss (26,461,964) (1,165,041) (1,259,228) (28,886,233)

Total comprehensive loss (85,657,018) (21,382,986) (41,283,119) (148,323,123)

(d) Significant restrictions

The above joint ventures cannot distribute their profits or repay advances made by the Company unless consents are obtained from the joint venture partner and its related banks under the loan covenant.

17. TRADE RECEIVABLES

Group Company

2019 2018 2019 2018

RM RM RM RM

Trade receivables

- Billed 141,292,304 143,205,837 373,339 373,624

- Unbilled - 4,515,828 - -

141,292,304 147,721,665 373,339 373,624

Less: Allowance for impairment loss (123,289,774) (119,079,207) (373,339) (373,624)

18,002,530 28,642,458 - -

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ANNUAL REPORT 2019


17. TRADE RECEIVABLES (CONTINUED)

Trade receivables of the Group and of the Company are non-interest bearing and generally on credit terms ranging from 15 to 120 days (2018: 15 to 120 days) except for an amount of RM14,545,080 (2018: RM14,345,690) which bear interest rates ranging from 4.32% to 4.79% (2018: 3.31% to 4.35%). They are recognised at their original invoices amounts which represent their fair value on initial recognition.

Included in trade receivables of the Group is an amount of RM131,148,248 (2018: RM126,775,169) due from affiliated companies on normal credit term.

Receivables that are impaired

The Group’s and the Company’s trade receivables that are impaired at the reporting date and the reconciliation of movement in the impairment of trade receivables are as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

At 1 July 119,079,207 112,505,198 373,624 1,497,796

Charge for the financal year (Note 6)

- Individually assessed 1,641,243 13,933,481 8,671 42,156

Reversal (Note 6) (264,602) (512,920) - (680,681)

Written off - - (8,956) (485,647)

Exchange differences 2,833,926 (6,846,552) - -

At 30 June 123,289,774 119,079,207 373,339 373,624

* Loss allowance disclosed in comparative period is based on incurred loss model in accordance with MFRS 139 Financial Instruments: Recognition and Measurement.

Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulty and have defaulted on payment. These receivables are not secured by any collateral or credit enhancements.

The information about the credit exposures are disclosed in Note 33(a). The foreign currency exposure profile of trade receivables balances is as follows:

Company

2019 2018

RM RM

United States Dollar 373,339 364,668

144



18. OTHER RECEIVABLES AND DEPOSITS

Group Company

2019 2018 2019 2018

RM RM RM RM

Non-current

Non-trade

Amounts due from subsidiaries - - 415,021,667 420,835,791

Less: Allowance for impairment loss - - (415,021,667) (420,835,791)

- - - -

Current

Non-trade

Sundry receivables 216,664 47,940 63,087 91,921

GST refundable 2,466,076 4,648,778 6,718 157,227

Insurance receivable - 5,034,791 - -

Interest receivable from subsidiaries - - 102,057,009 78,442,078

Amount due from an associate 118,725 118,725 118,725 118,725

Amount due from subsidiary - - - 189,615

Amounts due from joint ventures 57,172,872 55,984,205 57,152,204 55,816,698

Amount due from affiliated company 1,597,423 905,545 - -

61,571,760 66,739,984 159,397,743 134,816,264

Less: Allowance for impairment loss (58,908,019) (57,027,244) (159,346,938) (134,585,885)

2,663,741 9,712,740 50,805 230,379

Deposits 129,057 540,888 97,784 96,044

2,792,798 10,253,628 148,589 326,423

2,792,798 10,253,628 148,589 326,423

Non-current: The amounts due from subsidiaries are non-trade in nature, unsecured, not expected to be repayable within the next 12

months and bear interests at rates ranging from 4.28% to 10.15% (2018: 4.85% to 10.15%) per annum. These amounts are neither past due nor impaired.

Current: The amounts due from subsidiaries, associate and joint ventures are non-trade in nature, unsecured, interest free and repayable

on demand by cash. The amounts are neither past due nor impaired.

Insurance receivable represents reimbursement amount from insurance contracts on the third parties’ claims as further disclosed in Note 35.

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ANNUAL REPORT 2019


18. OTHER RECEIVABLES AND DEPOSITS (CONTINUED)

Receivables that are impaired

The Group’s and the Company’s other receivables that are impaired at the reporting date and the reconciliation of movement in the impairment of other receivables are as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Non-current

At 1 July - - 420,835,791 696,418,325

Charge for the financial year (Note 6)

- Individually assessed - - 10,010,532 -

Reversal (Note 6) - - (15,824,656) (51,907,858)

Written off - - - (223,674,676)

At 30 June - - 415,021,667 420,835,791

Current

At 1 July 57,027,244 118,725 134,585,885 69,198,068

Charge for the financial year (Note 6)

- Individually assessed 2,004,834 56,917,109 24,950,668 76,305,819

Written off - - - (10,918,002)

Deconsolidation (148,450) - (189,615) -

Exchange difference 24,391 (8,590) - -

At 30 June 58,908,019 57,027,244 159,346,938 134,585,885

The foreign currency exposure profile of other receivables is as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Ringgit Malaysia 2,484,981 5,746,287 - -

Singapore Dollar 177,031 - - -

United States Dollar 57,172,872 55,816,698 574,230,880 555,094,567

146



19. PREPAYMENTS

Group Company

2019 2018 2019 2018

RM RM RM RM

Prepayments 1,141,199 763,474 80,338 61,236

Less: Accumulated impairment loss

At beginning of financial year - (491,274,329) - -

Written off - 477,993,552 - -

Exchange difference - 13,280,777 - -

At end of the financial year - - - -

1,141,199 763,474 80,338 61,236

20. SHARE CAPITAL AND TREASURY SHARES

Group/Company

Number of ordinary shares Amounts

Share capital(Issued and

fully paid) Treasury

shares

Share capital(Issued and

fully paid) Treasury

shares

RM RM

At 1 July 2017 / 30 June 2018 1,260,872,078 400,000 770,888,300 (230,795)

At 1 July 2018 / 30 June 2019 1,260,872,078 400,000 770,888,300 (230,795)

(a) Share capital

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. Consequently, the amount standing to the credit of the share premium account of RM644,801,092 becomes part of the Company’s share capital pursuant to the transitional provisions set out in Section 618(2) of the Act. Notwithstanding this provision, the Company may within 24 months from the commencement of the Act, use the amount standing to the credit of its share premium account of RM644,801,092 for purposes as set out in Section 618(3) of the Act. There is no impact on the number of ordinary shares in issue or the relative entitlement of any of the members as a result of this transition.

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

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20. SHARE CAPITAL AND TREASURY SHARES (CONTINUED)

(b) Treasury shares

Treasury shares relate to ordinary shares of the Company that are held by the Company. The amount consists of the acquisition costs of treasury shares net of the proceeds received on their subsequent sale or issuance.

The directors of the Company are committed to enhancing the value of the Company for its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders. The repurchase transactions were financed by internally generated funds. The shares repurchased are being held as treasury shares.

There was no repurchase of issued share capital since the previous financial year end.

21. OTHER RESERVES

Group Company

2019 2018 2019 2018

RM RM RM RM

Share options reserve 23,493,665 23,587,923 23,493,664 23,587,923

Foreign currency translation reserve 249,009,975 259,199,219 - -

272,503,640 282,787,142 23,493,664 23,587,923

(a) Share options reserve

Share options reserve represents the equity-settled share options granted to employees (Note 28). This reserve is made up of the cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled share options, and is reduced by the expiry or exercise of the share options.

(b) Foreign currency translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of the entities within the Group with functional currencies other than RM (foreign operations) as well as the foreign currency differences arising from monetary items which form part of the Group’s net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation or another currency.

148



22. TRADE PAYABLES

Trade payables are non-interest bearing and the normal trade credit term granted to the Group ranges from 30 to 90 days (2018: 30 to 90 days).

Included in the trade payables are accrued purchases of RM10,356,361 (2018: RM9,835,066).

The foreign currency exposure profile of trade payables is as follows:

Group

2019 2018

RM RM

Ringgit Malaysia 3,246,061 1,906,535

Singapore Dollar 135,118 3,256,413

23. OTHER PAYABLES AND ACCRUALS

Group Company

2019 2018 2019 2018

Note RM RM RM RM

Non-current

Amount due to an affiliated company (a) 10,127,075 9,891,875 - -

Current

Sundry payables (b) 25,630,529 26,579,994 8,265,193 8,112,089

Interest payables 155,861,802 93,845,930 130,255,587 89,920,184

GST payables - 3,740,801 - -


Amounts due to subsidiaries (c) - - 553,021,334 543,876,587

Amount due to an associate 30,000 15,900 30,000 15,900

Accruals 3,687,715 2,618,047 872,950 1,331,966

Deposits (d) 67,075 - 23,000 23,000

185,277,121 126,800,672 857,501,571 779,342,631

(a) The amount due to an affiliated company in respect of acquisition of plant and equipment is unsecured, interest free and repayable in year 2020 by cash.

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23. OTHER PAYABLES AND ACCRUALS (CONTINUED)

(b) Included in sundry payables of the Group and the Company are:

(i) an amount of RM13,848,568 (2018: RM13,526,937) due to a supplier pursuant to the Rig Construction Contracts for a rig under construction;

(ii) an amount of RM2,026,095 (2018: RM1,928,094) due to EMAS Offshore Limited, a joint venture partner of the Group of which RM1,285,930 (2018: RM1,256,065) bears interest at rate of 4% (2018: 4%) per annum; and

(iii) an amount of RM53,680 and RM1,207 respectively (2018: RM53,612 and RM1,179) due to affiliated companies.

The above amounts due to joint venture partner and affiliated companies are non-trade in nature, unsecured, interest free and repayable on demand by cash.

(c) The amounts due to subsidiaries are non-trade in nature, unsecured, interest free and no fixed term of repayment except for an amount of RM492,609,982 (2018: RM478,556,614) which bear interest at rates ranging from 4.27% to 7.88% (2018: 4.85% to 8.65%) per annum.

(d) Included in deposits are rental deposits of RM23,000 (2018: RM23,000) received by the Company from a subsidiary.

The foreign currency exposure profile of other payables are as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Ringgit Malaysia 322,624 473,504 - -

Singapore Dollar 385,439 714,878 490,136,591 439,229,057

United States Dollar 15,311,415 11,630,121 364,234,074 336,479,016

24. PROVISION

Rectificationcosts

Onerous contract Total

RM RM RM

Group

At 1 July 2017 5,034,791 - 5,034,791

Charge for the financal year - 1,759,982 1,759,982

At 30 June 2018/1 July 2018 5,034,791 1,759,982 6,794,773

Reversal/deconsolidation (5,034,791) (1,759,982) (6,794,773)

At 30 June 2019 - - -

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24. PROVISION (CONTINUED)

(a) Rectification costs

This is in respect of third parties’ claims for rectification works and consultants fees. Details of are disclosed in Note 35.

(b) Onerous contracts

The Group entered into a non-cancellable lease for office space and cease occupying the premise in the previous financial year. This amount is in respect of provision for rental for unexpired term. The provision was adjusted as the related subsidiary was wound up as disclosed in Note 38(b).

The foreign currency exposure profile of provision is as follows:

2019 2018

RM RM

Ringgit Malaysia - 5,034,791

25. LOANS AND BORROWINGS

Group Company

2019 2018 2019 2018

Note RM RM RM RM

Unsecured

Bank overdraft (a) 5,940,673 5,370,595 5,940,673 5,370,595

Amount owing under revolving credit (b) 13,431,658 12,018,205 13,431,658 12,018,205

Revolving credits (c) 41,335,000 40,375,000 41,335,000 40,375,000

Medium Term Notes

- Singapore Dollar (“SGD”) (d) 382,037,500 370,312,500 - -

442,744,831 428,076,300 60,707,331 57,763,800

Secured

Term loans

- United States Dollar (“USD”) (e) 782,836,913 801,420,100 - -

782,836,913 801,420,100 - -

1,225,581,744 1,229,496,400 60,707,331 57,763,800

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25. LOANS AND BORROWINGS (CONTINUED)

(a) Unsecured bank overdraft

The bank overdraft of the Group and of the Company bears interest at rate of 10.15% (2018: 10.15%) per annum.

(b) Amount owing under revolving credit

In the previous financial years, the Group and the Company defaulted on the payment of interest on a revolving credit facility. Consequently, the revolving credit was not rolled-over and became due for immediate repayment. The outstanding amount bore interest at a rate of 10.15% (2018: 10.15%) per annum.

(c) Unsecured revolving credits

The revolving credits of the Group and of the Company bear interest rate at rates ranging from 5.82% to 6.84% (2018: 4.85% to 5.87%) per annum.

The foreign currency exposure profile of unsecured revolving credits of the Group and of the Company is as follows:

Group/Company

2019 2018

RM RM

United States Dollar 41,335,000 40,375,000

(d) Unsecured Medium Term Notes

On 19 August 2013, Perisai Capital (L) Inc. (“PCLI”), a wholly-owned subsidiary of the Company, established a Multi-currency Medium Term Notes (“MTN”) Programme arranged by Credit Suisse (Singapore) Limited to issue MTN up to SGD700,000,000. The net proceeds from the issuance of the MTN is expected to be on-lent and/or paid and/or advanced by PCLI to the Company for general corporate purpose of the Company and its subsidiaries including to finance potential acquisition, strategic expansion, general working capital, capital expenditure, investment and to refinance existing borrowings of the Company and its subsidiaries.

On 3 October 2013, PCLI issued the MTN amounting to SGD23,000,000, maturing on 3 October 2016 bearing interest at rate of 6.88% per annum. On 18 July 2014, PCLI issued additional MTN amounting to SGD102,000,000, maturing on 3 October 2016 bearing interest rate of 6.88% per annum. The MTNs are listed on the Singapore Exchange Trading Limited (“SGX-ST”).

The salient features of the MTN Programme are as follows:

(i) PCLI may, subject to compliance with all relevant laws, regulations and derivatives, from time to time issue MTN in series or tranches denominated in SGD and/or any other currency as may be agreed between the relevant dealer(s) and PCLI.

(ii) Each series of tranche of MTN may be issued in various amounts and tenors, and may bear fixed, floating, variable or hybrid rates of interest or may not bear interest.

(iii) The payment obligations of PCLI under the MTN and certain other obligations under the documents pursuant to the MTN Programme (“Programme Documents”) will be unconditionally and irrevocably guaranteed by the Company in accordance with the provisions of the applicable Programme Documents.

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25. LOANS AND BORROWINGS (CONTINUED)

(d) Unsecured Medium Term Notes (continued)

The salient features of the MTN Programme are as follows (continued):

(iv) The MTN and the coupons of all series will constitute direct, unconditional, unsubordinated and unsecured obligations of PCLI and shall at all times rank pari passu, without any preference or priority among themselves, and pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law) of PCLI.

(v) The MTN to be issued will be quoted on the SGX-ST pursuant to the MTN Programme.

The Company and PCLI, have both received a notice dated 10 October 2016 from the Trustee of the MTN notifying that an event of default for payment of principal and interest of the MTN has occurred as PCLI failed to pay the principal and interest due on the MTN on 3 October 2016. On 18 October 2016, the Company and PCLI received a notice from the Trustee notifying that the redemption amount of the MTN together with interest accrued to the date of payment are immediately due and payable and demanded immediate payment.

On 8 June 2018, the Company has obtained the requisite approval from scheme creditors during the court convened meeting of scheme creditors for the proposed debt restructuring scheme which includes the settlement of the principal and interest of MTN via distribution of Redeemable Convertible Unsecured Loan Stock and Irredeemable Convertible Unsecured Loan Stock of the Company by PCLI. On 11 January 2019, the Proposed Regularisation Plan was rejected by Bursa Malaysia. As at reporting date, the Company is in the midst of formulating a new regularisation plan.

(e) Secured term loans

The term loans of the Group, which are denominated in United States Dollar, bear interest at rates ranging from 4.02% to 5.26% (2018: 3.95% to 4.83%) per annum and are secured and supported as follows:

(i) a legal charge over respective subsidiaries’ Jack-up rig, MOPU and marine vessels;(ii) assignment of contract proceeds from the Charter Contract and Drilling Contract of the respective subsidiaries;(iii) specific and limited debenture over the assets of the respective borrowing subsidiaries;(iv) assignment of Insurance Policies; and(v) corporate guarantees by the Company.

The event of default on MTN also gave rise to a cross default of the financing facilities with all other lenders of the Group and of the Company.

26. DEFERRED TAXATION

Deferred tax assets and deferred tax liabilities presented after appropriate offsetting as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Deferred tax assets 1,310,623 173,737 13,845 14,609

Deferred tax liabilities (1,310,623) (173,737) ( 13,845) ( 14,609)

- - - -

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ANNUAL REPORT 2019


26. DEFERRED TAXATION (CONTINUED)

Deferred tax assets and liabilities are attributable to the following:

Group Company

2019 2018 2019 2018

RM RM RM RM

Deferred tax assets

Deductible temporary differences in respect of expenses 111,534 - - -

Unabsorbed tax losses 1,137,060 - - -

Unabsorbed capital allowances 62,029 173,737 13,845 14,609

1,310,623 173,737 13,845 14,609

Deferred tax liabilities

Differences between the carrying amount of plant and equipment and its tax base 1,310,623 173,737 13,845 14,609

The estimated temporary differences for which no deferred tax assets have been recognised in the financial statements are as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Unutilised tax losses 192,722,598 181,380,599 63,389,198 56,914,702

Unabsorbed capital allowances 100,102,577 99,538,048 565,112 526,251

292,825,175 280,918,647 63,954,310 57,440,953

27. CASH AND CASH EQUIVALENTS

Group Company

2019 2018 2019 2018

RM RM RM RM

Cash on hand and at bank 39,205,921 28,385,391 1,416,133 1,318,598

Less: Bank overdraft (Note 25) (5,940,673) (5,370,595) (5,940,673) (5,370,595)

33,265,248 23,014,796 (4,524,540) (4,051,997)

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27. CASH AND CASH EQUIVALENTS (CONTINUED)

The foreign currency exposure profile of cash and bank balances are as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Singapore Dollar 6,352 6,749 4,214 4,678

Ringgit Malaysia 27,733,058 16,962,856 - -

United States Dollar 51,495 43,415 51,416 43,338

28. EMPLOYEE BENEFITS

Employees’ Share Option Scheme (“ESOS”)

Eligible directors and employees of the Group participate in an equity-settled, share-based compensation unissued plan, i.e. ESOS operated by the Company to subscribe for new ordinary shares in the Company.

The Company’s ESOS is governed by the by-laws approved by its shareholders at an Extraordinary General Meeting held on 27 June 2012. The Company had on 4 July 2012, 25 June 2013, 19 June 2014 and 17 June 2015, granted 25,818,000, 14,068,000, 10,997,900 and 33,383,050 new options respectively to the eligible directors and employees of the Group. The existing ESOS was implemented on 1 July 2012 to be in force for a period of 10 years which will expire on 1 July 2022.

The salient features of the ESOS are as follows:

(a) The total number of options to be offered under the ESOS shall be subject to a maximum of 10% of the issued and paid-up share capital (excluding treasury shares) of the Company at any point in time;

(b) Any natural person who is employed full-time by and on the payroll of the Company and its subsidiaries and non-executive directors who fulfils the conditions of eligibility stipulated in the by-laws shall be eligible to participate in the ESOS. Employees include the executive directors of the Group;

(c) The subscription price for each new share shall be based on the weighted average of the market price of the Company shares for the five (5) market days immediately preceding the date on which the option is granted less a discount of up to 10% or the par value of the Company share, whichever is the higher;

(d) The ESOS shall be in force for a duration of ten (10) years from its commencement;

(e) The ESOS Committee may impose any condition or conditions on any option which they grant preventing its exercise unless such condition has been complied with. If after the ESOS Committee has imposed an Exercise Condition, an event occur which cause the ESOS Committee to consider that it is no longer appropriate, they may at their discretion, vary the Exercise Conditions;

Options which are exercisable in a particular year but are not exercised may be carried forward to subsequent years subject to the option period. All unexercised options shall be exercisable in the last year of the option period. Any options which remain unexercised at the expiry date of option period shall be automatically terminated; and

(f) All new ordinary shares issued upon exercise of the options granted under the ESOS will rank pari passu in all respects with the existing ordinary shares of the Company except that the shares so issued will not be entitled to any dividends, rights, allotments and/or any other distributions which may be declared, made or paid to shareholders prior to the date of allotment of the new shares.

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ANNUAL REPORT 2019


28. EMPLOYEE BENEFITS (CONTINUED)

Employees’ Share Option Scheme (“ESOS”) (continued)

Movement of share options during the financial year

The following table illustrates the number (“No.”) and weighted average exercise price (“WAEP”) of, and movements in, share options during the financial year:

2019 2018

No. WAEP (RM) No. WAEP (RM)

At the beginning of the financial year 52,090,490 0.818 70,514,640 0.816

Forfeited (603,940) 0.491 (18,424,150) 0.810

Outstanding at the end of the financial year 51,486,550 0.821 52,090,490 0.818

Exercisable at the end of the financial year 51,486,550 0.821 52,090,490 0.818

Share option outstanding at the end of financial year have the following expiry dates and exercise prices:

Exercise price Share options

Grant date Expiry date per share option 2019 2018

RM unit unit

4 July 2012 1 July 2022 0.785 14,095,170 14,095,170

25 June 2013 1 July 2022 1.440 8,692,000 8,692,000

19 June 2014 1 July 2022 1.400 7,233,750 7,288,750

17 June 2015 1 July 2022 0.400 21,465,630 22,014,570

51,486,550 52,090,490

29. COMMITMENTS

(a) Commitment

The Group has made commitment for the following capital expenditures:

Group

2019 2018

RM RM

Approved and not contracted for:

- Plant and equipment 24,404,268 -

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29. COMMITMENTS (CONTINUED)

(b) Operating lease arrangements – the Group as lessee

The future aggregate lease payments under non-cancellable operating leases contracted for at the reporting date but not recognised as liabilities are as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Future rental payments:

Not later than one year 789,880 838,240 789,880 838,240

This is in respect of the non-cancellable operating lease agreements entered into by the Group and the Company for the rental of office premises for period of 1 year and are renewable upon expiry. The leases do not include any contingent rentals.

(c) Operating lease arrangements – the Group as lessor

The Group entered into non-cancellable operating lease arrangements for the sub-rental of premises and parking lots. The lease has a tenure of three years with an option of renewal upon expiry. There are no restrictions placed upon the Group by entering into this lease.

The future minimum rental receivables under non-cancellable operating lease at the reporting date but not recognised as receivables, are as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Future rental receivables:

Not later than one year - - 281,750 230,000

30. CORPORATE GUARANTEE

Group Company

2019 2018 2019 2018

RM RM RM RM

Corporate guarantee given for borrowings and other banking facilities of:

- Subsidiaries - - 1,305,612,542 1,256,151,634

- Joint ventures 252,822,993 227,582,353 252,822,993 227,582,353

252,822,993 227,582,353 1,558,435,535 1,483,733,987

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ANNUAL REPORT 2019


31. RELATED PARTY DISCLOSURES

(a) Identity of related parties

For the purpose of these financial statements, parties are considered to be related to the Group and the Company if the Group and the Company have the ability to directly control the party or exercise significant influence over the party in making financial and operating decision, or vice versa, or where the Group and the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. The Company has a related party relationship with its subsidiaries, associates, joint ventures, key management personnel, companies related to directors and affiliated companies. Companies related to directors refer to companies in which a director of the Company has substantial financial interests.

(b) Significant related party transactions and balances

Significant related party transactions other than disclosed elsewhere in the financial statements are as follows:

Group

2019 2018

RM RM

Affiliated companies

Charter income from:

- Emas Offshore Pte. Ltd. * - (2,774,642)

- Emas Offshore (M) Sdn. Bhd. * (1,641,243) (10,349,679)

Rental of office income from:

- Bayu Emas Maritime Sdn. Bhd. * - (25,382)

Interest receivable from:

- Emas Offshore (M) Sdn. Bhd. * (669,097) (544,128)

Interest payable to:

- EMAS Offshore Limited ^ 52,078 51,308

Group/Company

2019 2018

RM RM

Associates

Agency fee to:

- Larizz Petroleum Services Sdn. Bhd. ** 165,000 180,000

Company

2019 2018

RM RM

Associates

Dividend received from:

- Larizz Petroleum Services Sdn. Bhd. ** - (810,000)

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31. RELATED PARTY DISCLOSURES (CONTINUED)

(b) Significant related party transactions and balances (continued)

Significant related party transactions other than disclosed elsewhere in the financial statements are as follows (continued):

Company

2019 2018

RM RM

Subsidiaries

Agency fee paid or payable:

- Perisai Offshore Sdn. Bhd. *** 101,530 110,760

- Larizz Energy Services Sdn. Bhd. @ 75,000 180,000

Dividend received (1,530,000) -

Interest paid or payable 34,146,399 34,075,871

Interest received or receivable (21,717,057) (24,746,745)

Management fee income (1,750,594) (1,880,614)

Rental received 305,196 46,000

* The companies are subsidiaries of EMAS Offshore Limited. ** 60% equity interest of the company is owned by Datuk Zainol Izzet Bin Mohamed Ishak, the Managing Director of

the Company. *** 49% equity interest of the Company is owned by Datuk Zainol Izzet Bin Mohamed Ishak, the Managing Director of

the Company.^ EMAS Offshore Limited is a subsidiary of Ezra Holdings Limited.@ 49% equity interest of the company is owned by Datuk Zainol Izzet Bin Mohamed Ishak, the Managing Director of

the Company.

Information regarding outstanding balances arising from related party transactions as at the reporting date is disclosed in Notes 17, 18 and 23.

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ANNUAL REPORT 2019



(c) Compensation of key management personnel

Key management personnel includes personnel having authority and responsibility for planning, directing and controlling the activities of the entity, including any executive director of the Company.

The remuneration of the key management personnel is as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Executive directors’ remuneration:

- Short term employee benefits (including estimated monetary value of benefits-in- kind) 1,056,043 1,048,950 984,088 946,788

- Post employment benefits 178,037 178,317 168,683 165,036


1,234,080 1,341,027 1,152,771 1,225,584

Non-executive directors’ remuneration:

- Short term employee benefits

- Fee and emoluments 304,200 388,561 304,200 388,561



348,700 504,169 348,700 504,169

Total directors’ remuneration 1,582,780 1,845,196 1,501,471 1,729,753

Other key management personnel

- Short-term employee benefits 2,410,800 2,592,746 2,356,800 2,478,746

- Post-employment benefits 244,031 260,064 239,843 248,748


2,654,831 3,144,690 2,596,643 3,019,374

4,237,611 4,989,886 4,098,114 4,749,127

160




(c) Compensation of key management personnel (continued)

Total compensation of key management personnel comprise:

Group Company 2019 2018 2019 2018

RM RM RM RM

Short-term employee benefits 3,815,543 4,086,257 3,689,588 3,870,095

Post-employment benefits 422,068 438,381 408,526 413,784


4,237,611 4,989,886 4,098,114 4,749,127

Other key management personnel comprises persons other than the directors of the Company, having authority and responsibility for planning, directing and controlling the activities of the Company, either directly or indirectly.

Directors’ interest in employees’ share option scheme

Nil (2018: nil) option were exercised by these directors during the financial year.

At the reporting date, the total number of outstanding share options granted by the Company to the above-mentioned directors under the ESOS plan amounts to 18,960,000 (2018: 23,875,850).

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ANNUAL REPORT 2019


32. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

The following table analyses the financial instruments in the statements of financial position by the classes of financial instruments to which they are assigned as follows:

From 1 July 2018:(i) Amortised cost

On or before 30 June 2018:(ii) Loan and receivables (“L&R”)(iii) Other financial liabilities (“FL”)

Carryingamount

Amortisedcost

RM RM

Group

2019

Financial assets

Trade receivables 18,002,530 18,002,530

Other receivables and deposits * 326,722 326,722


57,535,173 57,535,173

Financial liabilities

Trade payables 13,725,480 13,725,480

Other payables and accruals** 185,277,121 185,277,121

Loans and borrowings 1,225,581,744 1,225,581,744

1,424,584,345 1,424,584,345

* exclude GST refundable** exclude financial guarantee contracts

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32. FINANCIAL INSTRUMENTS (CONTINUED)

(a) Categories of financial instruments (continued)

Carrying amount


Other financial

liabilities

RM RM RM

Group

2018

Financial assets

Trade receivables 28,642,458 28,642,458 -

Other receivables and deposits * 5,604,850 5,604,850 -

Deposits, cash and bank balances 28,385,391 28,385,391 -

62,632,699 62,632,699 -


Trade payables 14,740,678 - 14,740,678

Other payables and accruals**# 122,065,099 - 122,065,099

Loans and borrowings 1,229,496,400 - 1,229,496,400

1,366,302,177 - 1,366,302,177

Carryingamount

Amortisedcost

RM RM

Company

2019

Financial assets

Other receivables and deposits* 141,871 141,871


1,558,004 1,558,004


Other payables and accruals ** 692,468,064 692,468,064

Loans and borrowings 60,707,331 60,707,331

753,175,395 753,175,395

* exclude GST refundable# exclude GST payable** exclude financial guarantee contracts

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(a) Categories of financial instruments (continued)

Carryingamount

Loans andreceivables

Otherfinancial

liabilities

RM RM RM

Company

2018

Financial assets

Other receivables and deposits * 169,196 169,196 -

Deposits, cash and bank balances 1,318,598 1,318,598 -

1,487,794 1,487,794 -


Other payables and accruals ** 643,279,726 - 643,279,726

Loans and borrowings 57,763,800 - 57,763,800

701,043,526 - 701,043,526

* exclude GST refundable** exclude financial guarantee contracts

(b) Fair value of financial instruments

The methods and assumptions used to determine the fair value of the following classes of financial assets and liabilities are as follows:

(i) Deposits, cash and bank balances, trade and other receivables and payables

The carrying amounts of deposits, cash and cash balances, trade and other receivables and payables are reasonable approximation of fair values due to short term nature of these financial instruments or that they are floating rate instruments that are re-priced to market interest rates on or near the reporting date.

The fair value non-current other payable is estimated using discounted cash flows analysis, based on current lending rate for similar type of arrangement.

(ii) Borrowings

The carrying amounts of the current portion of borrowings including Medium Term Notes (“MTN”) are reasonable approximation of fair values due to the insignificant impact of discounting.

The carrying amounts of long term floating rate loans are reasonable approximation of fair values as the loans will be re-priced to market interest rate on or near reporting date.

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(b) Fair value of financial instruments (continued)

(ii) Borrowings (continued)

The fair value of hire purchase payables is estimated using discounted cash flows analysis, based on current lending rate for similar types of borrowings.

The fair value of MTN was the quoted price at the end of the previous financial year.

The carrying amounts and fair values of financial instruments, other than those with carrying amounts are reasonable approximations of fair values are as follows:

Group Company

CarryingAmount

Fair Value

CarryingAmount

Fair Value

2019 RM RM RM RM


Other payable

(non-current ) 10,127,075 9,889,492 - -

2018

Other payable

(non-current ) 9,891,875 9,490,354 - -

(c) Fair value measurement

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, the lowest level input that is significant to the fair value measurement as a whole:

(i) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

(ii) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

(iii) Level 3 fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs).

165

ANNUAL REPORT 2019



(c) Fair value measurement (continued)

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities:

Amount Level 1 Level 2 Level 3

Group RM RM RM RM

2019

Other payable

(non-current ) 9,889,492 - 9,889,492 -

2018

Other payable

(non-current ) 9,490,354 - 9,490,354 -

During the financial year ended 30 June 2019, there was no transfer between Level 1 and Level 2 of the fair value measurement hierarchy.

33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s activities expose it to a variety of financial risks, including market risk (interest rate risk and foreign currency risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge designated risk exposures of the underlying hedge items and does not enter into derivative financial instruments for speculative purposes.

Risk management is carried out by a group treasury department under a policy approved by the Board of Directors. The policy provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and use of derivative financial instruments.

The following sections provide details regarding the Group’s and the Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

(a) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. The Group and the Company have a credit policy in place and the exposure to credit risk is managed through the application of credit approvals, credit limits and monitoring procedures. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment.

166



33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(a) Credit risk (continued)

Trade receivables

As at the end of the reporting period, the maximum exposure to credit risk arising from trade receivables is represented by the carrying amounts in the statements of financial position.

The carrying amount of trade receivables are not secured by any collateral or supported by any other credit enhancements. In determining the recoverability of these receivables, the Group considers any change in the credit quality of the receivables from the date the credit was initially granted up to the reporting date. The Group has adopted a policy of dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults.

Credit risk concentration profile

The Group has a significant concentration risk with three (2018: three) customers, on the entire of its trade receivables, contracted customers that have been transacting with the Group. The Group determines the credit risk concentration of its trade receivables by industry sector profile on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables and contract assets at the reporting date are as follows:

Group

2019 2018

RM RM

By country

Republic of Singapore - 2,774,642

Malaysia 116,906,231 124,405,136

116,906,231 127,179,778

The Group apply the simplified approach to providing for expected credit losses (“ECL”) prescribed by MFRS 9, which permits the use of the lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected credit losses also incorporate forward looking information.

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ANNUAL REPORT 2019




Trade receivables (continued)

Credit risk concentration profile (continued)

The information about the credit risk exposure on the Group’s trade receivables using provision matrix are as follows:

Gross carryingamount

ECL allowance

Netbalance

RM RM RM

Group

2019

Trade receivables

Current - - -

1 to 30 days past due 1,675,205 - 1,675,205

31 to 60 days past due - - -


91 to 120 days past due 16,327,325 - 16,327,325

18,002,530 - 18,002,530

Company

2019

Trade receivables

Current - - -




91 to 120 days past due 373,339 373,339 -

373,339 373,339 -

The significant changes in the gross carrying amounts of trade receivables do not contribute to changes in the impairment loss allowance during the financial year.

168





Trade receivables (continued)

Ageing analysis of trade receivables

As at 30 June 2018, the ageing analysis of the Group’s and the Company’s trade receivables are as follows:

Group Company

2018 2018

RM RM

Neither past due nor impaired 10,231,320 -

1 to 30 days past due not impaired 8,322,287 -

31 to 60 days past due not impaired 806,284 -

61 to 90 days past due not impaired 1,040,899 -

91 to 120 days past due not impaired 344,948 -

More than 120 days past due not impaired 7,896,720 -

18,411,138 -

Impaired 119,079,207 373,624

147,721,665 373,624

Receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the

Group and the Company.

Receivables that are past dues not impaired The Group have trade receivables amounting to RM16,327,325 (2018: RM18,411,138) respectively that are past due at

the reporting date but not impaired because there have been no significant changes in the credit quality of the debtors and the amounts are still considered recoverable. The Group does not hold any collateral or other credit enhancements over these balances.

Other receivables and other financial assets

For other receivables and other financial assets (including investment securities, cash and cash equivalents and derivatives), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. At the reporting date, the Group’s and the Company’s maximum exposure to credit risk arising from other receivables and other financial assets is represented by the carrying amount of each class of financial assets recognised in the statements of financial position.

The Group and the Company consider the probability of default upon initial recognition of asset and whether there has

been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Group and the Company compare the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forward-looking information.

Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due

in making a contractual payment.

169

ANNUAL REPORT 2019




Other receivables and other financial assets (continued)

The Company provides advances to subsidiaries. The Company monitors the results of the subsidiaries in determining the recoverability of intercompany balances. The advances to subsidiaries are repayable on demand. For such advances, expected credit losses are assessed based on the assumption that repayment of the advances is demanded at the reporting date. If the subsidiary companies do not have sufficient liquid reserves when the loan is demanded, the Company will consider the expected manner of recovery and recovery period of the advances.

Refer to Note 3.19(a) for the Group’s and the Company’s other accounting policies for impairment of financial assets.

Financial guarantee contracts

The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to subsidiaries and joint ventures.

The Company monitors on an ongoing basis the repayments made by the subsidiaries and joint ventures and their financial performance.

The maximum exposure of the Group and the Company to credit risk amounts to RM252,822,993 (2018: RM227,582,353) and RM1,558,435,535 (2018: RM1,483,733,987) respectively representing the outstanding credit facilities of the subsidiaries and joint ventures guaranteed by the Company at the reporting date. At the reporting date, the subsidiaries and joint ventures had defaulted on their repayment. Consequently, the Company remeasured the fair value of financial guarantee contracts and recognised an amount of RM165,033,507 (2018: RM136,062,905) as at 30 June 2019.

The financial guarantee has not been recognised as the fair value on initial recognition was immaterial since the financial guarantee provided by the Company did not contribute towards credit enhancement of the subsidiaries and joint ventures’ borrowings in view of the security pledged by the subsidiaries and joint ventures and it is unlikely the subsidiaries and joint ventures will default within the guarantee period.

(b) 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’s exposure to foreign currency is disclosed in the respective notes to the financial statements.

The Group and the Company hold cash and banks denominated in foreign currencies for working capital purposes (mainly in USD and SGD) amounting to RM51,495 and RM6,352 (2018: RM50,164 and RM48,016) respectively.

170




(b) Foreign currency risk (continued)

Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Group’s loss net of tax to a reasonably possible change in the USD

and SGD exchange rate against the functional currency of the Company and its subsidiaries, with all other variables held constant.

Group Company

2019 2018 2019 2018

RM RM RM RM

USD/RM

- strengthened 5% (2018: 5%) 28,898 192,750 8,454,328 8,932,428

- weakened 5% (2018: 5%) (28,898) (192,750) (8,454,328) (8,932,428)

SGD/RM

- strengthened 2% (2018: 2%) (6,743) (79,291) (9,802,648) (8,784,488)

- weakened 2% (2018: 2%) 6,743 79,291 9,802,648 8,784,488

RM/USD

- strengthened 5% (2018: 5%) 1,332,468 764,716 - -

- weakened 5% (2018: 5%) (1,332,468) (764,716) - -

171

ANNUAL REPORT 2019

33.

FIN

AN

CIA

L RI

SK M

AN

AG

EMEN

T O

BJEC

TIVE

S A

ND

PO

LICI

ES (C

ON

TIN

UED

)

(c)

Liqu

idity

risk

Li

qui

dit

y ris

k is

the

ris

k th

at t

he G

roup

will

enc

ount

er d

ifficu

lty

in m

eetin

g fin

anci

al o

blig

atio

ns w

hen

they

fal

l due

. The

Gro

up’s

exp

osur

e to

liq

uid

ity

risk

aris

es

prim

arily

fro

m m

ism

atch

es o

f th

e m

atur

ities

of

finan

cial

ass

ets

and

liab

ilitie

s. T

he G

roup

’s o

bje

ctiv

e is

to

mai

ntai

n a

bal

ance

bet

wee

n co

ntin

uity

of

fund

ing

and

flexi

bili

ty t

hrou

gh

use

of s

tand

-by

cred

it fa

cilit

ies.

Th

e G

roup

man

ages

its

deb

t mat

urit

y p

rofil

e, o

per

atin

g ca

sh fl

ows

and

the

avai

lab

ility

of f

und

ing

so a

s to

ens

ure

that

refi

nanc

ing,

rep

aym

ent a

nd fu

ndin

g ne

eds

are

met

. A

s p

art

of it

s ov

eral

l liq

uid

ity

man

agem

ent,

the

Gro

up m

aint

ains

suf

ficie

nt le

vels

of

cash

or

cash

con

vert

ible

inve

stm

ents

to

mee

t it

s w

orki

ng c

apita

l re

qui

rem

ents

. As

dis

clos

ed in

Not

e 2.

2, t

he G

roup

and

the

Com

pan

y ha

d d

efau

lted

on t

heir

finan

cing

fac

ilitie

s. T

he C

omp

any

had

obta

ined

the

ap

pro

val f

rom

sc

hem

e cr

edito

rs d

urin

g th

e co

urt c

onve

ned

mee

ting.

Lis

ting

Com

mit

tee

dec

ided

to g

rant

the

Com

pan

y an

ext

ensi

on o

f tim

e un

til 3

1 D

ecem

ber

201

9 to

sub

mit

a ne

w r

egul

aris

atio

n p

lan

to t

he r

elev

ant a

utho

ritie

s fo

r ap

pro

val.

Th

e ta

ble

bel

ow s

umm

aris

es t

he m

atur

ity

pro

file

of t

he G

roup

’s a

nd t

he C

omp

any’

s fin

anci

al li

abili

ties

at t

he r

epor

ting

dat

e b

ased

on

cont

ract

ual u

ndis

coun

ted

rep

aym

ent o

blig

atio

ns:

Gro

up C

arry

ing

am

ount

Tot

al c

ontr

actu

al

cas

h flo

ws

On

dem

and

or w

ithin

o

ne y

ear

One

to

five

yea

rs

Aft

er

five

yea

rs

2019

RM

R

M

RM

R

M

RM

Fina

ncia

l lia

bilit

ies:

Trad

e pa

yabl

es 1

3,72

5,48

0 1

3,72

5,48

0 1

3,72

5,48

0 -

-

Oth

er p

ayab

les

and

accr

uals

185

,277

,121

1

85,2

77,1

21

175

,150

,046

1

0,12

7,07

5 -

Loan

s an

d bo

rrow

ings

1,2

25,5

81,7

44

1,4

20,9

55,2

80

1,4

20,9

55,2

80

-

-

Fina

ncia

l gua

rant

ee c

ontr

acts

* -

2

52,8

22,9

93

252

,822

,993

-

-

1,4

24,5

84,3

45

1,8

72,7

80,8

74

1,8

62,6

53,7

99

10,

127,

075

-

2018

Fina

ncia

l lia

bilit

ies:

Trad

e pa

yabl

es 1

4,74

0,67

8 1

4,74

0,67

8 1

4,74

0,67

8 -

-

Oth

er p

ayab

les

and

accr

uals

123,

059,

871

123,

059,

871

113,

167,

996

9,8

91,8

75

-

Loan

s an

d bo

rrow

ings

1,2

29,4

96,4

00

1,4

35,8

98,0

00

1,4

35,8

98,0

00

-

-

Fina

ncia

l gua

rant

ee c

ontr

acts

* -

2

27,5

82,3

53

227

,582

,353

-

-

1,36

7,29

6,94

91,

801,

280,

902

1,79

1,38

9,02

7 9

,891

,875

-

* Th

e G

roup

has

giv

en c

orpo

rate

gur

ante

e to

the

ban

ks fo

r ba

nkin

g fa

cilit

ies

of it

s jo

int

vent

ures

. The

pot

entia

l exp

osur

e of

the

fina

ncia

l gua

rant

ee c

ontr

act

is

equi

vale

nt to

the

amou

nts

of th

e ba

nkin

g fa

cilit

ies

utili

sed

by th

e sa

id jo

int v

entu

res.

NO

TES

TO T

HE

FIN

AN

CIA

L ST

ATE

MEN

TS

172


33.

FIN

AN

CIA

L RI

SK M

AN

AG

EMEN

T O

BJEC

TIVE

S A

ND

PO

LICI

ES (C

ON

TIN

UED

)

(c)

Liqu

idity

risk

(con

tinue

d)

Th

e ta

ble

belo

w s

umm

aris

es t

he m

atur

ity p

rofil

e of

the

Gro

up’s

and

the

Com

pany

’s fin

anci

al li

abili

ties

at t

he re

port

ing

date

bas

ed o

n co

ntra

ctua

l und

isco

unte

d re

paym

ent o

blig

atio

ns (c

ontin

ued)

:

C

arry

ing

am

ount

Tota

l c

ontr

actu

al

cas

h flo

ws

On

dem

and

or w

ithin

o

ne y

ear

One

to

five

yea

rs

Aft

er

five

yea

rs

Com

pany

2019

RM

R

M

RM

R

M

RM

Fina

ncia

l lia

bilit

ies:

Oth

er p

ayab

les

and

accr

uals

692

,468

,064

6

92,4

68,0

64

692

,468

,064

-

-

Loan

s an

d bo

rrow

ings

60,

707,

331

63,

580,

544

63,

580,

544

-

-

Fina

ncia

l gua

rant

ee c

ontr

acts

# 1

65,0

33,5

07

1,5

58,4

35,5

35

1,5

58,4

35,5

35

-

-

918

,208

,902

2

,314

,484

,143

2

,314

,484

,143

-

-

2018

Fina

ncia

l lia

bilit

ies:

Oth

er p

ayab

les

and

accr

uals

643

,279

,726

6

43,2

79,7

26

643

,279

,726

-

-

Loan

s an

d bo

rrow

ings

57,

763,

800

59,

998,

329

59,

998,

329

-

-

Fina

ncia

l gua

rant

ee c

ontr

acts

# 1

36,0

62,9

05

1,4

83,7

33,9

87

1,4

83,7

33,9

87

-

-

837

,106

,431

2

,187

,012

,042

2

,187

,012

,042

-

-

# Th

e C

ompa

ny h

as g

iven

cor

pora

te g

uara

ntee

to

bank

s fo

r ba

nkin

g fa

cilit

ies

of it

s su

bsid

iarie

s an

d jo

int

vent

ures

. The

pot

entia

l exp

osur

e of

the

fina

ncia

l gu

aran

tee

cont

ract

s ar

e eq

uiva

lent

to th

e am

ount

s of

the

bank

ing

faci

litie

s ut

ilise

d by

the

said

sub

sidi

arie

s an

d jo

int v

entu

res.

NO

TES

TO T

HE

FIN

AN

CIA

L ST

ATE

MEN

TS

173

ANNUAL REPORT 2019



(d) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s exposure to interest rate risk mainly relates to financial liabilities. The Group’s interest bearing financial liabilities comprise loans and borrowings.

The loans and borrowings of the Group and of the Company totalling RM843,544,244 and RM60,707,331 (2018: RM859,183,900 and RM57,763,800) respectively at floating rate expose the Group and the Company to cash flow interest rate risk whilst Medium Term Notes of RM382,037,500 (2018: RM370,312,500) at fixed rate expose the Group to fair value interest rate risk.

Sensitivity analysis for interest rate risk

As at the reporting date, a change of 25 basis points in interest rates, with all other variables held constant, would increase/decrease the total loss for the financial year of the Group and of the Company by RM2,108,861 and RM151,768 (2018: RM2,147,960 and RM144,410) respectively, arising mainly as a result of higher/lower interest expense on floating rate loans and borrowings.

34. CAPITAL MANAGEMENT

The primary objective of the Group’s and Company’s capital management is to ensure that they maintain a strong credit rating and healthy capital ratios in order to support their business and maximise shareholders’ value.

The Group and the Company manage their capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group and the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the financial year ended 30 June 2019 and 30 June 2018 other than the Listing Committee decided to grant the Company an extension of time until 31 December 2019 to submit a new regularisation plan to the relevant authorities for approval as disclosed in Note 2.2.

The Group and the Company monitor capital using a gearing ratio, which is net debts divided by total capital plus net debts. The Group’s and the Company’s policy is to maintain the gearing ratio not exceeding 250%. The Group and the Company include within the net debts, hire purchase payables, loans and borrowings less cash and bank balances. Capital includes equity attributable to owners of the Company add or less foreign currency translation reserve and the fair value adjustment reserve, if any.

174



34. CAPITAL MANAGEMENT (CONTINUED)

The gearing ratios at 30 June 2019 and 30 June 2018 were as follows:

Group Company

2019 2018 2019 2018

RM RM RM RM

Loan and borrowings 1,225,581,744 1,229,496,400 60,707,331 57,763,800

Less: Deposits, cash and bank balances (39,205,921) (28,385,391) (1,416,133) (1,318,598)

Net debts 1,186,375,823 1,201,111,009 59,291,198 56,445,202

Equity attributable to owners of the Company (593,540,009) (356,824,913) (497,654,465) (417,107,442)

Less: Foreign currency translation reserve (249,009,975) (259,199,219) - -

Total capital (842,549,984) (616,024,132) (497,654,465) (417,107,442)

Capital and net debts 343,825,839 585,086,877 (438,363,267) (360,662,240)

Gearing ratio 345% 205% n/m n/m

n/m – not meaningful

The Company and certain subsidiaries are required to comply with certain loan-to-value ratio, consolidated net worth, consolidated borrowings to consolidated net worth ratio and interest coverage ratio in respect of the term loans and MTN facilities. The Company and its subsidiaries have not complied with the capital requirements since 30 June 2017. Accordingly, the borrowings had been reclassified as current liability since 30 June 2017.

35. CONTINGENCIES

On 22 August 2017, Perisai Drilling Sdn. Bhd. (“PDSB”), an indirect subsidiary of the Company had been served with a Notice of Demand (“Notice”) from Skrine acting on behalf of Konsortium Pelabuhan Kemaman Sdn. Bhd. (“KPKSB”), Pangkalan Bekalan Kemaman Sdn. Bhd. (“PBKSB”) and EPIC Mushtari Engineering Sdn. Bhd. (“EPIC”) (Collectively the “Claimants”) demanded for the sum of RM13,682,060 due and owing to the Claimants.

The claim originated from the letter of offer dated 1 August 2016 (“Letter of Offer”) in which EPIC agreed to offer PDSB its facilities including but not limited to providing berthing space for its rig namely, Perisai Pacific 101 (“Rig”) within the Kemaman Port. The Notice alleges that as a result of PDSB’s failure to moor the Rig on 5 September 2016, the Rig broke free of the moorings, drifted off and came into contact with a mobile offshore unit, namely Naga 4 and subsequently, the Rig continued drifting and collided with Berth 6 and 7 respectively, which are owned by PBKSB. The Notice further alleges that as a result of the collision, the finger jetty, Berth 6 and 7 and quay wall/wharf of Pangkalan Bekalan Kemaman were damaged.

175

ANNUAL REPORT 2019


35. CONTINGENCIES (CONTINUED)

The Notice alleges that due to the breach of PDSB’s contractual obligations to moor the Rig under the Letter of Offer, the Claimants had suffered losses and damages in the sum of RM13,682,060 as at 4 August 2017 as follows:

a. Rectification works to the East Wharf in the sum of RM4,588,937;b. Fees payable for the police report, weather report and meteorology data in the sum of RM822;c. Fees payable to the consultants in the sum of RM445,031; andd. Loss of revenue due to the Claimants inability to use Berth 6 and 7 at the East Wharf in the sum of RM8,647,269 (this loss

is continuing and the Claimants reserve their rights to claim for loss of revenue suffered after 4 August 2017).

Following the Notice, PDSB had on 13 October 2017 been served with a Writ of Summons and Statement of Claim dated 9 October 2017 from Skrine acting on behalf of the Claimants demanded for the sum of RM13,682,060 due and owing to the Claimants. The circumstances leading to the filing of the Writ of Summons and Statement of Claim against PDSB, alleging a sum of RM13,682,060 being the PDSB had failed to use reasonable care and skill to ensure mooring of the Rig within the Kemaman Port. PDSB had duly notified its insurer regarding the claim and the insurer had duly appointed solicitors to defend the legal action.

On 3 October 2018, the Group entered into Settlement Agreement (“SA”) with the Claimants. Based on the SA, the insurer agreed to pay EPIC an agreed sum as settlement and the Group is discharged from any future claim or liabilities.

36. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

Other than as disclosed elsewhere in the financial statements, the following are significant events during the financial year:

(a) On 4 July 2018, the Company served a Notice of Assignment to EMAS Offshore Limited (“EOL”) in relation to the Assigned Rights (as defined herein below):

i) By a Deed of Assignment dated 2 February 2018 made by the Company in favour of Perisai Production Holdings Sdn Bhd (“PPHSB”), the Company has assigned to PPHSB the proceeds of the Put Option (equivalent to the sum of USD43,031,407) and the rights and entitlement to claim for such proceeds which are now owing and due from EOL to the Company pursuant to the Company’s exercise of the right to sell of the Company’s remaining equity interest in SJR Marine (L) Ltd (“SJR Marine”), representing 51% of the equity interest in SJR Marine, vide the Company’s Put Option Notice dated 8 December 2016 (“Put Option”) (“Assigned Rights”).

ii) EOL is irrevocably authorised and instructed to pay to PPHSB all sums which are due to pay by EOL to the Company pursuant to exercise of the Put Option.

(b) On 1 August 2018, the application in relation to the proposed regularisation plan has been submitted to Bursa Malaysia Securities Berhad (“Bursa Securities”) for approval.

(c) On 8 August 2018, the Company has obtained an extension of the Restraining Order from the High Court of Malaya at Kuala Lumpur for a further period of nine (9) months effective from 8 August 2018 restraining all proceedings and actions brought against the Company.

(d) On 11 January 2019, the Company had received a suspension and de-listing notice from Bursa Securities wherein Bursa Securities vide their letter dated 11 January 2019 has rejected the Proposed Regularisation Plan.

(e) On 8 February 2019, the Company has submitted an appeal to Bursa Securities on its decision to reject the Company’s Proposed Regularisation Plan.

176



36. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONTINUED)

(f) On 5 April 2019, Bursa Securities has vide its letter dated on the same day stated that after due deliberation and having considered all facts and circumstances of the matter including the Company’s written and oral representations, the Listing Committee (“LC”) had decided to dismiss the Company’s appeal against the rejection by Bursa Securities of the Company’s Proposed Regularisation Plan. Notwithstanding the above decision, the LC decided to grant the Company an extension of time until 31 December 2019 to submit a new regulation plan to the relevant authorities for approval.

(g) On 6 May 2019, a Bilateral Settlement Agreement between an indirect subsidiary, Garuda Energy (L) Inc. (“Garuda”) and OCBC Bank (Malaysia) Berhad (“OCBC Malaysia”) was executed and as provided for in the Bilateral Settlement Agreement, part of Garuda’s debt owing to OCBC Malaysia shall be set-off against the mobile offshore production unit (“MOPU”) owned by Garuda. Garuda is the registered owner of the MOPU and had, pursuant to the Mortgage Agreements charged the MOPU to OCBC Malaysia as security for financing facilities granted by OCBC Malaysia to Garuda pursuant to two Facility Agreements both dated 29 March 2012. Accordingly, OCBC Malaysia exercised its’ right under the mortgage to dispose of the MOPU and has entered into a Memorandum of Agreement with a buyer for the purpose of such disposal. The disposal was completed during the financial year.

(h) On 10 May 2019, the Company obtained a Restraining Order under Section 368 of the Companies Act 2016 from the High Court of Malaya at Kuala Lumpur for a period of three (3) months effective from 10 May 2019 restraining all proceedings and actions to be brought against the Company.

37. SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Other than as disclosed elsewhere in the financial statements, the following are significant events subsequent to the financial year end:

(a) On 9 August 2019, the Company obtained a Restraining Order under Section 368 of the Companies Act 2016 from the High Court of Malaya at Kuala Lumpur for a period of nine (9) months effective from 9 August 2019 restraining all proceedings and actions to be brought against the Company.

(b) Intan Offshore (L) Ltd. (“IOLL”), the indirect subsidiary of the Company has issued a Notice of Termination (“Notice”) dated 22 August 2019 to Emas Offshore (M) Sdn Bhd (“EOM”) notifying that the Charter Agreement would be deemed terminated pursuant to Clause 28 of the Charter Agreement and legal proceeding shall be commenced against EOM unless full payment of the outstanding sum of USD3,242,824.00 is received from EOM by IOLL within fourteen (14) days from the date of the Notice. IOLL has the rights to repossess the vessel upon termination of the Charter Agreement pursuant to Clause 29 of the Charter Agreement.

On 19 September 2019, IOLL has issued a Letter of Termination of the Charter Agreement with immediate effect to EOM as IOLL did not receive any response from EOM.

177

ANNUAL REPORT 2019


38. MATERIAL LITIGATION

(a) As disclosed in Note 35, PDSB had on 13 October 2017 been served with a Writ of Summons and Statement of Claim dated 9 October 2017 from Skrine acting on behalf of the Claimants demanded for the sum of RM13,682,060 due and owing to the Claimants. The circumstances leading to the filing of the Writ of Summons and Statement of Claim against PDSB, alleging a sum of RM13,682,060 being the PDSB had failed to use reasonable care and skill to ensure mooring of the Rig within the Kemaman Port. PDSB had duly notified its insurer regarding the claim and the insurer had duly appointed solicitors to defend the legal action.

On 3 October 2018, the Group entered into Settlement Agreement (“SA”) with the Claimants. Based on the SA, the insurer agreed to pay EPIC an agreed sum as settlement and the Group is discharged from any future claim or liabilities.

(b) On 21 November 2017 Alpha Perisai Sdn Bhd (“APSB”), a wholly-owned subsidiary of the Company had been served with a Letter of Demand dated 20 November 2017 from Shaikh David & Co., acting on behalf of Teknik Janakuasa Sdn Bhd (“the Plaintiff”) demanded for the rental arrears and rental for unexpired term amounting to RM2,754,754 due and owing to the Plaintiff pursuant to the tenancy agreement dated 27 May 2013 (“Tenancy Agreement”) entered into between APSB and the Plaintiff in respect of the premises known as Level 13A, Block 3B, Plaza Sentral, Jalan Stesen Sentral 5, 50470 Kuala Lumpur (“Demised Premises”). APSB is required to pay the total sum of RM2,754,754 together with interest within 7 days from the date of the Letter of Demand.

APSB has been served with a Writ and Statement of Claim dated 13 December 2017 from Messrs Shaikh David & Co acting on behalf of the Plaintiff. After several hearings between March 2018 till August 2018, on 4 September 2018, the high court partially allowed the termination of the Appeal Judgement (“the Appeal”), whereby:

(i) the amount outstanding for the months of June 2016 to June 2017 in the total sum of RM994,772 (as admitted by the APSB) was allowed;

(ii) the rental for the unexpired term in the total sum of RM1,759,982 was not allowed and trial date(s) for the same would need to be set by the Sessions Court.

(iii) the costs of RM3,000 to be paid by the APSB to the Plaintiff will be set off against the costs obtained from the Plaintiff in the Sessions Court.

On 1 March 2019, the Shah Alam High Court (“Court”) had ordered that APSB to be wound up by the Court under the provisions of the Companies Act 2016 with the Official Receiver to be appointed as the Liquidator. The costs of and incidental to this exercise to be paid out from the assets of APSB.

39. SEGMENT INFORMATION

(a) Operating segments

For management purposes, the Group is organised into business segments based on their services and has three reportable operating segments as follows:

(i) Drilling Units - Operations and maintenance service and provision of offshore assets which are primarily for oil and gas offshore drilling.

(ii) Production Units - Operations and maintenance service and provision of offshore assets which are primarily for oil and gas offshore production.

(iii) Marine vessels - Provision of vessels, barges and equipment on vessels carter services.

178



39. SEGMENT INFORMATION (CONTINUED)

(a) Operating segments (continued)

Other non-reportable segment comprises investment holding and management services.

Management monitors the operating results of its business segments 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 is measured differently from operating profit or loss in the consolidated financial statements.

Segment assets and liabilities information are neither included in the internal management reports nor provided regularly to the management. Hence, no disclosures are made on segment assets and liabilities.

Transfer prices between operating segments are carried out on negotiated terms.

(b) Geographical segments

Segmental reporting by geographical segments has not been prepared as the Group’s operation are carried out predominantly in Malaysia.

Revenue information based on the geographical location of customers is as follows:

2019 2018

RM RM

Malaysia 116,906,231 124,405,136

Republic of Singapore - 2,774,642

116,906,231 127,179,778

All non-current assets (excluding deferred tax assets and financial instruments) of the Group based on the geographical location of entities holding the assets are located in Malaysia.

179

ANNUAL REPORT 2019

39.

SEG

MEN

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Se

gmen

t rev

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and

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RM

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115

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3,2

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115

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1

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3

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4) (1

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65,9

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(236

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180


39.

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RM

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114

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313

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- inv

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(55,

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(55,

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s -

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181

ANNUAL REPORT 2019

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2019

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-

-

114

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-

-

NO

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L ST

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182


We, Dato’ Anwarrudin Bin Ahamad Osman and Datuk Zainol Izzet Bin Mohamed Ishak, being two of the directors of Perisai Petroleum Teknologi Bhd., do hereby state that, in the opinion of the directors, the accompanying financial statements as set out on pages 74 to 181 are drawn up in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2019 and of their financial performance and cash flows for the financial year then ended.

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

DATO’ ANWARRUDIN BIN AHAMAD OSMAN DATUK ZAINOL IZZET BIN MOHAMED ISHAKDirector Director


STATUTORY DECLARATION(Pursuant to Section 251(1) of the Companies Act 2016)

I, Yeo Peck Chin, being the officer primarily responsible for the financial management of Perisai Petroleum Teknologi Bhd., do solemnly and sincerely declare that to the best of my knowledge and belief, the accompanying financial statements set out on pages 74 to 181 are correct, and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

YEO PECK CHINMIA Membership No.: 11356

Subscribed and solemnly declared by the abovenamed at Kuala Lumpur in the Federal Territory on 26 September 2019.

Before me,

HADINUR MOHD SYARIF (No. W76)Commissioner for OathsKuala Lumpur, Malaysia

STATEMENT BY DIRECTORS(Pursuant to Section 251(2) of the Companies Act 2016)

183

ANNUAL REPORT 2019

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Perisai Petroleum Teknologi Bhd., which comprise the statements of financial position as at 30 June 2019 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 74 to 181.

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 June 2019, and of their financial performance and their cash flows for the financial year then ended in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 2.2 to the financial statements, which disclosed that the Group and the Company incurred net losses of RM237,052,638 and RM80,547,023 respectively. As at that date, the Group and the Company recorded net current liabilities of RM1,363,327,952 and RM916,497,842 and capital deficiencies of RM504,891,047 and RM497,654,465 respectively. As stated in Note 2.2 to the financial statements, these events or conditions, along with other matters as set forth in Note 2.2 to the financial statements indicate that a material uncertainty exists that may cast significant doubt about the Group’s and the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

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. In addition to the matters described in the Material Uncertainty Related to Going Concern section, we have determined the matters below to be the key audit matters to be communicated in our report.

Plant and equipment and investments in joint ventures (Note 2.8(a), 12 and 16 to the financial statements)

The Group has significant carrying amount of plant and equipment and investments in joint ventures relating to its oil and gas operations which was impaired in the previous financial years. The directors have continued to perform an impairment assessment in the current financial year to estimate the recoverable amount of these assets with reference to the valuation performed by external independent valuers. We focused on this area because the directors’ assessment of the recoverable amount of these assets involved significant judgements.

INDEPENDENT AUDITORS’ REPORT To The Members Of Perisai Petroleum Teknologi Bhd. (Incorporated in Malaysia)

184


Plant and equipment and investments in joint ventures (Note 2.8(a), 12 and 16 to the financial statements) (continued)

Our audit response:

Our audit procedures included, among others: • evaluating the competency, capabilities and objectivity of the external valuers which includes consideration of their qualifications

and experience;• understanding the scope and purpose of the valuation;• reading the valuation reports and discussing with external valuers on their valuation approach and significant judgements

made; and • testing the mathematical calculation of directors’ impairment assessment.

Financial guarantee contracts (Note 2.8(b) and 23 to the financial statements)

The Company provides corporate guarantees to the lenders of its subsidiaries and joint ventures, including the payment obligations under the Medium Term Notes Programme (“MTN”). During the financial year, the Company had recognised an expense of RM25,433,443 in respect of the financial guarantee contracts provided to its subsidiaries. We focused on this area because significant judgement is required in estimating the expenditure which is the expected cash outflows required to settle the defaulted borrowings and interest payables of the subsidiaries and joint ventures, including the value of assets pledged for the borrowings.

Our audit response:

Our audit procedures included, among others: • assessing the directors’ basis in arriving at their judgement on the likelihood and amount of the cash outflows required to settle

the defaulted borrowings and interest payables; and• assessing the reasonableness of the amount recognised for financial guarantee contracts.

Information Other than the Financial Statements and Auditors’ Report Thereon

The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Statements

The directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

INDEPENDENT AUDITORS’ REPORT

To The Members Of Perisai Petroleum Teknologi Bhd. (Incorporated in Malaysia)

185

ANNUAL REPORT 2019

Responsibilities of the Directors for the Financial Statements (continued)

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.

The directors of the Company are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and 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 the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

• evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

• obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion 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.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.



186


Auditors’ Responsibilities for the Audit of the Financial Statements (continued)

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current financial year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors, are disclosed in Note 14 to the financial statements.

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 contents of this report.

Baker Tilly Monteiro Heng PLT Andrew Choong Tuck KuanLLP0019411-LCA & AF 0117 No.03264/04/2021 JChartered Accountants Chartered Accountant

Kuala Lumpur




187

ANNUAL REPORT 2019

Total number of Issued Shares : 1,260,872,078 ordinary shares Class of Security : Ordinary shares Voting Rights : 1 vote per ordinary share

DISTRIBUTION OF SHAREHOLDINGSAs At 30 September 2019

Size of Shareholdings No. of Shareholders Total Holdings %

Less than 100 shares 282 10,683 0.00

100 - 1,000 shares 855 603,923 0.05

1,001 - 10,000 shares 5,078 30,361,550 2.41

10,001 - 100,000 shares 4,853 189,726,917 15.05

100,001 and less than 5% of issued shares 1,341 758,824,755 60.18

5% and above of the issued shares 2 281,344,250 22.31

Total 12,411 1,260,872,078 100.00

SUBSTANTIAL SHAREHOLDERS AS PER THE REGISTER OF SUBSTANTIAL SHAREHOLDERS As At 30 September 2019

No. of Ordinary Shares Held

No. Name of Shareholders Direct Interest %* Indirect Interest %*

1. Ezra Holdings Limited - - 281,344,2501 22.32

2. EMAS Offshore Limited 144,661,250 11.48 - -

3. HCM Logistics Limited 136,683,000 10.84 - -

Notes:-1 Deemed interested by virtue of the company’s interest in EMAS Offshore Limited and HCM Logistics Limited pursuant to

Section 8 of the Companies Act, 2016.* Excluding a total of 400,000 ordinary shares bought back by the Company and retained as treasury shares.

ANALYSIS OF SHAREHOLDINGS

188


DIRECTORS’ SHAREHOLDINGS AND OPTIONS HELD UNDER THE EMPLOYEES’ SHARE OPTION SCHEME As At 30 September 2019

No. of Ordinary Shares Held No. of Options HeldNo. Name of Shareholders Direct Interest %* Deemed Interest %*

1. Dato’ Anwarrudin Bin Ahamad Osman - - - - 2,340,000

2. Datuk Zainol Izzet Bin Mohamed Ishak 29,473,900 2.34 - - 11,200,000

3. Dato’ Yogesvaran A/L T. Arianayagam 3,006,207 0.24 - - 2,340,000

4. Dato’ Dr. Mohamed Ariffin Bin Hj. Aton 85,000 0.01 - - 1,640,000

5. Chan Feoi Chun 500,000 0.04 - - 1,440,000

* Excluding a total of 400,000 ordinary shares bought back by the Company and retained as treasury shares.

ANALYSIS OF SHAREHOLDINGS

189

ANNUAL REPORT 2019

No. Name of Shareholders No. of Ordinary Shares Held %*

1. CIMB Group Nominees (Asing) Sdn. Bhd. 144,661,250 11.48

(Exempt an for DBS Bank Ltd (SFS))#

2. UOBM Nominees (Asing) Sdn Bhd (HCM Logistics Limited) 136,683,000 10.84

3. Lynear Plus Limited 49,830,800 3.95

4. Zainol Izzet Bin Mohamed Ishak 25,873,900 2.05

5. Yew Soon Keong 20,000,000 1.59

6. HSBC Nominees (Asing) Sdn Bhd 18,200,000 1.44

(Exempt An for Bank Julius Baer & Co. Ltd. [Singapore BCH])

7. Citigroup Nominees (Tempatan) Sdn Bhd (Pledged Securities Account for Song Soon Hee)

16,000,000 1.26

8. Krishna Moorthy A/L Nookannah 13,000,000 1.03

9. Toh Seng Hon 13,000,000 1.03

10. Soon Choong Teck 12,850,000 1.02

11. Raja Muhammad Bin Raja Omar 11,000,000 0.87

12. Tan Kean Yip 7,000,000 0.55

13. Tang Khai Hing 6,045,400 0.48

14. Tan Onn Poh 5,000,000 0.40

15. TA Nominees (Tempatan) Sdn Bhd (Pledged Securities Account for Ong Lee Chuan)

5,000,000 0.40

16. Gary Heah Hye Seng 5,000,000 0.40

17. Lee Ah Lik 4,983,200 0.39

18. Kong Ah Then 4,429,000 0.35

19. Teh Bee Lan 4,155,900 0.33

20. Lim Seng Chee 4,154,000 0.33

21. Maybank Nominees (Asing) Sdn Bhd (Su Kuei Hui @ Sophia Su) 4,100,000 0.32

22. Phang Kin Cheong @ Phang Ngok Kee 4,000,000 0.32

23. Teoh Kock Seng 4,000,000 0.32

24. Ting Chee Ming 4,000,000 0.32

25. Ng Guat Looi 4,000,000 0.32

26. Affin Hwang Nominees (Tempatan) Sdn Bhd 3,912,000 0.31

(Pledged Securities Account for Cheh Kah Mun)

27. Maybank Nominees (Tempatan) Sdn Bhd 3,600,000 0.29

(Pledged Securities Account for Zainol Izzet Bin Mohamed Ishak)

28. Zulkifli Bin Ismail 3,599,100 0.29

29. Loh Hai Boey 3,500,000 0.28

THIRTY (30) LARGEST SHAREHOLDERS As At 30 September 2019

190


30. Lee See Jin 3,500,000 0.28

TOTAL 545,077,550 43.24

# Beneficially held by EMAS Offshore Limited. * Excluding a total of 400,000 ordinary shares bought back by the Company and retained as treasury shares.

As At 30 September 2019

THIRTY (30) LARGEST SHAREHOLDERS

191

ANNUAL REPORT 2019

NOTICE IS HEREBY GIVEN THAT the Sixteenth Annual General Meeting (“16th AGM”) of PERISAI PETROLEUM TEKNOLOGI BHD. (“Perisai” or “Company”) will be held at Dewan Tun Abdul Razak, Menara Kembar Bank Rakyat, No. 33, Jalan Rakyat, 50470 Kuala Lumpur on Thursday, 28 November 2019 at 10.00 a.m. to transact the following businesses:-

AGENDA

AS ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended 30 June 2019 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees and benefits payable to the Directors up to an aggregate amount of RM301,100.00 from this Annual General Meeting until the next Annual General Meeting of the Company.

3. To re-elect Dato’ Yogesvaran A/L T. Arianayagam who is retiring pursuant to Article 93 of the Articles of Association of the Company and being eligible, has offered himself for re-election.

[Dato’ Dr. Mohamed Ariffin bin Hj. Aton who retires pursuant to Article 93 of the Articles of Association of the Company has expressed his intention not to seek re-election]

4. To re-appoint Messrs Baker Tilly Monteiro Heng PLT as Auditors of the Company and to authorise the Directors to fix their remuneration.

AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following Resolutions:- 5. PROPOSED NEW SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY

TRSANSACTION OF A REVENUE OR TRADING NATURE (“PROPOSED RRPT MANDATE”)

“THAT subject always to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and/or its subsidiaries (“Perisai Group”) to enter into the recurrent related party transaction of a revenue or trading nature as specified in Section 2.4 of Part A of this Circular, which are necessary for the Perisai Group’s day-to-day operations and are in the ordinary course of business and are carried out at arm’s length basis on normal commercial terms of the Perisai Group on terms not more favourable to the related party than those generally available to the public and are not detrimental to the minority shareholders of the Company;

THAT the Proposed New Shareholders’ Mandate, if approved at the AGM, will continue to be in force until:

(i) the conclusion of the next AGM of the Company following the AGM at which such ordinary resolution for the Proposed New Shareholders’ Mandate will be passed, at which time it will lapse, unless by a resolution passed at a general meeting, the mandate is again renewed; or

(ii) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 340(2) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Act); or

[Please refer to Note 1 of the Explanatory Notes]

Ordinary Resolution 1[Please refer to Note 2 of the Explanatory Notes]

Ordinary Resolution 2



NOTICE OF SIXTEENTH ANNUAL GENERAL MEETING

192


(iii) revoked or varied by resolution passed by the shareholders in general meeting,

whichever is the earlier.

AND THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the Proposed RRPT Mandate.”

6. PROPOSED ADOPTION OF NEW CONSTITUTION OF THE COMPANY

THAT the existing Memorandum and Articles of Association of the Company be and is hereby deleted in its entirety and the new Constitution of the Company as set out in Part B of the Circular to Shareholders be and is hereby adopted as the new Constitution of the Company.

AND THAT the Directors of the Company be and are hereby authorised to do all things and acts necessary or required by any relevant authorities to take all such steps as may be considered necessary to effect to the foregoing.

7. To transact any other business for which due notice shall have been given.

BY ORDER OF THE BOARD

TAI YIT CHAN (MAICSA 7009143)TAN AI NING (MAICSA 7015852)Company Secretaries Kuala Lumpur30 October 2019

Special Resolution [Please refer to Note 3 of the Explanatory Notes]


193

ANNUAL REPORT 2019

NOTES ON APPOINTMENT OF PROXY:

1. In respect of deposited securities, only members whose names appear on the Record of Depositors as at 22 November 2019 (General Meeting Record of Depositors) shall be entitled to attend the meeting or appoint proxy(ies) to attend, speak and vote on his/her behalf.

2. A member of the Company entitled to attend, speak and vote at the Meeting is entitled to appoint a proxy or proxies to attend, speak and vote on his/her behalf.

3. A Proxy need not be a member of the Company. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at a meeting of the Company shall have the same rights as the member to speak at the meeting.

4. A member shall be entitled to appoint more than two proxies to attend and vote at the same meeting.

5. Where a member appoints two or more proxies, the proxies shall be invalid unless the proportion of his/her holdings to be represented by each proxy is specified.

6. Where a member is an authorised nominee as defined under the Central Depositories Act, it may appoint at least one proxy in respect of each securities account it holds in ordinary shares of the Company standing to the credit of the said securities account.

7. Where a member 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 authorised nominee may appoint in respect of each omnibus account it holds.

8. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or, if the appointer is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised.

9. The instrument appointing a proxy, together with the power of attorney (if any) under which it is signed or a certified copy thereof, shall be deposited at the Company’s Share Registrar’s office at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur, not less than 48 hours before the time of meeting or any adjourned meeting, otherwise the instrument of proxy shall not be treated as valid.

EXPLANATORY NOTES

1. To receive the Audited Financial Statements for the financial year ended 30 June 2019 together with the Reports of the Directors and Auditors

This Agenda item is meant for discussion only as the provision of Section 340(1)(a) of the Companies Act 2016 do not require approval from the shareholders and hence it is not put forward for voting.

2. To approve the payment of Directors’ fees and benefits payable to the Directors up to an aggregate amount of RM301,100.00 from this Annual General Meeting until the next Annual General Meeting of the Company.

The amount of proposed Directors’ fees to be payable to each Director remain unchanged compared to the previous year.

There is a slight increase in the proposed meeting allowance due to the increase in number of meetings.

3. Special Resolution on Proposed Adoption of the Constitution of the Company

The Special Resolution, if passed, will align the Constitution of the Company with the new Companies Act 2016, the updated provisions of the Main Market Listing Requirements of Bursa Securities and the prevailing laws, guidelines or requirements of the relevant authorities, to enhance administrative efficiency and provide greater clarity.


194


Please refer to Part B of the Circular to Shareholders dated 30 October 2019 accompanying the Annual Report of the Company for the financial year ended 30 June 2019.

Personal data privacy:

By submitting an instrument appointing a proxy(ies) and/or representative(s) to attend, speak and vote at the AGM and/or any adjournment thereof, a member of the Company (i) consents to the collection, use and disclosure of the member’s personal data by the Company (or its agents) for the purpose of the processing and administration by the Company (or its agents) of proxies and representatives appointed for the AGM (including any adjournment thereof) and the preparation and compilation of the attendance lists, minutes and other documents relating to the AGM (including any adjournment thereof), and in order for the Company (or its agents) to comply with any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”), (ii) warrants that where the member discloses the personal data of the member’s proxy(ies) and/or representative(s) to the Company (or its agents), the member has obtained the prior consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by the Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the Purposes, and (iii) agrees that the member will indemnify the Company in respect of any penalties, liabilities, claims, demands, losses and damages as a result of the member’s breach of warranty.


FORM OF PROXY(Before completing this form please refer to the note below)

PERISAI PETROLEUM TEKNOLOGI BHD.(Company No. 632811-X)(Incorporated in Malaysia)

CDS Account No: No. of Shares Held

I/We NRIC/Passport/Company No. (Full Name in block letters)of (Full Address)

being a member/members of PERISAI PETROLEUM TEKNOLOGI BHD. hereby appoint the following person(s): -

Name of proxy, NRIC No. & AddressNo. of shares to be

represented by proxy

1.

2.

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Sixteenth Annual General Meeting (“AGM”) of the Company to be held at Dewan Tun Abdul Razak, Menara Kembar Bank Rakyat, No. 33, Jalan Rakyat, 50470 Kuala Lumpur on Thursday, 28 November 2019 at 10.00 a.m. and at any adjournment thereof. My/our proxy/proxies is/are to vote as indicated below:-

NO. ORDINARY RESOLUTION

FIRST PROXY SECOND PROXY

For Against For Against

1 To approve the payment of Directors’ fees and benefits payable to the Directors up to an aggregate amount of RM301,100.00 from this Annual General Meeting until the next Annual General Meeting of the Company

2 Re-election of Dato’ Yogesvaran A/L T. Arianayagam

3 Re-appointment of Messrs Baker Tilly Monteiro Heng PLT as Auditors of the Company

4 Proposed New Shareholders’ Mandate for the Recurrent Related Party Transactions of a Revenue or Trading Nature

5 Proposed Adoption of new Constitution of the Company

(Please indicate with a “√” or “X” in the spaces provided how you wish your vote to be cast. If no instruction as to voting is given, the proxy/proxies may vote or abstain from voting at his/her/their discretion. The first named proxy shall be entitled to vote on a show of hands on my/our behalf.

Dated this ___________ day of ___________, 2019 ________________________________ Signature/Common Seal

NOTES ON APPOINTMENT OF PROXY

1. For the purpose of determining a member who shall be entitled to attend and vote at the AGM, the Company shall be requesting the Record of Depositors as at 22 November 2019. Only a depositor whose name appears on the Record of Depositors as at 22 November 2019 shall be entitled to attend the said meeting or appoint proxies to attend, speak and vote on his/her stead.

2. A member of the Company entitled to attend, speak and vote at the Meeting of the Company is entitled to appoint a proxy or proxies to attend, speak and vote on his/her behalf.

3. A Proxy need not be a member of the Company. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at a meeting of the Company shall have the same rights as the member to speak at the meeting.

4. A member shall be entitled to appoint more than two proxies to attend and vote at the same meeting.

5. Where a member appoints two or more proxies, the proxies shall be invalid unless the proportion of his/her holding to be represented by each proxy is specified.

6. Where a member is an authorised nominee as defined under the Central Depositories Act, it may appoint at least one proxy in respect of each securities account it holds in ordinary shares of the Company standing to the credit of the said securities account.

7. Where a member 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 authorised nominee may appoint in respect of each omnibus account it holds.

8. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or, if the appointer is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised.

9. The instrument appointing a proxy, together with the power of attorney (if any) under which it is signed or a certified copy thereof, shall be deposited at the Company’s Share Registrar’s office at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur, not less than 48 hours before the time of meeting or any adjournment thereof.

Personal Data Privacy: -By submitting an instrument appointing a proxy(ies) and/or representative(s), the member accepts and agrees to the personal data privacy terms set out in the Notice of AGM dated 30 October 2019.

Fold this flap for sealing

Then fold here

AFFIXSTAMP

1st fold here

PERISAI PETROLEUM TEKNOLOGI BHD. (632811-X)c/o Mega Corporate Services Sdn. Bhd. (187984-H)Level 15-2, Bangunan Faber Imperial CourtJalan Sultan Ismail50250 Kuala Lumpur

Perisai Petro

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tekno

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. (632811-X) an

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rt 2019

PERISAI PETROLEUM TEKNOLOGI BHD. (632811-X)Suite 3A-17, Level 17, Block 3A, Plaza Sentral, Jalan Stesen Sentral 550470 Kuala Lumpur, MalaysiaEmail: [email protected]

www.perisai.biz