Realising Potential
ANNUAL REPORT 2020
Scomi Group Bhd Contents
001 Key Financial Indicators Statement on Risk Management 027 & Internal Control 002 Corporate Information 030 Audit & Risk Management 003 Corporate Structure Committee Report 005 Corporate Statement 034 Additional Information 006 Board of Directors Statement of Directors’ 035 Responsibility 009 Key Senior Management 036 Financial Information 010 Management Discussion & Analysis 162 Analysis of Shareholdings 013 Sustainability Statement 164 Analysis of Warrant Holdings 014 Corporate Governance Overview 166 Request Form Statement Key Financial Indicators
2020 20191,2 20182 20173 20163 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 (Restated) (Restated) (Restated)
Continuing operations Turnover - 8 613,957 826,892 1,383,332
EBITDA (144,087) (190,050) (114,613) 17,666 199,531 Depreciation and amortization 122 158 80,839 104,962 110,032 Finance costs 3,455 2,536 23,943 61,107 63,706 Share of (loss)/profit in associates (8,410) - - - 495 Share of (loss)/profit from joint ventures - - (36,663) (24,208) (10,628)
(Loss)/Profit before tax (147,664) (192,744) (219,395) (148,403) 25,793 Taxation - - (13,058) (17,248) (13,889)
(Loss)/Profit from continuing operations (147,664) (192,744) (232,453) (165,651) 11,904 Loss from discontinued operations (91,459) (233,225) (99,629) - -
(Loss)/Profit for the year (239,123) (425,969) (332,082)) (165,651) 11,904 Non-controlling interest 3,016 29,798 82,108 58,246 10,632
(Loss)/Profit attributed to owners of the Company (242,139) (396,171) (249,974) (107,405) 22,536
Numbers of shares in issue (‘000) 1,093,907 1,093,907 1,093,907 1,917,510 1,917,510 Weighted average number of shares assumed in issue (‘000) 1,093,907 1,093,907 1,092,657 1,903,083 1,903,083 Weighted average number of shares used to compute diluted earnings per share (‘000) 1,093,907 1,093,907 1,092,657 1,903,083 1,903,083
Basic - Net (Loss)/Earning Per Share (sen)** (22.14) (36.22) (22.88) (5.64) 1.18
Fully diluted - Net (Loss)/Earning Per Share (sen)@ (22.14) (36.22) (22.88) (5.64) 1.18
Notes
** Based on profit/(loss) attributed to owner of the Company and the weighted average number ofshares assumed to be in issue in the respective period/year. @ Based on profit/(loss) attributed to owner of the Company and the weighted average number ofshares assumed to be in issue in the respective period/year after taking into consideration the dilutive effect of convertible bonds.
1 The results for the financial period ended 30 June 2019 is for a period of fifteen (15) months.
2 The results for the continuing operations for the financial period ended 30 June 2019 and financial year ended 31 March 2018 excludes the Transport Solutions segment as it was deconsolidated as at 30 June 2019.
3 The results for the continuing operations for the financial years ended 31 March 2017, 31 March 2016 and 31 March 2015 includes the Transport Solutions segment.
1 ANNUAL REPORT 2020 SCOMI GROUP BHD Corporate Information
BOARD OF DIRECTORS
Cheong Wong Sang Independent Non-Executive Director
Tunku Azlan Bin Tunku Aziz Independent Non-Executive Director
Ong Hock Seng Independent Non-Executive Director
Shah Hakim @ Shahzanim Bin Zain COMPANY SECRETARY Non-Independent Non-Executive Director Ramnath A/L R. Sundaram (MIA 34590) Rafidah Binti Ibrahim (LS 0005649) Sammy Tse Kwok Fai AUDITORS Executive Director/Chief Executive Officer KPMG PLT (LLP0010081-LCA & AF 0758) Chartered Accountants Level 10, KPMG Tower AUDIT AND RISK MANAGEMENT COMMITTEE 8, First Avenue, Bandar Utama Tunku Azlan Bin Tunku Aziz (Chairman) 47800 Petaling Jaya Cheong Wong Sang Selangor Darul Ehsan Ong Hock Seng Malaysia NOMINATION AND REMUNERATION COMMITTEE Cheong Wong Sang (Chairman) Tunku Azlan Bin Tunku Aziz Ong Hock Seng PRINCIPAL BANKERS REGISTERED OFFICE D-31-01, Menara Suezcap 1 CIMB Bank Berhad Gerbang Kerinchi Lestari Plaza Azalea, No 2 Jalan Kerinchi Persiaran Bandaraya 59200 Kuala Lumpur Seksyen 14, 40000 Shah Alam Tel : 03-2771 1571 Selangor Darul Ehsan, Malaysia
ADMINISTRATIVE AND CORRESPONDENCE ADDRESS Level 15, Menara TSR No. 12, Jalan PJU 7/3 Mutiara Damansara 47810 Petaling Jaya STOCK EXCHANGE LISTING Selangor Darul Ehsan Main Market of Bursa Malaysia Securities Berhad Malaysia Stock Name: SCOMI Tel : 03-7717 3000 Stock Code: 7158 Fax : 03-7728 5258 Website : www.scomigroup.com.my INVESTOR RELATIONS Email : [email protected] Meena Kanthaswamy Level 15, Menara TSR REGISTRAR No. 12, Jalan PJU 7/3 Boardroom Share Registrars Sdn Bhd Mutiara Damansara (formerly known as Symphony Share 47810 Petaling Jaya Registrars Sdn Bhd) Selangor Darul Ehsan 11th Floor, Menara Symphony Malaysia No. 5, Jalan Prof Khoo Kay Kim Tel : 03-7717 3000 Seksyen 13, 46200 Petaling Jaya Fax : 03-7728 5258 Selangor Darul Ehsan, Malaysia Email : [email protected] Tel : +603 7890 4700 Fax : +603 7890 4600 Email : [email protected]
SCOMI GROUP BHD ANNUAL REPORT 2020 2 Corporate Structure as at 27 November 2020
SCOMI GROUP BHD1
Scomi Oiltools Scomi International Scomi Solutions Bermuda Limited Private Limited Sdn Bhd (Bermuda) (Singapore)
Scomi Oiltools Scomi Oiltools Scomi Ecosolve Scomi Precision Overseas (M) (Europe) Ltd Limited Engineering Sdn Bhd Limited (Scotland) (BVI) (Mauritius)
Scomi Chemicals Scomi OBM KMC Oiltools Scomi Oiltools Inc Terminal Sdn Bhd Algerie EURL (Texas, USA) Sdn Bhd (Algeria)
Global Learning Scomi Energy Sdn Bhd Scomi Oiltools Oilfield Services de and Development Egypt SAE3,4 Mexico S de RL de Sdn Bhd (Egypt) CV5* (Mexico) 51% Scomi Enviro Scomi SGSB Scomi Oiltools de Sdn Bhd Sdn Bhd Mexico S de RL de CV5* (Mexico) 30% Strong Elegance Sdn Bhd
3 ANNUAL REPORT 2020 SCOMI GROUP BHD 2 100% 29.4%
Scomi Engineering Scomi Energy Bhd (In Liquidation) Services Bhd1
Scomi Transit Scomi Transit Projects Brazil Projects Sdn Bhd Sdn Bhd
Urban Transit Scomi Transit Servicos Do Projects Brazil Brasil LTDA6 (Sao Paulo) (Brazil) Sdn Bhd
Scomi Urban Transit Transportation Private Limited7 Systems Sdn Bhd (India)
80%
Scomi Rail Bhd Quark Fabricação De (In Liquidation) Equipamentos Ferroviårios E Serviços De Engenharia LTDA (Brazil)
Scomi Coach Scomi Special Sdn Bhd Vehicles Sdn Bhd (In Liquidation)
Scomi Coach Marketing Scomi Trading Sdn Bhd Sdn Bhd
1. Listed on the Bursa Malaysia Securities Berhad (Kuala Lumpur Stock Exchange). Notes: 2. Includes 0.01% held by Scomi Energy Sdn Bhd. * Except as otherwise expressly stated, all companies in 3 Scomi Oiltools Bermuda Limited holds on trust for Scomi Oilfield Limited pursuant this corporate structure are incorporated in Malaysia. to a trust deed dated 8 March 2013. * Except as otherwise expressly stated, all companies in 4. Includes 1 share each held by Scomi Oiltools Ltd and Scomi Oiltools (Cayman) Ltd. this corporate structure are wholly owned by their 5. Includes 1 share held by an individual. respective holding companies. 6. Includes 1 quota (similar to share in other jurisdictions) held by Scomi Rail Bhd. 7. Includes 0.0004% held by Scomi Rail Bhd.
SCOMI GROUP BHD ANNUAL REPORT 2020 4 Corporate Statement
We aim to realise potential for our stakeholders. We are a global technology enterprise.
Our global reach, capabilities and talent provide us with the necessary resources to develop and own new Our customers: technology in all areas of our business. We will develop and offer customers innovative and competitive products and services that help them grow their business.
We focus on Energy & Logistics. Our shareholders: All our businesses are focused on the Energy and Logistics We are committed to providing long-term sectors with the ability to compete globally. All of us in the Scomi family should remember that any new initiatives superior returns to our shareholders. we undertake will focus on these areas of business. Our people:
We aim to provide our employees with developmental opportunities so they can We provide innovative solutions. succeed on personal and professional levels.
We innovate to respond to an evolving environment. Our products and operations meet today’s needs Our suppliers: while anticipating tomorrow’s. We are committed to developing competitive and innovative solutions to We will treat our suppliers as our partners in the create efficiency, add value and grow with our customers mutual interest of business growth. to shape our future. Our society / environment:
As a good corporate citizen, we will give back to the communities we operate in, worldwide.
5 ANNUAL REPORT 2020 SCOMI GROUP BHD Board of Directors
CHEONG WONG SANG Independent Non-Executive Director
Mr Cheong, 63, male, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 18 June 2020.
Mr. Cheong Wong Sang is a Certified Public Accountant (CPA) and a Certified Management Accountant (CMA) by profession.
He has varied and extensive hands-on specialised business experiences, both in Malaysia and overseas. He started his early articleship training with an international accounting firm and simultaneously graduated as a Chartered Management Accountant. He specializes in turn-around situations, portfolio management, divestment exercise merges & acquisitions and high level negotiations involving privatization of national projects. Prior to that he worked and participated in senior executive positions including as director and advisor to the Board of various business entrepreneurial organizations including public listed entities in the Asia Pacific Region.
Mr Cheong does not hold any directorship in any other public companies and listed issuers.
Mr Cheong chairs the Nomination and Remuneration Committee and is also a member of the Audit and Risk Management Committee of the Board. He did not attend any of the Board Meetings held from the date of his appointment up to the financial year ended 30 June 2020.
TUNKU AZLAN BIN TUNKU AZIZ Independent Non-Executive Director
Tunku Azlan, 52, male, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 18 June 2020.
Tunku Azlan is a Chartered Accountant with the Malaysian Institute of Accountants.
He was with Pengurusan Danaharta Nasional Berhad during the early years of his career and has served as the Chief Financial Officer (CFO) of a Public Listed Company and the Chief Executive Officer (CEO) of a Private Company.
He also holds directorship in LFE Corporation Berhad.
Tunku Azlan chairs the Audit and Risk Management Committee and is also a member of the Nomination and Remuneration Committee of the Board. He attended the 1 Board Meeting held from the date of his appointment up to the financial year ended 30 June 2020.
SCOMI GROUP BHD ANNUAL REPORT 2020 6 Board of Directors
ONG HOCK SENG Independent Non-Executive Director
Mr Ong, 52, male, a Singaporean, is an Independent Non-Executive Director of the Company and was appointed to the Board on 16 July 2020.
Mr. Ong holds a Bachelor of Science in Economics from the Wharton School of the University of Pennsylvania.
He has more than 23 years of international investment banking experience and has completed capital markets and advisory transactions in a number of countries, including United States, Hong Kong, Malaysia, China, Vietnam and Thailand. His transactional experience includes industries such as power, infrastructure, mining, telco and media. He was a founding member of Shine Media, a US listed special purpose acquisition corporation focusing on media acquisition(s) in China. He is currently the Chief Executive Officer of mm2 Asia Limited’s cinema operations in Singapore and Malaysia.
He does not hold any directorship in any other public companies or listed issuers.
Mr Ong is a member of the Audit and Risk Management Committee and is also a member of the Nomination and Remuneration Committee of the Board. He did not attend any of the Board Meetings held during the financial year ended 30 June 2020 as he was appointed after the financial year end.
SHAH HAKIM @ SHAHZANIM BIN ZAIN Non-Independent Non-Executive Director
Encik Shah Hakim, aged 55, a Malaysian, is the Non-Independent Non-Executive Director of the Company. He was appointed to the Board as Non-Independent Executive Director of the Company on 3 March 2003 and was re-designated as Non-Independent Non-Executive Director on 2 August 2018.
Encik Shah Hakim started his career as an auditor with Ernst & Young and was subsequently promoted as Consulting Manager, responsible for servicing large corporations. He went on to be appointed as Executive Director of a regional packaging manufacturer in 1992, with direct operational responsibility. He currently sits on the Board of public company KMCOB Capital Berhad.
He attended 13 out of the 14 Board Meetings held during the financial year ended 30 June 2020.
7 ANNUAL REPORT 2020 SCOMI GROUP BHD Board of Directors
SAMMY TSE KWOK FAI Executive Director and Chief Executive Officer
Mr Tse, 57, male, a British, is an Executive Director and Chief Executive Officer of the Company and was appointed to the Board on 24 July 2018.
Mr Tse holds a Bachelor of Arts (Hon) in Geography and Geology from the University of Hong Kong (1986) and a Master of Business Management from the Chinese University of Hong Kong (1995). He is a Fellow Member of The Institute of Directors, United Kingdom and the Hong Kong Institute of Directors.
He started his career in IFS (HK) Limited in 1990 before joining the Hong Kong Telecom Group (now known as PCCW Limited) in 1992 where he held various positions culminating in the position as General Manager of Fixed Mobile Integration. He then joined Hutchinson Telecom as Director of International and Multimedia Services in 1998. In 2000, he was promoted as the Chief Executive Officer of Hutchinson E-commerce Limited. In 2004, he took up the position as Chief Operating Officer of entities within the South China Group before leaving in 2007 to take up the position as Executive Director and Chief Executive Officer of EPI Holdings Limited, a company listed on the Main Board of the Hong Kong Stock Exchange. He resigned from these positions in 2016 but continues to provide consultancy services to this company.
He does not hold any directorship in any other public companies and listed issuers.
He attended all of the 14 Board Meetings held in the financial year ended 30 June 2020.
Notes: Save as disclosed, none of the Directors have: • any family relationship with any Director and/or Major Shareholder of Scomi Group Bhd; • any conflict of interest or any personal interest in any business arrangement, involving Scomi Group Bhd; • any conviction for offences within the past five (5) years (other than traffic offences, if any); and • any public sanction or penalty imposed by the relevant regulated bodies during the financial year ended 30 June 2020.
SCOMI GROUP BHD ANNUAL REPORT 2020 8 Key Senior Management
Sammy Tse Kwok Fai Chacko Kunjuvaru Chief Executive Officer Chief Financial Officer Scomi Group Bhd Scomi Group Bhd
Mr Tse, male, aged 57, a British, is the Chief Executive Chacko Kunjuvaru, male, aged 43, Malaysian, has Officer of the Company and was appointed on2 more than 19 years of experience in Finance and August 2018. Accounting roles, having worked with some of the larger engineering and Oil & Gas companies in Mr Tse holds a Bachelor of Arts (Hon) in Geography Malaysia. and Geology from the University of Hong Kong (1986) and a Master of Business Management from the He joined Scomi Group Bhd in 2010 as Senior Manager Chinese University of Hong Kong (1995). He is a Fellow Finance. He then joined Scomi Energy Services Bhd Member of The Institute of Directors, United Kingdom (“SESB”) as General Manager, Finance and Accounts and the Hong Kong Institute of Directors. in 2012. In 2015 he was appointed as Group Financial Controller for SESB and subsequently as its Chief He started his career in IFS (HK) Limited in 1990 before Financial Officer. joining the Hong Kong Telecom Group (now known as PCCW Limited) in 1992 where he held various positions On 1 March 2018, he assumed his current role as the culminating in the position as General Manager of Chief Financial Officer of Scomi Group Bhd. Fixed Mobile Integration. He then joined Hutchinson Telecom as Director of International and Multimedia Services in 1998. In 2000, he was promoted as the Chief Executive Officer of Hutchinson E-commerce Limited. In 2004, he took up the position as Chief Operating Officer of entities within the South China Group before leaving in 2007 to take up the position as Executive Director and Chief Executive Officer of EPI Holdings Limited, a company listed on the Main Board of the Hong Kong Stock Exchange. He resigned from these positions in 2016 but continues to provide consultancy services to this company.
Notes:
Save as disclosed, none of the Senior Management have: • any family relationship with any Director and/or Major Shareholder of Scomi Group Bhd; • any conflict of interest or any personal interest in any business arrangement, involving Scomi Group Bhd; • any conviction for offences within the past five (5) years (other than traffic offences, if any); and • any public sanction or penalty imposed by the relevant regulated bodies during the financial year ended 30 June 2020.
9 ANNUAL REPORT 2020 SCOMI GROUP BHD SCOMI GROUP BHD : MANAGEMENTManagement DISCUSSION AND ANALYSIS Discussion & Analysis
OVERVIEW OF GROUP’S BUSINESS AND OPERATIONS
Scomi Group Bhd (“SGB”, “the Company”, “the Group”) is currently an investment holding company that had operations in the oil and gas industry and in urban transport solutions.
In the oil and gas industry, its businesses were operated by its then Malaysian public listed subsidiary, Scomi Energy Services Bhd (“SESB”). The operations included Drilling Fluids services, Drilling Waste Management services and Marine Logistics services. However SESB ceased to be a subsidiary of SGB on 26th February 2020 and is now only an Associate Company.
In the urban transport solutions business, it was involved in various rail and commercial vehicles segments operated under the Scomi Engineering Bhd (“SEB”) group of companies. However, on 30th January 2020, SEB was placed under Liquidation and hence all its group of companies are no longer under the purview of SGB.
SGB is managed by a core management team and is governed by a Board of Directors (“Board”). During the year under review and the current year, we had several resignations from the Board of Directors as well as new experienced Directors joining the Board. The company would like to thank all the Directors who had served on the Board for their contributions in terms of experience and expertise. We also thank our current Board of Directors and management team for their efforts during this year.
FINANCIAL HIGHLIGHTS
The comparative financial results for the financial year ended 30 June 2019 (“FY2019”) is for a period of 15 months. The results of the Company’s former subsidiary (currently classified as an Associate Company), Scomi Energy Services Bhd (“SESB”) has been consolidated and shown under Discontinued Operations up to the reclassification to an Associate Company. Subsequent to SESB’s reclassification as an Associate Company, the results of SESB has been accounted for as Share Of Loss Of Equity-Accounted For Associates, Net Of Tax (“Share of Loss of Associate”). The comparative results for SESB consolidated in the financial period ended 30 June 2019 (“FY2019”) has been also reclassified to Discontinued Operations.
FY2020 FY2019 (RM’000) (RM’000)
(12 months) (15 months) Revenue - 8 Cost of Sales/Services - - Gross Profit - 8 Other Cost (103,533) (45,986) Operating Cost (13,486) (21,053) Net loss on impairment of financial instruments (18,780) (123,177) Results from operating activities (135,799) (190,208) Finance Cost net of Finance income (3,455) (2,536) Share of loss of equity - accounted for associates, net of tax (8,410) - Loss Before Tax (147,664) (192,744) Tax Expense - - Loss from continuing operations for the financial year/period (147,664) (192,744) Loss from discontinued operation (91,459) (233,225) Loss for the financial year/period (239,123) (425,969) Loss Attributable To The Owners of the Company (242,139) (396,171) Total Deficit in Equity Attributable to Owners of the Company (240,537) (23,728) Borrowings 388 186,289 Net Debt/Equity Ratio N/A N/A Loss Per Share – continuing operations (13.50) (17.62) Loss Per Share – discontinued operations (8.64) (18.60)
The deconsolidation of SESB has resulted the group with no revenue for the current year as the accounting standard requires the results of deconsolidated entities to be reclassified to Discontinued Operations (for both FY2020 and FY2019). As such, there are no revenue reported for SESB for both the current and previous financial year.
SCOMI GROUP BHD ANNUAL REPORT 2020 10 ManagementSCOMI GROUP BHD : MANAGEMENT Discussion DISCUSSION AND ANALYSIS & Analysis
The Other Cost for FY2020 consist of mainly of Provision For Redemption Of Securities Pledged To Financial Institution (“Provision for Redemption”) of RM94.4 million and offset by reversal of prior years accruals and provisions. The Other Cost in the previous financial period principally includes Provision for Redemption of RM38.0 million and impairment of investment in jointly-controlled entities of RM8.7 million.
Net Loss On Impairment of Financial Instrument (“Impairment of Receivables”) for FY2020 arose due to the impairment of amount owing by former subsidiaries. The reduction in Operating Cost compared to previous financial year was the result of reduction in head count as well as cost rationalisation initiatives undertaken during the FY2020. The higher Finance Cost for FY2020 was mainly due to the interest cost incurred for the advances received pursuant to the proposed renounceable rights issue (as per Note 32 of the Financial Statement for FY2020).
The Share of Loss of Associate was derived from SESB subsequent to the deconsolidation as a subsidiary during the FY2020. The Share Of Loss From Associate was mainly as a result of the Goodwill and Other Impairments recognized by SESB as at FY2020.
The significant reduction in the Total Equity Attributable To The Owners Of The Company is due to the Discontinued Operations impact from SESB consisting mainly of impact from deconsolidation and the Share Of Losses of Associate as well as the other non-recurring costs as explained above. Borrowings as at FY2020 is minimal as SESB has been deconsolidated from the consolidated balance sheet of the Group.
CAPITAL STRUCTURE AND SIGNIFICANT CHANGES TO ASSETS
FY2020 FY2019
(RM’000) (RM’000) Non-current 357 426,559 Current 77 399,384 Total Assets 434 825,943
The reduction in Group’s total assets was mainly due to reclassification of SESB from a subsidiary to an associate which resulted in the deconsolidation of all assets from the consolidated balance sheet of the Group in FY2020.
Equity & Liabilities Capital and Reserves Attributable to Owners of FY2020 FY2019 the Company (RM’000) (RM’000) Share Capital 224,964 224,964 Total Deficit in Equity Attributable to Owners of the Company (240,537) (23,728) Total Equity (240,537) 293,829 Non-Current Liabilities 255 64,111 Current Liabilities 240,716 468,003 Total Liabilities 240,971 532,114 Total Equity and Liabilities 434 825,943 Net Liabilities Per Share (RM) (0.22) (0.02)
• As at 30 June 2020, the lower Equity level as well as Net Liabilities Per Share was mainly due to the Discontinued Operations impact from SESB consisting mainly of impact from deconsolidation and the Share Of Losses of Associate as well as the other non-recurring costs as explained above. • The reduction in Group’s total liabilities is mainly due to reclassification of SESB from a subsidiary to an associate which resulted in the deconsolidation of all liabilities/equities from the consolidated balance sheet of the Group.
CASH FLOW, CASH AND BANK BALANCES
FY2020 FY2019
(RM’000) (RM’000) Net cash (used in)/from operating activities (21,292) 76,529 Net cash (used)/from investing activities (36,000) 34,184 Net cash from/(used in)financing activities 18,115 (44,315) Net (decrease)/increase in cash and cash equivalents (39,177) 66,398 Effect of exchange rate fluctuations on cash held - 4,263 Cash and cash equivalents at the beginning of the year/period 39,254 (31,407) Cash and cash equivalents at the end of the year/period 77 39,254
11 ANNUAL REPORT 2020 SCOMI GROUP BHD SCOMI GROUP BHD : MANAGEMENTManagement DISCUSSION AND ANALYSIS Discussion & Analysis
The significant reduction in the consolidated cash position as at FY2020 is due to the deconsolidation of SESB as a subsidiary. The Company continues to be prudent in its cash management as it takes initiatives to address its PN 17 status. The Net Cash Outflow from Investing activities is mainly due to the Net Outflow from deconsolidation of subsidiary.
KNOWN TREND AND EVENTS
Whilst SGB does not currently have any direct revenue generating business, indirectly it is still involved in the oil and gas industry through its Associate company, SESB, and in the rail industry bearing in mind its technological experience and technical expertise in this business segment.
The COVID-19 global pandemic has affected all industries and economies. Further exacerbating the global economic conditions was the drastic drop in the oil price during the third and fourth quarter of the financial year. Both these events have resulted in an unprecedented level of volatility in the industry with demand drop, high inventories and dampened drilling and exploration activities.
The rail industry, which should be a buoyant industry due to the focus by developing nations to improve public transport solutions, has taken the same hit due to the pandemic and lockdowns introduced by most countries globally. Without a clear line of sight towards a vaccine for COVID-19, it is uncertain times on industry recoveries and economic growth. However, there is the potential for continued growth of this industry.
OPERATIONAL HIGHLIGHTS
With the classification of the company as a PN17 status and with the loss of revenue generating businesses during the year under review, the operational focus for SGB has been on rehabilitation and revival of the financial health of the Company.
SGB had undertaken a corporate exercise intended to raise funds for the continued operations of the Group. However unfavourable market conditions coupled with the deteriorating value of SGB share price contributed towards the termination of the corporate exercise. Subsequently, the Company continues to explore various options for the rehabilitation of the Company for which it is required to submit a plan to Bursa Malaysia Securities Berhad by 30th August 2021.
In the meantime, being mindful of the need to keep its operating costs to a minimum, SGB has trimmed its workforce to a minimal core team sufficient to support the continued operations of the Company.
The Company continues to pursue other opportunities in the Monorail sector and is also is actively exploring various business structures to operate effectively in this segment as we continue leveraging on the knowledge we possess in this sector.
OUTLOOK & PROSPECTS IN FY2021
Whilst SGB is currently in a challenging financial situation, its business emphasis towards revival continues to be on technology ownership, integration capability and smart partnerships. Hence, all of the various options being explored in the bid to rehabilitate the Company is geared towards technology and its potential growth and development that could possibly create prospects for SGB. The industry segments that it looks towards continues to remain in the oil and gas industry and the urban transport industry. The Company has had the experience in these industries and therefore any prospects would be easier to translate to revenue generating potential for the Group.
SCOMI GROUP BHD ANNUAL REPORT 2020 12 Sustainability Statement
OUR BUSINESS SUSTAINABILITY
Scomi Group Bhd’s (“SGB”, the “Company”) sustainability statement revolves around its Corporate Statement, “we are a global enterprise that provides innovative solutions focusing on the energy and logistics sectors to realise potential for our stakeholders”. Thus, the Company’s sustainability rests in the ability to introduce innovative products and services for its customers.
SUSTAINABILITY FRAMEWORK & SCOPE
SGB today is an investment holding company and it has first reported its Sustainability Statement in the financial year 2018 with the view towards developing a sustainability framework, its strategic thrusts and its continued developments in the forthcoming financial years. The business operations of SGB then had two distinctive business divisions namely the Oilfield Services and Transport Solutions. SGB also had a global presence in 19 countries. However, during the course of the financial year under review, Scomi Engineering Bhd, the flagship company for the Transport Solutions division was placed under Liquidation on 30th January 2020. Further, Scomi Energy Services Bhd (“SESB”), the Oilfield Services division, also ceased to be a subsidiary of SGB on 26th February 2020 and has been reclassified as an Associate Company.
Hence, the Company has had to re-think and re-strategise its resources with the business and financial challenges that it currently faces amongst which are the material uncertainty as a going concern, the resultant PN17 classification of the Company and subsequently the lack of a revenue generating business within the Company.
In view of these challenges, the Company’s sustainability focus is centred around one strategic thrust which is financial stability for business viability. Several initiatives have been taken towards achieving this objective and amongst them were a corporate exercise to raise funds and negotiations with interested investors. However, the corporate exercise was terminated due to market condition as well as the deteriorating market price of SGB share price to explore a fresh proposal to comprehensively address its PN17 classification.
The Company is also mindful that it needs to ensure its business sustainability and therefore the future of the Company will be to focus on two thrusts which are :
• financial rehabilitation • revenue generating business
The approach to the sustainability activities and its reporting for SGB requires extensive development to be able to effectively meet sustainability reporting. However this is only possible to be developed in detail with the improvement of its business prospects and financial position. The Company is cautiously optimistic that as it builds on the identified thrusts above in the coming financial year, it will be better positioned to regain financial stability and therefore be able to provide better analytics of its activities for future reporting.
13 ANNUAL REPORT 2020 SCOMI GROUP BHD CORPORATECorporate GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
INTRODUCTION
The Board of Directors (the “Board”) of the Company is mindful of its accountability to shareholders and other stakeholders and in order to steer Scomi Group Bhd (the “Company”) and its group of companies (the “Group”) towards achieving its mission and vision as well as sustainable business growth, and to implement sound corporate governance practices throughout the Group. The Board is committed to ensure that the highest standards of corporate governance are practiced by the Group at all times and views this as a fundamental part of discharging its roles and responsibilities.
This Corporate Governance Overview Statement (“Statement”) provides an overview of the corporate governance (“CG”) practices of the Company under the leadership of the Board during the financial year ended 30 June 2020. This Statement is prepared in compliance with the Bursa Malaysia Securities Berhad’s Main Market Listing Requirements (“Listing Requirements”) and is to be read together with the Corporate Governance Report for the financial year ended 30 June 2020 (“CG Report”). The Corporate Governance Report is available on the Company’s website, www.scomigroup.com.my and via an announcement on the website of Bursa Securities.
PRINCIPLE A : BOARD LEADERSHIP AND EFFECTIVENESS
I. BOARD RESPONSIBILITIES
The Board is responsible for oversight over the control and management of the Company and to protect and promote the interest of its shareholders, with the overriding objective of enhancing the long-term value of the Group, whilst the Management manages the Company and the Group in accordance with the strategic direction and delegations of the Board. In this regard, the Board remains focused and committed to maintaining good governance standard whilst ensuring that the appropriate management of risks is mitigated by leveraging on Management’s knowledge and experience.
In addition to the above, the Board assumes, amongst others, the following principal roles and responsibilities in discharging its stewardship role, leadership and fiduciary functions:
(a) reviewing and adopting a strategic plan for the Company and the Group;
The Board constructively challenges and contributes to the development of the Company and the Group’s strategic directions, and subsequently monitors the implementation of the strategic business plan by the Management to ensure sustainable growth and optimisation of returns for the Company and the Group.
The Management regularly updates and presents to the Board the development, action plan and recommended strategy in relation to its financial status and the Board reviews and deliberates upon the action plan presented by Management and ensures that Management has taken into account all factors in its process to develop a sound regularisation plan to address its financial position. In conjunction with this, the Board also reviews and approves the key performance indicators (“KPIs”) for the Corporate Balanced Scorecard (“BSC”) as prepared and presented by the Management.
(b) overseeing and evaluating the conduct and performance of the Company and the Group’s business;
The Chief Executive Officer (“CEO”) has overall responsibility, with the support of the Key Management Team, for the day-to-day management of the business and operation of the Group as well as the implementation of the Board’s policies, directives, strategies and decisions.
On a quarterly basis, both the Audit and Risk Management Committee of the Board (“ARMC”) and the Board reviews the Group’s key financial performance metrics with the CEO who highlights concerns and issues, if any, faced by the Group. The actual performance of the Group is assessed on a quarterly basis against the approved budget, the results of the corresponding quarter of the preceding year and the immediate preceding quarter. Where significant variances in the performance results are reported by the Management to the ARMC and the Board, it is accompanied with explanations, clarifications and the corrective action taken.
Besides this, the ARMC and the Board are also informed by the Management of the key initiatives and significant operational issues. A summary of the performance of each business division is also provided to the Board.
Page 1 of 13 SCOMI GROUP BHD ANNUAL REPORT 2020 14 CorporateCORPORATE GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
(c) identifying principal risks of the Company and the Group and ensuring the implementation of appropriate internal controls and mitigation measures to manage these risks;
Whilst the Board has overall responsibility for the Group’s risk management framework and internal controls system, it has delegated the implementation of the risk management framework and internal controls system to the Management and tasked the ARMC with the oversight responsibility to review the adequacy and effectiveness of the risk management framework and internal controls system.
However, the Board recognises that such systems are designed to manage and reduce, rather than eliminate, the risks identified to acceptable levels. Therefore, the internal controls implemented can only provide reasonable and not absolute assurance against the occurrence of any material misstatement, loss or fraud.
The Management reports to the ARMC on a quarterly basis on all risk areas faced by the Group and the audit findings identified from the internal audit activities conducted by its outsourced internal audit firm (“IA”).
The ARMC deliberates the actions taken by the Management to address high risks areas and audit findings. The ARMC also acts as an intermediary between the Management and the external auditors where the external auditors are invited to present to the ARMC the audit plan, the audit findings, the independent auditors’ report as well as any other matters considered by the external auditors as important and requiring the ARMC’s attention. The ARMC also conducts private meetings with the external auditors, to give opportunity to the external auditors to raise any matters without the presence of the Executive Board Member and Management. Minutes of the meetings of the ARMC which record the deliberations of the ARMC are presented to the Board.
The Chairman of the ARMC will also report to the Board if required, on the principal risks and internal controls related matters and recommendations deliberated by the ARMC at the immediate subsequent Board meeting.
Details of the Enterprise Risk Management Framework and internal controls system of the Group are as set out in the Statement of Risk Management and Internal Control in this Annual Report.
(d) reviewing the adequacy and the integrity of the management information, risk management and internal controls system of the Company and the Group;
The risk management and internal controls system of the Company and the Group is subject to the Board’s periodic review with a view towards appraising the adequacy, effectiveness and efficiency of such system within the Group and to ensure that these systems are viable and robust. This is also addressed by the IA as part of its audit plan and reports to the ARMC on its findings and recommendation for improvement.
(e) overseeing management;
The Board, through the Nomination and Remuneration Committee (“NRC”), annually develops and agrees on the CEO’s BSC with the CEO based on the strategic objectives, measures and KPIs which are aligned to the Group’s corporate goal and strategic direction set by the Board.
The NRC is also tasked by the Board to evaluate the performance of the CEO against the approved KPIs or initiatives as set out in the BSC of the CEO and provides the Board with its recommendation for the CEO’s performance evaluation for decision.
(f) overseeing the development and implementation of the investor relations and shareholder communications policy for the Company and the Group.
Recognising the importance of accurate and timely public disclosures of corporate information in order for the shareholders to exercise their ownership rights on an informed basis, the Board has established a Global Communications Policy.
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15 ANNUAL REPORT 2020 SCOMI GROUP BHD CORPORATECorporate GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
Establish Clear Roles and Responsibilities
To enhance the Board and the Management’s accountability to the Company and its shareholders, the Board has established clear functions reserved for the Board and those delegated to the Management. The Board operates under a Board Charter and Board Policy Manual, which establishes a formal schedule of matters and outlines the types of information required for the Board’s attention and deliberation at the Board meetings. The Board Charter is available on the Company’s website at www.scomigroup.com.my.
The Board has established two (2) Board Committees, namely the ARMC and the NRC. The Board Committees review in detail on the matters within their Terms of Reference (“TOR”) and make the necessary recommendations to the Board, which retains full responsibility for approval of these recommendations.
In order to ensure orderly and effective discharge of the functions and responsibilities of the Board, the Board has delegated specific responsibilities to the relevant Board Committees, CEO and Management through a clear and formally defined written TOR and delegated authority limits (“DAL”), which are the primary instruments that govern and manage the decision-making process in the Group. Whilst the objective of the DAL is to empower Management, the key principle adhered to in its formulation is to ensure that a system of internal controls and checks and balances are incorporated therein. The TOR and DAL are continuously reviewed and updated to ensure their relevance to the Group’s operations as well as for compliance with legislation and standards. The Board is kept apprised of the activities of the Board Committees through circulation of the minutes of the Board Committee meetings as well as by the briefings given by the Chair of the respective Board Committees on key matters discussed within their respective committees.
The Board Charter, TORs, DAL and all other policies and procedures of the Company are reviewed as and when required, to ensure a relevant and optimum structure for efficient and effective decision making in the organisation. The Board Charter, TORs, DAL and all policies and procedures of the Company, if relevant, are adopted by the subsidiaries to ensure that their corporate practices are aligned with the strategies of the Company.
The Board Charter provides that the roles of the Chairman and the CEO are to be held by two separate individuals with each having a clear scope of duties and responsibilities to ensure there is a balance of power and authority. The Chairman is responsible for the leadership, effectiveness, conduct and governance of the Board, while the CEO has overall responsibility, with the support of the Key Management Team, for the day-to- day management of the business and operations of the Group as well as the implementation of the Board’s policies, directives, strategies and decisions.
Reinforce Independence
In general, the tenure of an Independent Director shall not exceed a cumulative term of nine (9) years. In line with the recommendation of the Code, the Board, through the NRC, has assessed the independence of each Independent Director annually. All the Independent Directors had given their confirmation on their independence pursuant to the Listing Requirements and responses had been collated by the Company Secretary. Taking into consideration interests disclosed by each Independent Director and having regard to the criteria for assessing the independence of Directors under the annual Board assessment and the Listing Requirements, the Board is satisfied with the level of independence demonstrated by all the Non-Executive Directors and their ability to act in the best interests of the Company during deliberations at Board meetings.
Board Committees
The Board has established two (2) committees of the Board, namely the ARMC and the NRC, which operate within clearly defined written TOR. The Board Committees deliberate issues on a broad and in-depth basis before putting up any recommendation to the Board for decision. Notwithstanding the existence of the Board Committees and the relevant authorities granted to a committee under its TOR, ultimate responsibility for the affairs of the Company and decision-making lies with the Board. The Board keeps itself abreast of the significant matters and resolutions deliberated by each Board Committee through the reports by the Chairman of the respective Board Committees and the tabling of the Minutes of the Board Committees meetings and circular resolutions passed by each Board Committee at the immediate subsequent Board meeting.
The Board is satisfied that the ARMC and NRC have effectively and efficiently discharged their roles and responsibilities with respect to their functions as defined in the respective TOR. As such, there is no need to separate the audit, risk management, nomination and remuneration functions into distinct committees.
Page 3 of 13 SCOMI GROUP BHD ANNUAL REPORT 2020 16 CorporateCORPORATE GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
The composition of the Board and its Committees is as follows:
Board Committees
ARMC NRC Independent Non-Executive Directors Dato’ Sreesanthan a/l Eliathamby (2) M - Mr Liew Willip (1) C M Dato’ Mohd Shahrom bin Mohamad (4) M C Encik Amirul Azhar Bin Baharom (5) - M Tunku Azlan Bin Tunku Aziz(7) C M Mr Cheong Wong Sang(8) M C Mr Ong Hock Seng(9) M M Dato’ Sharkawi Bin Alis(10) M M Dato' Faisal Zelman Bin Datuk Abdul Malik(11) - M
Non-Independent Non-Executive Directors Encik Shah Hakim @ Shahzanim Bin Zain - - Mr Foong Choong Hong (3) M - Mr Lee Chun Fai (6) - M
CEO/Executive Director Mr Sammy Tse Kwok Fai - -
Notes: C – Chairman M – Member (1) Resigned as Independent Non-Executive Director and as member/Chairman of the ARMC and member of NRC on 29 February 2020. (2) Resigned as Independent Non-Executive Director and member of the ARMC on 28 January 2020. (3) Resigned as Non-Independent Non-Executive Director and member of the ARMC on 17 March 2020. (4) Appointed as member of NRC on 23 September 2019 and redesignated as Chairman of NRC on 25 October 2019. Appointed as member of ARMC on 23 June 2020. Resigned as an Independent Non-Executive Director, NRC Chairman/member and as member of ARMC on 15 July 2020. (5) Appointed as member of NRC on 27 March 2020. Resigned as Independent Non-Executive Director and member of NRC on 31 July 2020. (6) Resigned as Non-Independent Non-Executive Director and member of NRC on 31 July 2020. (7) Appointed as Independent Non-Executive Director on 18 June 2020. Appointed as member of ARMC on 23 June 2020 and redesignated as Chairman of ARMC on 21 August 2020. Appointed as member of NRC on 2 November 2020. (8) Appointed as Independent Non-Executive Director on 18 June 2020. Appointed as Chairman/member of ARMC on 23 June 2020 and redesignated as member of ARMC on 21 August 2020. Appointed as Chairman/member of NRC on 11 August 2020. (9) Appointed as Independent Non-Executive Director on 16 July 2020. Appointed as member of NRC on 2 October 2020. Appointed as member of ARMC on 2 November 2020. (10) Appointed as Independent Non-Executive Director on 16 July 2020. Appointed as member of NRC on 11 August 2020. Appointed as member of ARMC on 21 August 2020. Resigned as Independent Non-Executive Director, member of NRC and ARMC on 28 August 2020. (11) Appointed as Independent Non-Executive Director on 16 July 2020. Appointed as member of NRC on 11 August 2020. Resigned as Independent Non-Executive Director and member of NRC on 9 October 2020.
The ARMC and NRC established by the Board are tasked to:
ARMC :
Details are provided in the Audit and Risk Management Report section of this Annual Report.
NRC :
• ensure an effective process for selection of new Directors and assessment of the effectiveness of the Board and Board Committees and the performance of individual Directors which will result in the required mix of skills, experience and responsibilities being present on the Board;
• establish, review and report to the Board on a formal and transparent policy on Executive Directors’ remuneration; and
• review and recommend to the Board the remuneration of the Executive Directors in all its forms with the aim of attracting, retaining and motivating individuals of the highest quality needed to run the Company successfully.
Page 4 of 13 17 ANNUAL REPORT 2020 SCOMI GROUP BHD CORPORATECorporate GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
The members of the NRC are appointed by the Board and shall comprise at least three (3) members who are all non-executive, a majority of whom are Independent Directors. Members of the NRC elect a Chairman from among themselves who is an Independent Non-Executive Director. All members of the NRC, including the Chairman, shall hold office only so long as they serve as Directors of the Company. Members of the NRC may relinquish their membership in the NRC with prior written notice to the Company Secretary. The NRC reports its recommendations back to the Board for its consideration and approval. In the event of any vacancies arising in the NRC resulting in the number of members of the NRC falling below three (3), the vacancy should be filled within three months. The NRC meets at least once during a financial year. In the interim period between meetings, if the need arises, issues shall be resolved through circular resolution. A circular resolution in writing, stating the reason(s) to arrive at a recommendation or resolution, signed by a majority of the members, shall be valid and effective as if it had been passed at a meeting duly convened and constituted.
The duties and responsibilities of the ARMC and NRC are set out in the TOR of the NRC which is available at the Company’s website at www.scomigroup.com.my.
Board and Board Committee Meetings
During the financial year ended 30 June 2020, fourteen (14) Board Meetings, five (5) ARMC Meetings and two (2) NRC Meetings were held. The Board is satisfied with the level of commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of the Company. The attendance record of the Directors at the meetings of the Board and its Committees are as follows:
MEETING ATTENDANCE (attended/held) BOARD ARMC NRC Independent Non-Executive Directors Dato’ Sreesanthan a/l Eliathamby (2) 4/6 3/3 - Mr Liew Willip (1) 11/11 4/4 1/1 Dato’ Mohd Shahrom bin Mohamad (4) 12/12 1/1 2/2 Encik Amirul Azhar Bin Baharom (5) 12/12 - 1/1 Tunku Azlan Bin Tunku Aziz(7) 1/1 1/1 - Mr Cheong Wong Sang(8) 0/1 1/1 - Mr Ong Hock Seng(9) - - - Dato’ Sharkawi Bin Alis(10) - - - Dato' Faisal Zelman Bin Datuk Abdul Malik(11) - - -
Non-Independent Non-Executive Directors Encik Shah Hakim @ Shahzanim Bin Zain 13/14 - - Mr Foong Choong Hong (3) 9/11 4/4 - Mr Lee Chun Fai (6) 14/14 - 2/2
CEO/Executive Director Mr Sammy Tse Kwok Fai 14/14 - -
Notes: (1) Resigned as Independent Non-Executive Director and as member/Chairman of the ARMC and member of NRC on 29 February 2020. (2) Resigned as Independent Non-Executive Director and member of the ARMC on 28 January 2020. (3) Resigned as Non-Independent Non-Executive Director and member of the ARMC on 17 March 2020. (4) Appointed as member of NRC on 23 September 2019 and redesignated as Chairman of NRC on 25 October 2019. Appointed as member of ARMC on 23 June 2020. Resigned as an Independent Non-Executive Director, NRC Chairman/member and as member of ARMC on 15 July 2020. (5) Appointed as member of NRC on 27 March 2020. Resigned as Independent Non-Executive Director and member of NRC on 31 July 2020. (6) Resigned as Non-Independent Non-Executive Director and member of NRC on 31 July 2020. (7) Appointed as Independent Non-Executive Director on 18 June 2020. Appointed as member of ARMC on 23 June 2020 and redesignated as Chairman of ARMC on 21 August 2020. Appointed as member of NRC on 2 November 2020. (8) Appointed as Independent Non-Executive Director on 18 June 2020. Appointed as Chairman/member of ARMC on 23 June 2020 and redesignated as member of ARMC on 21 August 2020. Appointed as Chairman/member of NRC on 11 August 2020. (9) Appointed as Independent Non-Executive Director on 16 July 2020. Appointed as member of NRC on 2 October 2020. Appointed as member of ARMC on 2 November 2020. (10) Appointed as Independent Non-Executive Director on 16 July 2020. Appointed as member of NRC on 11 August 2020. Appointed as member of ARMC on 21 August 2020. Resigned as Independent Non-Executive Director, member of NRC and ARMC on 28 August 2020. (11) Appointed as Independent Non-Executive Director on 16 July 2020. Appointed as member of NRC on 11 August 2020. Resigned as Independent Non-Executive Director and member of NRC on 9 October 2020.
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SCOMI GROUP BHD ANNUAL REPORT 2020 18 CorporateCORPORATE GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
Ethics and Code of Conduct
In discharging its duties and responsibilities, the Board is also guided by the Code of Conduct of the Group which provides the framework to ensure that the Group conducts itself in compliance with laws and ethical values. The Board ensures that compliance is monitored through a Confirmation of Compliance declaration process where all employees above a certain grade are required to confirm their receipt and understanding of the Code of Conduct and further to certify their continued compliance with the Code of Conduct on an annual basis. This serves to drive organisational culture and continuing awareness amongst the employees of the need to understand, develop and maintain a value-based culture beyond mere compliance.
It is a condition of appointment and/or employment with the Group that the Board and all employees of the Group to comply with the Code of Conduct and all applicable laws, regulations and other policies of the Group and failure to comply may result in the commencement of disciplinary proceedings that may lead to termination of appointment and/or employment.
The appropriateness and effectiveness of the Code of Conduct of the Group are continuously monitored and appropriate agreed improvements and reporting procedures will be adopted where necessary. The Code of Conduct is available on the Company’s website at www.scomigroup.com.my.
Whistleblowing Policy and Procedures
The Group is also committed to openness, probity and accountability. In relation to the amendments of the Malaysian Anti-Corruption Commission (MACC) Act 2009 (“MACC Act”), and in particular the new Section 17A of the MACC Act that introduces, amongst others, new corporate liability for companies, arising from corrupt acts committed by employees or persons associated with the company, the Company has taken proactive actions to ensure that it has the adequate procedures, policies and controls for the prevention of corrupt acts and practices. The corporate liability provision criminalises a Company based on illegal actions taken by the employee. The Code of Conduct and Whistleblowing Policy of the Company have adequate procedures to prevent such illegal actions taken by the employees.
An important aspect of accountability and transparency is the existence of a mechanism to enable employees of the Group to voice their concerns in a responsible and effective manner. The Group has in place a Whistleblower Framework and Policy (“WFP”) to provide an avenue for employees to raise genuine concerns internally or report any breach or suspected breach of any law or regulation including the Group’s policies and procedures (“Disclosure”). During the financial year, there were no Steering Committee/Working Committee/Disclosure Officer as per the WFP. However, the employees were allowed to provide disclosures directly to the Board and the Board can form the Steering Committee/Working Committee to investigate the Disclosure in accordance with the WFP. The WFP is subject to periodic assessment and review to ensure that it remains relevant to the Group’s changing business circumstances. The WFP is available on the Company’s website at www.scomigroup.com.my.
Environmental, Social and Governance
The Board is cognisant of the importance of business sustainability and, in managing the Group’s business, take into consideration its impact on the environment and society in general. Balancing the environment, social and governance aspects with the interest of various stakeholders is essential to enhancing investor and public trust. We acknowledge our responsibility to all the lives we touch either directly or indirectly and are committed to making a positive impact in the many communities where we have a presence while further strengthening our corporate reputation via upholding a culture of integrity and transparency. Over the years, our approach towards corporate social responsibility has become progressively more holistic, evolving from individual acts of philanthropy to becoming a mindset that influences business decision and strategy. We further ensure that this mindset is shared among all our employees by reinforcing the principles of integrity and corporate citizenry in our training and internal communication and encouraging a spirit of volunteerism across our operations globally. We also realise that, given the nature of the businesses we are involved in, we can make a positive impact on the environment. Hence, we invest significantly in research and development to develop ‘green’ products that are efficient, cost-effective and, most importantly, environmentally friendly. The Board also strives to promote conservation and encourages a paperless environment for all Board and Board Committees meetings, where digital access is given to meeting papers to save on the distribution of hard copies.
Page 6 of 13 19 ANNUAL REPORT 2020 SCOMI GROUP BHD CORPORATECorporate GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement Access to Information
Every Director has full, free and unrestricted access to information within the Group. Where required, the Board and its Committees are provided with independent professional advice or other advice in furtherance of their duties, the cost of which is borne by the Company. The Board may also seek advice from the Management or request further explanation, information or update on any aspect of the Group’s operations or business concerns. The Board is supplied with quality and timely information, which allows it to discharge its responsibilities effectively and efficiently. The agenda for each meeting together with a set of comprehensive Board Papers for each agenda item are delivered to each Director in advance of meetings, to enable the Board sufficient time to review the matters to be deliberated for effective discussion and decision making during the meeting, and where necessary, to obtain supplementary information before the meeting.
In addition, the Directors have full and unrestricted access to the advice and dedicated support services of the Company Secretary appointed by the Board. The Company Secretary, who is qualified, experienced and competent, advises the Board on procedural and regulatory requirements to ensure that the Board adheres to the Company’s constitution, board policies, procedures and regulatory requirements in carrying out its roles and responsibilities effectively.
II. BOARD COMPOSITION
The Board recognises the benefits of having a diverse Board to ensure that the mix and profiles of the Board members in term of age, ethnicity, gender skillset and professional background provide the necessary range of perspectives, experience and expertise required to achieve effective stewardship and management.
The Constitution of the Company provides for a minimum of two (2) directors and a maximum of twelve (12) directors. At any one time, at least two (2) Directors or one-third (1/3) of the Board, whichever is higher, shall be Independent Directors, who are to provide independent judgment, experience and objectivity to the Board deliberations so that the interests of all shareholders are taken into account by the Board. The Directors shall elect a Chairman among themselves who shall be a Non-Executive Director.
The Board currently consists of five (5) members, comprising one (1) Executive Director and four (4) Non- Executive Directors of whom three (3) are Independent Directors as defined by the Listing Requirements. The Board will consider the appointment of a Chairman of the Board upon completion of the proposed restructuring exercise.
The composition of the Board reflects a diversity of backgrounds, skills and experiences in the areas of business, economics, finance, legal, general management and strategy that contributes effectively in leading and directing the management and affairs of the Group. Given the calibre and integrity of its members and the objectivity and independent judgment brought by the Independent Directors, the Board is of the opinion that its current size and composition contribute to an effective Board.
A brief description of the background of each Director is as set out in the Profile of Directors section of this Annual Report.
New Appointment to the Board
The appointment of directors is a vital process as it determines the composition and quality of the Board’s mix of skills and competencies. The nomination and appointment of new Directors takes place within the parameters set out in the TOR of the NRC and the Board Composition Policy.
Annual Board Evaluation
The Board, through the NRC undertakes an annual assessment of the Board as a whole and each individual Directors’ performance. This includes a review of the desirable mix of competencies, qualification, knowledge, skills, expertise and personal characteristics of Directors and any gaps that exist in the optimum mix of skills required for the Board.
It is tasked with assessing the effectiveness of the Board and Board Committees and the performance of individual directors to ensure that the required mix of skills and experience are present on the Board.
Page 7 of 13 SCOMI GROUP BHD ANNUAL REPORT 2020 20 CorporateCORPORATE GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
The NRC collectively conducted the assessments of the effectiveness of the Board and its Committees and the performance of each individual Director, which considered the qualification, contribution and performance of Directors taking into account their competencies, character, commitment, integrity, experience and time expended in meeting the needs of the Group. The effectiveness of the Board was assessed internally.
All assessments and evaluations carried out by the NRC in the discharge of its functions are properly documented, summarised and reported to the Board.
In accordance with the approved TOR of the NRC, the NRC carried out the following activities during the financial year ended 30 June 2020:
• assessed the annual performance of each individual Director;
• assessed the continued independence of each Independent Director;
• reviewed the skills, experience and competencies of each individual Director and based thereupon, assessed the training needs of each individual Director;
• assessed the effectiveness of the Board, the ARMC and other Committees of the Board;
• reviewed the skills, experience and competencies of the non-executive Directors;
• assessed the adequacy of the size and composition of the Board;
• reviewed the proposed remuneration for the Non-Executive Directors of the Company;
• reviewed the retirement and re-election of the Directors pursuant to the Articles of Association of the Company;
• evaluated and recommended to the Board the CEO’s BSC for the financial year under review;
• assessed and recommended to the Board the appointment and remuneration package for the CEO and Executive Director;
• reviewed the composition of the Board and Board Committees and recommended to the Board the proposed appointment of Independent Non-Executive Director and member to the Board Committees.
• reviewed the developments relating to legal proceedings taken by the authorities against one of the Directors (the director is no longer part of the Board).
III. REMUNERATION
The NRC is responsible for the review of the overall remuneration policy for the Directors and the CEO whereupon recommendations are submitted to the Board for approval. The NRC advocates a fair and transparent remuneration policy framework such that the Group may attract, retain and motivate high quality Directors.
The Non-Executive Directors are paid by way of fees for their services, as from time to time determined by the Company in AGM and are not compensated based on the Company’s (Group’s) performance and results as this may impair the Directors’ objectivity and independence, particularly when asked to endorse risky business decisions that may have a vast upside potential.
The Non-Executive Directors are reimbursed for all their travelling, hotel and other expense properly and necessarily expended by them in and about the business of the Company and are entitled to meeting allowances together with travelling and other expenses incurred, in attending the meetings of the Board or any Board Committees of the Company.
The Executive Director is not entitled to the abovementioned Director’s fee or any meeting attendance allowances. The remuneration package for the CEO comprises a fixed direct compensation, principally salary and benefits-in-kind, taking into consideration market rates and practices. The CEO, who serves as an Executive Director of the Company received no payment from the Company, save for the remuneration paid to him for his management position arising from his employment contract with the Company.
Page 8 of 13 21 ANNUAL REPORT 2020 SCOMI GROUP BHD CORPORATECorporate GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
Section 230(1) of the Companies Act, 2016 (the “Act”) provides amongst others, that “any benefits” payable to the directors of a listed company and its subsidiaries shall be approved at a general meeting. In view that the “benefits payable to the directors” under the Act is not defined by the Act itself, the Board approved the NRC’s recommendation to seek the approval of the shareholders for the benefits payable to the Directors for the period from the forthcoming AGM until the date of the next AGM of the Company (“Relevant Period”) at the forthcoming AGM of the Company in accordance with the remuneration structure set out below:
Type of Benefit Chairman Non-Executive Directors (RM/meeting) (RM/meeting) Meeting Allowance • Board Meeting 1,500 1,500 • ARMC Meeting 1,500 1,000 • NRC Meeting 1,000 1,000
The estimated benefits payable to the Directors for the Relevant Period are expected to come up to approximately RM200,000.00. In determining the estimated total benefits payable to the Directors for the Relevant Period, the size of the Board and Board Committees and the number of scheduled meetings of the Board and Board Committees to be held during the Relevant Period based on the above remuneration structure were taken into consideration.
The Board is of the view that it is just and equitable for the Non-Executive Directors to be paid the Directors’ remuneration (excluding Directors’ fees) as and when incurred, particularly after they have discharged their responsibilities and rendered their services to the Company throughout the Relevant Period.
The structure of the remuneration package for the Non-Executive Directors was last revised by the Board in respect of the financial year ended 31 December 2009 and since then the remuneration package for the Non-Executive Directors has remained unchanged. In view of the current challenges faced by the Group, although the Non-Executive Directors are burdened with increasing tasks, responsibilities and liabilities as well as tighter corporate and capital market rules and regulations, the Board concurred with the recommendation of the NRC to maintain the same remuneration structure and Directors’ fees for the Non-Executive Directors in respect of the financial year ended 30 June 2020, which is subject to the approval of the shareholders at the forthcoming AGM of the Company.
Nonetheless, the Non-Executive Directors did not receive any payment of Directors’ fees since year 2016 in respect of the financial years/period ended 31 March 2016 to 31 March 2018 and 30 June 2019 despite the fees having been approved by the shareholders at the respective AGMs, due to the financial position of the Company.
The remuneration of individual Directors of the Company, including the remuneration for services rendered to the Group for the financial year ended 30 June 2020, are as follows:-
The Company and the Group Other Fee Salaries Allowances Total Directors Company/ Company/ Company/ Company/ Group Group Group Group RM'000 RM'000 RM'000 RM'000 Mr Liew Willip(1) 47 - 23 70 Dato’ Sreesanthan A/L Eliathamby (2) 41 - 9 50 Mr Foong Choong Hong (3) 50 - 18 68 Dato’ Mohd Shahrom bin Mohamed (4) 50 - 20 70 Encik Amirul Azhar bin Baharom (5) 49 - 19 68 Mr Lee Chun Fai(6) 60 - 23 83 Encik Shah Hakim @ Shahzanim bin Zain 60 - 20 80 Mr Sammy Tse Kwok Fai - 1,927 - 1,927 Tunku Azlan Bin Tunku Aziz(7) 1 - 3 4 Mr Cheong Wong Sang(8) 2 - 1 3 Mr Ong Hock Seng(9) - - - - Dato’ Sharkawi Bin Alis(10) - - - - Dato' Faisal Zelman Bin Datuk Abdul Malik(11) - - - -
Grand Total 360 1,927 136 2,423
Page 9 of 13 SCOMI GROUP BHD ANNUAL REPORT 2020 22 CorporateCORPORATE GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement Notes: (1) Resigned as Independent Non-Executive Director and as member/Chairman of the ARMC on 29 February 2020. (2) Resigned as Independent Non-Executive Director and member of the ARMC on 28 January 2020. (3) Resigned as Non-Independent Non-Executive Director and member of the ARMC on 17 March 2020. (4) Appointed as member of NRC on 23 September 2019 and redesignated as Chairman of NRC on 25 October 2019. Appointed as member of ARMC on 23 June 2020. Resigned as an Independent Non-Executive Director, NRC Chairman/member and as member of ARMC on 15 July 2020. (5) Appointed as member of NRC on 27 March 2020. Resigned as Independent Non-Executive Director and member of NRC on 31 July 2020. (6) Resigned as Non-Independent Non-Executive Director and member of NRC on 31 July 2020. (7) Appointed as Independent Non-Executive Director on 18 June 2020. Appointed as member of ARMC on 23 June 2020 and redesignated as Chairman of ARMC on 21 August 2020. Appointed as member of NRC on 2 November 2020. (8) Appointed as Independent Non-Executive Director on 18 June 2020. Appointed as Chairman/member of ARMC on 23 June 2020 and redesignated as member of ARMC on 21 August 2020. Appointed as Chairman/member of NRC on 11 August 2020. (9) Appointed as Independent Non-Executive Director on 16 July 2020. Appointed as member of NRC on 2 October 2020. Appointed as member of ARMC on 2 November 2020. (10) Appointed as Independent Non-Executive Director on 16 July 2020. Appointed as member of NRC on 11 August 2020. Appointed as member of ARMC on 21 August 2020. Resigned as Independent Non-Executive Director, member of NRC and ARMC on 28 August 2020. (11) Appointed as Independent Non-Executive Director on 16 July 2020. Appointed as member of NRC on 11 August 2020. Resigned as Independent Non-Executive Director and member of NRC on 9 October 2020.
PRINCIPLE B : EFFECTIVE AUDIT AND RISK MANAGEMENT
I. Audit and Risk Management Committee
In discharging its fiduciary responsibility, the Board is assisted by the ARMC to oversee the financial reporting processes and the quality of the Group’s financial statements. The ARMC members, all of whom are financially literate, reviewed the Company and the Group’s financial statements, prior to recommending them for approval by the Board and issuance to the shareholders and stakeholders.
The ARMC is chaired by an Independent Non-Executive Director who is distinct from the Chairman of the Board.
The ARMC has met five (5) times during the financial year under review in order to carry out their duties in accordance with the TOR. The CEO and CFO formally presented to the ARMC and the Board the details of the financial performance of the Company and the Group, for review of quarter-to-quarter and year-to-date performance against the approved budget. The attendance of each ARMC member is set out in the Audit and Risk Management Report in this Annual Report.
The primary objective of the ARMC is to assist the Board to review the adequacy and integrity of the Group’s financial administration and reporting, internal control and risk management systems, including the management information system and systems for compliance with applicable laws, regulations, rules, directives and guidelines.
The Board, through the ARMC, maintains an appropriate, formal and transparent relationship with the Group’s internal and external auditors. The ARMC is guided by the Group’s policies and procedures in accessing the suitability and independence of the external auditors, which also includes the provision of non-audit services by the external auditors to the Group and the Company to ensure their independence is not compromised. Those policies and procedures are to be read in conjunction with the TOR of the ARMC, which outlines the duties and responsibilities of the ARMC relating to the appointment of the external auditors.
The ARMC has explicit authority to communicate directly with the Group’s internal and external auditors and vice versa the Group’s internal and external auditors also have direct access to the ARMC to highlight any issues of concern at any time. Further, the ARMC meets the external auditors without the presence of Executive Directors or the Management whenever necessary, but no less than twice a year. Meetings with the external auditors are held to further discuss the Group’s audit plans, audit findings, financial statements, as well as to seek their professional advice on other related matters.
The ARMC is also tasked by the Board to consider the appointment of the external auditor, the audit fee and any questions relating to the resignation or dismissal as well as all non-audit services to be provided by the external auditors to the Company with a view to auditor independence and to provide its recommendations thereon to the Board.
The ARMC had at its meeting held on 27 November 2020 undertook an annual assessment of the suitability and independence of the external auditors, KPMG PLT (“KPMG”) in accordance with the Policy on the Selection of External Auditors of the Company which was adopted in 2014. Being satisfied with KPMG’s performance, technical competency and audit independence as well as fulfilment of criteria as set out in the Policy on the Selection of External Auditors of the Company and Paragraph 15.21 of the Listing Requirements,
Page 10 of 13 23 ANNUAL REPORT 2020 SCOMI GROUP BHD CORPORATECorporate GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement the ARMC recommended the re-appointment of KPMG, who have consented to act, as external auditors of the Company for financial year ending 30 June 2021. The ARMC was also satisfied that the provision of the non-audit services by KPMG for the financial period ended 30 June 2020 did not in any way impair their objectivity and independence as external auditors of the Company. Subsequently, the Board at its meeting held on 27 November 2020 concurred with the ARMC on its recommendation for the shareholders’ approval to be sought at the forthcoming AGM on the re-appointment of KPMG as external auditors of the Company for the financial year ending 30 June 2021.
The membership, TOR, roles and relationship with both the internal and external auditors and activities of the ARMC during the financial period year 30 June 2020 are set out on ARMC Report of this Annual Report.
II. Risk Management and Internal Control Framework
The Board firmly believes in maintaining a sound risk management framework and internal controls system with a view to safeguard shareholders’ investment and the assets of the Group. In establishing and reviewing the risk management and internal controls system, the Board recognises that such systems can provide only reasonable, but not absolute, assurance against the occurrence of any material misstatement or loss.
The ARMC meets on a regular basis to ensure that there is clear accountability for managing significant identified risks and that identified risks are satisfactorily addressed on an ongoing basis. In addition, the adequacy and effectiveness of the risk management and internal controls system is also periodically reviewed by the ARMC.
The Board has received assurance from the CEO and the CFO that the Group’s risk management and internal controls system is operating adequately and effectively, in all material aspects.
Regular assessments on the adequacy and integrity of the internal controls and monitoring of compliance with policies and procedures are also carried out through internal audits. The risk-based internal audit plan that covers internal audit coverage and scope of work is presented to the ARMC for its consideration and approval annually. Internal audit reports encompassing the audit findings together with recommendations thereon are presented to the ARMC on a periodic basis. The senior and functional line management are tasked to ensure management action plans are carried out effectively and regular follow-up audits are performed by IA to monitor the continued compliance.
The main features of the risk management framework and internal controls system of the Group are as set out in the Statement on Risk Management and Internal Control of this Annual Report.
PRINCIPLE C : INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS
I. COMMUNICATION WITH STAKEHOLDERS
The Board recognises the importance of maintaining transparency and accountability to its shareholders. The Board ensures that all the shareholders of the Company are treated equitably and provided with comprehensive, accurate and quality information on a timely and non-selective basis, in order to keep them abreast of all material business matters affecting the Company and the Group.
Recognising the importance of accurate and timely public disclosures of corporate information in order for the shareholders to exercise their ownership rights on an informed basis, the Board has established a Global Communications Policy with the following intention:
• to provide guidance and structure in disseminating corporate information to, and in dealing with investors, analysts, media representatives, employees and the public; • to raise management and employees’ awareness on the disclosure requirements and practices; • to ensure compliance with legal and regulatory requirements on disclosure; and • to protect the brand equity of the Group by managing the risk associated with the brand i.e. exposures to the brand that can undermine its ability to maintain its desired differentiation and competitive advantage.
The Global Communications Policy outlines how the Group identifies and distributes information in a timely manner to all shareholders. It also reinforces the Group’s commitment to the continuous disclosure obligations imposed by law, and describes the procedures implemented to ensure compliance.
Page 11 of 13 SCOMI GROUP BHD ANNUAL REPORT 2020 24 CorporateCORPORATE GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
The Board through the Management oversees the Group’s corporate disclosure practices and ensures implementation and adherence to the policy. The Board has authorised the CEO as the primary spokesperson responsible for communicating information to all stakeholders including the public.
The Group also maintains a corporate website, www.scomigroup.com.my to disseminate information and enhance its investor relations.
The Group recognises the need for due diligence in maintaining, updating and clearly identifying the accuracy, veracity and relevance of information on the website. The Corporate Communications Department has ongoing responsibility for ensuring that information on the website is up-to-date.
II. CONDUCT OF GENERAL MEETINGS
Shareholders are encouraged to attend the AGM and any general meetings of the shareholders, which is the principal forum for dialogue between the Board and the shareholders and provides shareholders the opportunity to raise questions or concerns with regards to the Group as a whole, as well as to discuss any other important matters with the Management and the Board.
The Company has obtained approval from Companies Commission of Malaysia for an extension of time for holding the AGM of the Company under Section 340(4) of the Companies Act 2016. A notice period of more than 21 days will be given to shareholders for the upcoming AGM in compliance with the Companies Act 2016 and the Listing Requirements.
This is to provide sufficient time to shareholders to understand and evaluate the matters involved as well as to make necessary arrangements to attend, participate and vote either in person, by corporate representative, by proxy or by attorney, to exercise their ownership rights on an informed basis during the AGM and any general meetings of the shareholders. Where special business items are to be transacted, a full explanation is provided in the notice of the AGM and any general meetings of the shareholders or the related circular to shareholders in order to assist the shareholders’ understanding of matters and the implication of their decision in voting for or against a resolution.
In line with paragraph 8.29A of the Listing Requirements, all the resolutions set out in the notices of the 17th AGM were put to vote by poll. The Company had appointed Boardroom Share Registrars Sdn Bhd as Poll Administrator to conduct the polling process, and Boardroom Corporate Services Sdn Bhd as Independent Scrutineers to verify the poll results. Voting at the previous AGM was conducted through electronic poll voting (e-voting), where personalised wristbands were issued by the Share Registrar upon registration. The electronic poll voting was conducted upon completion of the deliberation of all items to be transacted at the AGM. The Chairman, upon the verification of the poll results by the Independent Scrutineers, announced the results for each resolution, which include votes in favour and against and declared whether the resolutions were carried. The outcomes of the AGM were announced to Bursa Securities on the same day the meeting was held. The Minutes of the AGM was also made available on the Company’s website at www.scomigroup.com.my.
The Board, the Management Team and external auditors of the Company and if required, the Advisers, are present at the AGM and any general meetings of the shareholders to answer questions or concerns raised by shareholders.
Before the commencement of the AGM and any general meetings of the shareholders, the Directors and the Management Team will take the opportunity to engage directly with the shareholders which provides the shareholders a better appreciation of the Company’s objectives, quality of its management and the challenges faced, while also making the Company aware of the expectations and concerns of its shareholders.
During the AGM and any general meetings of the shareholders, there is always a presentation by the CEO or a representative from the Management Team on the Group’s strategy, the operations and financial performance of the Group, the major developments and the prospects of the Group and the subject matters tabled for decision. Besides that, the Chairman of the AGM and any general meetings of the shareholders will invite the shareholders to raise questions pertaining to the Company’s financial performance and other items for adoption at the meeting, before putting a resolution to vote. The Chairman of the AGM and any general meetings of the shareholders will also share with the shareholders the Company’s responses to questions submitted in advance of the AGM and any general meetings of the shareholders by the Minority Shareholder Watchdog Group, if any.
Page 12 of 13 25 ANNUAL REPORT 2020 SCOMI GROUP BHD CORPORATECorporate GOVERNANCE Governance OVERVIEW STATEMENT Overview Statement
At the 17th AGM, majority of the Directors were present in person. Following the presentation by the CEO of the Group’s strategy, the operations and financial performance of the Group, the major developments and the prospects of the Group to the shareholders, the Chairman of the AGM invited shareholders to raise questions pertaining to the Company’s financial performance and other items for adoption at the meeting, before putting a resolution to vote. The Directors, CEO, Management, internal and external auditors were in attendance to respond to the questions or concerns raised by shareholders.
FOCUS AREAS AND PRIORITIES ON CORPORATE GOVERNANCE
I. PROFESSIONAL DEVELOPMENT OF DIRECTORS
To remain relevant in the rapidly changing and complex modern business environment, our Directors are committed to continuing education and lifelong learning to fulfil their responsibilities to the Company and enhance their contributions to board deliberations.
An appropriate induction is provided to any newly appointed Directors in order for them to familiarise themselves with the Group’s organisational structure, strategic plans, significant financial, accounting and risk issues and other important matters and become effective in their role within the shortest practicable time. The induction programme also allows them to get acquainted with Senior Management, so as to facilitate board interaction and independent access to the Management.
During the financial year under review, there were limited trainings attended by the Board members due to the Movement Control Order. The trainings attended by the Board members are as follows:
Programmes Attended
• Amendments to Companies Act 2016 and What You Should Know About the Practising Certificate Under Section 241 • MIA Public Practice Programme 2019 • The convergence of digitisation and sustainability • National Anti-Corruption Plan (NACP) and corporate liability provision • Mandatory Accreditation Programme for Directors of Public Listed Companies
This Statement is made in accordance with the resolution of the Board dated 30 November 2020.
Page 13 of 13 SCOMI GROUP BHD ANNUAL REPORT 2020 26 StatementSTATEMENT on Risk ON RISK Management MANAGEMENT AND andINTERNAL Internal CONTROL Control
INTRODUCTION
The Board of Directors is pleased to provide the following statement which has been prepared in accordance with the Statement on Risk Management and Internal Control - Guidelines for Directors of Listed Issuers endorsed by Bursa Securities. It outlines the main features of the Risk Management Framework and Internal Controls System of Scomi Group Bhd and its subsidiaries (“the Group”) covering all operations during the financial year under review pursuant to Paragraph 15.26(b) of the Listing Requirements and the Malaysia Code on Corporate Governance 2017. The disclosures in this statement do not include the risk management and internal control practices of all the associates and joint ventures of the Group.
INTERNAL AUDIT FUNCTION
The internal audit function is carried out by an outsourced internal audit firm (“IA”) appointed in September 2019. The IA provides an independent assurance on the adequacy and effectiveness of the Internal Controls System implemented by the Group and reports directly to the Audit and Risk Management Committee (“ARMC”) of the Group.
ARMC receives and reviews IA’s audit reports including the agreed corrective actions to be undertaken by the auditees. IA monitors status of the agreed corrective actions submitted by auditees which will be assessed and verified by IA prior to reporting to the ARMC. The status of the audit findings is submitted and presented to the ARMC for deliberation on a quarterly basis except for the 3rd quarter of Financial Year 2020 (3QFY2020) whereby IA was unable to conduct the internal audit and present to the ARMC for deliberation due to the delays resulting from the Covid-19 pandemic and Movement Control Order (“MCO”).
RESPONSIBILITY AND ACCOUNTABILITY
The Board
The Board is committed to ensure that its Group’s Risk Management Framework and Internal Controls System are effective and adequate. However, the Board recognises that such systems are designed to manage and reduce, rather than eliminate the risks identified to acceptable levels. Therefore, the internal controls implemented can only provide reasonable and not absolute assurance against the occurrence of any material misstatement, loss or fraud.
The Board has overall responsibility for the Group’s Risk Management Framework and Internal Controls System and has delegated the implementation of the framework and system to the Management whilst the ARMC was tasked by the Board with oversight responsibility to review the adequacy and effectiveness of the Risk Management Framework and Internal Controls System.
The Management
The Management acknowledges responsibility for implementing the processes to identify, assess, treat, monitor and report on risks and the effectiveness of the Internal Controls System, taking appropriate and timely corrective actions as required. It assures the Board that the Group’s risks are effectively managed based on the Risk Management Framework adopted by the Group and the Internal Controls System is operating adequately and effectively, in all material aspects.
On a quarterly basis, Management reports to the ARMC on all risk areas faced by the Group as well as actions taken by Management to address those high risk areas. At the same meeting, findings identified from the internal audit reviews conducted by the IA and actions taken by Management to address the findings are reported to the ARMC. The Chairman of the ARMC will also report to the Board if there are significant matters arising from the risks and internal controls related matters and recommendations deliberated by the ARMC, at the immediate subsequent Board meeting.
RISK MANAGEMENT FRAMEWORK
The management of risks is aimed at achieving an appropriate balance between realising opportunities for gains while minimising losses to the Group. The Group is committed to ensuring that the organisation achieves its strategic objectives and that the risks inherent in its business are identified and effectively managed.
27 ANNUAL REPORT 2020 SCOMI GROUP BHD StatementSTATEMENT on Risk ON RISK Management MANAGEMENT AND INTERNALand Internal CONTROL Control
The Group has established an Enterprise Risk Management Framework (“Framework”) which serves to inform and provide guidance to Directors, senior management, functional line management and staff in managing risks affecting businesses and operations of the Group. The risk management process is applied to all levels of activity in the Group, with the objective of establishing accountability and ensuring risk mitigation at the source.
The level of risk tolerance of the Group is expressed through the use of a risk impact and likelihood matrix. Once the risks level is determined, the risk owner is required to deal with the relevant risks by adhering to the Group’s risk treatment guidance on the actions to be taken and establish Risk Action Plans (“RAP”) to detail out mitigating activities to be carried out.
INTERNAL CONTROLS SYSTEM
The internal controls system of the Group covers amongst others, matters on governance, organisation, financial, business strategy, operations, regulatory and compliance control matters which includes:
Structured Organisational Reporting Lines
The Board is supported by two (2) Board Committees which provide focus and counsel in the areas of:
1. Audit and Risk Management; and 2. Nomination and Remuneration of Directors and CEO.
Certain Board responsibilities are delegated to the Board Committees through defined Terms of Reference.
On a quarterly basis, board papers, which include financial and non-financial matters such as quarterly results, business strategies, explanation of the performance of the Group and corporate activities and exercises of the Group are tabled to the Board for deliberation and approval.
Delegated Authority Limits (“DAL”)
The Board’s approving authority on certain specified activities is delegated to the Management through a formally defined DAL which is the primary instrument that governs and manages the business decision making process in the Group. The key principle adhered to in its formulation is to ensure that a system of internal controls, and checks and balances are incorporated therein.
Code of Conduct
The Board and employees of the Group are committed to adhering to the best practises in corporate governance and observing the highest standards in integrity and behaviour in all activities conducted by the Group. All employees of the Group of managerial level and above are required to annually confirm their receipt and understanding of the Code of Conduct and certify their continued compliance.
Policies, Procedures, Processes and Systems
Processes are documented and formalised in the form of internal policies and procedures to ensure compliance with internal controls and relevant rules and regulations except on the areas as highlighted in the independent auditors’ report on the audit of the financial statements, “Report on Other Legal and Regulatory Requirements” section. These documents are made available on the Scomi intranet for easy access by the employees.
Information and Communication
Following from the organisational reporting structure, information is communicated and disseminated to all employees within the Group whenever necessary.
Whistleblower Framework and Policy
The Group has in place a Whistleblower Framework and Policy (“WFP”) to provide an avenue for employees to raise genuine concerns internally or report any breach or suspected breach of any law or regulation (“Disclosure”). During the financial year, there were no Steering Committee/Working Committee/Disclosure Officer as per the WFP. However, the employees were allowed to provide disclosures directly to the Board and the Board can form the Steering Committee/Working Committee to investigate the Disclosure in accordance with the WFP.
SCOMI GROUP BHD ANNUAL REPORT 2020 28 StatementSTATEMENT on Risk ON RISK Management MANAGEMENT AND andINTERNAL Internal CONTROL Control
Independent Assurance Mechanism
Regular assessments on the adequacy and integrity of the internal controls and monitoring of compliance with policies and procedures are carried out through internal audits. The internal audit function reports to the ARMC quarterly (except for 3QFY2020) and is independent of the activities and operations of the Group.
Internal audit reports, which encompass audit findings together with recommendations thereon, are presented to the ARMC during its quarterly meetings (except for 3QFY2020). In addition to this internal assurance mechanism, the Group also received ARMC reports and management letter (if any) from its External Auditors that primarily focuses on financial controls which were presented to the ARMC for deliberation.
Besides this, the ARMC also conducts private meetings with the External Auditors, to give an opportunity to the External Auditors to raise any matters without executive board members or the Management present.
BOARD ASSURANCE AND LIMITATION
The Board of Directors received an assurance from the CEO and CFO that the Group’s risk management and internal control system are operating adequately and effectively, in all material aspects, based on the risk management and internal controls system of the Group.
The abovementioned process served as an on-going process to identify, evaluate, monitor and manage the risks faced by the Group during the period under review and up to the date of approval of this Statement for inclusion in the Annual Report.
While the Board reiterates that the Risk Management Framework and Internal Controls System should be continuously improved in line with evolving business developments, it should also be noted that the framework and system can only manage rather than eliminate the risks of the failure to achieve business objectives. Therefore, the Risk Management Framework and Internal Controls System in the Group can only provide reasonable but not absolute assurance against material misstatements, losses and frauds.
This Statement is made in accordance with the resolution of the Board dated 30 November 2020.
29 ANNUAL REPORT 2020 SCOMI GROUP BHD Audit and Risk Management Committee Report
The Board of Directors of Scomi Group Bhd (the “Company”) (the “Board”) is pleased to present the Report of the Audit and Risk Management Committee (the “ARMC” or “Committee”) for the financial year ended 30 June 2020 (“FY2020”) to provide insights into the manner in which the ARMC discharged its functions for FY2020.
TERMS OF REFERENCE (“TOR”)
The details of the TOR of the ARMC are available for reference on the Company’s website at www.scomigroup.com.my.
COMPOSITION
The ARMC comprised three (3) members, all of whom are Non-Executive and Independent Directors. As at the date of this report, the following is the composition of the ARMC:
1. Tunku Azlan Bin Tunku Aziz Independent Director (appointed as a member to ARMC on 23 June 2020 and redesignated as Chairman on 21 August 2020).
2. Cheong Wong Sang Independent Director (appointed to ARMC and as Chairman on 23 June 2020. Redesignated to ARMC member on 21 August 2020).
3. Ong Hock Seng Independent Director (appointed to ARMC on 2 November 2020).
As disclosed in the Profile of Directors section of this Annual Report, two (2) members of the Committee fulfil the financial expertise requirement of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”) and all members of the Committee are financially literate with sufficient financial experience and ability to assist in discharging the Board’s fiduciary duties with respect to its responsibility for overseeing the following:
(i) the financial administration and reporting process and ensuring that the financial results of the Group and the Company are truly and fairly presented in its financial statements; (ii) the adequacy and effectiveness of the risk management and internal control systems; (iii) the performance of the external and internal audit functions; and (iv) the fairness and reasonableness of the related party transactions (“RPTs”) entered into by the Company with related parties.
The composition of the ARMC complies with paragraph 15.09(1) of the Listing Requirements.
MEETINGS AND ATTENDANCE
A total of five (5) ARMC meetings were held during the financial year under review, which were held on 26 August 2019, 25 October 2019, 25 November 2019, 28 February 2020, and 29 June 2020. A quorum, established by the presence of a majority of members who are Independent Directors, was always met as required under Paragraph 15.18 of the Main Market Listing Requirements (“Listing Requirements”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) for the meetings on 26 August 2019, 25 October 2019, 25 November 2019 and 29 June 2020. However, for the meeting on 28 February 2020, the Company applied to Bursa Securities for a modification to Paragraph 15.18 of the Listing Requirements in order to permit the ARMC to modify the quorum requirement for its meeting with an independent and a non-independent director forming the quorum (Paragraph 15.18 of the Listing Requirements requires majority of members who are Independent Directors for quorum) and it was duly approved by Bursa Securities. The modification to Paragraph 15.18 was sought for the ARMC meeting held on 28 February 2020 as the Company and the Nomination and Remuneration Committee was unable to find a timely replacement subsequent to the resignation of Dato’ Sreesanthan A/L Eliathamby (ARMC member) on 28 January 2020.
SCOMI GROUP BHD ANNUAL REPORT 2020 30 Audit and Risk Management Committee Report
During FY2020, the following changes took place in the composition of the ARMC:
Composition of ARMC during meeting held on 26 August 2019, 25 October 2019 and 25 November 2019
1. Liew Willip (appointed Chairman of ARMC on 25 October 2019) Independent Director (resigned on 29 February 2020).
2. Dato’ Sreesanthan A/L Eliathamby Independent Director (resigned on 28 January 2020).
3. Foong Choong Hong Non-Independent Non-Executive Director (resigned on 17 March 2020).
Composition of ARMC during the meeting held on 28 February 2020
1. Liew Willip Independent Director (resigned on 29 February 2020)
2. Foong Choong Hong Non-Independent Non-Executive Director (resigned on 17 March 2020)
Composition of ARMC during meeting held on 29 June 2020
1. Tunku Azlan Bin Tunku Aziz Independent Director (appointed as a member to ARMC on 23 June 2020 and redesignated as Chairman on 21 August 2020).
2. Cheong Wong Sang Independent Director (appointed to ARMC and as Chairman on 23 June 2020. Redesignated to ARMC member on 21 August 2020).
3. Dato’ Mohd Shahrom Bin Mohamad Independent Director (appointed to ARMC on 23 June 2020, resigned on 15 July 2020).
The Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Corporate Secretarial and the representatives from the outsourced internal audit firm (“IA”) were invited to the ARMC meetings to provide a direct flow of information to the ARMC as well as to provide clarification in the finding of any issues arising. The responsible personnel were invited to brief the ARMC on specific issues involving their respective areas of responsibility arising from the risk management and internal audit reports, when necessary.
The external auditors were also invited to present to the ARMC the audit plan, the audit findings, the independent auditors’ report as well as any other matters as they considered were important for the ARMC’s attention. During FY2020, the ARMC has conducted two (2) private meetings with the external auditors, to give opportunity to the external auditors to raise any matters without the presence of the executive board members and the Management.
In FY2020, the members of the ARMC and their attendance of Meetings held was as follows:
ATTENDANCE NAME ARMC DESIGNATION (attended/held) Independent Non-Executive Liew Willip(1) Chairman 4/4 Director Independent Non-Executive Dato' Sreesanthan A/L Eliathamby(2) Member 3/3 Director Non-Independent Non-Executive Foong Choong Hong(3) Member 4/4 Director Independent Non-Executive Tunku Azlan Bin Tunku Aziz(4) Chairman 1/1 Director Independent Non-Executive Cheong Wong Sang(5) Member 1/1 Director Independent Non-Executive Dato’ Mohd Shahrom Bin Mohamad(6) Member 1/1 Director
31 ANNUAL REPORT 2020 SCOMI GROUP BHD Audit and Risk Management Committee Report
Note: (1) Resigned as Independent Non-Executive Director and as member/Chairman of the ARMC on 29 February 2020. (2) Resigned as Independent Non-Executive Director and member of the ARMC on 28 January 2020. (3) Resigned as Non-Independent Non-Executive Director and member of the ARMC on 17 March 2020. (4) Appointed as member of the ARMC on 23 June 2020 and redesignated as the Chairman of the ARMC on 21 August 2020. (5) Appointed as member and Chairman of the ARMC on 23 June 2020. Redesignated to a member of ARMC on 21 August 2020. (6) Appointed as member of ARMC on 23 June 2020 and resigned as an Independent Non-Executive Director and as member of the ARMC on 15 July 2020.
The minutes of each ARMC meeting were recorded and tabled to the ARMC for adoption at subsequent ARMC meetings and thereafter all minutes of ARMC meetings and circular resolutions passed were presented to the Board for notation. The proceeding of ARMC meetings and recommendations of the ARMC as well as the significant matters and resolutions deliberated by the ARMC were reported to the Board at its immediate subsequent meeting for consideration and approval if required.
SUMMARY OF ACTIVITIES
In accordance with the approved TOR of the ARMC, the ARMC carried out the following activities for the FY2020:
1. reviewed the quarterly financial performance and annual audited financial statements of the Company prior to submission to the Board for consideration and approval;
2. reviewed the quarterly financial performance of the Company and its substantial subsidiaries and associates against the approved budget where explanations, clarifications and corrective action taken for significant variances are reported by the Management to the ARMC;
3. reviewed and discussed with the external auditors the nature and scope of the audit plan and ensure that the audit plan is comprehensive;
4. reviewed the audit findings arising from the statutory audit activities conducted by the external auditors and the Management’s responses thereto;
5. reviewed and recommended to the Board the proposed non-audit services to be provided by the external auditors in accordance with the Policy on the Selection of External Auditors;
6. reviewed the non-audit fees paid or payable to the external auditors based on the approved audit plan and non-audit services for the Group and the Company and recommended the same to the Board for approval;
7. conducted private meetings with the external auditors, without the presence of the CEO and Management, to give the external auditors the opportunity to raise any matters of concern and, arising therefrom, directing Management to take further action on such matters;
8. reviewed and approved the annual risk-based internal audit plan and scope of work for the Company and ensured the adequacy of resources and competencies of the IA to carry out the internal audit on all significant businesses and support functions based on identification and evaluation of the respective risks and control environment;
9. reviewed the internal audit reports comprising audit findings, recommendations and the Management responses for the Group and the Company prepared by the IA;
10. reviewed the reports prepared by the IA relating to the follow-up audits on all major areas of concern and recurring issues and risk areas to assess the extent to which the Management has made progress in implementing the agreed action plans arising from the prior internal audit reviews;
11. reviewed the list of related party transactions and conflict of interest entered into by the Company;
12. reviewed the Company’s risk profiles and actions plan taken by the Management to control and mitigate the risks on a quarterly basis;
SCOMI GROUP BHD ANNUAL REPORT 2020 32 Audit and Risk Management Committee Report ADDITIONAL INFORMATION
13. reviewed the annual Corporate Governance Overview Statement and Corporate Governance Report, 1. Material Contracts of the Company and its Subsidiaries, involving the interests of the Directors, Chief Statement on Risk Management and Internal Control and ARMC Report to be published in the Annual Executive Officer or Major Shareholders’ Interests Report; There was no material contract entered into by the Group involving the interest of Directors, Chief 14. tabled the approved Minutes of the ARMC meetings for the notation of the Board ; and Executive Officer or major shareholders, either still subsisting at the end of the financial year ended 30 June 2020 or entered into since the end of the previous financial year. 15. reported significant matters and resolutions deliberated by the ARMC to the Board.
2. Utilisation of Proceeds INTERNAL AUDIT FUNCTION The Company did not raise and did not have any balance of proceeds from any corporate proposal During FY2020, the IA report directly to the ARMC to ensure impartiality and independence. The ARMC reviews during the financial year ended 30 June 2020. the risk based internal audit plans and scope of work for the year for the Company as well as the performance of the IA in undertaking their internal audit function. The ARMC has direct communication channels with, and full access to, the IA for all internal audit reports prepared. 3. Audit and Non-Audit Fees
During the financial year under review, the IA conducted various internal audit engagements in accordance The amount of audit and non-audit fees incurred for the services rendered to the Company and the with the approved risk-based internal audit plans that are consistent with the corporate goal of the Company. Group by the external auditors during the financial year under review are as follows: Details of the internal audit activities carried out by the IA are as follows: The Company The Group Types of Fees 1. prepared and presented the risk-based internal audit plan, audit strategy, scope of work and resource (RM) (RM) requirements to the ARMC for deliberation and approval; Audit fee 350,000 350,000 2. evaluated and appraised the soundness, adequacy and application of financial and other controls and promoting effective controls in the Company at reasonable cost; Non-audit fee 140,000 140,000
3. ascertained the level of operational compliance with established policies, procedures and statutory
requirements; 4. Director’s Conflict of Interest
4. identified and recommended opportunities for improvements to the existing system of internal control, Save as disclosed below and the disclosures in the Notes to the Financial Statements of the Company for operations and processes in the Company; the financial year ended 30 June 2020, the Directors of the Company do not have any existing conflicts
of interest or any personal interest in any business arrangement involving the Company: 5. conducted follow-up audits on areas of concern and ensure that the corrective actions were
implemented appropriately to enhance the governance, risk management and control processes within the Company; Director of the Nature of existing Transactions Company conflict of interest The total costs incurred for the IA of the Company amounted to RM37,397.00. Lee Chun Fai (“Mr Mr Lee is formerly the common a. Sharing of rental of office This Statement is made in accordance with the resolution of the Board dated 30 November 2020. Lee”), Encik Shah directors of the Company and Scomi premises for Level 15 Menara TSR Hakim and Mr Sammy Energy Services Bhd (“SESB”). Mr Lee between the Company and Tse Kwok Fai (“Mr Tse”) resigned as director of SESB on 4 SESB. March 2020 and resigned as the b. Sharing of costs for Legal and director of SGB on 31 July 2020. Information & Communications Technology Services between Encik Shah Hakim is formerly the Non- the Company and SESB. Independent Non-Executive Director c. Interest charged by SESB on of SESB and for the Financial Year advances to SGB. 2020 the Non-Independent Non- Executive Director and substantial shareholder of SGB. He resigned as director of SESB on 4 March 2020.
Mr Tse is formerly the Executive Director of SESB and for the Financial Year 2020 the Executive Director and shareholder of the Company. He resigned as director of SESB on 4 March 2020.
In respect of each of the above transactions, the relevant Director concerned had declared the nature of his conflict of interest and had abstained from deliberating and voting on the relevant resolutions (if any) of the Board of Directors of the Company.
33 ANNUAL REPORT 2020 SCOMI GROUP BHD ADDITIONAL INFORMATION Additional Information
1. Material Contracts of the Company and its Subsidiaries, involving the interests of the Directors, Chief Executive Officer or Major Shareholders’ Interests
There was no material contract entered into by the Group involving the interest of Directors, Chief Executive Officer or major shareholders, either still subsisting at the end of the financial year ended 30 June 2020 or entered into since the end of the previous financial year.
2. Utilisation of Proceeds
The Company did not raise and did not have any balance of proceeds from any corporate proposal during the financial year ended 30 June 2020.
3. Audit and Non-Audit Fees
The amount of audit and non-audit fees incurred for the services rendered to the Company and the Group by the external auditors during the financial year under review are as follows:
The Company The Group Types of Fees (RM) (RM)
Audit fee 350,000 350,000
Non-audit fee 140,000 140,000
4. Director’s Conflict of Interest
Save as disclosed below and the disclosures in the Notes to the Financial Statements of the Company for the financial year ended 30 June 2020, the Directors of the Company do not have any existing conflicts of interest or any personal interest in any business arrangement involving the Company:
Director of the Nature of existing Transactions Company conflict of interest
Lee Chun Fai (“Mr Mr Lee is formerly the common a. Sharing of rental of office Lee”), Encik Shah directors of the Company and Scomi premises for Level 15 Menara TSR Hakim and Mr Sammy Energy Services Bhd (“SESB”). Mr Lee between the Company and Tse Kwok Fai (“Mr Tse”) resigned as director of SESB on 4 SESB. March 2020 and resigned as the b. Sharing of costs for Legal and director of SGB on 31 July 2020. Information & Communications Technology Services between Encik Shah Hakim is formerly the Non- the Company and SESB. Independent Non-Executive Director c. Interest charged by SESB on of SESB and for the Financial Year advances to SGB. 2020 the Non-Independent Non- Executive Director and substantial shareholder of SGB. He resigned as director of SESB on 4 March 2020.
Mr Tse is formerly the Executive Director of SESB and for the Financial Year 2020 the Executive Director and shareholder of the Company. He resigned as director of SESB on 4 March 2020.
In respect of each of the above transactions, the relevant Director concerned had declared the nature of his conflict of interest and had abstained from deliberating and voting on the relevant resolutions (if any) of the Board of Directors of the Company.
SCOMI GROUP BHD ANNUAL REPORT 2020 34 STATEMENT OF DIRECTORS’ RESPONSIBILITY Statement of Directors’ Responsibility
The Directors are required under the provisions of the Companies Act 2016 (“Act”) to prepare financial statements which includes the consolidated statement consisting of the consolidated statement of financial position and the consolidated statement of comprehensive income of the Company and its subsidiaries (“Group”) for each financial year, made out in accordance with the applicable approved accounting standards and the provisions of the Act., and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, and to present it before the Company at its annual general meeting.
The Directors are required to take reasonable steps in ensuring that the financial statements give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year ended 30 June 2020.
In the preparation of the financial statements, the Directors have ensured that:
• appropriate accounting policies have been adopted and applied consistently; • the statements are supported by reasonable and prudent judgement and estimates; • a going concern basis has been adopted unless it is inappropriate to assume that the Group will continue its business (to be read in conjunction with Note 1(b) of the Financial Statements); and • all applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.
The Directors are required under the Act to ensure that the Company keeps accounting records which disclose with reasonable accuracy the financial position of the Company, and to cause such records to be kept in such manner as to enable them to be conveniently and properly audited.
This Statement on Directors’ Responsibility for preparing the financial statements is made in accordance with the resolution of the Board dated 30 November 2020.
Page 1 of 1
35 ANNUAL REPORT 2020 SCOMI GROUP BHD STATEMENT OF DIRECTORS’ RESPONSIBILITY
The Directors are required under the provisions of the Companies Act 2016 (“Act”) to prepare financial statements which includes the consolidated statement consisting of the consolidated statement of financial position and the consolidated statement of comprehensive income of the Company and its subsidiaries (“Group”) for each financial year, made out in accordance with the applicable approved accounting standards and the provisions of the Act., and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, and to present it before the Company at its annual general meeting.
The Directors are required to take reasonable steps in ensuring that the financial statements give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year ended 30 June 2020. Financial In the preparation of the financial statements, the Directors have ensured that:
• appropriate accounting policies have been adopted and applied consistently; • the statements are supported by reasonable and prudent judgement and estimates; Information • a going concern basis has been adopted unless it is inappropriate to assume that the Group will continue its business (to be read in conjunction with Note 1(b) of the Financial Statements); and Scomi Group Bhd • all applicable accounting standards have been followed, subject to any material departures disclosed (Registration No. 200201003549 (571212-A)) and explained in the financial statements. (Incorporated in Malaysia)
The Directors are required under the Act to ensure that the Company keeps accounting records which and its subsidiaries disclose with reasonable accuracy the financial position of the Company, and to cause such records to be kept in such manner as to enable them to be conveniently and properly audited. Financial statements for the financial
This Statement on Directors’ Responsibility for preparing the financial statements is made in accordance with year ended 30 June 2020 the resolution of the Board dated 30 November 2020.
037 Directors’Report 045 Statements of Financial Position 046 Statements of Profit or Loss & Other Comprehensive Income 048 Consolidated Statement of Changes in Equity 050 Statement of Changes in Equity 051 Statements of Cash Flows
057 Notes to the Financial Statements
155 Statement by Directors
156 Statutory Declaration
157 Independent Auditors’ Report
161 Appendix
Page 1 of 1 37
Scomi Group Bhd (Registration No. 200201003549 (571212-A)) (Incorporated in Malaysia) and its subsidiaries Directors’ Report for the year ended 30 June 2020 Directors’ report for the financial year ended 30 June 2020
The Directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 30 June 2020.
Principal activities
The Company is principally engaged in investment holding activities whilst the principal activities of the subsidiaries are as stated in Note 6 to the financial statements. Except as disclosed in the financial statements, there has been no significant change in the nature of these activities during the financial year.
As disclosed in Note 21.1 to the financial statements, the Group has deconsolidated the financial position and results of Scomi Energy Services Bhd and its subsidiaries since 26 February 2020.
Subsidiaries
The details of the Company’s subsidiaries are disclosed in Note 6 to the financial statements.
Results Group Company RM’000 RM’000
Loss for the financial year attributable to: Owners of the Company (242,139) (404,062) Non-controlling interests 3,016 - (239,123) (404,062)
Reserves and provisions
There were no other material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial statements.
Dividends
No dividend was paid during the financial year and the Directors do not recommend any dividend to be paid for the financial year under review.
37 ANNUAL REPORT 2020 SCOMI GROUP BHD 38 RegistrationDirectors’ No. 200201003549 (571212Report-A) for the year ended 30 June 2020
Consolidation of subsidiaries with different financial year end
The following subsidiaries of the Company continue to have or to adopt a financial year which does not coincide with the Company in relation to the financial year ended 30 June 2020, subject to the following conditions:-
(i) approval by the Companies Commission of Malaysia pursuant to Section 247(7) of the Companies Act 2016; and (ii) the Company is to ensure compliance with Sections 252 and 253 of the Companies Act 2016 and the approved accounting standards pertaining to the preparation of consolidated financial statements.
Subsidiaries of the Company affected by the above are as follows:
(a) Scomi Oiltools Inc; (b) Scomi Oiltools (Europe) Ltd; (c) Scomi Oiltools de Mexico S de RL de CV; (d) KMC Oiltools Algerie EURL; (e) Oilfield Services de Mexico S de RL de CV.
Directors of the Company
Directors who served during the financial year until the date of this report are:
Shah Hakim @ Shahzanim bin Zain Sammy Tse Kwok Fai Cheong Wong Sang (Appointed on 18 June 2020) Tunku Azlan bin Tunku Aziz (Appointed on 18 June 2020) Ong Hock Seng (Appointed on 16 July 2020) Dato’ Sharkawi bin Alis (Appointed on 16 July 2020; Resigned on 28 August 2020) Dato’ Faisal Zelman bin Datuk Abdul Malik (Appointed on 16 July 2020; Resigned on 9 October 2020) Amirul Azhar bin Baharom (Appointed on 4 September 2019; Resigned on 31 July 2020) Dato’ Mohd Shahrom bin Mohamad (Appointed on 4 September 2019; Resigned on 15 July 2020) Dato’ Sreesanthan A/L Eliathamby (Resigned on 28 January 2020) Liew Willip (Resigned on 29 February 2020) Foong Choong Hong (Resigned on 17 March 2020) Lee Chun Fai (Resigned on 31 July 2020)
SCOMI GROUP BHD ANNUAL REPORT 2020 38 39 Directors’Registration No. 200201003549 Report (571212 for- A)the year ended 30 June 2020
List of Directors of Subsidiaries
Pursuant to Section 253 of the Companies Act 2016 in Malaysia, the Directors of the subsidiaries who served during the financial year until the date of this report are disclosed in the Appendix on page 161 of the financial statements.
Directors’ interests in shares
The interests and deemed interests in the shares, and/or warrants over ordinary shares, of the Company and of its related corporations (other than wholly owned subsidiaries) of those who were Directors at financial year end (including the interests of the spouses or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:
Number of ordinary shares At At 1.7.2019 Bought Sold 30.6.2020 ’000 ’000 ’000 ’000 The Company Direct interests Shah Hakim @ Shahzanim bin Zain 11,865 - - 1,865 Sammy Tse Kwok Fai 1 - - 1
Indirect interests Shah Hakim @ Shahzanim bin Zain 288,726 - - 88,726 Sammy Tse Kwok Fai - 233,992 - 5233,992
Number of warrants At At 1.7.2019 Bought Sold 30.6.2020 ’000 ’000 ’000 ’000 The Company Direct interests Shah Hakim @ Shahzanim bin Zain 3576 - - 576
Indirect interests Shah Hakim @ Shahzanim bin Zain 444,056 - - 44,056
39 ANNUAL REPORT 2020 SCOMI GROUP BHD 40 RegistrationDirectors’ No. 200201003549 (571212Report-A) for the year ended 30 June 2020
Directors’ interests in shares (continued)
1 886,214 shares held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim bin Zain (Margin) and Maybank Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim bin Zain.
2 Deemed interested by virtue of Section 8(4) of the Companies Act 2016 through his shareholding in Kaspadu Sdn Bhd, Rentak Rimbun Sdn Bhd and Onstream Sdn Bhd.
3 372,821 warrants held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim bin Zain (Margin) and Maybank Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim bin Zain.
4 Deemed interested by virtue of Section 8(4) of the Companies Act 2016 through his shareholding in Kaspadu Sdn Bhd, Rentak Rimbun Sdn Bhd and Onstream Sdn Bhd.
5 Deemed interested by virtue of Section 8(4) of the Companies Act 2016 through his shareholding in SBI Spectrum Sdn Bhd.
Save as disclosed above, none of the other Directors holding office at 30 June 2020 had any interest in the shares and options over shares of the Company and of its related corporations during the financial year.
Directors’ benefits
Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Company or of related corporations) 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 other than those disclosed in Note 30 to the financial statements.
There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
Issue of shares and debentures
There were no changes in the issued and paid-up capital of the Company during the financial year. There were no debentures issued during the financial year. Details of the issued and paid-up capital are set out in Note 13 to the financial statements.
SCOMI GROUP BHD ANNUAL REPORT 2020 40 41 Directors’Registration No. 200201003549 Report (571212 for- A)the year ended 30 June 2020
Treasury shares
There was no repurchase of the Company’s shares during the financial year under review. Details of the treasury shares are set out in Note 14 to the financial statements.
Options granted over unissued shares
No options were granted to any person to take up unissued shares of the Company during the financial year, except as disclosed below:
Warrants B On 30 January 2018, the Company executed a Deed Poll pertaining to the creation and issuance of detachable 491,279,410 warrants in the Company pursuant to the:
i) bonus issue of 477,765,360 warrants on the basis of 1 warrant for every 2 existing ordinary shares held in the Company; and
ii) issuance of 13,514,050 warrants arising from the merger of Scomi Engineering Bhd with the Company to be undertaken by way of a members scheme of arrangement pursuant to Section 365 of the Companies Act 2016.
The Warrants B were listed on Main Market Bursa Malaysia Securities Berhad. As at the end of the financial year, 491,279,410 Warrants B remained unexercised. There are no movement in the Warrants as at 30 June 2020.
The main features of the Warrants B are as follows:
i) the Warrants may be exercised at any time within a period of 5 years commencing from and including the date of issuance of the Warrants. Any Warrants not exercised during the exercise year will thereafter lapse and cease to be valid;
ii) the exercise price was RM0.21 per Warrant;
iii) each Warrant entitles the holder to subscribe for 1 new Consolidated Share at the exercise price at any time during the exercise year, subject to adjustments in accordance with the provisions of the Deed Poll;
iv) the Warrant holders shall not be entitled to any voting rights or to participate in any form of distribution other than on winding up, compromise or arrangement of the Company as set out the Deed Poll and/ or offer of further securities in the Company until and unless such holders exercise their Warrants into new Consolidated Shares;
41 ANNUAL REPORT 2020 SCOMI GROUP BHD 42 RegistrationDirectors’ No. 200201003549 (571212Report-A) for the year ended 30 June 2020
Options granted over unissued shares (continued)
The main features of the Warrants B are as follows: (continued) v) where a resolution has been passed for a members’ voluntary winding up of the Company, or where there is a compromise or arrangement, whether or not for the purpose of or in connection with a scheme for the reconstruction of the Company or the amalgamation of the Company with 1 or more companies, then every holder of the Warrants shall be entitled upon and subject to the provisions of the Deed Poll at any time within 6 weeks after the passing of such resolution for a members’ voluntary winding up of the Company or 6 weeks after the granting of the court order approving the compromise or arrangement, by the irrevocable surrender of his/her Warrants to the Company, elect to be treated as if he/she had immediately prior to the commencement of such winding up, compromise or arrangement exercised the exercise rights represented by his/her Warrants to the extent specified in the relevant subscription forms and be entitled to receive out of the assets of the Company which would be available in liquidation as if he/she had on such date been the holder of the new Consolidated Shares to which he/she would have been entitled to pursuant to such exercise; and vi) the Warrants shall be transferable in the manner provided under the Securities Industry (Central Depositories) Act 1991 and the Rules of Bursa Malaysia Depository Sdn Bhd.
Significant events during the financial year
Details of the significant events during the financial year are disclosed in Note 32 to the financial statements.
Significant events subsequent to the financial year end
Details of the subsequent events after the financial year are disclosed in Note 33 to the financial statements.
Indemnity and insurance costs
During the financial year, the total amount of insurance effected for Directors and Officers of the Company on group basis is RM50 million.
No indemnity was given nor was any insurance taken for auditors of the Company.
SCOMI GROUP BHD ANNUAL REPORT 2020 42 43 Directors’Registration No. 200201003549 Report (571212 for- A)the year ended 30 June 2020
Other statutory information
Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:
i) all known bad debts have been written off and adequate provision made for doubtful debts, and
ii) any current assets which were unlikely to be realised in the ordinary course of business have 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:
i) that would render the amount written off for bad debts or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent, or
ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or
iii) 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, or
iv) not otherwise dealt with in this report or the financial statements that would render any amount stated in the financial statements of the Group and of the Company misleading.
At the date of this report, there does not exist:
i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or
ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.
No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.
In the opinion of the Directors, except as disclosed in Note 21.1, Note 32 and Note 33 to the financial statements, the financial performance of the Group and of the Company for the financial year ended 30 June 2020 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.
43 ANNUAL REPORT 2020 SCOMI GROUP BHD 44 RegistrationDirectors’ No. 200201003549 Report (571212-A) for the year ended 30 June 2020
Auditors
The auditors, KPMG PLT, have indicated their willingness to accept re-appointment.
The auditors’ remuneration is disclosed in Note 22 to the financial statements.
Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:
………………………………………………. Tunku Azlan bin Tunku Aziz Director
………………………………………………. Sammy Tse Kwok Fai Director
Petaling Jaya
Date: 30 November 2020
SCOMI GROUP BHD ANNUAL REPORT 2020 44 45
Scomi Group Bhd 46 (Registration No. 200201003549 (571212-A)) (Incorporated in Malaysia) Scomi Group Bhd and its subsidiaries (Registration No. 200201003549 (571212-A)) Statements of Financial Position as at 30 June 2020 (Incorporated in Malaysia) Statements of financial position as at 30 June 2020 and its subsidiaries
Group Company Statements of profit or loss and other comprehensive Note 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 income for the financial year ended 30 June 2020 Assets Property, plant and equipment 3 357 297,237 357 479 Group Company Intangible assets 5 - 103,531 - - 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to Investments in subsidiaries 6 - - - 332,967 Note 30.6.2020 30.6.2019 30.6.2020 30.6.2019 Investments in associates 7 - 8,847 15,847 - RM’000 RM’000 RM’000 RM’000 Investments in joint ventures 8 - 2,083 - - Restated Deferred tax assets 9 - 529 - - Continuing operations Trade and other receivables 10 - 14,332 - - Revenue - 8 - - Other income 6,781 670 6,781 6,486 Total non-current assets 357 426,559 16,204 333,446 Personnel expenses (5,264) (16,919) (4,978) (15,334)
Foreign exchange loss (784) (2,058) (1,600) (2,776) Inventories 11 - 82,815 - - Professional and consultancy fee (4,722) (1,025) (4,635) (970) Current tax assets - 13,490 - - Net loss on impairment of financial Trade and other receivables 10 - 236,745 - 68 instruments (18,780) (123,177) (23,634) (53,391) Cash and bank balances 12 77 66,334 73 582 Loss on disposal of shares in Total current assets 77 399,384 73 650 subsidiaries - - (257,614) - Total assets 434 825,943 16,277 334,096 Other expenses (113,030) (47,707) (113,510) (114,250) Results from operating activities (135,799) (190,208) (399,190) (180,235) Equity Finance costs 19 (3,455) (2,536) (4,872) (2,536) Share capital 13 224,964 224,964 224,964 224,964 Share of loss of equity - accounted Translation reserve 15 (7,437) (71,984) - - for associates, net of tax (8,410) - - - Accumulated losses (458,064) (176,708) (445,895) (41,833) Loss before tax (147,664) (192,744) (404,062) (182,771) Total deficit in equity attributable Tax expense 20 - - - - to owners of the Company (240,537) (23,728) (220,931) 183,131 Loss from continuing operations Non-controlling interests 6(a) - 317,557 - - for the financial year/period (147,664) (192,744) (404,062) (182,771) Total (deficit in) equity/Total
equity (240,537) 293,829 (220,931) 183,131 Discontinued operations
Liabilities Loss from discontinued operations 21 (91,459) (233,225) - - Trade and other payables 16 - 1,028 - - Loss for the financial year/period 22 (239,123) (425,969) (404,062) (182,771) Loans and borrowings 17 255 50,196 255 396 Provision for retirement benefits 18 - 8,401 - - Other comprehensive income, Deferred tax liabilities 9 - 4,486 - - net of tax Total non-current liabilities 255 64,111 255 396 Items that will not be reclassified subsequently to profit or loss Trade and other payables 16 235,868 307,605 236,820 150,482 Remeasurement of defined benefit Loans and borrowings 17 133 136,093 133 87 liability - 470 - - Current tax liabilities 4,715 24,305 - - Total current liabilities 240,716 468,003 236,953 150,569 Total liabilities 240,971 532,114 237,208 150,965 Total equity and liabilities 434 825,943 16,277 334,096
The notes on pages 57 to 154 are an integral part of these financial statements.
45 ANNUAL REPORT 2020 SCOMI GROUP BHD 46
Scomi Group Bhd (Registration No. 200201003549 (571212-A)) (IncorporatedStatements in Malaysia) of Profit or Loss and Other and its subsidiaries Comprehensive Income Statements of profit or for loss the financial and other year ended comprehensive 30 June 2020 income for the financial year ended 30 June 2020
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to Note 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Restated Continuing operations Revenue - 8 - - Other income 6,781 670 6,781 6,486 Personnel expenses (5,264) (16,919) (4,978) (15,334) Foreign exchange loss (784) (2,058) (1,600) (2,776) Professional and consultancy fee (4,722) (1,025) (4,635) (970) Net loss on impairment of financial instruments (18,780) (123,177) (23,634) (53,391) Loss on disposal of shares in subsidiaries - - (257,614) - Other expenses (113,030) (47,707) (113,510) (114,250) Results from operating activities (135,799) (190,208) (399,190) (180,235) Finance costs 19 (3,455) (2,536) (4,872) (2,536) Share of loss of equity - accounted for associates, net of tax (8,410) - - - Loss before tax (147,664) (192,744) (404,062) (182,771) Tax expense 20 - - - - Loss from continuing operations for the financial year/period (147,664) (192,744) (404,062) (182,771)
Discontinued operations Loss from discontinued operations 21 (91,459) (233,225) - - Loss for the financial year/period 22 (239,123) (425,969) (404,062) (182,771)
Other comprehensive income, net of tax Items that will not be reclassified subsequently to profit or loss Remeasurement of defined benefit liability - 470 - -
SCOMI GROUP BHD ANNUAL REPORT 2020 46 47 Registration No. 200201003549 (571212-A) Statements of Profit or Loss and Other
ComprehensiveStatements of profit Income or loss and other comprehensive forincome the financial for year the endedfinancial 30 June year 2020 ended (continued) 30 June 2020 (continued)
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to Note 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Restated Items that are or may be reclassified subsequently to profit or loss Foreign currency translation differences for foreign operations 1,077 9,438 - - Share of other comprehensive loss of equity-accounted associate (7,437) - - - Reclassification of foreign currency differences on loss of control 34,283 21,956 - - Other comprehensive income for the financial year/period, net of tax 23 27,923 31,864 - - Total comprehensive loss for the financial year/period (211,200) (394,105) (404,062) (182,771)
(Loss)/Profit attributable to: Owners of the Company (242,139) (396,171) (404,062) (182,771) Non-controlling interests 6(a) 3,016 (29,798) - - Loss for the financial year/period (239,123) (425,969) (404,062) (182,771)
Total comprehensive (loss)/ income attributable to: Owners of the Company (216,809) (369,991) (404,062) (182,771) Non-controlling interests 5,609 (24,114) - - Total comprehensive loss for the financial year/period (211,200) (394,105) (404,062) (182,771)
Total comprehensive loss attributable to owners of the Company: Continuing operations (157,694) (194,512) (404,062) (182,771) Discontinued operations (59,115) (175,479) - - Total comprehensive loss for the financial year/period attributable to owners of the Company (216,809) (369,991) (404,062) (182,771)
Basic loss per ordinary share (sen): from continuing operations (13.50) (17.62) from discontinued operations (8.64) (18.60) 24 (22.14) (36.22)
The notes on pages 57 to 154 are an integral part of these financial statements.
47 ANNUAL REPORT 2020 SCOMI GROUP BHD 48 Scomi Group Bhd (Registration No. 200201003549 (571212-A)) ConsolidatedNotes(Incorporated toin Malaysia) the FinancialStatement Statements of Changes in Equity and its subsidiaries for the financial year ended 30 June 2020 Consolidated statement of changes in equity for the financial year ended 30 June 2020
<------Attributable to owners of the Company------> <------Non-distributable------> Non- Share Treasury Translation Accumulated controlling Total Group capital shares reserve losses Total interests equity Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 April 2018 664,964 (3,239) (97,856) (217,768) 346,101 341,671 687,772 Foreign currency translation differences for foreign operations - - 3,916 - 3,916 5,522 9,438 Retirement benefits - - - 308 308 162 470 Deconsolidation of subsidiaries 21.2 - - 21,956 - 21,956 - 21,956 Total other comprehensive income for the financial period - - 25,872 308 26,180 5,684 31,864 Loss for the financial period - - - (396,171) (396,171) (29,798) (425,969) Total comprehensive income/(loss) for the financial period - - 25,872 (395,863) (369,991) (24,114) (394,105) Contributions by and distributions to owners of the Company Capital reduction (440,000) - - 440,000 - - - Own shares sold - 3,239 - (3,077) 162 - 162 Total transactions with owners of the Company (440,000) 3,239 - 436,923 162 - 162 At 30 June 2019 224,964 - (71,984) (176,708) (23,728) 317,557 293,829 Note 14
SCOMI GROUP BHD ANNUAL REPORT 2020 48 49 Registration No. 200201003549 (571212-A) Notes to the Financial Statements Consolidated Statement of Changes in Equity forConsolidated the financial yearstatement ended 30 of June changes 2020 in(continued) equity for the financial year ended 30 June 2020 (continued)
<------Attributable to owners of the Company-----> <------Non-distributable------> Non- Share Translation Accumulated controlling Total Group capital reserve losses Total interests equity Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 July 2019 224,964 (71,984) (176,708) (23,728) 317,557 293,829 Foreign currency translation differences for foreign operations - (8,953) - (8,953) 6,475 (2,478) Deconsolidation of subsidiaries 21.1 - 34,283 - 34,283 (327,048) (292,765) Total other comprehensive income/(loss) for the financial year - 25,330 - 25,330 (320,573) (295,243) Reclassification of translation reserve to accumulated losses 39,217 (39,217) - - - (Loss)/Profit for the financial year - - (242,139) (242,139) 3,016 (239,123) Total comprehensive income/(loss) for the financial year - 64,547 (281,356) (216,809) (317,557) (534,366) At 30 June 2020 224,964 (7,437) (458,064) (240,537) - (240,537) Note 15
The notes on pages 57 to 154 are an integral part of these financial statements.
SCOMI GROUP BHD ANNUAL REPORT 2020 49 50 Registration No. 200201003549 (571212-A) StatementNotes to the of Financial Changes Statementsin Equity for the financial year ended 30 June 2020 Statement of changes in equity for the financial year ended 30 June 2020
<------Attributable to owners of the Company------> <------Non-distributable------> Share Treasury Accumulated Total capital shares losses equity Company Note RM’000 RM’000 RM’000 RM’000
At 1 April 2018 664,964 (3,239) (295,985) 365,740 Loss and total comprehensive loss for the financial period - - (182,771) (182,771) Contributions by and distributions to owners of the Company Capital reduction (440,000) - 440,000 - Own shares sold - 3,239 (3,077) 162 Total transactions with owners of the Company (440,000) 3,239 436,923 162 At 30 June 2019/1 July 2019 224,964 - (41,833) 183,131 Loss and total comprehensive loss for the financial year - - (404,062) (404,062) At 30 June 2020 224,964 - (445,895) (220,931) Note 13 Note 14
The notes on pages 57 to 154 are an integral part of these financial statements.
SCOMI GROUP BHD ANNUAL REPORT 2020 50 51
Scomi Group Bhd (Registration No. 200201003549 (571212-A)) 52 Statements(Incorporated in Malaysia) of Cash Flows Registration No. 200201003549 (571212-A) and its subsidiaries for the financial year ended 30 June 2020 Statements of cash flows for the financial year ended Statements of cash flows for the financial year ended 30 June 2020 30 June 2020 (continued)
Group Company Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cash flows from operating Cash flows from operating activities activities (continued) (Loss)/Profit before tax from: Provision for redemption of - continuing operations (147,664) (192,744) (404,062) (182,771) securities pledged with a financial - discontinued operations 27,530 (147,435) - - institution 94,372 38,000 94,372 38,000 Write-off: Adjustments for: - property, plant and equipment - 994 - - Amortisation of intangible assets - 812 - - - inventories - 590 - - Depreciation Operating profit/(loss) before - property, plant and equipment 26,123 80,793 122 158 changes in working capital 55,330 (3,967) (6,275) (15,142) - investment properties - 169 - - Disposal (gain)/loss on property, Changes in working capital: plant and equipment (20) 35,241 (220) (50) Inventories (3,181) 28,406 - - Disposal gain on investment Trade and other receivables, properties - (3,643) - (2,236) prepayments and other financial (Gain)/Loss on disposal of assets (40,929) 39,673 (34,167) (3,521) subsidiaries - (2,181) 257,614 - Trade and other payables (16,241) (7,434) (2,168) 12,617 Finance costs 10,665 44,097 4,872 2,536 Net impact from derecognition of Finance income - (1,391) - - liabilities - 41,777 - - Impairment losses: Cash (used in)/generated from - property, plant and equipment 1,300 1,542 - - operations (5,021) 98,455 (42,610) (6,046) - trade receivables and other Net tax paid (14,386) (20,772) - - receivables 18,780 128,959 18,780 52,325 Retirement benefits paid (1,885) (1,154) - - - amount due from subsidiaries - - 4,854 1,066 Net cash (used in)/from operating - investment in subsidiaries - - 636 64,397 activities (21,292) 76,529 (42,610) (6,046) - investment in associates 15,157 6,111 15,157 - - investment in joint ventures - 9,653 - 8,657 Cash flows from investing Provisions for retirement benefits - 1,093 - - activities Reversal of impairment losses: Acquisition of property, plant and - inventories - (3,983) - - equipment (1,148) (18,760) - (563) - receivables - (5,048) - - Proceeds from disposal of Share of results in joint ventures property, plant and equipment 220 16,977 220 89 and associates 8,303 6,165 - - Proceeds from disposal of Unrealised loss/(gain) on foreign investment properties - 5,712 - 6,500 exchange 784 (1,761) 1,600 2,776 (Outflow)/Proceeds from disposal of subsidiaries, net of cash disposed off (35,072) 19,054 - - Repayment of advance from jointly- controlled entities - 9,810 - - Interest received - 1,391 - - Net cash (used in)/from investing activities (36,000) 34,184 220 6,026
51 ANNUAL REPORT 2020 SCOMI GROUP BHD 52 Registration No. 200201003549 (571212-A) Statements of Cash Flows for the financial year ended 30 June 2020 (continued) Statements of cash flows for the financial year ended 30 June 2020 (continued)
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Cash flows from operating activities (continued) Provision for redemption of securities pledged with a financial institution 94,372 38,000 94,372 38,000 Write-off: - property, plant and equipment - 994 - - - inventories - 590 - - Operating profit/(loss) before changes in working capital 55,330 (3,967) (6,275) (15,142)
Changes in working capital: Inventories (3,181) 28,406 - - Trade and other receivables, prepayments and other financial assets (40,929) 39,673 (34,167) (3,521) Trade and other payables (16,241) (7,434) (2,168) 12,617 Net impact from derecognition of liabilities - 41,777 - - Cash (used in)/generated from operations (5,021) 98,455 (42,610) (6,046) Net tax paid (14,386) (20,772) - - Retirement benefits paid (1,885) (1,154) - - Net cash (used in)/from operating activities (21,292) 76,529 (42,610) (6,046)
Cash flows from investing activities Acquisition of property, plant and equipment (1,148) (18,760) - (563) Proceeds from disposal of property, plant and equipment 220 16,977 220 89 Proceeds from disposal of investment properties - 5,712 - 6,500 (Outflow)/Proceeds from disposal of subsidiaries, net of cash disposed off (35,072) 19,054 - - Repayment of advance from jointly- controlled entities - 9,810 - - Interest received - 1,391 - - Net cash (used in)/from investing activities (36,000) 34,184 220 6,026
SCOMI GROUP BHD ANNUAL REPORT 2020 52 53 54 StatementsRegistration No. 200201003549 of Cash (571212-A) Flows Registration No. 200201003549 (571212-A)
for the financial year ended 30 June 2020 (continued) Statements of cash flows for the financial year ended Statements of cash flows for the financial year ended 30 June 2020 (continued) 30 June 2020 (continued)
Group Company Notes to statements of cash flows 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to Note 30.6.2020 30.6.2019 30.6.2020 30.6.2019 (i) Cash and cash equivalents RM’000 RM’000 RM’000 RM’000 Cash flows from financing Cash and cash equivalents included in the statements of cash flows comprise the activities following statements of financial position amounts: Proceeds from borrowings 42,000 31,006 42,000 - Repayment of borrowings (16,143) (48,166) - - Group Company Interest paid on borrowings (6,701) (21,104) - - Note 2020 2019 2020 2019 Increase in short-term deposits RM’000 RM’000 RM’000 RM’000 pledged as security (922) (6,213) - - Proceeds from sale of treasury Cash and bank balances 12 77 41,428 73 582 shares - 162 - 162 Deposits placed with Payment of lease liabilities (119) - (119) 362 licensed banks 12 - 24,906 - - Net cash from/(used in) financing 77 66,334 73 582 activities 18,115 (44,315) 41,881 524 Less: Pledged deposits and bank balances 12 - (27,080) - - Net (decrease)/increase in cash and cash equivalents (39,177) 66,398 (509) 504 77 39,254 73 582 Effect of exchange rate fluctuations on cash held - 4,263 - - (ii) Cash outflows for leases as a lessee Cash and cash equivalents at beginning of financial year/period 39,254 (31,407) 582 78 Group and Cash and cash equivalents at end Company of the financial year/period (i) 77 39,254 73 582 2020 RM’000 Significant non-cash transaction Included in net cash from operating activities: Payment relating to short-term leases 122 During the financial year, the outstanding loan amount owing to Tan Sri Nik Awang @ Wan Interest paid in relation to lease liabilities 24 Azmi bin Wan Hamzah (“TSWA”) and Gelombang Global Sdn Bhd (“GGSB”) are deemed to Included in net cash from financing activities: be settled via transferring of Scomi Energy Services Bhd (“SESB”) shares to both lenders on Payment of lease liabilities 119 26 February 2020 as disclosed in Note 21.1. Total cash outflows for leases 265
53 ANNUAL REPORT 2020 SCOMI GROUP BHD 54 Registration No. 200201003549 (571212-A) Statements of Cash Flows for the financial year ended 30 June 2020 (continued) Statements of cash flows for the financial year ended 30 June 2020 (continued)
Notes to statements of cash flows
(i) Cash and cash equivalents
Cash and cash equivalents included in the statements of cash flows comprise the following statements of financial position amounts:
Group Company Note 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000
Cash and bank balances 12 77 41,428 73 582 Deposits placed with licensed banks 12 - 24,906 - - 77 66,334 73 582 Less: Pledged deposits and bank balances 12 - (27,080) - - 77 39,254 73 582
(ii) Cash outflows for leases as a lessee
Group and Company 2020 RM’000 Included in net cash from operating activities: Payment relating to short-term leases 122 Interest paid in relation to lease liabilities 24 Included in net cash from financing activities: Payment of lease liabilities 119 Total cash outflows for leases 265
SCOMI GROUP BHD ANNUAL REPORT 2020 54 55 NotesRegistration No.to 200201003549 the Financial (571212-A) Statements Statements of Cash Flows for the financial year ended 30 June 2020 (continued) Statements of cash flows for the financial year ended 30 June 2020 (continued)
(iii) Reconciliation of movements of liabilities to cash flows arising from financing activities
Interest Foreign exchange charge/ Net changes movement/ Deconsolidation At 1 amortisation from financing non-cash of subsidiaries At 30 June Group July 2019 cost cash flows repayment (Note 21.1) 2020 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Guaranteed Serial Bonds 103,917 2,538 (3,303) (915) (102,237) - Bank loans – secured 40,618 3,571 (19,541) 2,014 (26,662) - Revolving credit 41,271 1,101 - (1,608) (40,764) - Lease liabilities 483 24 (119) - - 388 Proceeds from borrowings - - 42,000 - - 42,000 Repayment through share transfer – non-cash - - - (42,000) - (42,000) Total liabilities from financing activities 186,289 7,234 19,037 (42,509) (169,663) 388
Interest charge/ Net changes Deconsolidation At 1 amortisation from financing Foreign exchange of subsidiaries At 30 June Group April 2018 cost cash flows movement (Note 21.2) 2019 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Guaranteed Serial Bonds 104,322 11,428 (11,428) (405) - 103,917 Bank loans – secured 251,223 - (22,445) 4,601 (192,761) 40,618 Revolving credit 242,369 - (4,728) 1,109 (197,479) 41,271 Lease liabilities 39,092 26 337 3 (38,975) 483 Total liabilities from financing activities 637,006 11,454 (38,264) 5,308 (429,215) 186,289
SCOMI GROUP BHD ANNUAL REPORT 2020 55 56 Registration No. 200201003549 (571212-A) StatementsNotes to the of Financial Cash Flows Statements for the financial year ended 30 June 2020 (continued) Statements of cash flows for the financial year ended 30 June 2020 (continued)
(iii) Reconciliation of movements of liabilities to cash flows arising from financing activities (continued)
Interest charge/ Net changes from At 1 amortisation financing cash Non-cash At 30 Company July 2019 cost flows repayment June 2020 RM’000 RM’000 RM’000 RM’000 RM’000
Lease liabilities 483 24 (119) - 388 Proceeds from borrowings - - 42,000 - 42,000 Repayment through share transfer – non-cash - - - (42,000) (42,000) Total liabilities from financing activities 483 24 41,881 (42,000) 388
Interest charge/ Net changes At 1 amortisation from financing At 30 Company April 2018 cost cash flows June 2019 RM’000 RM’000 RM’000 RM’000
Lease liabilities 95 26 362 483 Total liabilities from financing activities 95 26 362 483
The notes on pages 57 to 154 are an integral part of these financial statements.
SCOMI GROUP BHD ANNUAL REPORT 2020 56 57
Scomi Group Bhd (Registration No. 200201003549 (571212-A)) (Incorporated in Malaysia) Notesand its subsidiaries to the Financial Statements
Notes to the financial statements
Scomi Group Bhd is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of the principal place of business and registered office of the Company are as follows:
Principal place of business Level 15, Menara TSR, No. 12, Jalan PJU 7/3, Mutiara Damansara, 47810 Petaling Jaya Selangor Darul Ehsan
Registered office D-31-1, Menara SuezCap 1, Gerbang Kerinchi, No. 2 Jalan Kerinchi, 59200 Kuala Lumpur Wilayah Persekutuan
The consolidated financial statements of the Company as at and for the financial year ended 30 June 2020 comprise the Company and its subsidiaries (together referred to as the “Group” and individually referred to as “Group Entities”) and the Group’s interests in associates and joint ventures.
The Company is principally engaged in investment holding activities, whilst the principal activities of the subsidiaries are as stated in Note 6. As disclosed in Note 21.1, the Group has deconsolidated the financial position and results of Scomi Energy Services Bhd and its subsidiaries since 26 February 2020.
These financial statements were authorised for issue by the Board of Directors on 30 November 2020.
57 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements58 Registration No. 200201003549 (571212-A)
1. Basis of preparation
(a) Statement of compliance
The financial statements of the Group and the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.
The following are accounting standards, interpretations and amendments of the MFRSs that have been issued by the Malaysian Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Company:
MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2020 • Amendments to MFRS 3, Business Combinations – Definition of a Business • Amendments to MFRS 101, Presentation of Financial Statements and MFRS 108, Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material • Amendments to MFRS 9, Financial Instruments, MFRS 139, Financial Instruments: Recognition and Measurement and MFRS 7, Financial Instruments: Disclosures – Interest Rate Benchmark Reform
MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 June 2020 • Amendment to MFRS 16, Leases – Covid-19-Related Rent Concessions
MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2021 • Amendments to MFRS 9, Financial Instruments, MFRS 139, Financial Instruments: Recognition and Measurement, MFRS 7, Financial Instruments: Disclosures, MFRS 4, Insurance Contracts and MFRS 16, Leases – Interest Rate Benchmark Reform – Phase 2
MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2022 • Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements to MFRS Standards 2018−2020) • Amendments to MFRS 3, Business Combinations – Reference to the Conceptual Framework • Amendments to MFRS 9, Financial Instruments (Annual Improvements to MFRS Standards 2018−2020) • Amendments to Illustrative Examples accompanying MFRS 16, Leases (Annual Improvements to MFRS Standards 2018−2020) • Amendments to MFRS 116, Property, Plant and Equipment − Proceeds before Intended Use • Amendments to MFRS 137, Provisions, Contingent Liabilities and Contingent Assets − Onerous Contracts − Cost of Fulfilling a Contract • Amendments to MFRS 141, Agriculture (Annual Improvements to MFRS Standards 2018−2020)
SCOMI GROUP BHD ANNUAL REPORT 2020 58 Notes to the Financial Statements 59 Registration No. 200201003549 (571212-A)
1. Basis of preparation (continued)
(a) Statement of compliance (continued)
MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2023 • MFRS 17, Insurance Contracts • Amendments to MFRS 101, Presentation of Financial Statements – Classification of Liabilities as Current or Non-current
MFRSs, interpretations and amendments effective for annual periods beginning on or after a date yet to be confirmed • Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
The Group and the Company plan to apply the abovementioned accounting standards, interpretations and amendments:
• from the annual period beginning on 1 July 2020 for those amendments that are effective for annual periods beginning on or after 1 January 2020 and 1 June 2020.
• from the annual period beginning on 1 July 2021 for those amendments that are effective for annual periods beginning on or after 1 January 2021.
• from the annual period beginning on 1 July 2022 for those amendments that are effective for annual periods beginning on or after 1 January 2022, except for amendments to MFRS 141 which is not applicable to the Group and the Company.
• from the annual period beginning on 1 July 2023 for the accounting standard and amendments that are effective for annual periods beginning on or after 1 January 2023, except for MFRS 17 which is not applicable to the Group and the Company.
The initial application of the abovementioned amendments is not expected to have any material financial impact to the current period and prior period financial statements of the Group and of the Company.
(b) Basis of measurement
The Group and the Company report the following:
i) the Group and the Company incurred net losses of RM239 million and RM404 million respectively for the financial year ended 30 June 2020 and as at that date, the current liabilities of the Group and of the Company exceeded their current assets by RM241 million and RM237 million, respectively. As at the year end date, the Group and the Company had deficits in equity amounting to RM241 million and RM221 million, respectively;
59 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements60 Registration No. 200201003549 (571212-A)
1. Basis of preparation (continued)
(b) Basis of measurement (continued)
ii) the Company had on 30 August 2019 triggered the criteria pursuant to Paragraphs 2.1(a) and 2.1(e) of Practice Note No. 17 (“PN17”) of the Main Market Listing Requirements of Bursa Securities (“Listing Requirements”) and was classified as a PN17 Company on 3 December 2019. The Company has up to August 2021 to submit its regularisation plan to relevant regulatory authorities for approval;
iii) the following events and circumstances indicate material uncertainties that may cast significant doubt over the abilities of Scomi Energy Services Bhd (“SESB”), a material associate to the Group and the Company, to continue as a going concern: a. SESB has been classified as a PN17 issuer on 21 January 2020; b. certain material subsidiaries of SESB are currently under judicial management; c. a key subsidiary of SESB has defaulted in repaying the guaranteed serial bonds of RM80.4 million, the event of default also resulted in cross defaults on SESB Group’s other credit facilities; and d. auditor issued a disclaimer opinion due to material uncertainty on going concern on the financial statements of SESB Group for the financial year ended 30 June 2020.
These events and conditions indicate that material uncertainties exist that may cast significant doubt on the ability of the Group and of the Company to continue as going concerns and therefore, the Group and the Company may be unable to realise their assets and discharge their liabilities in the normal course of business.
The financial statements of the Group and the Company have been prepared on going concern basis. The going concern assumption is highly dependent on the successful formulation, approval and implementation of a regularisation plan, and the ability of the Group and the Company to attain profitable, sustainable and viable operations so as to generate sufficient cash flows to fulfil their obligations as and when they fall due.
(c) Functional and presentation currency
These financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.
SCOMI GROUP BHD ANNUAL REPORT 2020 60 Notes to the Financial Statements 61 Registration No. 200201003549 (571212-A)
1. Basis of preparation (continued)
(d) Use of estimates and judgements
The preparation of the financial statements in conformity with MFRSs requires Directors to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and in any future years affected.
There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the followings:
(i) Litigations
Significant judgement is required to determine the likelihood of the obligation and the estimation of amounts to be recognised in respect of legal matters, subject to uncertain future events. The legal cases may extend over several years and the amount or timing may differ from current assumptions.
(ii) Measurement of expected credit loss (“ECL”)
The Group and the Company applies MFRS 9 to measure expected credit losses of other receivables and amount due from related companies. There are assumptions and judgements such as historical bad debts and current economic trends made to assess and measure ECL.
(iii) Impairment of investments in subsidiaries, associates and joint ventures
The Group and the Company assess the impairment of investments in subsidiaries, associates and joint ventures when there is an indication of impairment. There are assumptions and judgements involved in determining the amount of the remaining interest in investment in associate at Company level.
(iv) Deconsolidation of Scomi Energy Services Bhd and its subsidiaries
As disclosed in Note 21.1, as at 30 June 2020, the Directors have determined that the Company has lost control in Scomi Energy Services Bhd and its subsidiaries (“SESB Group”) due to the transfer of pledged shares pursuant to the Company’s default on repayment of loans to Tan Sri Nik Awang @ Wan Azmi bin Wan Hamzah and Gelombang Global Sdn Bhd.
61 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements62 Registration No. 200201003549 (571212-A)
1. Basis of preparation (continued)
(d) Use of estimates and judgements (continued)
(iv) Deconsolidation of Scomi Energy Services Bhd and its subsidiaries (continued)
The assets and liabilities and the results of SESB Group have been deconsolidated from the date of transfer of the pledged shares on 26 February 2020. There are significant judgements made by Directors as to whether the Group has significant influence on SESB Group after the loss of control of SESB Group.
(v) Going concern
As disclosed in Note 1(b), there were events and conditions which indicate that a material uncertainty exists that may cast significant doubt on the ability of the Group and the Company to continue as going concerns. There are significant judgement made by Directors in preparing the financial statements on a going concern basis.
2. Significant accounting policies
The accounting policies set out below have been applied consistently to the periods presented in these financial statements and have been applied consistently by Group entities, unless otherwise stated.
Arising from the adoption of MFRS 16, Leases, there are changes to the accounting policy applied to leases contracts entered into by the Group entities as compared to those applied in the previous financial statements. The impacts arising from the changes are disclosed in Note 34.
(a) Basis of consolidation
(i) 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.
The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.
Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investment includes transaction costs.
SCOMI GROUP BHD ANNUAL REPORT 2020 62 Notes to the Financial Statements 63 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
(ii) Business combinations
Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.
For new acquisitions, the Group measures the cost of goodwill at the acquisition date as: • the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus • if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less • 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 it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.
(iii) Acquisitions of non-controlling interests
The Group accounts for all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.
(iv) Loss of control
Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or a financial asset depending on the level of influence retained.
63 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements64 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
(v) Associates
Associates are entities, including unincorporated entities, in which the Group has significant influence, but not control, over the financial and operating policies.
Investments in associates are accounted for in the consolidated financial statements using the equity method less any impairment losses, unless it is classified as held for sale or distribution. The cost of the investment includes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the associates, after adjustments if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.
When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-term investments is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate.
When the Group ceases to have significant influence over an associate, any retained interest in the former associate at the date when significant influence is lost is measured at fair value and this amount is regarded as the initial carrying amount of a financial asset. The difference between the fair value of any retained interest plus proceeds from the interest disposed of and the carrying amount of the investment at the date when equity method is discontinued is recognised in the profit or loss.
When the Group’s interest in an associate decreases but does not result in a loss of significant influence, any retained interest is not remeasured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to the profit or loss if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities.
Investments in associates are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investment includes transaction costs.
SCOMI GROUP BHD ANNUAL REPORT 2020 64 Notes to the Financial Statements 65 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
(vi) Joint arrangements
Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements’ returns.
Joint arrangements are classified and accounted for as follows:
• A joint arrangement is classified as “joint operation” when the Group or the Company has rights to the assets and obligations for the liabilities relating to an arrangement. The Group and the Company account for each of its share of the assets, liabilities and transactions, including its share of those held or incurred jointly with the other investors, in relation to the joint operation.
• A joint arrangement is classified as “joint venture” when the Group or the Company has rights only to the net assets of the arrangements. The Group accounts for its interest in the joint venture using the equity method. Investments in joint venture are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investment includes transaction costs.
(vii) Non-controlling interests
Non-controlling interests at the end of the reporting period, 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 year between non-controlling interests and 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.
(viii) 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.
Unrealised gains arising from transactions with equity-accounted associates and joint ventures are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
65 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements66 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date.
Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date, except for those that are measured at fair value which are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of equity instruments where they are measured at fair value through other comprehensive income or a financial instrument designated as a cash flow hedge, which are recognised in other comprehensive income.
In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the foreign currency translation reserve (“FCTR”) in equity.
(ii) Operations denominated in functional currencies other than Ringgit Malaysia
The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to RM at exchange rates at the dates of the transactions.
The income and expenses of foreign operations in hyperinflationary economies are translated to RM at the exchange rate at the end of the reporting period. Prior to translating the financial statements of foreign operations in hyperinflationary economies, their financial statements for the current period are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices at the end of the reporting period.
SCOMI GROUP BHD ANNUAL REPORT 2020 66 Notes to the Financial Statements 67 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(b) Foreign currency (continued)
(ii) Operations denominated in functional currencies other than Ringgit Malaysia (continued)
Foreign currency differences are recognised in other comprehensive income and accumulated in the FCTR in equity. However, if the operation is a non- wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.
When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
(c) Financial instruments
(i) Recognition and initial measurement
A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without significant financing component) or a financial liability is initially measured at fair value plus or minus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issuance. A trade receivable without a significant financing component is initially measured at the transaction price.
An embedded derivative is recognised separately from the host contract where the host contract is not a financial asset, and accounted for separately if, and only if, the derivative is not closely related to the economic characteristics and risks of the host contract and the host contract is not measured at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.
67 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements68 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(c) Financial instruments (continued)
(ii) Financial instrument categories and subsequent measurement
Financial assets
Categories of financial assets are determined on initial recognition and are not reclassified subsequent to their initial recognition unless the Group or the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting year following the change of the business model.
(a) Amortised cost
Amortised cost category comprises financial assets that are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets are not designated as fair value through profit or loss. Subsequent to initial recognition, these financial assets are measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.
Interest income is recognised by applying effective interest rate to the gross carrying amount except for credit impaired financial assets (see Note 2(j)(i)) where the effective interest rate is applied to the amortised cost.
(b) Fair value through other comprehensive income
(i) Debt investments
Fair value through other comprehensive income category comprises debt investment where it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the debt investment, and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The debt investment is not designated as at fair value through profit or loss. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.
SCOMI GROUP BHD ANNUAL REPORT 2020 68 Notes to the Financial Statements 69 70 Registration No. 200201003549 (571212-A) Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued) 2. Significant accounting policies (continued)
(c) Financial instruments (continued) (c) Financial instruments (continued)
(ii) Financial instrument categories and subsequent measurement (ii) Financial instrument categories and subsequent measurement (continued) (continued)
Financial assets (continued) Financial liabilities
(b) Fair value through other comprehensive income (continued) The categories of financial liabilities at initial recognition are as follows:
(i) Debt investments (continued) (a) Fair value through profit or loss
Interest income is recognised by applying effective interest rate to Fair value through profit or loss category comprises financial liabilities the gross carrying amount except for credit impaired financial that are derivatives (except for a derivative that is a financial guarantee assets (see Note 2(j)(i)) where the effective interest rate is applied contract or a designated and effective hedging instrument), contingent to the amortised cost. consideration in a business combination and financial liabilities that are specifically designated into this category upon initial recognition. (ii) Equity investments On initial recognition, the Group or the Company may irrevocably This category comprises investment in equity that is not held for designate a financial liability that otherwise meets the requirements to trading, and the Group and the Company irrevocably elect to be measured at amortised cost as at fair value through profit or loss: present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an (a) if doing so eliminates or significantly reduces an accounting investment-by-investment basis. Dividends are recognised as mismatch that would otherwise arise; income in profit or loss unless the dividend clearly represents a recovery of part of the cost of investment. Other net gains and (b) a group of financial liabilities or assets and financial liabilities is losses are recognised in other comprehensive income. On managed and its performance is evaluated on a fair value basis, in derecognition, gains and losses accumulated in other accordance with a documented risk management or investment comprehensive income are not reclassified to profit or loss. strategy, and information about the group is provided internally on that basis to the Group’s key management personnel; or (c) Fair value through profit or loss (c) if a contract contains one or more embedded derivatives and the All financial assets not measured at amortised cost or fair value through host is not a financial asset in the scope of MFRS 9, where the other comprehensive income as described above are measured at fair embedded derivative significantly modifies the cash flows and value through profit or loss. This includes derivative financial assets separation is not prohibited. (except for a derivative that is a designated and effective hedging instrument). On initial recognition, the Group or the Company may Financial liabilities categorised as fair value through profit or loss are irrevocably designate a financial asset that otherwise meets the subsequently measured at their fair value with gains or losses, including requirements to be measured at amortised cost or at fair value through any interest expense are recognised in the profit or loss. other comprehensive income as at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that For financial liabilities where it is designated as fair value through profit would otherwise arise. or loss upon initial recognition, the Group and the Company recognise the amount of change in fair value of the financial liability that is Financial assets categorised as fair value through profit or loss are attributable to change in credit risk in the other comprehensive income subsequently measured at their fair value. Net gains or losses, including and remaining amount of the change in fair value in the profit or loss, any interest or dividend income, are recognised in the profit or loss. unless the treatment of the effects of changes in the liability’s credit risk would create or enlarge an accounting mismatch. All financial assets, except for those measured at fair value through profit and loss and equity investments measured at fair value through other comprehensive income, are subject to impairment assessment (see Note 2(j)(i)).
69 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements70 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(c) Financial instruments (continued)
(ii) Financial instrument categories and subsequent measurement (continued)
Financial liabilities
The categories of financial liabilities at initial recognition are as follows:
(a) Fair value through profit or loss
Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument), contingent consideration in a business combination and financial liabilities that are specifically designated into this category upon initial recognition.
On initial recognition, the Group or the Company may irrevocably designate a financial liability that otherwise meets the requirements to be measured at amortised cost as at fair value through profit or loss:
(a) if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise;
(b) a group of financial liabilities or assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the Group’s key management personnel; or
(c) if a contract contains one or more embedded derivatives and the host is not a financial asset in the scope of MFRS 9, where the embedded derivative significantly modifies the cash flows and separation is not prohibited.
Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair value with gains or losses, including any interest expense are recognised in the profit or loss.
For financial liabilities where it is designated as fair value through profit or loss upon initial recognition, the Group and the Company recognise the amount of change in fair value of the financial liability that is attributable to change in credit risk in the other comprehensive income and remaining amount of the change in fair value in the profit or loss, unless the treatment of the effects of changes in the liability’s credit risk would create or enlarge an accounting mismatch.
SCOMI GROUP BHD ANNUAL REPORT 2020 70 Notes to the Financial Statements 71 72 Registration No. 200201003549 (571212-A) Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued) 2. Significant accounting policies (continued)
(c) Financial instruments (continued) (c) Financial instruments (continued)
(ii) Financial instrument categories and subsequent measurement (iv) Financial guarantee contracts (continued) A financial guarantee contract is a contract that requires the issuer to make Financial liabilities (continued) 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 (b) Amortised cost original or modified terms of a debt instrument.
Other financial liabilities not categorised as fair value through profit or Financial guarantees issued are initially measured at fair value. Subsequently, loss are subsequently measured at amortised cost using the effective they are measured at higher of: interest method. • the amount of the loss allowance; and Interest expense and foreign exchange gains and losses are recognised • the amount initially recognised less, when appropriate, the cumulative in the profit or loss. Any gains or losses on derecognition are also amount of income recognised in accordance to the principles of MFRS 15, recognised in the profit or loss. Revenue from Contracts with Customers.
(iii) Regular way purchase or sale of financial assets Liabilities arising from financial guarantees are presented together with other provisions. A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date or settlement date accounting (v) Hedge accounting in the current year. At inception of a designated hedging relationship, the Group and the Trade date accounting refers to: Company document the risk management objective and strategy for undertaking the hedge. The Group and the Company also document the (a) the recognition of an asset to be received and the liability to pay for it on economic relationship between the hedged item and the hedging instrument, the trade date, and including whether the changes in cash flows of the hedged item and hedging (b) derecognition of an asset that is sold, recognition of any gain or loss on instrument are expected to offset each other. disposal and the recognition of a receivable from the buyer for payment on the trade date. (a) Fair value hedge
Settlement date accounting refers to: A fair value hedge is a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, (a) the recognition of an asset on the day it is received by the Group or the or an identified portion of such an asset, liability or firm commitment, Company, and that is attributable to a particular risk and could affect the profit or loss. (b) derecognition of an asset and recognition of any gain or loss on disposal on the day that is delivered by the Group or the Company. In a fair value hedge, the gain or loss on the hedging instrument shall be recognised in profit or loss (or other comprehensive income, if the Any change in the fair value of the asset to be received during the financial hedging instrument hedges an equity instrument which the Group or period between the trade date and the settlement date is accounted in the the Company has elected to present the subsequent changes in fair same way as it accounts for the acquired asset. value of the investment in equity in other comprehensive income).
Generally the Group or the Company applies settlement date accounting unless otherwise stated for the specific class of asset.
71 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements72 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(c) Financial instruments (continued)
(iv) 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.
Financial guarantees issued are initially measured at fair value. Subsequently, they are measured at higher of:
• the amount of the loss allowance; and • the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance to the principles of MFRS 15, Revenue from Contracts with Customers.
Liabilities arising from financial guarantees are presented together with other provisions.
(v) Hedge accounting
At inception of a designated hedging relationship, the Group and the Company document the risk management objective and strategy for undertaking the hedge. The Group and the Company also document the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.
(a) Fair value hedge
A fair value hedge is a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect the profit or loss.
In a fair value hedge, the gain or loss on the hedging instrument shall be recognised in profit or loss (or other comprehensive income, if the hedging instrument hedges an equity instrument which the Group or the Company has elected to present the subsequent changes in fair value of the investment in equity in other comprehensive income).
SCOMI GROUP BHD ANNUAL REPORT 2020 72 Notes to the Financial Statements 73 74 Registration No. 200201003549 (571212-A) Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued) 2. Significant accounting policies (continued)
(c) Financial instruments (continued) (c) Financial instruments (continued)
(v) Hedge accounting (continued) (v) Hedge accounting (continued)
(a) Fair value hedge (continued) (b) Cash flow hedge (continued)
The hedging gain or loss on the hedged item shall adjust the carrying Cash flow hedge accounting is discontinued prospectively when the amount of the hedged item and be recognised in profit or loss. If the hedging instrument expires or is sold, terminated or exercised, the hedged item is a financial asset (or a component thereof) that is hedge is no longer highly effective, the forecast transaction is no longer measured at fair value through other comprehensive income, the expected to occur or the hedge designation is revoked. If the hedge is hedging gain or loss on the hedged item shall be recognised in profit or for a forecast transaction, the cumulative gain or loss on the hedging loss. However, if the hedged item is an equity instrument for which an instrument remains in equity until the forecast transaction occurs. When entity has elected to present changes in fair value in other hedge accounting for cash flow hedges is discontinued, the amount that comprehensive income, those amounts shall remain in other has been accumulated in the hedging reserve and the cost of hedging comprehensive income. When a hedged item is an unrecognised firm reserve remains in equity until, for a hedge of a transaction resulting in commitment (or a component thereof), the cumulative change in the fair recognition of a non-financial item, it is included in the non-financial value of the hedged item subsequent to its designation is recognised item’s cost on its initial recognition or, for other cash flow hedges, it is as an asset or a liability with a corresponding gain or loss recognised reclassified to profit or loss in the same financial year or years as the in profit or loss. hedged expected future cash flows affect profit or loss.
(b) Cash flow hedge If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the hedging reserve and A cash flow hedge is a hedge of the exposure to variability in cash flows the cost of hedging reserve are immediately reclassified to profit or loss. that is attributable to a particular risk associated with all, or a component of, a recognised asset or liability or a highly probable (c) Hedge of a net investment forecast transaction and could affect the profit or loss. In a cash flow hedge, the portion of the gain or loss on the hedging instrument that is A hedge of a net investment is a hedge in the interest of the net assets determined to be an effective hedge is recognised in other of a foreign operation. In a net investment hedge, the portion of the comprehensive income and accumulated in equity and the ineffective gain or loss on the hedging instrument that is determined to be an portion is recognised in profit or loss. The effective portion of changes effective hedge is recognised in other comprehensive income and the in the fair value of the derivative that is recognised in other ineffective portion is recognised in profit or loss. The cumulative gain comprehensive income is limited to the cumulative change in fair value or loss recognised in other comprehensive income is reclassified from of the hedged item, determined on a present value basis, from inception equity into profit or loss on disposal of the foreign operation. of the hedge. (vi) Derecognition Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss in A financial asset or part of it is derecognised when, and only when the the same financial year or years during which the hedged forecast cash contractual rights to the cash flows from the financial asset expire or flows affect profit or loss. If the hedge item is a non-financial asset or transferred, or control of the asset is not retained or substantially all of the liability, the associated gain or loss recognised in other comprehensive risks and rewards of ownership of the financial asset are transferred to income is removed from equity and included in the initial amount of the another party. On derecognition of a financial asset, the difference between asset or liability. However, loss recognised in other comprehensive the carrying amount of the financial asset and the sum of consideration income that will not be recovered in one or more future years is received (including any new asset obtained less any new liability assumed) reclassified from equity into profit or loss immediately. is recognised in profit or loss.
The Group designates only the change in fair value of the spot element of forward contracts as the hedging instrument in cash flow hedging relationships. The change in fair value of the forward element of forward exchange contracts (“forward points”) and/or the foreign currency basis spread are separately accounted for as cost of hedging and recognised in a cost of hedging reserve within equity.
73 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements74 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(c) Financial instruments (continued)
(v) Hedge accounting (continued)
(b) Cash flow hedge (continued)
Cash flow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected to occur or the hedge designation is revoked. If the hedge is for a forecast transaction, the cumulative gain or loss on the hedging instrument remains in equity until the forecast transaction occurs. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the hedging reserve and the cost of hedging reserve remains in equity until, for a hedge of a transaction resulting in recognition of a non-financial item, it is included in the non-financial item’s cost on its initial recognition or, for other cash flow hedges, it is reclassified to profit or loss in the same financial year or years as the hedged expected future cash flows affect profit or loss.
If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the hedging reserve and the cost of hedging reserve are immediately reclassified to profit or loss.
(c) Hedge of a net investment
A hedge of a net investment is a hedge in the interest of the net assets of a foreign operation. In a net investment hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss. The cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss on disposal of the foreign operation.
(vi) Derecognition
A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or transferred, or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset are transferred to another party. On derecognition of a financial asset, the difference between the carrying amount of the financial asset and the sum of consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss.
SCOMI GROUP BHD ANNUAL REPORT 2020 74 Notes to the Financial Statements 75 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(c) Financial instruments (continued)
(vi) Derecognition (continued)
A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expires. A financial liability is also derecognised when its terms are modified and the cash flows of the modified liability are substantially different, in which case, a new financial liability based on modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
(vii) Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group or the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and liability simultaneously.
(d) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within “other income” or “other expenses” respectively in profit or loss.
75 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements76 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(d) Property, plant and equipment (continued)
(ii) Subsequent costs
The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment from the date that they are available for use. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use.
The estimated useful lives for the current and comparative periods are as follows:
• Freehold buildings 5 – 50 years • Leasehold buildings 3 – 50 years • Marine vessels 25 years • Tools, plant and machinery 3 – 12 years • Renovation, office equipment, fittings and computers 3 – 10 years • Motor vehicles 3 – 7 years
Depreciation methods, useful lives and residual values are reviewed at end of the reporting period, and adjusted as appropriate.
SCOMI GROUP BHD ANNUAL REPORT 2020 76 Notes to the Financial Statements 77 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(e) Leases
The Group and the Company have applied MFRS 16 using the modified retrospective approach, under which the Group and the Company have chosen to measure the right-of-use asset equals to the lease liability at 1 July 2019. Accordingly, the comparative information presented for 2019 has not been restated – i.e. it is presented, as previously reported under MFRS 117, Leases and related interpretations.
Current financial year
(i) Definition of a lease
A contract is, or contains, a lease if the contract conveys a right to control the use of an identified assets for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group and the Company assess whether:
• the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
• the customer has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and
• the customer has the right to direct the use of the asset. The customer has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the customer has the right to direct the use of the asset if either the customer has the right to operate the asset; or the customer designed the asset in a way that predetermines how and for what purpose it will be used.
At inception or on reassessment of a contract that contains a lease component, the Group and the Company allocate the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices. However, for leases of properties in which the Group and the Company are a lessee, they have elected not to separate non-lease components and will instead account for the lease and non-lease components as a single lease component.
77 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements78 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(e) Leases (continued)
Current financial year (continued)
(ii) Recognition and initial measurement
(a) As a lessee
The Group and the Company recognise a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the respective Group entities’ incremental borrowing rate. Generally, the Group entities use their incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
• fixed payments, including in-substance fixed payments less any incentive receivables;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee;
• the exercise price under a purchase option that the Group and the Company are reasonably certain to exercise; and
• penalties for early termination of a lease unless the Group and the Company are reasonably certain not to terminate early.
The Group and the Company exclude variable lease payments that linked to future performance or usage of the underlying asset from the lease liability. Instead, these payments are recognised in profit or loss in the period in which the performance or use occurs.
The Group and the Company have elected not to recognise right-of- use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Group and the Company recognise the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
SCOMI GROUP BHD ANNUAL REPORT 2020 78 Notes to the Financial Statements 79 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(e) Leases (continued)
Current financial year (continued)
(iii) Subsequent measurement
(a) As a lessee
The right-of-use asset is subsequently depreciated using the straight- line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a revision of in-substance fixed lease payments, or if there is a change in the Group’s and the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group or the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use has been reduced to zero.
Previous financial period
As a lessee
(i) Finance lease
Leases in terms of which the Group or the Company assumed substantially all the risks and rewards of ownership were classified as finance leases. Upon initial recognition, the leased asset was measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset was accounted for in accordance with the accounting policy applicable to that asset.
Minimum lease payments made under finance leases were apportioned between the finance expense and the reduction of the outstanding liability. The finance expense was allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments were accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment was confirmed.
Leasehold land which in substance was a finance lease was classified as property, plant and equipment, or as investment property if held to earn rental income or for capital appreciation or for both.
79 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements80 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(e) Leases (continued)
Previous financial period (continued)
As a lessee (continued)
(ii) Operating lease
Leases, where the Group or the Company did not assume substantially all the risks and rewards of ownership were classified as operating leases and, except for property interest held under operating lease, the leased assets were not recognised on the statement of financial position. Property interest held under an operating lease, which was held to earn rental income or for capital appreciation or both, was classified as investment property and measured at cost, similarly to property, plant and equipment.
Payments made under operating leases were recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals were charged to profit or loss in the reporting period in which they were incurred.
Leasehold land which in substance was an operating lease was classified as prepaid lease payments.
(f) Intangible assets
(i) Goodwill
Goodwill arises on business combinations is measured at cost less any accumulated impairment losses. In respect of equity-accounted associates and joint ventures, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted associates and joint ventures.
(ii) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.
Expenditure on development activities, whereby the application of research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset.
SCOMI GROUP BHD ANNUAL REPORT 2020 80 Notes to the Financial Statements 81 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(f) Intangible assets (continued)
(ii) Research and development (continued)
The expenditure capitalised includes the cost of materials, direct labour and overheads costs that are directly attributable to preparing the asset for its intended use. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Other development expenditure is recognised in profit or loss as incurred.
Capitalised development expenditure is measured at cost less any accumulated amortisation and any accumulated impairment losses.
(iii) Other intangible assets
Intangible assets, other than goodwill, that are acquired by the Group, which have finite useful lives, are measured at cost less any accumulated amortisation and any accumulated impairment losses.
(iv) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.
(v) Amortisation
Goodwill and intangible assets with indefinite useful lives are not amortised but are tested for impairment annually and whenever there is an indication that they may be impaired.
Other intangible assets are amortised from the date that they are available for use. Amortisation is based on the cost of an asset less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets.
The estimated useful lives for the current and comparative period are as follows:
• capitalised development costs: - Drilling waste equipment and EMS engineering package 9 years • patents rights 9 years
Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if appropriate.
81 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements82 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(g) Investment properties
(i) Investment properties carried at cost
Investment properties are properties which are owned to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.
Investment properties are stated at cost less any accumulated depreciation and any accumulated impairment losses, consistent with the accounting policy for property, plant and equipment as stated in accounting policy Note 2(d).
Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.
Depreciation is charged to the profit or loss on a straight-line basis over the estimated useful lives of 20 to 50 years for buildings. Freehold land is not depreciated.
An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period in which the item is derecognised.
(ii) Reclassification to/from investment property
When an item of property, plant and equipment is transferred to investment property following a change in its use, any difference arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in equity as a revaluation of property, plant and equipment. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in profit or loss. Upon disposal of an investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through profit or loss.
When the use of a property changes such that it is reclassified as property, plant and equipment or inventories, its fair value at the date of reclassification becomes its cost for subsequent accounting.
SCOMI GROUP BHD ANNUAL REPORT 2020 82 Notes to the Financial Statements 83 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(h) Inventories
Inventories are measured at the lower of cost and net realisable value.
The cost of inventories is calculated using the weighted average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of work-in-progress and finished goods, cost includes an appropriate share of production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
(i) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in fair value with original maturities of three months or less, and are used by the Group and the Company in the management of their short term commitments. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.
(j) Impairment
(i) Financial assets
The Group and the Company recognise loss allowances for expected credit losses on financial assets measured at amortised cost, debt investments measured at fair value through other comprehensive income and lease receivables. Expected credit losses are a probability-weighted estimate of credit losses.
The Group and the Company measure loss allowances at an amount equal to lifetime expected credit loss, except for debt securities that are determined to have low credit risk at the reporting date, cash and bank balance and other debt securities for which credit risk has not increased significantly since initial recognition, which are measured at 12-month expected credit loss. Loss allowances for trade receivables and lease receivables are always measured at an amount equal to lifetime expected credit loss.
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 historical experience and informed credit assessment and including forward-looking information, where available.
83 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements84 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(j) Impairment (continued)
(i) Financial assets (continued)
Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of the asset, while 12- month expected credit losses are the portion of expected credit losses that result from default events that are possible within the 12 months after the reporting date. The maximum year considered when estimating expected credit losses is the maximum contractual year over which the Group and the Company are exposed to credit risk.
The Group and the Company estimate the expected credit losses on trade receivables using a provision matrix with reference to historical credit loss experience.
An impairment loss in respect of financial assets measured at amortised cost is recognised in profit or loss and the carrying amount of the asset is reduced through the use of an allowance account.
An impairment loss in respect of debt investments measured at fair value through other comprehensive income is recognised in profit or loss and the allowance account is recognised in other comprehensive income.
At each reporting date, the Group and the Company assess whether financial assets carried at amortised cost and debt securities at fair value through other comprehensive income 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 the financial asset have occurred.
The gross carrying amount of a financial asset is written off (either partially or full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group or the Company determines that the debtor does not have assets or sources 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 or the Company’s procedures for recovery amounts due.
SCOMI GROUP BHD ANNUAL REPORT 2020 84 Notes to the Financial Statements 85 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(j) Impairment (continued)
(ii) Other assets
The carrying amounts of other assets (except for inventories, lease receivables, deferred tax asset, assets arising from employee benefits, investment property measured at fair value and non-current assets (or disposal groups) classified as held for sale) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each period at the same time.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash- generating units. Subject to an operating segment ceiling test, for the purpose of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to a cash-generating unit or a group of cash-generating units that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less costs of disposal. In assessing value- in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.
An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount.
Impairment losses are recognised 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 cash-generating unit (group of cash-generating units) and then to reduce the carrying amounts of the other assets in the cash-generating unit (groups of cash-generating units) on a pro rata basis.
85 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements86 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(j) Impairment (continued)
(ii) Other assets (continued)
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised.
(k) Equity instruments
Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.
(i) Issue expenses
Costs directly attributable to the issue of instruments classified as equity are recognised as a deduction from equity.
(ii) Ordinary shares
Ordinary shares are classified as equity.
(iii) Repurchase, disposal and reissue of share capital (treasury shares)
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelled are classified as treasury shares in the statement of changes in equity.
When treasury shares are sold or reissued subsequently, the difference between the sales consideration net of directly attributable costs and the carrying amount of the treasury shares is recognised in equity.
SCOMI GROUP BHD ANNUAL REPORT 2020 86 Notes to the Financial Statements 87 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(l) Compound financial instruments
A compound financial instrument is a non-derivative financial instrument that contains both a liability and an equity component.
Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the option of the holder, when the number of shares to be issued does not vary with changes in their fair value.
The proceeds are first allocated to the liability component, determined based on the fair value of a similar liability that does not have a conversion feature or similar associated equity component. The residual amount is allocated as the equity component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.
Interest and losses and gains relating to the financial liability are recognised in profit or loss. On conversion, the financial liability is reclassified to equity; no gain or loss is recognised on conversion.
(m) Employee benefits
(i) Short-term employee benefits
Short-term employee benefit obligations 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 liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans 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.
(ii) State plans
The Group’s contributions to statutory pension funds are charged to profit or loss in the financial year to which they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
87 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements88 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(n) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre- tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
(o) Revenue
Revenue is measured based on the consideration specified in a contract with a customer in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. The Group or the Company recognises revenue when (or as) it transfers control over a product or service to customer. An asset is transferred when (or as) the customer obtains control of the asset.
The Group or the Company transfers control of a good or service at a point in time unless one of the following overtime criteria is met:
(a) the customer simultaneously receives and consumes the benefits provided as the Group or the Company performs; (b) the Group’s or the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (c) the Group’s or the Company’s performance does not create an asset with an alternative use and the Group or the Company has an enforceable right to payment for performance completed to date.
(p) Borrowing costs
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
SCOMI GROUP BHD ANNUAL REPORT 2020 88 Notes to the Financial Statements 89 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(q) Income tax
Income tax expense comprises current and deferred tax. Current tax 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.
Current tax is the expected tax payable or receivable on the taxable income or loss for the financial year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.
Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(r) Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and other comprehensive income is re- presented as if the operation had been discontinued from the start of the comparative year.
89 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements90 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(s) Earnings per ordinary share
The Group presents basic and diluted earnings per share data for its ordinary shares (“EPS”).
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.
(t) Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Operating segment results are reviewed regularly by the chief operating decision maker, which in this case is the Chief Executive Officer of the Group, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.
(u) Contingencies
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 of 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.
SCOMI GROUP BHD ANNUAL REPORT 2020 90 Notes to the Financial Statements 91 Registration No. 200201003549 (571212-A)
2. Significant accounting policies (continued)
(v) Fair value measurements
Fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction 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.
For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value is categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: unobservable inputs for the asset or liability.
The Group recognises transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.
.
91 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements 92 Registration No. 200201003549 (571212-A)
3. Property, plant and equipment
Renovation, office Tools, equipment, Capital Freehold Leasehold Freehold Leasehold Marine plant and fitting and Motor Monorail work-in- land land buildings buildings vessels machinery computers vehicles test track progress Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost At 1 April 2018 1,858 8,020 3,906 48,453 886,986 588,432 65,568 24,877 14,795 1,838 1,644,733 Additions 50 - - - 2,107 2,564 763 1,429 - 12,403 19,316 Deconsolidation of subsidiaries (Note 21.2) - (8,020) - (34,000) - (23,702) (15,898) (12,912) (14,795) - (109,327) Disposals - - - - (91,333) (11,780) (1,608) (1,139) - - (105,860) Disposal of subsidiaries - - - - - (65,524) (2,522) (273) - - (68,319) Write-off - - - - - (1,196) (21) - - - (1,217) Reclassification - - - - 9,075 - - - - (9,075) - Effect of movements in exchange rates - - 115 247 61,140 34,316 755 (85) - 133 96,621
At 30 June 2019/1 July 2019 1,908 - 4,021 14,700 867,975 523,110 47,037 11,897 - 5,299 1,475,947 Additions - - - - - 1,148 - - - - 1,148 Deconsolidation of subsidiaries (Note 21.1) (1,908) - (4,021) (14,700) (867,975) (525,534) (42,594) (10,794) - (5,299) (1,472,825) Disposals - - - - - (589) - (248) - - (837) Effect of movements in exchange rates - - - - - 1,865 - - - - 1,865 At 30 June 2020 ------4,443 855 - - 5,298
SCOMI GROUP BHD ANNUAL REPORT 2020 92 Notes to the Financial Statements 93 Registration No. 200201003549 (571212-A)
3. Property, plant and equipment (continued)
Renovation, office Tools, equipment, Capital Freehold Leasehold Freehold Leasehold Marine plant and fitting and Motor Monorail work-in- land land buildings buildings vessels machinery computers vehicles test track progress Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Depreciation and impairment At 1 April 2018 Accumulated depreciation - 757 2,221 19,726 523,459 458,852 63,212 15,474 5,901 - 1,089,602 Accumulated impairment loss - - - 280 103,717 9,549 - - - - 113,546 - 757 2,221 20,006 627,176 468,401 63,212 15,474 5,901 - 1,203,148 Depreciation for the financial period - - 44 235 42,923 32,509 869 460 - - 77,040 Depreciation for subsidiaries deconsolidated (Note 21.2) - 210 - 1,260 - 938 428 710 207 - 3,753 Impairment loss - - - - 1,542 - - - - - 1,542 Disposals - - - - (39,311) (11,635) (1,600) (1,096) - - (53,642) Disposal of subsidiaries - - - - - (58,492) (2,489) (276) - - (61,257) Deconsolidation of subsidiaries (Note 21.2) - (967) - (7,863) - (19,902) (15,521) (9,548) (6,108) - (59,909) Write-off - - - - - (202) (21) - - - (223) Effect of movements in exchange rates - - 111 225 43,401 22,594 1,468 459 - - 68,258 At 30 June 2019/1 July 2019 Accumulated depreciation - - 2,376 13,583 570,472 424,662 46,346 6,183 - - 1,063,622 Accumulated impairment loss - - - 280 105,259 9,549 - - - - 115,088
- - 2,376 13,863 675,731 434,211 46,346 6,183 - - 1,178,710
SCOMI GROUP BHD ANNUAL REPORT 2020 93 Notes to the Financial Statements 94 Registration No. 200201003549 (571212-A)
3. Property, plant and equipment (continued)
Renovation, office Tools, equipment, Monorail Capital Freehold Leasehold Freehold Leasehold Marine plant and fitting and Motor test work-in- land land buildings buildings vessels machinery computers vehicles track progress Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Depreciation and impairment (continued) Depreciation for the financial year ------122 - - 122 Depreciation for subsidiaries deconsolidated (Note 21.1) - - - - - 26,001 - - - - 26,001 Impairment loss - - - - - 1,300 - - - - 1,300 Disposals - - - - - (389) - (248) - - (637) Deconsolidation of subsidiaries (Note 21.1) - - (2,376) (13,863) (675,731) (451,329) (41,904) (5,558) - - (1,190,761) Effect of movements in exchange rate - - - - - (9,794) - - - - (9,794) At 30 June 2020 Accumulated depreciation ------4,442 499 - - 4,941
Carrying amounts At 1 April 2018 1,858 7,263 1,685 28,447 259,810 120,031 2,356 9,403 8,894 1,838 441,585 At 30 June 2019 1,908 - 1,645 837 192,244 88,899 691 5,714 - 5,299 297,237 At 30 June 2020 ------1 356 - - 357
SCOMI GROUP BHD ANNUAL REPORT 2020 94 Notes to the Financial Statements 95 96 Registration No. 200201003549 (571212-A) Registration No. 200201003549 (571212-A)
3. Property, plant and equipment (continued) 3. Property, plant and equipment (continued)
Office (a) Right-of-use assets Motor equipment vehicles and fittings Renovation Total Right-of-use assets related to leased properties that do not meet the definition of RM’000 RM’000 RM’000 RM’000 investment property are presented as property, plant and equipment. Company Cost Leasehold Motor At 1 April 2018 838 3,684 750 5,272 buildings vehicles Total Additions 563 - - 563 Group RM’000 RM’000 RM’000 Disposals (298) - - (298) 2020 At 30 June 2019/1 July 2019 1,103 3,684 750 5,537 At 1 July 837 478 1,315 Disposals (248) - - (248) Depreciation charge for the year - (122) (122) Deconsolidation of subsidiaries (837) - (837) At 30 June 2020 855 3,684 750 5,289 At 30 June - 356 356 Accumulated depreciation At 1 April 2018 735 3,677 747 5,159 Motor Depreciation for the financial period 149 6 3 158 vehicles Total
Disposals (259) - - (259) Company RM’000 RM’000 2020 At 30 June 2019/1 July 2019 625 3,683 750 5,058 At 1 July 478 478 Depreciation for the financial year 122 - - 122 Depreciation charge for the year (122) (122) Disposals (248) - - (248) At 30 June 356 356 At 30 June 2020 499 3,683 750 4,932 (b) Leased property, plant and equipment Carrying amounts At 1 April 2018 103 7 3 113 At 30 June 2019, the net carrying amount of motor vehicles acquired under finance lease arrangements was RM478,000. At 30 June 2019 478 1 - 479
At 30 June 2020 356 1 - 357
95 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements96 Registration No. 200201003549 (571212-A)
3. Property, plant and equipment (continued)
(a) Right-of-use assets
Right-of-use assets related to leased properties that do not meet the definition of investment property are presented as property, plant and equipment.
Leasehold Motor buildings vehicles Total Group RM’000 RM’000 RM’000 2020 At 1 July 837 478 1,315 Depreciation charge for the year - (122) (122) Deconsolidation of subsidiaries (837) - (837)
At 30 June - 356 356
Motor vehicles Total Company RM’000 RM’000 2020 At 1 July 478 478 Depreciation charge for the year (122) (122)
At 30 June 356 356
(b) Leased property, plant and equipment
At 30 June 2019, the net carrying amount of motor vehicles acquired under finance lease arrangements was RM478,000.
SCOMI GROUP BHD ANNUAL REPORT 2020 96 Notes to the Financial Statements 97 Registration No. 200201003549 (571212-A)
3. Property, plant and equipment (continued)
(c) Impairment loss - Marine vessels
During the previous financial period ended 30 June 2019, the prolonged decline in global oil and gas prices had resulted in a decrease in charter contracts for the Group vessels, which indirectly had an impact on the recoverable amount of the vessels. Accordingly, the Group reviewed the recoverable amount of its vessels, which resulted in an impairment loss during the previous financial period amounting to RM1,542,000.
The recoverable amount of the vessels of the Group were determined based on the higher of fair value less costs of disposal and value-in-use calculation. In valuing the vessels using fair value less costs of disposal, the valuer had taken into consideration the prevailing market conditions and made adjustments for differences such as age, size and specification where necessary before arriving at the most appropriate fair value for the vessels. The fair value measurement of the vessels was performed by an independent valuer not connected with the Group, who has appropriate qualifications and recent experience in the fair value measurement of the vessels in the relevant sector.
The fair value was based on the following key assumptions:
(i) historical transacted prices remain relevant; and (ii) the growth of oil and gas industries will not deteriorate further.
The value-in-use calculations used pre-tax cash flow projections based on financial budgets approved by the Board covering a five-year period. The key assumptions used in the value-in-use calculation in the previous financial period were as follows:
2019 % Discount rate 9.7 Terminal growth rate 2.0
The Directors were of the opinion that there were no reasonable possible changes in any key assumptions that would cause the carrying amount of the marine vessels to materially exceed the recoverable amount.
(d) Security
In previous financial period ended 30 June 2019, the net carrying amount of property, plant and equipment of the Group charged as security for banking facilities granted to the deconsolidated subsidiaries (see Note 21.1) was as follows:
Group 2020 2019 RM’000 RM’000
Marine vessels - 140,359
97 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements98 Registration No. 200201003549 (571212-A)
4. Investment properties Group 2020 2019 RM’000 RM’000 Cost At beginning of the financial year/period 2,890 4,860 Disposal - (2,069) Deconsolidation of subsidiaries (Note 21.1) (2,890) - Effect of movements in exchange rates - 99 At end of the financial year/period - 2,890
Depreciation and impairment At beginning of the financial year/period Accumulated depreciation 2,435 2,265 Accumulated impairment loss 455 455 2,890 2,720 Depreciation for the financial period - 169 Deconsolidation of subsidiaries (Note 21.1) (2,890) - Effect of movements in exchange rates - 1 At end of the financial year/period Accumulated depreciation - 2,435 Accumulated impairment loss - 455 - 2,890
Carrying amount At end of the financial year/period - - Fair value at end of the financial year/period - -
SCOMI GROUP BHD ANNUAL REPORT 2020 98 Notes to the Financial Statements 99 Registration No. 200201003549 (571212-A)
5. Intangible assets Development <-Capitalised development costs-> <-costs work-in-progress-> Drilling Mass rapid EMS waste transit/ engineering Goodwill Patents Monorail Bus equipment Propulsion package Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost At 1 April 2018 238,744 12,745 115,657 4,552 16,186 21,212 11,762 420,858 Deconsolidation of subsidiaries (Note 21.2) (27,914) - (115,657) (4,552) - (21,212) - (169,335) Write-off due to deconsolidation of subsidiaries (Note 21.2) (20,850) ------(20,850) Disposals (2,824) ------(2,824) Effect of movements in exchange rates 197 70 - - 1,541 - - 1,808 At 30 June 2019/1 July 2019 187,353 12,815 - - 17,727 - 11,762 229,657 Deconsolidation of subsidiaries (Note 21.1) (187,353) (12,815) - - (17,727) - (11,762) (229,657) At 30 June 2020 ------
SCOMI GROUP BHD ANNUAL REPORT 2020 99 Notes to the Financial Statements 100 Registration No. 200201003549 (571212-A)
5. Intangible assets (continued) Development <-Capitalised development costs-> <-costs work-in-progress-> Drilling Mass rapid EMS waste transit/ engineering Goodwill Patents Monorail Bus equipment Propulsion package Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Amortisation and impairment losses At 1 April 2018 Accumulated amortisation - 12,436 11,090 4,552 4,484 - 743 33,305 Accumulated impairment losses 87,850 - - - 7,576 3,815 11,019 110,260 87,850 12,436 11,090 4,552 12,060 3,815 11,762 143,565 Deconsolidation of subsidiaries (Note 21.2) - - (11,090) (4,552) - (3,815) - (19,457) Amortisation for the financial year - 330 - - 482 - - 812 Disposals (100) ------(100) Effect of movements in exchange rates - 49 - - 1,257 - - 1,306 At 30 June 2019/1 July 2019 Accumulated amortisation - 12,815 - - 6,223 - 743 19,781 Accumulated impairment losses 87,750 - - - 7,576 - 11,019 106,345 87,750 12,815 - - 13,799 - 11,762 126,126 Deconsolidation of subsidiaries (Note 21.1) (87,750) (12,815) - - (13,799) - (11,762) (126,126) At 30 June 2020 Accumulated amortisation ------Accumulated impairment losses ------Carrying amounts At 1 April 2018 150,894 309 104,567 - 4,126 17,397 - 277,293
At 30 June 2019/1 July 2019 99,603 - - - 3,928 - - 103,531 At 30 June 2020 ------
SCOMI GROUP BHD ANNUAL REPORT 2020 100 Notes to the Financial Statements 101 102 Registration No. 200201003549 (571212-A) Registration No. 200201003549 (571212-A)
5. Intangible assets (continued) 6. Investments in subsidiaries
(a) Amortisation Company 2020 2019 In previous financial period, the amortisation of patents and capitalised RM’000 RM’000 development costs are allocated to the cost of inventory and are recognised in At cost cost of sales when inventory is sold. Quoted shares in Malaysia - 877,466 Unquoted shares 152,598 152,598 Useful life of the patents had expired and the remaining useful lives of the capitalised development costs was 9 years prior to deconsolidation. 152,598 1,030,064 Less: Impairment loss (152,598) (697,097) (b) Impairment - 332,967 At market value (i) Impairment testing for cash-generating units containing goodwill Quoted shares in Malaysia - 106,697
At 30 June 2019, the carrying amounts of goodwill allocated to the Group’s Deconsolidation of subsidiaries cash-generating unit (“CGU”) related to the deconsolidated subsidiaries (see
Note 21.1) are as follows: The Company has lost control in SESB during the financial year following the transfer
of 848,018,018 pledged shares and reduction of shareholding in SESB to 29.4%, as
Group disclosed in Note 21.1. 2020 2019
RM’000 RM’000 Pursuant thereto, SESB has been deconsolidated as a subsidiary and is henceforth
accounted for as an associate. Drilling services - 99,603
- 99,603 Details of the subsidiaries are as follows:
Goodwill allocated to drilling services Principal place Effective of business/ ownership During the previous financial period, the cash-generating units with the Country of interest and voting allocated goodwill was reviewed for impairment using the value-in-use Name of entity incorporation Principal activities interest calculations. The value-in-use calculations used pre-tax cash flow 2020 2019 projections for each country based on financial budgets approved by the Subsidiaries of SGB % % Board of Directors covering a five-year period. Scomi Oiltools Bermuda Investment holding 100.0 100.0 Bermuda Limited The key assumptions used in the value-in-use calculations in the previous (“SOBL”) Ω financial period were as follows: 2019 Scomi Solutions Sdn. Malaysia Ceased business 100.0 100.0 % Bhd. Ω operation Revenue growth rates in the first 5 years 0.0 - 20.0 Discount rates 9.0 - 21.0 Scomi Precision Malaysia Ceased business 100.0 100.0 Terminal growth rates 0.0 Engineering Sdn. operation Bhd. Ω The projections over these years were based on an approved business plan and reflect the expectation of usage, revenue growth, operating costs and Scomi Chemicals Sdn. Malaysia Ceased business 100.0 100.0 margins based on past experience and current assessment of market share, Bhd. Ω operation expectations of market growth and industry growth. The discount rates used were pre-tax and reflect specific risk relating to individual countries in which Global Learning and Malaysia Ceased business 100.0 100.0 the Group operates. The terminal growth rate was based on long-term Development Sdn. operation growth rates relating to the individual countries. Bhd. Ω
Based on the calculations, no impairment had been recognised in the Scomi Energy Sdn. Malaysia Investment holding 100.0 100.0 previous financial period. However, an increase/(decrease) of a one Bhd. Ω percentage point in the discount rate used would have (decreased)/increased the recoverable amount by approximately (RM24.1 million)/RM28.1 million.
101 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements102 Registration No. 200201003549 (571212-A)
6. Investments in subsidiaries
Company 2020 2019 RM’000 RM’000 At cost Quoted shares in Malaysia - 877,466 Unquoted shares 152,598 152,598 152,598 1,030,064 Less: Impairment loss (152,598) (697,097) - 332,967 At market value Quoted shares in Malaysia - 106,697
Deconsolidation of subsidiaries
The Company has lost control in SESB during the financial year following the transfer of 848,018,018 pledged shares and reduction of shareholding in SESB to 29.4%, as disclosed in Note 21.1.
Pursuant thereto, SESB has been deconsolidated as a subsidiary and is henceforth accounted for as an associate.
Details of the subsidiaries are as follows:
Principal place Effective of business/ ownership Country of interest and voting Name of entity incorporation Principal activities interest 2020 2019 Subsidiaries of SGB % % Scomi Oiltools Bermuda Investment holding 100.0 100.0 Bermuda Limited (“SOBL”) Ω
Scomi Solutions Sdn. Malaysia Ceased business 100.0 100.0 Bhd. Ω operation
Scomi Precision Malaysia Ceased business 100.0 100.0 Engineering Sdn. operation Bhd. Ω
Scomi Chemicals Sdn. Malaysia Ceased business 100.0 100.0 Bhd. Ω operation
Global Learning and Malaysia Ceased business 100.0 100.0 Development Sdn. operation Bhd. Ω
Scomi Energy Sdn. Malaysia Investment holding 100.0 100.0 Bhd. Ω
SCOMI GROUP BHD ANNUAL REPORT 2020 102 Notes to the Financial Statements 103 104 Registration No. 200201003549 (571212-A) Registration No. 200201003549 (571212-A)
6. Investments in subsidiaries (continued) 6. Investments in subsidiaries (continued)
Details of the subsidiaries are as follows (continued): Details of the subsidiaries are as follows (continued):
Principal place Effective # Audited by other member firms of KPMG International. of business/ ownership Ω Not audited by KPMG PLT. Country of interest and voting ^ In members’ winding up. Name of entity incorporation Principal activities interest * 2020 2019 In winding up by the Court. Subsidiaries of SGB (continued) % % & SESB was deconsolidated as a subsidiary since 26 February 2020 and is Scomi OBM Terminal Malaysia Ceased business 100.0 100.0 accounted for as an associate. Sdn. Bhd. Ω operation @ Under liquidation since 30 January 2020. Deconsolidated as a subsidiary since 24 January 2019 due to loss of control (see Note 21.2). Scomi International Singapore Ceased business 100.0 100.0 Private Limited # Ω operation (a) Non-controlling interest in subsidiaries
Scomi Ecosolve British Virgin Ceased business 100.0 100.0 In the previous financial period, Scomi Energy Services Bhd (“SESB”), a Limited Ω Islands operation subsidiary, had material non-controlling interests (“NCI”).
Scomi Enviro Sdn. Malaysia Ceased business 100.0 100.0 Following the deconsolidation of SESB as disclosed in Note 21.1, the Group no Bhd. Ω operation longer had any material NCI as at the end of the financial year.
Scomi Energy Malaysia Investment holding 29.4 65.6 SESB Services Bhd 2020 2019 (“SESB”) & RM’000 RM’000
Scomi Engineering Malaysia Investment holding, 100.0 100.0 NCI percentage of ownership and voting interest - 34.35% Berhad (“SEB”) Ω @ provision of management services Carrying amount of NCI - 317,557 to subsidiaries and the design, manufacture Income/(Loss) allocated to NCI 3,016 (29,798) and supply of monorail trains and related Total comprehensive income/(loss) allocated to NCI 5,609 (24,114) services
Subsidiaries of SOBL Summarised financial information before intra-group elimination Scomi Oiltools Mauritius Ceased business 100.0 100.0
Overseas (M) operation SESB Limited Ω 2019
RM’000 Scomi Oiltools Scotland Ceased business 100.0 100.0
(Europe) Ltd Ω * ^ operation Non-current assets 428,314
Current assets 429,491 KMC Oiltools Algerie Algeria Ceased business 100.0 100.0 Non-current liabilities (63,715) EURL Ω operation Current liabilities (356,094)
Scomi Oiltools Inc Ω Texas, USA Ceased business 100.0 100.0 Net assets 437,996 operation
Oilfield Services de Mexico Ceased operations 100.0 100.0 Mexico S de RL de CV Ω ^
Scomi Oiltools de Mexico Ceased operations 100.0 100.0 Mexico S de RL de CV Ω ^
103 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements104 Registration No. 200201003549 (571212-A)
6. Investments in subsidiaries (continued)
Details of the subsidiaries are as follows (continued):
# Audited by other member firms of KPMG International. Ω Not audited by KPMG PLT. ^ In members’ winding up. * In winding up by the Court. & SESB was deconsolidated as a subsidiary since 26 February 2020 and is accounted for as an associate. @ Under liquidation since 30 January 2020. Deconsolidated as a subsidiary since 24 January 2019 due to loss of control (see Note 21.2).
(a) Non-controlling interest in subsidiaries
In the previous financial period, Scomi Energy Services Bhd (“SESB”), a subsidiary, had material non-controlling interests (“NCI”).
Following the deconsolidation of SESB as disclosed in Note 21.1, the Group no longer had any material NCI as at the end of the financial year.
SESB 2020 2019 RM’000 RM’000
NCI percentage of ownership and voting interest - 34.35%
Carrying amount of NCI - 317,557
Income/(Loss) allocated to NCI 3,016 (29,798)
Total comprehensive income/(loss) allocated to NCI 5,609 (24,114)
Summarised financial information before intra-group elimination
SESB 2019 RM’000
Non-current assets 428,314 Current assets 429,491 Non-current liabilities (63,715) Current liabilities (356,094)
Net assets 437,996
SCOMI GROUP BHD ANNUAL REPORT 2020 104 Notes to the Financial Statements 105 Registration No. 200201003549 (571212-A)
6. Investments in subsidiaries (continued)
(a) Non-controlling interest in subsidiaries (continued)
Summarised financial information before intra-group elimination (continued)
SESB 1.4.2018 to 30.6.2019 RM’000 Financial period ended Revenue 643,494 Loss for the financial period (103,462) Total comprehensive loss (86,926)
Cash flows from operating activities 13,095 Cash flows from investing activities 26,306 Cash flows used in financing activities (44,839) Net decrease in cash and cash equivalents (5,438)
Dividends paid to NCI -
7. Investments in associates
Group Company Note 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 At cost Quoted shares - in Malaysia 31,004 - 31,004 - Unquoted shares - outside Malaysia - 26,675 - - Less: Impairment loss 7.1 (15,157) (15,900) (15,157) - Add: Share of post- acquisition loss (15,847) (1,928) - -
- 8,847 15,847 -
Fair value of quoted
shares – Level 1 15,847 - 15,847 -
In the previous financial period, the Group held significant influence over its associates by way of indirect interest through SESB and its subsidiaries. During the financial year, these associates were deconsolidated together with SESB as disclosed in Note 21.1, and SESB Group is henceforth accounted for as an associate.
7.1 Impairment review of investment in associate
During the financial year, the Company impaired the carrying amount of investment in an associate to its fair value as the associate continued to make losses. In prior financial period, the Group had undertaken an impairment assessment on investment in an associate.
105 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements106 Registration No. 200201003549 (571212-A)
7. Investments in associates (continued)
7.1 Impairment review of investment in associate (continued)
The recoverable amount for the associate was determined based on value-in-use calculations. The value-in-use calculations used pre-tax cash flow projections based on financial budgets approved by the Board of Directors covering a five- year period. The value-in-use was based on the following key assumptions.
2019 % Discount rates 20.0 Terminal growth rates 0.0
Based on the assessment, the Group had impaired the entire carrying amount of the associate of RM6,111,000 after the Group’s share of losses in the previous financial period.
Details of the material associates are as follows:
Principal place Effective of business/ ownership Country of Nature of interest and voting Name of entity incorporation relationship interest 2020 2019 % % Held by SGB Scomi Energy Malaysia Investment holding 29.4 65.6 Services Bhd (“SESB”) &
Held by SESB Southern Petroleum Vietnam Provide oil tankers 4.07 9.1 Transportation Joint services to the Stock Company * & Group
* Company with direct ownership less than 20% of the equity shareholding but treated as associates as SESB Group is able to exercise significant influence over the entity. & SESB was deconsolidated from 26 February 2020 onwards due to loss of control upon transfer of pledged shares pursuant to default on loan repayment (Note 21.1). SESB is henceforth accounted for as an associate.
SCOMI GROUP BHD ANNUAL REPORT 2020 106 Notes to the Financial Statements 107 Registration No. 200201003549 (571212-A)
7. Investments in associates (continued)
The following table summarises the information of the Group’s material associate, adjusted for any differences in accounting policies and reconciles the information to the carrying amount of the Group’s interest in the associates.
Scomi Energy Services Bhd and its 30 June 2020 Note subsidiaries Total Group RM’000 RM’000 Summarised financial information 7.2 As at 30 June 2020 Non-current assets 298,714 Current assets 264,326 Non-current liabilities (17,845) Current liabilities (313,039) Net assets 232,156
Financial period from 1.1.2020 – 30.6.2020 Included in the total comprehensive loss are: Revenue 191,298 Loss from continuing operations (179,454) Other comprehensive loss (27,098) Total comprehensive loss (206,552)
Reconciliation of net assets to carrying amount as at 30 June 2020 Group’s share of net assets 68,347 68,347 Fair value adjustment (53,190) (53,190) (-) Impairment loss (15,157) (15,157) Carrying amount in the statement of financial position - -
Other information Dividends received by the Group -
7.2 The auditor issued a disclaimer opinion due to material uncertainty on going concern on the financial statements of SESB Group for the financial year ended 30 June 2020. Refer to Note 21.1, the deconsolidation starting from 1.1.2020 instead of 26.2.2020 due to unavailable financial information.
107 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements108 Registration No. 200201003549 (571212-A)
7. Investments in associates (continued)
Southern Petroleum Transportation Other Joint Stock immaterial 30 June 2019 Note Company associates Total Group RM’000 RM’000 RM’000 Summarised financial information As at 30 June 2019 Non-current assets 128,003 Current assets 23,230 Non-current liabilities (37,757) Current liabilities (42,862) Net assets 70,614
Financial period ended 30 June 2019 Included in the total comprehensive income are:
Revenue 203,195
Profit from continuing operations 10,172
Other comprehensive income -
Total comprehensive income 10,172
Reconciliation of net assets to carrying amount as at 30 June 2019 Group’s share of net assets 8,847 15,900 24,747 (-) Impairment loss - (15,900) (15,900) Carrying amount in the statement of financial position 8,847 - 8,847
Other information Dividends received by the Group -
7.3 As the SESB Group has been deconsolidated, the comparatives for share of results for associates have been reclassed to loss from discontinued operations.
SCOMI GROUP BHD ANNUAL REPORT 2020 108 Notes to the Financial Statements 109 Registration No. 200201003549 (571212-A)
8. Investments in joint ventures
Group Company Note 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 At cost Unquoted shares - outside Malaysia 8,657 13,089 8,657 8,657 Deemed investment - capital contribution (a) - 51,240 - - Deemed investment - financial guarantee liabilities - 329 - - Share of post-acquisition loss - (46,234) - - Less: Impairment loss (b) (8,657) (16,341) (8,657) (8,657) Share of net assets - 2,083 - -
In the previous financial period, the Group had participated in several joint ventures by way of indirect interest through SESB and its subsidiaries. During the financial year, these joint ventures were deconsolidated together with SESB as disclosed in Note 21.1.
(a) Deemed investment – capital contribution
The deemed investment – capital contribution were related to advances provided to certain joint ventures that were contractually not receivable until the external borrowings of the joint ventures had been repaid.
(b) Impairment loss on investment in joint venture
In the previous financial period, due to the presence of impairment indicators arising from the operation of a joint venture, the Group and the Company had undertaken an impairment assessment on the investment in the joint venture.
Based on the assessment, the Group and the Company had recognised an impairment loss of RM9,653,000 and RM8,657,000 respectively on the cost of the investment in the joint venture in the profit or loss of the Group and the Company in the previous financial period.
As at the end of the current financial year, the Group’s remaining investments in joint ventures have been fully impaired since previous financial period.
109 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements 110 Registration No. 200201003549 (571212-A)
9. Deferred tax assets/(liabilities)
9.1 Recognised deferred tax assets/(liabilities) Assets Liabilities Net 2020 2019 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Property, plant and equipment - - - (694) - (694) Others - 529 - (3,792) - (3,263) Net tax assets/(liabilities) - 529 - (4,486) - (3,957)
9.2 Movement in temporary differences during the financial year
Effect of Effect of Recognised Deconsolidation movements At Deconsolidation movements At in profit of in exchange 30.6.2019/ of in exchange At 1.4.2018 or loss subsidiaries rates 1.7.2019 subsidiaries rates 30.6.2020 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Tax losses, capital allowances and tax incentives 76,957 - (76,957) - - - - - Property, plant and equipment (36,335) 882 34,635 124 (694) 798 (104) - Deductible temporary differences (9,119) (2,292) 8,934 (786) (3,263) 3,263 - - 31,503 (1,410) (33,388) (662) (3,957) 4,061 (104) - Note 20 Note 21.2.3 Note 21.1.3
SCOMI GROUP BHD ANNUAL REPORT 2020 110 Notes to the Financial Statements 111 112 Registration No. 200201003549 (571212-A) Registration No. 200201003549 (571212-A)
9. Deferred tax assets/(liabilities) (continued) 10. Trade and other receivables (continued)
9.3 Unrecognised deferred tax assets Group Company Note 2020 2019 2020 2019 Deferred tax assets have not been recognised in respect of the following items Current RM’000 RM’000 RM’000 RM’000 (stated at net): Non-trade Other receivables - 61,958 - 65 Group Company VAT recoverable - 19,000 - - 2020 2019 2020 2019 Deposits - 3,921 - 1 RM’000 RM’000 RM’000 RM’000 Prepayments - 10,672 - 2
Deductible temporary differences - 9,407 - - - 95,551 - 68 Unutilised tax losses 38,660 38,660 38,660 38,660 Amount due from: 38,660 48,067 38,660 38,660 - joint ventures (d) - 1,260 - - - associates (d) - 4,131 - - Deferred tax assets have not been recognised in respect of these items because Less: Allowance for it is not probable that future taxable profit will be available against which the Group impairment loss - (1,260) - - and the Company can utilise the benefits therefrom. The unutilised tax losses of the Group and the Company amounting to RM38,660,000 can be utilised until - 4,131 - - Year of Assessment (YA) 2025 and will expire thereafter. - 236,745 - 68
- 251,077 - 68 10. Trade and other receivables (a) Amount due from subsidiaries of the Company is unsecured and non-interest Group Company bearing, except for certain advances in prior year amounting to RM17 million which Note 2020 2019 2020 2019 had interest at 6.00% per annum. RM’000 RM’000 RM’000 RM’000 Non-current (b) Other receivables mainly comprise of the following: Amount due from subsidiaries (a) - - 111,519 106,665 Less: Allowance for impairment i. unsecured advances to deconsolidated subsidiaries (Note 21.2) amounting loss - - (111,519) (106,665) to RM106.73 million (2019: RM137.51 million), which is subject to interest of Amount due from subsidiary - Nil % (2019: 9.19%). These advances are not expected to be repaid within net - - - - 12 months from the date of the statements of financial position. Other receivables (b) 141,957 137,509 120,875 102,095 ii. an amount of RM14.15 million in relation to redemption of SESB shares Less: Allowance for impairment charged by the Company in favour of a financial institution to provide security loss (141,957) (123,177) (120,875) (102,095) for a facility provided to a deconsolidated subsidiary. The Company has filed - 14,332 - - a suit against the deconsolidated subsidiary to claim for the redemption Current amount.
Trade Trade receivables (c) - 181,821 - - (c) All trade receivables related to deconsolidated subsidiaries (Note 21.1) have been Less: Allowance for impairment deconsolidated from the Group consolidated financial statements as at financial loss - (44,758) - - year end. Credit terms for trade receivables for previous financial year ranged from 30 to 90 days. No interest was charged on outstanding trade receivables within the Trade receivables - net - 137,063 - - stipulated credit year from the due date of invoice and thereafter, interest was - 137,063 - - charged at 1.5% to 2.0% per annum on the outstanding balance.
(d) Amount due from joint ventures and associates of the Group were unsecured, interest free and repayable upon demand.
111 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements112 Registration No. 200201003549 (571212-A)
10. Trade and other receivables (continued)
Group Company Note 2020 2019 2020 2019 Current RM’000 RM’000 RM’000 RM’000 Non-trade Other receivables - 61,958 - 65 VAT recoverable - 19,000 - - Deposits - 3,921 - 1 Prepayments - 10,672 - 2 - 95,551 - 68
Amount due from: - joint ventures (d) - 1,260 - - - associates (d) - 4,131 - - Less: Allowance for impairment loss - (1,260) - - - 4,131 - - - 236,745 - 68 - 251,077 - 68
(a) Amount due from subsidiaries of the Company is unsecured and non-interest bearing, except for certain advances in prior year amounting to RM17 million which had interest at 6.00% per annum.
(b) Other receivables mainly comprise of the following:
i. unsecured advances to deconsolidated subsidiaries (Note 21.2) amounting to RM106.73 million (2019: RM137.51 million), which is subject to interest of Nil % (2019: 9.19%). These advances are not expected to be repaid within 12 months from the date of the statements of financial position. ii. an amount of RM14.15 million in relation to redemption of SESB shares charged by the Company in favour of a financial institution to provide security for a facility provided to a deconsolidated subsidiary. The Company has filed a suit against the deconsolidated subsidiary to claim for the redemption amount.
(c) All trade receivables related to deconsolidated subsidiaries (Note 21.1) have been deconsolidated from the Group consolidated financial statements as at financial year end. Credit terms for trade receivables for previous financial year ranged from 30 to 90 days. No interest was charged on outstanding trade receivables within the stipulated credit year from the due date of invoice and thereafter, interest was charged at 1.5% to 2.0% per annum on the outstanding balance.
(d) Amount due from joint ventures and associates of the Group were unsecured, interest free and repayable upon demand.
SCOMI GROUP BHD ANNUAL REPORT 2020 112 Notes to the Financial Statements 113 Registration No. 200201003549 (571212-A)
11. Inventories Group 2020 2019 RM’000 RM’000 At cost Consumables - 29,413 Raw materials - 2,245 Finished goods - 51,157 - 82,815
During the financial year, the inventories of SESB’s Group were deconsolidated as disclosed in Note 21.1.
12. Cash and bank balances
Group Company 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 Short-term deposits placed with licensed banks - 24,906 - - Cash and bank balances 77 41,428 73 582 77 66,334 73 582 Less: Pledged deposits and bank balances - (27,080) - - 77 39,254 73 582
The effective interest rates for short-term deposits placed with licensed banks of the Group and of the Company in prior year were 0.18% to 6.50% per annum. Short-term deposits of the Group had maturity days ranging from 1 day to 365 days.
Included in the Group’s bank balances and deposits placed with licensed banks in the previous financial period were RM27,080,000 pledged for repayment of Guaranteed Serial Bonds and bank facilities granted to the deconsolidated subsidiaries (Note 21.1) as disclosed in Note 17.
13. Share capital Group and Company 2020 2019 Number Number of shares Amount of shares Amount ’000 RM’000 ’000 RM’000 Issued and fully paid shares: Ordinary shares: At beginning of the financial year/period 1,093,907 224,964 1,093,907 664,964
Capital reduction - - - (440,000) At end of the financial year/period 1,093,907 224,964 1,093,907 224,964
113 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements114 Registration No. 200201003549 (571212-A)
13. Share capital (continued)
a) The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. In respect of the Company’s treasury shares (see Note 14), all rights are suspended until those shares are reissued.
b) In the previous financial period, the Company undertook a reduction of RM440,000,000 of the issued share capital (“Capital Reduction Exercise”) pursuant to Section 116 of the Companies Act 2016. The corresponding credit arising from such cancellation was being utilised to set-off against the accumulated losses amounting to RM440,000,000 of the Company. The Capital Reduction Exercise was completed on 31 January 2019.
14. Treasury shares
The rights attached to treasury shares as to voting, dividends and participation in other distribution and otherwise are suspended.
There was no repurchase or sale of the Company’s shares during the financial year. During the previous financial year, 1,250,000 units of treasury shares were sold for total value of RM162,566. No ordinary shares were held as treasury shares at the end of the reporting period (2019: Nil).
15. Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as the share of translation reserve of equity-accounted associate.
Majority of the translation reserves were related to few foreign subsidiaries which have been dormant. Accordingly, the translation reserves of RM39.217 million arising from these foreign operations have been reclassified to accumulated losses due to cessation of business operations.
SCOMI GROUP BHD ANNUAL REPORT 2020 114 Notes to the Financial Statements 115 Registration No. 200201003549 (571212-A)
16. Trade and other payables
Group Company Note 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 Non-current Non-trade Other payables and accruals - 1,028 - - - 1,028 - -
Current Trade Trade payables 16.1 - 95,311 - -
- 95,311 - -
Non-trade Amount due to subsidiaries 16.2 - - 26,508 66,325 Amount due to associates 16.3 53,186 - 42,408 - Other payables 16.4 178,906 66,363 164,825 66,310 Accruals 16.4 3,776 145,931 3,079 17,847 235,868 307,605 236,820 150,482 235,868 308,633 236,820 150,482
16.1 Trade payables
As at 30 June 2019, trade payables were related to deconsolidated subsidiaries as disclosed in Note 21.1 and were non-interest bearing and credit terms for trade payables ranged from cash term to 90 days.
16.2 Amount due to subsidiaries
The amount due to subsidiaries is unsecured and interest free except for RM47,501,000 of prior year, which was subject to interest of 7% when the outstanding balance exceeds the credit term.
16.3 Amount due to associates
The amount due to associates is subject to interest of 7% per annum when the outstanding balance exceeds the credit term.
16.4 Other payables and accruals
Other payables mainly comprise of:
(i) RM132.37 million (2019: RM38 million) payable to Malayan Banking Berhad (“Maybank”) in relation to the Notice of Demand issued by Maybank as disclosed in Note 33(ii). The amount due to Maybank is secured with 57,208,320 ordinary shares of SESB (equivalent to 12.21% interest in SESB) and is subject to interest of 3.5% (2019: Nil) per annum above Base Lending Rate (“BLR”). The BLR during the year range from 5.65% to 6.90% (2019: Nil).
115 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements116 Registration No. 200201003549 (571212-A)
16. Trade and other payables (continued)
16.4 Other payables and accruals (continued)
(ii) RM9.76 million (2019: RM8.78 million) payable to Standard Chartered Private Equity Limited (“SCPEL”) in relation to breach of contractual obligation to pay the debt restructuring exercise involving sales of shares of Scomi Oiltools Bermuda Limited applicable to the Company as disclosed in Note 32(iii). The amount due to SCPEL is unsecured and is subject to interest of 12% per annum (2019: 12%).
(iii) RM3.64 million (2019: RM nil) payable to See Song & Sons Sdn. Bhd. (“See Song”) to is in relation to purchase of toolings and materials as disclosed in Note 33(i) on behalf of a deconsolidated subsidiary. The amount due to See Song is unsecured and is subject to interest of 8% per annum (2019: Nil).
(iv) RM3.62 million (2019: RM0.97 million) payable to Directors of the Company and the companies connected to the Directors. The amount due to the Directors is unsecured and interest free.
(v) A provision of RM4.7 million is in relation to a dispute with the tax authority of Algeria concerning the works done by Scomi Oiltools Ltd in 1997 wherein KMC Oiltools Algerie EURL (Oiltools Algeria), a subsidiary of the Company seek to set aside a tax demand. The case was heard by the Algerian Court and then rejected by the Court for being unfounded. Oiltools Algeria then filed an appeal on 13 March 2016. After several hearings, the case was reserved for deliberation. To date, there was no further updates have been provided by the local counsel in relation to this matter.
(vi) An amount of RM5.02 million owing to a deconsolidated subsidiary for payroll cost settlement on behalf of a subsidiary of the Company.
(vii) Liabilities amounting to RM5.4 million of the Group are mainly related to past related parties transactions, of which RM2.68 million is recognised in the book of a subsidiary incorporated in Bermuda which has been dormant for more than seven years.
17. Loans and borrowings
Group Company 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 Non-current Guaranteed Serial Bonds – secured - 50,000 - - Less: Bond arrangement costs - (200) - - - 49,800 - - Lease liabilities 255 396 255 396 255 50,196 255 396
SCOMI GROUP BHD ANNUAL REPORT 2020 116 Notes to the Financial Statements 117 Registration No. 200201003549 (571212-A)
17. Loans and borrowings (continued)
Group Company 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 Current Guaranteed Serial Bonds – secured - 55,000 - - Less: Bond arrangement costs - (883) - - - 54,117 - - Bank loans – secured - 40,618 - - Revolving credits – secured - 41,271 - - Lease liabilities 133 87 133 87
133 136,093 133 87 388 186,289 388 483
During the financial year, the Group’s secured Guaranteed Serial Bonds, bank loans, revolving credits and bank overdrafts related to SESB Group were deconsolidated as disclosed in Note 21.1.
Previous financial period
(a) RM300.00 million Guaranteed Serial Bonds
Breach of bond covenants
In the prior financial period, there was a breach in the bonds covenant where SESB Group was unable to maintain its Group’s EBITDA to the Group’s gross debt ratio of not less than 0.30 times. However, the subsidiary obtained a waiver from Danajamin Nasional Berhad for this non-compliance.
Besides, there was an additional covenant which required the subsidiary to progressively build up the principal redemption in debt payment account for repayment of the bonds of RM55 million due on 14 December 2019. By 30 June 2019, the subsidiary was required to have built up principal redemption in debt payment account of RM51.5 million. However, at 30 June 2019, the total principal redemption build up in the debt payment account was RM18.6 million and there was a shortfall of RM32.9 million. The subsidiary obtained a waiver from the bond guarantor on 28 June 2019 to fulfill the redemption build up amount by 30 November 2019.
Security
The bonds and financial guarantee insurance facility were supported and secured by: (i) Corporate Guarantees from SESB and certain subsidiaries of SESB; (ii) Pledge of shares of certain subsidiaries of SESB; (iii) Assignment of contract proceeds; and (iv) Fixed and floating charge over all present and future assets of certain subsidiaries of SESB.
117 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements118 Registration No. 200201003549 (571212-A)
17. Loans and borrowings (continued)
Previous financial period (continued)
(b) Bank loans, revolving credit and bank overdrafts
Breach of loan covenant
In the previous financial period, a subsidiary of SESB breached loan covenants in respect of compliance with debt to net cash accruals ratio, minimum tangible net worth and adjusted tangible net worth covenant of the subsidiary. These loan covenants were not regularised as at 30 June 2019. As a result of the breaches, the non-current portion of the bank loan amounted to RM6.6 million as at 30 June 2019 continued to be reclassed to current liabilities as the subsidiary was unable to obtain a waiver from the bank.
Security
The bank loans and revolving credit were supported and secured by: (i) Assignment and charge of relevant short-term deposits and bank balances of the Group; (ii) Assignment of contract proceeds; (iii) Corporate Guarantees from certain subsidiaries of SESB; and (iv) Fixed and floating charge over all present and future assets of certain subsidiaries of SESB.
Finance lease liabilities and hire purchase creditors
Finance lease liabilities and hire purchase creditors were payable as follows:
<------2019 ------> Present Future value of minimum minimum lease lease payments Interest payments RM’000 RM’000 RM’000 Group Less than one year 110 23 87 Between one and five years 470 74 396 580 97 483
Company Less than one year 110 23 87 Between one and five years 470 74 396 580 97 483
SCOMI GROUP BHD ANNUAL REPORT 2020 118 Notes to the Financial Statements 119 Registration No. 200201003549 (571212-A)
18. Provision for retirement benefits
In the previous financial period, the Group operated an unfunded defined benefits plan related to the deconsolidated subsidiaries for qualifying employees and vessel crew of its subsidiaries in Indonesia. Under the plan, the employees and vessel crew were entitled to retirement benefits as defined in Indonesian Labour Laws and government regulations regarding maritime.
During the current financial year, the Group’s defined benefits plan was deconsolidated together with SESB as disclosed in Note 21.1.
Movement in net defined benefit liability
The following table shows a reconciliation from the opening balance to the closing balance for net defined benefit liability and its components:
Group 2019 RM’000
Balance at 1 April 8,932 Included in profit or loss Current service costs 788 Interest cost 124 Effect of movement of exchange rate 181 1,093 Included in other comprehensive income - Experience adjustment (470) (470) Other Benefits paid (1,154) Balance at 30 June 8,401
The principal actuarial assumptions used were as follows:
Group 2019
Discount rates (per annum) (%) 8.0 Expected rates of salary increase (per annum) (%) 0.0 – 8.0 Normal retirement age (years) 55
In previous financial period, the actuarial valuation was carried out as at 18 June 2019 by independent professional actuaries using the projected unit credit method.
119 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements120 Registration No. 200201003549 (571212-A)
19. Finance costs
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Restated
Interest expense on: - amount due from a deconsolidated subsidiary 635 2,510 2,052 2,510 - lease liabilities 24 26 24 26 - others 2,796 - 2,796 - 3,455 2,536 4,872 2,536
20. Tax expense
Recognised in profit or loss
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Current tax expense Current financial year 4,013 16,042 - - Underprovision in prior financial year/period - 6,251 - - 4,013 22,293 - -
Deferred tax expense Reversal and origination of temporary differences - (1,373) - - Over provision in prior financial year/period - (37) - - - (1,410) - - Total income tax expense 4,013 20,883 - -
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Restated
Income tax is attributable to - Discontinued operation 4,013 20,883 - - Total income tax expense 4,013 20,883 - -
SCOMI GROUP BHD ANNUAL REPORT 2020 120 Notes to the Financial Statements 121 Registration No. 200201003549 (571212-A)
20. Tax expense (continued)
Reconciliation of tax expense
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Restated Loss before tax from continuing operations for the financial year/period (147,664) (192,744) (404,062) (182,771)
Income tax calculated using Malaysia tax rate 24% (2019: 24%) (35,439) (46,259) (96,975) (43,865) Tax effects of non-deductible expenses 35,439 46,259 96,975 43,865 Tax expense on continuing operations - - - -
21. Deconsolidation of subsidiaries
Group 1.7.2019 to 1.4.2018 to Note 30.6.2020 30.6.2019 RM’000 RM’000
Loss from discontinued operations: - Scomi Energy Services Bhd 21.1 (91,459) (71,592) - Scomi Engineering Bhd 21.2 - (161,633) (91,459) (233,225)
21.1 Deconsolidation of Scomi Energy Services Bhd (“SESB”) and its subsidiaries
The Company entered into Loan Agreements on 17 July 2019 with Tan Sri Nik Awang @ Wan Azmi bin Wan Hamzah (“TSWA”) and Gelombang Global Sdn Bhd (“GGSB”) for amounts of up to RM21 million each. The loans were secured by a first ranking charge over the pledged shares fully paid up and unencumbered ordinary shares in the capital of SESB (“Pledged Shares”), pledged with Malaysian Trustee Berhad (“MTB”), being the stakeholder to hold and deal with the Pledged Shares.
121 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements122 Registration No. 200201003549 (571212-A)
21. Deconsolidation of subsidiaries (continued)
21.1 Deconsolidation of Scomi Energy Services Bhd (“SESB”) and its subsidiaries (continued)
On 21 January 2020, the Company announced that it failed to repay the loan within the stipulated timeline, respectively, upon which the Company received a letter of demand from TSWA and GGSB.
The following share transfer was effected by MTB on 26 February 2020:
(i) Transfer of 424,054,054 of Pledged Shares to TSWA; and
(ii) Transfer of 423,963,964 of Pledged Shares to GGSB.
Subsequent to the share transfer, the Company’s shareholding in SESB has reduced to 29.4%. Consequentially, SESB no longer meets the criteria of a subsidiary and has been reclassified as an associate in the consolidated financial statements of the Group.
In accordance with MFRS 10, Consolidated Financial Statements, the Group controls an entity when it is exposed, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Effective from the date of transfer of the Pledged Shares, the Company had lost its ability to be involved in SESB’s activities to affect the returns from SESB.
Accordingly, the Directors have determined that the Company has lost control in SESB upon the date of transfer of the Pledged Shares, and the assets and liabilities and the results of SESB Group have been deconsolidated from that date.
As SESB Group contributed wholly to the operating segments of oilfield services and marine services, hence, these segments have been deemed as discontinued operations during the financial year. The comparatives for the statements of profit or loss and other comprehensive income of the Group have been restated to reflect the discontinued operations.
SCOMI GROUP BHD ANNUAL REPORT 2020 122 Notes to the Financial Statements 123 124 Registration No. 200201003549 (571212-A) Registration No. 200201003549 (571212-A)
21. Deconsolidation of subsidiaries (continued) 21. Deconsolidation of subsidiaries (continued)
21.1 Deconsolidation of Scomi Energy Services Bhd (“SESB”) and its 21.1 Deconsolidation of Scomi Energy Services Bhd (“SESB”) and its subsidiaries (continued) subsidiaries (continued)
The consolidated financial information of SESB Group for the financial period 21.1.1 The profit or loss contribution from SESB Group are as follows: ended 26 February 2020 was not made available for the Group to account the deconsolidation of SESB Group. The closest available financial information of Unaudited Audited SESB Group was for the financial period ended 31 December 2019. In the 1.7.2019 to 1.4.2018 to absence of the relevant financial information as at 26 February 2020, the Group’s 31.12.2019 30.6.2019 basis are as follows: RM’000 RM’000
(a) the Group derecognised the assets and liabilities of SESB Group from the Revenue 232,022 643,494 consolidated statement on financial position on 31 December 2019; and Cost of sales (174,996) (519,993)
(b) the loss from discontinued operations has been computed based on the Gross profit 57,026 123,501 consolidated profit or loss of SESB group for the financial period ended 31 Other income - 4,842 December 2019. Selling and distribution expense (15,856) (56,212) Administrative expense (5,138) (91,062) On 30 October 2020, the auditor of SESB Group issued a disclaimer opinion due Net loss on impairment of financial to material uncertainty on going concern on the financial statements of SESB instruments (1,006) (734) Group for the financial year ended 30 June 2020. Other expenses (393) (5,641) Finance costs (7,210) (20,629) Finance income - 1,391 Share of loss of equity-accounted associates, net of tax - (2,299) Share of profit/(loss) of equity-accounted joint ventures, net of tax 107 (3,866) Gain/(Loss) before tax for the financial period 27,530 (50,709) Tax expense (4,013) (20,883) Gain/(Loss) for the financial period 23,517 (71,592) Loss on deconsolidation of subsidiaries (114,976) - Loss from discontinued operation (91,459) (71,592)
21.1.2 Cash flows used in discontinued operation
Unaudited Audited 1.7.2019 to 1.4.2018 to 31.12.2019 30.6.2019 RM’000 RM’000
Net cash from operating activities 21,318 16,145 Net cash (used in)/from investing activities (1,148) 26,307 Net cash used in financing activities (23,766) (44,839) Effect of exchange rate fluctuations on cash held - 4,263 Effect on cash flows (3,596) 1,876
123 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements124 Registration No. 200201003549 (571212-A)
21. Deconsolidation of subsidiaries (continued)
21.1 Deconsolidation of Scomi Energy Services Bhd (“SESB”) and its subsidiaries (continued)
21.1.1 The profit or loss contribution from SESB Group are as follows:
Unaudited Audited 1.7.2019 to 1.4.2018 to 31.12.2019 30.6.2019 RM’000 RM’000
Revenue 232,022 643,494 Cost of sales (174,996) (519,993)
Gross profit 57,026 123,501 Other income - 4,842 Selling and distribution expense (15,856) (56,212) Administrative expense (5,138) (91,062) Net loss on impairment of financial instruments (1,006) (734) Other expenses (393) (5,641) Finance costs (7,210) (20,629) Finance income - 1,391 Share of loss of equity-accounted associates, net of tax - (2,299) Share of profit/(loss) of equity-accounted joint ventures, net of tax 107 (3,866) Gain/(Loss) before tax for the financial period 27,530 (50,709) Tax expense (4,013) (20,883) Gain/(Loss) for the financial period 23,517 (71,592) Loss on deconsolidation of subsidiaries (114,976) - Loss from discontinued operation (91,459) (71,592)
21.1.2 Cash flows used in discontinued operation
Unaudited Audited 1.7.2019 to 1.4.2018 to 31.12.2019 30.6.2019 RM’000 RM’000
Net cash from operating activities 21,318 16,145 Net cash (used in)/from investing activities (1,148) 26,307 Net cash used in financing activities (23,766) (44,839) Effect of exchange rate fluctuations on cash held - 4,263 Effect on cash flows (3,596) 1,876
SCOMI GROUP BHD ANNUAL REPORT 2020 124 Notes to the Financial Statements 125 Registration No. 200201003549 (571212-A)
21. Deconsolidation of subsidiaries (continued)
21.1 Deconsolidation of Scomi Energy Services Bhd (“SESB”) and its subsidiaries (continued)
21.1.3 The assets and liabilities of SESB Group as at 31 December 2019 are as follows:
Unaudited 31.12.2019 RM’000
Property, plant and equipment 282,064 Intangible assets 106,937 Deferred tax assets 725 Investments in joint ventures 2,083 Investments in associates 8,847 Inventories 85,993 Trade and other receivables 324,026 Current tax assets 21,328 Cash and bank balances 27,786
Total assets 859,789
Deferred tax liabilities (4,786) Loans and borrowings (169,663) Trade and other payables (216,594) Current tax liabilities (14,844) Provision for retirement benefits (6,516)
Total liabilities (412,403)
Total net assets 447,386
Adjustments: Reclassification of foreign currency translation reserve to profit or loss 34,283 Derecognition of non-controlling interest (327,048) Net assets of SESB Group in the consolidation books of SGB Group 154,621 Equity interest in SESB retained as an associate (31,004) Settlement of the loans due to TSWA and GGSB, net of cash and cash equivalents of deconsolidated subsidiaries (8,641)
Loss on deconsolidation of subsidiaries 114,976
125 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements126 Registration No. 200201003549 (571212-A)
21. Deconsolidation of subsidiaries (continued)
21.2 Deconsolidation of Scomi Engineering Bhd (“SEB”) and its subsidiaries
In the previous financial period, the assets and liabilities and the results of SEB and its subsidiaries (“SEB Group”) were deconsolidated following loss of control over SEB upon appointment of judicial managers.
On 7 December 2018, the Directors made a Judicial Management Application for SEB, a wholly owned subsidiary of the Company, in the High Court of Malaysia (“The High Court”) which was subsequently approved on 24 January 2019.
In accordance with Section 414(2) of the Companies Act 2016 (“CA 2016”), during the previous financial period for which a judicial management order is in force, all powers conferred, and duties imposed on the directors by CA 2016 or by the constitution of the Company shall be exercised and performed by the judicial managers and not by the Directors.
In accordance with MFRS 10, Consolidated Financial Statements, the Group controls an entity when it is exposed, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Effective from the date of appointment of judicial managers by the High Court, the Company had lost its ability to be involved in SEB’s activities to affect the returns from SEB.
Accordingly, the Directors had determined that the Company had lost control in SEB upon the appointment of the judicial managers and the assets and liabilities and the results of SEB Group had been deconsolidated from that date.
As the SEB Group contributed wholly to the operating segment of transport solutions, hence, this segment had been deemed as discontinued operations during the previous financial reporting period.
21.2.1 The profit or loss contribution from SEB Group was as follows:
Unaudited 1.4.2018 to 24.1.2019 RM’000 Revenue - Selling and distribution expense (107) Administrative expense (61,209) Other expenses (14,478) Finance costs (20,932) Loss before tax for the financial period (96,726) Tax expense - Loss for the financial period (96,726) Loss on deconsolidation of subsidiaries (64,907)
Loss from discontinued operation (161,633)
SCOMI GROUP BHD ANNUAL REPORT 2020 126 Notes to the Financial Statements 127 Registration No. 200201003549 (571212-A)
21. Deconsolidation of subsidiaries (continued)
21.2 Deconsolidation of Scomi Engineering Bhd (“SEB”) and its subsidiaries (continued)
21.2.2 Cash flows from discontinued operation
Unaudited 1.4.2018 to 24.1.2019 RM’000
Net cash from operating activities 26,676 Net cash used in financing activities (26,676) Effect on cash flows -
21.2.3 The assets and liabilities of SEB Group as at 24 January 2019 was as follows:
Unaudited 24.1.2019 RM’000
Property, plant and equipment 49,418 Intangible assets 149,878 Deferred tax assets 39,324 Inventories 12,091 Trade and other receivables 708,574 Current tax assets 650
Total assets 959,935
Deferred tax liabilities (5,936) Loans and borrowings (498,505) Trade and other payables (419,725) Current tax liabilities (13,668)
Total liabilities (937,834)
Total net assets 22,101
Adjustments: Reclassification of foreign currency translation reserve to profit or loss 21,956 Goodwill written off 20,850 Net assets of SEB Group in the consolidation books of SGB Group 64,907 Fair value of the interest in SEB after deconsolidation -
Loss on deconsolidation of subsidiaries 64,907
127 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements128 Registration No. 200201003549 (571212-A)
21. Deconsolidation of subsidiaries (continued)
21.2 Deconsolidation of Scomi Engineering Bhd (“SEB”) and its subsidiaries (continued)
21.2.4 Lack of accounting records
During the previous financial period, a secured creditor had appointed a receiver and manager for a significant local subsidiary of SEB. The accounting records of the subsidiary together with other subsidiaries of SEB were seized by the receiver and manager. The Mumbai Metropolitan Rails Development Authority (“MMRDA”) also took the accounting records of a subsidiary of SEB in India. The records of a subsidiary in Brazil were also unavailable due to closure of that office.
As a result of the lack of accounting records, the Directors were unable to obtain sufficient and appropriate documentation to determine the appropriateness of certain balances and the effect of misstatements, if any, for the following:
i. the amounts disclosed in Note 21.2.1 on the loss for the financial period ended 24 January 2019 for SEB Group amounting to RM96.7 million and loss on deconsolidation of subsidiaries amounting to RM64.9 million;
ii. the amount disclosed in Note 21.2.3 on the net assets of SEB Group as at 24 January 2019 amounting to RM64.9 million; and
iii. the adoption of MFRS 15 of SEB Group and its consequential financial effect on the accumulated losses of the Group as at 1 April 2018; net assets of SEB Group as at 24 January 2019 amounting to RM64.9 million as disclosed in Note 21.2.3; and loss on discontinued operation of the Group amounting to RM161.6 million as disclosed in Note 21.2.1.
The auditors’ report for the financial period ended 30 June 2019 of the Group and of the Company issued on 31 October 2019 included a qualified opinion in respect to the above.
On 30 January 2020, the Company announced that the High Court of Malaya at Shah Alam approved the winding-up of SEB.
SCOMI GROUP BHD ANNUAL REPORT 2020 128 Notes to the Financial Statements 129 Registration No. 200201003549 (571212-A)
22. Loss for the financial year/period
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Restated Loss before tax is stated after charging/(crediting): Auditors’ remuneration: Audit fees: - KPMG PLT 350 530 350 530 - Other auditors 31 20 - - Non-audit fees: - KPMG PLT 126 6 126 6 - Local affiliates of KPMG PLT 14 13 14 13 - Other auditors 52 28 - - Material expenses/(income): Employee benefits costs (including Executive Director): - Wages, salaries and other employee benefits (including allowances) 4,956 16,358 4,731 14,871 - Defined contribution plan 308 561 247 463 Gain on disposal of investment properties - (2,236) - (2,236) Impairment loss: - investment in subsidiaries - - 636 64,397 - investment in associate - - 15,157 - - investment in joint ventures - 8,657 - 8,657 Over provision of amount due to associate (1,087) - (1,087) - Over provision of amount due to joint venture (3,553) - (3,553) - Over provision of other payables (1,736) - (1,736) - Provision for redemption of pledged securities 94,372 38,000 94,372 38,000 Net loss on impairment of financial instruments: - other receivables 18,780 123,177 18,780 52,325 - amount due from subsidiaries - - 4,854 1,066 Expenses arising from leases: Expenses relating to short-term leases 122 - 122 - Rental expense: - land and office premises - 420 - 420
129 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements130 Registration No. 200201003549 (571212-A)
23. Other comprehensive income
1.7.2019 to 30.6.2020 1.4.2018 to 30.6.2019 Tax Tax Before (expense)/ Net Before (expense)/ Net tax benefit of tax tax benefit of tax Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Items that will not be reclassified
subsequently to profit or loss Remeasurement of defined benefit liability - - - 470 - 470 Items that are or may be reclassified subsequently to profit or loss Foreign currency translation differences for foreign operations 1,077 - 1,077 9,438 - 9,438 Share of other comprehensive loss of equity-accounted associate, translation reserve (7,437) - (7,437) - - - Reclassifications of foreign currency differences on deconsolidation of subsidiary 34,283 - 34,283 21,956 - 21,956 27,923 - 27,923 31,864 - 31,864
24. Loss per ordinary share
The calculation of basic loss per ordinary share was based on the loss attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding, calculated as follows:
Loss attributable to ordinary shareholders Continuing Discontinued Group operations operation Total RM’000 RM’000 RM’000 1.7.2019 to 30.6.2020 Loss attributable to ordinary shareholders 147,664 94,475 242,139
Continuing Discontinued operations operation Total RM’000 RM’000 RM’000 1.4.2018 to 30.6.2019 Loss attributable to ordinary shareholders (restated) 192,744 203,427 396,171
SCOMI GROUP BHD ANNUAL REPORT 2020 130 Notes to the Financial Statements 131 Registration No. 200201003549 (571212-A)
24. Loss per ordinary share (continued)
Group 2020 2019 ’000 ’000
Weighted average number of ordinary shares in issue (basic) 1,093,907 1,093,907
Group 2020 2019 Restated Sen Sen From continuing operations (13.50) (17.62) From discontinued operation (8.64) (18.60) Basic loss per ordinary share (22.14) (36.22)
Diluted loss per ordinary share is not presented as the Company has no shares with potential dilutive effects as at 30 June 2020 and the warrants exercise price is more than the average share price for the financial year (2019: None).
25. Operating segment
In the previous financial period, the operating segments disclosed were related to Scomi Energy Services Bhd (“SESB”). As disclosed in Note 21.1, the Directors determined that the Company lost its control in Scomi Energy Services Bhd and its subsidiaries (“SESB Group”) following the transfer of pledged SESB shares on 26 February 2020. The consolidated financial information of SESB Group for the financial period ended 26 February 2020 was not made available for the Group to account the deconsolidation of SESB Group. The closest available financial information of SESB Group was for the financial period ended 31 December 2019. In the absence of the relevant financial information as at 26 February 2020, the assets and liabilities and the results of SESB Group have been deconsolidated since 31 December 2019. As a result of the deconsolidation, the Oilfield Services and Marine Services segment have been deemed as discontinued operations. As such, there is no disclosure on operating segment for the financial year ended 30 June 2020.
Segment assets
The total of segment asset is measured based on all assets (including goodwill) of a segment, as included in the internal management reports that are reviewed by the Chief Operating Decision Maker (“CODM”). Segment total asset is used to measure the return of assets of each segment.
Segment liabilities
Segment liabilities information is neither included in the internal management reports nor provided regularly to the CODM. Hence, no disclosure is made on segment liability.
131 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements 132 Registration No. 200201003549 (571212-A)
25. Operating segment (continued)
Elimination/ Oilfield Marine Unallocated services services Total cost Total RM’000 RM’000 RM’000 RM’000 RM’000 2019 Segment assets Assets employed in operations 603,297 229,559 832,856 (31,862) 800,994 Investments in associates - 8,847 8,847 - 8,847 Investments in joint ventures 2,083 - 2,083 - 2,083 605,380 238,406 843,786 (31,862) 811,924 Unallocated corporate assets: Current tax assets 13,490 - 13,490 Deferred tax assets 529 - 529 Total assets 857,805 - 825,943
Segment liabilities Liabilities in segment 337,580 57,992 395,572 107,751 503,323
Unallocated corporate liabilities: Current tax liabilities 19,752 4,553 24,305 Deferred tax liabilities 4,486 - 4,486 Total liabilities 419,810 - 532,114 Net assets 437,995 - 293,829
SCOMI GROUP BHD ANNUAL REPORT 2020 132
Notes to the Financial Statements 133 Registration No. 200201003549 (571212-A)
25. Operating segment (continued)
Geographical information
Total non-current Group assets 2020 2019 RM’000 RM’000
Malaysia 357 35,502 Indonesia - 204,924 Russia - 6,377 Nigeria - 1,545 Other countries - 178,211 357 426,559
26. Financial instruments
(a) Categories of financial instruments
The table below provides an analysis of financial instruments categorised as follows: (i) Amortised cost (“AC”);
Carrying amount AC 2020 RM’000 RM’000 Financial assets Group Cash and bank balances 77 77
77 77 Company Cash and bank balances 73 73
73 73 Financial liabilities Group Loans and borrowings 388 388 Other payables 255,762 255,762
256,150 256,150 Company Loans and borrowings 388 388 Other payables 236,820 236,820
237,208 237,208
133 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements134 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(a) Categories of financial instruments (continued)
Carrying amount AC RM’000 RM’000 2019 Financial assets Group Trade and other receivables* 221,405 221,405 Cash and bank balances 66,334 66,334 287,739 287,739 Company Trade and other receivables* 66 66 Cash and bank balances 582 582 648 648 Financial liabilities Group Loans and borrowings 186,289 186,289 Trade and other payables 308,633 308,633 494,922 494,922 Company Loans and borrowings 483 483 Trade and other payables 150,482 150,482 150,965 150,965 * Excluding prepayments and VAT recoverable
(b) Net gains and losses arising from financial instruments
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000
Financial liabilities measured at amortised cost (3,455) (2,536) (4,872) (2,536) (3,455) (2,536) (4,872) (2,536)
(c) Financial risk management
The Group and Company have exposure to the following risks from its use of financial instruments:
• Credit risk • Liquidity risk • Market risk
SCOMI GROUP BHD ANNUAL REPORT 2020 134 Notes to the Financial Statements 135 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(d) Credit risk
Credit risk is the risk of a financial loss to the Group if a related company or counterparty to a financial instrument fails to meet its contractual obligations. The Company’s exposure to credit risk arises principally from advances to subsidiaries and other receivables.
Intercompany advances
Risk management objectives, policies and processes for managing the risk
The Company provides unsecured advances to subsidiaries. The Company monitors the results of the subsidiaries regularly.
Exposure to credit risk, credit quality and collateral
As at the end of the reporting year, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.
Recognition and measurement of impairment loss
Generally, the Company considers advances to subsidiaries to have low credit risk. The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. As the Company is able to determine the timing of payments of the subsidiaries’ advances when they are payable, the Company considers the advances to be in default when the subsidiaries are not able to pay when demanded. The Company considers a subsidiary’s advance to credit impaired when: • The subsidiary is unlikely to repay its advance to the Company in full; • The subsidiary’s advance is overdue for more than 365 days; or • The subsidiary is continuously loss making and is having a deficit shareholders’ fund.
The Company determines the probability of default for these advances individually using internal information available.
The following table provides information about the exposure to credit risk and ECLs for subsidiaries’ advances:
Gross Impairment carrying loss Net amount allowance balance Company RM’000 RM’000 RM’000 2020 Credit impaired 111,519 (111,519) -
2019 Credit impaired 106,665 (106,665) -
135 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements136 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(d) Credit risk (continued)
Intercompany advances (continued)
Recognition and measurement of impairment loss (continued)
The movement in the allowance for impairment in respect of advances to subsidiaries during the year is as follows:
Lifetime Company ECL RM’000
Balance at 1 April 2018 105,599 Net remeasurement of loss allowance 1,066 Balance at 30 June 2019/1 July 2019 106,665 Net remeasurement of loss allowance 4,854 Balance at 30 June 2020 111,519
Other receivables
Risk management objectives, policies and processes for managing the risk
Credit risk on other receivables are mainly arising from amount due from Scomi Engineering Bhd and its subsidiaries which have been deconsolidated from the Group on 24 January 2019.
Exposure to credit risk, credit quality and collateral
As at the end of the reporting year, the maximum exposure to credit risk is represented by their carrying amount in the statement of financial position.
Recognition and measurement of impairment loss
The deconsolidated subsidiaries are unlikely to repay this amount outstanding to the Company in full due to the deconsolidated subsidiary is in the winding up process. The Company has fully impaired the amount due from these deconsolidated subsidiaries as at the financial year end.
SCOMI GROUP BHD ANNUAL REPORT 2020 136 Notes to the Financial Statements 137 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(d) Credit risk (continued)
Other receivables (continued)
The movement in the allowance for impairment in respect of other receivables during the year is as follows:
Lifetime ECL Group RM’000
Balance at 1 April 2018 - Net remeasurement of loss allowance 123,177 Balance at 30 June 2019/1 July 2019 123,177 Net remeasurement of loss allowance 18,780 Balance at 30 June 2020 141,957
Company
Balance at 1 April 2018 49,770 Net remeasurement of loss allowance 52,325 Balance at 30 June 2019/1 July 2019 102,095 Net remeasurement of loss allowance 18,780 Balance at 30 June 2020 120,875
137 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements 138 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(e) Liquidity risk
Liquidity risk is the risk that the Group and the Company will not be able to meet its financial obligations as they fall due. The Group’s and the Company’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.
The Group and the Company do not have sufficient liquidity to meet its liabilities when they fall due as disclosed in Note 1(b).
Maturity analysis
The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities as at the end of the reporting year based on undiscounted contractual payments:
Contractual More Carrying interest rate/ Contractual Under 1 1 - 2 2 - 5 than Group amount coupon cash flows year years years 5 years 2020 RM’000 % RM’000 RM’000 RM’000 RM’000 RM’000 Non-derivative financial liabilities Lease liabilities 388 2.53 465 156 110 199 - Trade and other payables 235,868 5.00 - 12.00 255,076 255,076 - - - 236,256 255,541 255,232 110 199 -
2019 Non-derivative financial liabilities Lease liabilities 186,289 2.53 - 6.9 194,882 143,232 51,285 110 255 Trade and other payables 308,633 5.00 - 12.00 310,421 310,421 - - - 494,922 505,303 453,653 51,285 110 255
SCOMI GROUP BHD ANNUAL REPORT 2020 138 Notes to the Financial Statements 139 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(e) Liquidity risk (continued)
Maturity analysis (continued) Contractual More Carrying interest rate/ Contractual Under 1 1 - 2 2 - 5 than 5 Company amount coupon cash flows year years years years 2020 RM’000 % RM’000 RM’000 RM’000 RM’000 RM’000 Non-derivative financial liabilities Lease liabilities 388 2.53 465 156 110 199 - Trade and other payables 236,820 5.00 - 12.00 255,274 255,274 - - - 237,208 255,739 255,430 110 199 - 2019 Non-derivative financial liabilities Lease liabilities 483 2.53 585 110 110 365 - Trade and other payables 150,482 5.00 - 12.00 155,595 155,595 - - - 150,965 156,180 155,705 110 365 -
SCOMI GROUP BHD ANNUAL REPORT 2020 139 Notes to the Financial Statements140 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(f) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other prices that will affect the Group’s financial position or cash flows.
(i) Currency risk
The Group is exposed to foreign currency risk on payables that are denominated in a currency other than the respective functional currencies of Group Entities. The currency giving rise to this risk are primarily U.S. Dollar (“USD”).
Risk management objectives, policies and processes for managing the risk
The Group does not have a fixed policy to hedge its payables via forward contracts. These exposures are managed primarily by using natural hedges that arise from offsetting assets and liabilities that are denominated in foreign currencies whenever possible and close monitoring of the currency exposures by management.
Exposure to foreign currency risk
The Group’s exposure to foreign currency (a currency which is other than the functional currency of the Group Entities) risk, based on carrying amounts as at the end of the reporting year was:
Denominated in USD 2020 2019 RM’000 RM’000 Balances recognised in the statement of financial position Group Trade and other receivables - 4,441 Cash and bank balances 19 1,616 Loans and borrowings - (17,437) Trade and other payables (17,684) (57,014) Net exposure (17,665) (68,394) Company Cash and bank balances 19 19 Trade and other payables (70,120) (79,271) Net exposure (70,101) (79,252)
SCOMI GROUP BHD ANNUAL REPORT 2020 140 Notes to the Financial Statements 141 142 Registration No. 200201003549 (571212-A) Registration No. 200201003549 (571212-A)
26. Financial instruments (continued) 26. Financial instruments (continued)
(f) Market risk (continued) (f) Market risk (continued)
(i) Currency risk (continued) (ii) Interest rate risk (continued)
Currency risk sensitivity analysis Exposure to interest rate risk
A 5% (2019: 5%) strengthening of the RM against the following currency at The interest rate profile of the Group’s and the Company’s significant the end of the reporting year would have increased post-tax profit or loss by interest-bearing financial instruments, based on carrying amounts as at the the amounts shown below. This analysis is based on foreign currency end of the reporting year was: exchange rate variances that the Group considered to be reasonably possible at the end of the reporting year. This analysis assumes that all other Group Company variables, in particular interest rates, remained constant. 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 Group Company Fixed rate instruments Profit or loss Profit or loss Financial assets - 24,906 - - 2020 2019 2020 2019 Financial liabilities (74,213) (120,723) (63,435) (64,307) RM’000 RM’000 RM’000 RM’000 (74,213) (95,817) (63,435) (64,307)
USD (671) (2,599) (2,664) (3,012) Floating rate
instruments A 5% (2019: 5%) weakening of RM against the above currency at the end of Financial liabilities (132,372) (81,889) (132,372) - the reporting year would have had equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remained constant. Interest rate risk sensitivity analysis
(a) Fair value sensitivity analysis for fixed rate instruments (ii) Interest rate risk
The Group does not account for any fixed rate financial liabilities at fair The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s variable rate value through profit or loss, and the Group does not designate payables and borrowings are exposed to a risk of change in cash flows due derivatives as hedging instruments under a fair value hedge accounting to changes in interest rates. model. Therefore, a change in interest rates at the end of the reporting year would not affect profit or loss. Risk management objectives, policies and processes for managing the risk (b) Cash flow sensitivity analysis for variable rate instruments The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate payables and borrowings. The Group reviews its debt A change of 100 basis points (“bp”) in interest rates at the end of the portfolio, taking into account the investment holding year and nature of its reporting year would have increased/(decreased) equity and post-tax assets. profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remained constant.
Profit or loss 100 bp 100 bp 100 bp 100 bp increase decrease increase decrease 2020 2020 2019 2019 Group RM’000 RM’000 RM’000 RM’000 Floating rate instruments (1,006) 1,006 (622) 622
Company Floating rate instruments (1,006) 1,006 - -
141 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements142 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(f) Market risk (continued)
(ii) Interest rate risk (continued)
Exposure to interest rate risk
The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments, based on carrying amounts as at the end of the reporting year was:
Group Company 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 Fixed rate instruments Financial assets - 24,906 - - Financial liabilities (74,213) (120,723) (63,435) (64,307) (74,213) (95,817) (63,435) (64,307)
Floating rate instruments Financial liabilities (132,372) (81,889) (132,372) -
Interest rate risk sensitivity analysis
(a) Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial liabilities at fair value through profit or loss, and the Group does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the end of the reporting year would not affect profit or loss.
(b) Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points (“bp”) in interest rates at the end of the reporting year would have increased/(decreased) equity and post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remained constant.
Profit or loss 100 bp 100 bp 100 bp 100 bp increase decrease increase decrease 2020 2020 2019 2019 Group RM’000 RM’000 RM’000 RM’000 Floating rate instruments (1,006) 1,006 (622) 622
Company Floating rate instruments (1,006) 1,006 - -
SCOMI GROUP BHD ANNUAL REPORT 2020 142 Notes to the Financial Statements 143 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(g) Fair value information
The carrying amounts of cash and cash equivalents, short-term receivables and payables and short-term borrowings reasonably approximate fair values due to the relatively short term nature of these financial instruments.
The table below analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statement of financial position.
Fair value of financial instruments Fair value of financial instruments not Total carried at fair value carried at fair value fair Carrying Group Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total value amount 2020 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Financial liabilities Lease liabilities ------388 388 388 388
Company
Financial liabilities Lease liabilities ------388 388 388 388
SCOMI GROUP BHD ANNUAL REPORT 2020 143 Notes to the Financial Statements 144 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(g) Fair value information (continued)
Fair value of financial instruments Fair value of financial instruments not Total carried at fair value carried at fair value fair Carrying Group Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total value amount 2019 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Financial liabilities Guaranteed Serial Bonds - - - - - 103,917 - 103,917 103,917 103,917 Hire purchase creditors ------483 483 483 483 - - - - - 103,917 483 104,400 104,400 104,400
Company
Financial liabilities Hire purchase creditors ------483 483 483 483
SCOMI GROUP BHD ANNUAL REPORT 2020 144 Notes to the Financial Statements 145 Registration No. 200201003549 (571212-A)
26. Financial instruments (continued)
(g) Fair value information (continued)
Level 2 fair value
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. For other borrowings, the market rate of interest is determined by reference to similar borrowing arrangements.
Transfers between Level 1 and Level 2 fair values
There has been no transfer between Level 1 and 2 fair values during the financial year (2019: no transfer in either directions).
Level 3 fair value
Financial instruments not carried at fair value
Type used Description of valuation technique and inputs Lease liabilities Discounted cash flows using a rate based on current market rate of borrowing of the respective Group entities at the reporting date.
27. Capital management
The Group’s objectives when managing capital is to maintain a strong capital base and restore the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business.
The Company had on 30 August 2019 announced that it had triggered the Prescribed Criteria under 8.04(2) of the Listing Requirements of Bursa Malaysia Securities Berhad. The Company had also triggered the Prescribed Criteria under Paragraph 2.1(a) of PN17 and Paragraph 2.1(e) that:
a. its shareholders’ equity on a consolidated basis was 25% or less of its share capital and its shareholders’ equity was less than RM40.0 million; and b. the auditor had highlighted a material uncertainty related to going concern in the Company’s latest audited financial statements and its shareholders’ equity on a consolidated basis was 50% or less of share capital (excluding treasury shares).
The Company is in the midst of implementing on the proposed regularisation plan to regularise its financial condition in efforts to maintain its listing status on the Main market of Bursa Securities.
145 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements146 Registration No. 200201003549 (571212-A)
28. Other commitments
Group 2020 2019 RM’000 RM’000 Capital expenditure commitments Property, plant and equipment Not contracted - 20,895
29. Contingent liabilities
Group Note 2020 2019 RM’000 RM’000 Contingent liabilities not considered remote Taxation - 2,000 Litigation 29.1 1,750 -
29.1 On 13 March 2020, the Company received a letter from Surend Mokhzani & Partners acting on behalf of Gannon Dunkerly & Co Ltd (“GDCL”) demanding for a sum of INR30,784,961 (equivalent to approximately RM1.75 million).
This is in relation to a corporate guarantee executed by Scomi Engineering Bhd (“SEB”) for the payment of the entire sum and all dues thereunder by Urban Transit Pvt Ltd (“UTPL”), a wholly-owned Indian subsidiary of SEB, on 20 November 2015.
As SEB has been put under liquidation on 30 January 2020, GDCL claimed that the Company is liable for the claim as SEB was a wholly-owned subsidiary of the Company.
The Company has filed an Application to strike out the Write of Summons and Statement of Claim and an Application for Security for Costs. Both Applications were initially fixed for Hearing on 20 November 2020, but were subsequently extended to 25 February 2021 following a Court Notice.
The Directors are of the opinion that provisions are not required in respect of this matter, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
SCOMI GROUP BHD ANNUAL REPORT 2020 146 Notes to the Financial Statements 147 Registration No. 200201003549 (571212-A)
30. Related parties
Identity of related parties
For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control. Related parties may be individuals or other entities.
Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly and entity that provides key management personnel services to the Group. The key management personnel include all the Directors of the Group, and certain members of senior management of the Group.
The Group has related party relationship with subsidiaries, associates and key management personnel.
Significant related party transactions
Related party transactions have been entered into, in the normal course of business under negotiated terms. The significant related party transactions of the Group and the Company are shown below. The balances related to the transactions below are shown in Notes 10 and 16.
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Income/(Expenses) A. Subsidiaries Interest expenses on intercompanies' advances - - - (2,510) Rental income on investment properties - - - 204 Disposal of investment property to Scomi Energy Services Bhd - - - 6,500 Shared cost between the Company and Scomi Energy Services Bhd - - - (847) Administrative cost - - - (859)
147 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements148 Registration No. 200201003549 (571212-A)
30. Related parties (continued)
Significant related party transactions (continued)
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Income/(Expenses) B. Associate Interest expenses on intercompanies' advances (2,052) - (2,052) - Shared cost between the Company and Scomi Energy Services Bhd (882) - (882) -
C. Related parties Airline ticketing services provided by Lintas - (38) - - Rental income for office - Suria Business Solutions Sdn Bhd - Directors - 190 - -
Lintas Travel & Tours Sdn. Bhd. (“Lintas”) and Suria Business Solutions Sdn. Bhd. are companies connected to a Director.
D. Key management personnel Salaries and short-term employee benefits 2,781 8,144 2,781 2,779 Defined contribution plan 104 339 104 77 2,885 8,483 2,885 2,856
Other key management personnel comprise persons other than the Directors of Group Entities, having authority and responsibility for planning, directing and controlling the activities of the Group Entities either directly or indirectly.
SCOMI GROUP BHD ANNUAL REPORT 2020 148 Notes to the Financial Statements 149 Registration No. 200201003549 (571212-A)
31. Directors’ remuneration
The aggregate amount of emoluments received/receivable by Directors of the Company during the financial year is as follows:
Group Company 1.7.2019 to 1.4.2018 to 1.7.2019 to 1.4.2018 to 30.6.2020 30.6.2019 30.6.2020 30.6.2019 RM’000 RM’000 RM’000 RM’000 Non-executive directors Fees 360* 1,208 360* 355 Other emoluments 136 389 136 353 496 1,597 496 708 Executive director Salaries and bonuses 1,740 1,747 1,740 1,747 Estimated monetary value of benefits-in-kind 187 388 187 388 1,927 2,135 1,927 2,135 2,423 3,732 2,423 2,843
* The proposed annual Directors’ fees are subject to the shareholders’ approval at the forthcoming Annual General Meeting of the Company or of the respective subsidiary.
32. Significant events during the financial year
(i) On 22 June 2020, the Company was served with a Writ of Summon (“Suit”) by Scomi Energy Services Bhd (“SESB”) through its solicitors. SESB is claiming the following from the Company:
(a) a sum of RM54,525,036 (as at 31 March 2020) being the outstanding sum due and owing by the Group and its deconsolidated subsidiaries (Note 21.2) to SESB; (b) interest at the rate of 5% per annum on the final judgement sum from the date of filing of the Suit herein until the date of full and final settlement; (c) costs; and (d) such further or other relief and/or orders as deemed fit and proper by the Honourable Court.
On 6 August 2020, SESB has filed an Application for Summary of Judgment against the Company. On 26 November 2020, the Court has allowed SESB’s application for Summary of Judgment.
An amount of RM53,186,000 had been recognised in Note 16.3. Remaining balance of RM1,339,036 was not included in the consolidated statement of financial position of the Group as at the financial year end due to the amount was owing by deconsolidated subsidiaries which had been deconsolidated from the Group.
149 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements150 Registration No. 200201003549 (571212-A)
32. Significant events during the financial year (continued)
(ii) On 20 March 2020, after taking into consideration the current market conditions as well as the deteriorating market price of the Company’s shares, the Company announced the abortion of the following proposals:
(a) proposed reduction of the Company’s issued share capital pursuant to Section 116 of the Companies Act, 2016; (b) proposed consolidation of every four (4) existing ordinary shares in the Company (“SGB Share” or “Share”) into one (1) SGB Share; (c) proposed renounceable rights issue of up to 1,188,890,151 new Consolidated Shares (“Rights Shares”) together with up to 396,296,717 free detachable warrants (“Warrants C”) on the basis of three (3) Rights Shares together with one (1) free Warrant C for every one (1) Consolidated Share held by the entitled shareholders, on an entitlement date to be determined later at an issue price of RM0.18 per Rights Share; (d) proposed settlement of liabilities owing by the Company to Malayan Banking Berhad (“Maybank”); and (e) proposed net-off of the amount repayable to Sammy Tse Kwok Fai (“STKF”) against the subscription moneys payable by STKF pursuant to the proposed Right Issues of shares with warrant.
All the above points are collectively referred to as the “Proposals”. The applications in relation to the Proposals had been approved by Bursa Malaysia Securities Berhad via its letter dated 2 December 2019 prior to the announcement of its abortion.
Pursuant thereto, the Directors will pursue other proposals to address the Company’s current PN17 status.
(iii) On 7 February 2020, the Company received a service of Statutory Demand from Shearn Delamore & Co. acting on behalf of Standard Chartered Private Equity Limited (“SCPEL”) stating that SCPEL had originated summons in High Court of Malaya at Kuala Lumpur on 28 November 2019 against the Company and pursuant to which a sum of RM8,999,485.71 (“Demanded Sum”) which was due and owing to SCPEL as of the date of Statutory Demand, 7 February 2020.
This Statutory Demand arose as the Company has defaulted in paying the outstanding considerations and the associated interest owing to SCPEL involving the purchasing of shares of Scomi Oiltools Bermuda Limited (“SOBL”) by the Company from SCPEL.
The Demanded Sum is payable within 21 days upon the service of Statutory Demand, failing which, SCPEL can take appropriate action without further notice for the winding-up of the Company.
An amount of RM9,763,731 included interest payable as at the financial year end had been recognised as part of other payables in Note 16.4(ii). The Group and the Company did not settle the amount within the stipulated time as stated in the statutory demand.
SCOMI GROUP BHD ANNUAL REPORT 2020 150 Notes to the Financial Statements 151 Registration No. 200201003549 (571212-A)
32. Significant events during the financial year (continued)
(iv) As disclosed in Note 21.1, SESB ceased to be a subsidiary of the Company upon completion of the share transfer to TSWA and GGSB on 26 February 2020.
(v) On 23 December 2019, the Company announced the execution of a binding term sheet (“BTS”) between the Company and the receiver and manager (“R&M”) of Scomi Rail Bhd (“SRB”), appointed by Maybank, for a composite SCOMI Monorail Business Revival Plan, involving the following:
(a) proposed business reorganisation on the monorail business segment for the Group; and (b) proposed transfer of SGB’s monorail business intellectual property from the R&M of SRB for RM36 million.
On 22 January 2020, SGB and R&M mutually agreed to extend the expiry of the execution of the Definitive Agreements until 28 February 2020. As the Definitive Agreements have yet to be executed and no further extension of time has been agreed upon, the BTS is deemed to have lapsed. Both parties have since been discharged from their respective obligations, with neither party having any rights and claims whatsoever against each other in relation to the BTS.
(vi) The Company had on 30 August 2019 triggered the criteria pursuant to Paragraphs 2.1(a) and 2.1(e) of Practice Note No. 17 (“PN17”) of the Main Market Listing Requirements of Bursa Securities (“Listing Requirements”) and was classified as a PN17 Company on 3 December 2019 following the rejection of the Company’s application for waiver by Bursa Malaysia, vide its letter dated 2 December 2019.
The Directors are in the midst of finalising a plan to regularise the Company’s financial condition and announcement on the same will be made in due course in accordance to the Listing Requirements.
33. Significant events subsequent to the financial year end
(i) On 10 September 2020, the Company received a Letter of Demand (“LOD”) from See Song & Sons Sdn Bhd (“See Song”) for the outstanding sum of RM3,799,193.74 (“Demanded Sum”) as of the date of LOD to be payable within 7 days from the date of the LOD, failing which, See Song has the right to proceed with legal proceedings against the Company.
The Demanded Sum arose due to the default in payment to See Song on the sales and purchase agreement entered on 2 July 2019 to purchase the toolings and materials on behalf of a deconsolidated subsidiary worth RM4.2 million whereby the Company has only made a payment of RM1 million on 23 July 2020. As of to date, the Company has not made any payment subsequent to the expiry of 7 days of the LOD.
151 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements152 Registration No. 200201003549 (571212-A)
33. Significant events subsequent to the financial year end (continued)
(ii) On 6 August 2020, the Company announced that it had received a Notice of Demand (“NOD”) dated 29 July 2020 from Maybank for the sum of RM113,957,000 (“Demanded Sum”) together with interest accruing thereon at a rate of 3.5% per annum above Maybank’s Base Lending Rate on a monthly rest and compounded monthly (“Interest Accrued”).
The Demanded Sum originally arose due to the default in payment to Maybank by an indirect deconsolidated subsidiary of the Company, Scomi Rail Bhd (“SRB”) (which was ordered to wind-up by the High Court on 6 May 2019 with a Receiver and Manager appointed on 9 May 2019). 57,208,320 shares (equivalent to 12.21% ownership interest) (“Pledged Shares”) of Scomi Energy Services Bhd (“SESB”) owned by the Company was secured against the bank facilities granted by Maybank to SRB which was defaulted by SRB.
Maybank has issued a demand for the Demanded Sum and Interest Accrued from 1 January 2019 until the date of full payment, within 7 days from the date of the NOD. The Group and the Company did not settle the amount within the stipulated time as stated in the NOD.
On 10 November 2020, the Company announced that it was served with a Writ of Summons (“WOS”) dated 6 November 2020 from Maybank for Demanded Sum together with Interest Accrued. On 24 November 2020, the Company has filed a Memorandum of Appearance for the WOS by Maybank against the Company. The Company had on the same day served the said Memorandum on Maybank’s solicitor.
An amount of RM132,371,627 included interest payable had been recognised as part of other payables as at the financial year end in Note 16.4(i).
(iii) On 2 July 2020, the Company announced that it had entered into a loan agreement with SBI Spectrum Sdn Bhd (“SBI”) in relation to the provision of financial assistance to the Company amounting to RM1.0 million (“Loan”) (“Financial Assistance”). SBI is a substantial shareholder of the Company. Mr Sammy Tse Kwok Fai (“STKF”), who is the Executive Director of the Company, is a substantial shareholder of SBI. Both SBI and STKF are deemed interested in the Financial Assistance. The principal salient terms of the Financial Assistance are as follows:
(a) The Financial Assistance is for the purpose of meeting the working capital requirements of the Company; (b) Interest on the Loan is at eight percent (8%) per annum; (c) The Financial Assistance is for a tenure of 6 months from disbursement; (d) Unencumbered shares of Scomi Energy Services Bhd (an associate of the Company) with market value of up to RM2.0 million are charged as collateral for the Loan, being two (2) times cover over the Loan, as a security for the repayment of the Loan.
SCOMI GROUP BHD ANNUAL REPORT 2020 152 Notes to the Financial Statements 153 Registration No. 200201003549 (571212-A)
33. Significant events subsequent to the financial year end (continued)
(iv) On 27 October 2020, See Song agreed to provide the Company with a loan of RM1 million for working capital purposes, to be repaid together with interest of 8% per annum within 6 months. The loan is secured by a first charge over the Company’s shareholding in SESB equivalent to market value of RM2 million.
34. Significant changes in accounting policies
During the financial year, the Group and the Company adopted MFRS 16.
Definition of a lease
On transition to MFRS 16, the Group and the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied MFRS 16 only to contracts that were previously identified as leases.
As a lessee
The Group and the Company leased an office space from the deconsolidated subsidiary (Note 21.1) with lease term less than 12 months. The Group and the Company elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short- term leases’).
For leases that were classified as finance lease under MFRS 117, the carrying amounts of the right-of-use asset and the lease liability at 1 July 2019 are determined to be the same as the carrying amount of the leased asset and lease liability under MFRS 117 immediately before that date.
Impacts on financial statements
The transition to MFRS 16 does not have a material effect on the Group’s and the Company’s financial statements.
153 ANNUAL REPORT 2020 SCOMI GROUP BHD Notes to the Financial Statements154 Registration No. 200201003549 (571212-A)
35. Comparative
These comparative figures have been restated:
(i) due to deconsolidation of Scomi Energy Services Bhd.
(ii) to conform to current year’s presentation.
The changes do not have any impact on the earnings per ordinary shares of the Group.
As previously Effect of As reported reclassification restated Note RM’000 RM’000 RM’000 Group 2019 Statement of profit or loss Revenue 643,502 (643,494) 8 35(i) Cost of sales/services (519,993) 519,993 - 35(i) Other income 5,512 (4,842) 670 35(i) Personnel expenses - (16,919) (16,919) 35(ii) Foreign exchange loss - (2,058) (2,058) 35(ii) Professional and consultancy fee - (1,025) (1,025) 35(ii) Selling and distribution expenses (56,213) 56,213 - 35(i) Administrative expenses (112,115) 112,115 - 35(i) & 35(ii) Net loss on impairment of financial instruments (123,911) 734 (123,177) 35(i) Other expenses (52,296) 4,589 (47,707) 35(i) Finance costs (23,165) 20,629 (2,536) 35(i) Finance income 1,391 (1,391) - 35(i) Share of loss of equity – accounted for associates, net of tax (2,299) 2,299 - 35(i) Share of loss of equity – accounted for joint ventures, net of tax (3,866) 3,866 - 35(i) Tax expense (20,883) 20,883 - 35(i) Loss from discontinued operation (161,633) (71,592) (233,225) 35(i)
SCOMI GROUP BHD ANNUAL REPORT 2020 154 155
Scomi Group Bhd (Registration No. 200201003549 (571212-A)) (Incorporated in Malaysia) and its subsidiaries Statement by Directors pursuantStatement to Sectionby Directors 251(2) pursuantof the Companies to Act 2016 Section 251(2) of the Companies Act 2016
In the opinion of the Directors, the financial statements set out on pages 45 to 154 are drawn
up in accordance with Malaysian Financial Reporting Standards, International Financial
Reporting Standards and the requirements of Companies Act 2016 in Malaysia so as to give
a true and fair view of the financial position of the Group and of the Company as of 30 June
2020 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:
………………………………………………… Tunku Azlan bin Tunku Aziz Director
………………………………………………… Sammy Tse Kwok Fai Director
Petaling Jaya
Date: 30 November 2020
155 ANNUAL REPORT 2020 SCOMI GROUP BHD 156
Scomi Group Bhd (Registration No. 200201003549 (571212-A)) (Incorporated in Malaysia) and its subsidiaries Statutory Declaration Statutorypursuant declaration to Section pursuant 251(1)(b) to of the Companies Act 2016 Section 251(1)(b) of the Companies Act 2016
I, Chacko Kunjuvaru, the officer primarily responsible for the financial management of Scomi
Group Bhd, do solemnly and sincerely declare that the financial statements set out on pages
45 to 154 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the declaration to be true, and by virtue of the Statutory
Declarations Act, 1960.
Subscribed and solemnly declared by the abovenamed Chacko Kunjuvaru, NRIC: 770103-
01-7229, MIA CA 23373, at Petaling Jaya in the State of Selangor Darul Ehsan on 30
November 2020.
…………………………………. Chacko Kunjuvaru
Before me:
SCOMI GROUP BHD ANNUAL REPORT 2020 156
Independent Auditors’ Report to theINDEPENDENT members of Scomi AUDITORS’ Group Bhd REPORT TO THE MEMBERS OF SCOMI GROUP BHD (Registration No. 200201003549 (571212-A)) (Incorporated in Malaysia)
Report on the Audit of the Financial Statements
Disclaimer of Opinion
We were engaged to audit the financial statements of Scomi Group Bhd, which comprise the statements of financial position as at 30 June 2020, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies as set out on pages 45 to 154.
We do not express an opinion on the accompanying financial statements of the Group and the Company. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.
Basis for Disclaimer of Opinion
In seeking to form an opinion on the financial statements, we have considered the following matters: 1. The events and conditions as disclosed in Note 1(b) to the financial statements indicate existence of material uncertainties which may cast significant doubt on the ability of the Group and the Company to continue as going concerns. The financial statements have been prepared on the historical cost basis and on the assumption that the Group and the Company are going concerns. However, the going concern assumption is highly dependent on the successful formulation, approval and implementation of the regularisation plan, and the ability of the Group and the Company to achieve sustainable and viable operations so as to generate sufficient cash flows to enable them to meet their obligations as and when they fall due. In the event that the regularisation plan is not successfully formulated, approved and implemented, 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 recoverability and classification of recorded assets and to the classification and additional amounts of liabilities should the Group and Company be unable to continue as going concerns.
157
157 ANNUAL REPORT 2020 SCOMI GROUP BHD
Independent Auditors’ Report to the members of Scomi Group Bhd
Basis for Disclaimer of Opinion (continued)
2. As disclosed in Note 21.1 to the financial statements, the consolidated financial information of Scomi Energy Services Bhd and its subsidiaries (“SESB Group”) for the financial period ended 26 February 2020, being the date that the Company lost its control in SESB Group, was not made available for the Group to account for the effect of the deconsolidation of SESB Group on the said date. The Group accounted for the effects of deconsolidation using the closest available financial information of SESB Group for the financial period ended 31 December 2019. We are unable to determine if there were any material differences between the financial information of the two different dates. On 30 October 2020, the auditor of SESB Group issued a disclaimer opinion due to material uncertainty on going concern on the financial statements of SESB Group for the financial year ended 30 June 2020. The auditor of SESB Group had not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements of SESB Group for the financial year ended 30 June 2020. In view of the above, we are unable to obtain sufficient appropriate audit evidence to determine the appropriateness of amount and the effect of misstatements, if any, for the following: i. the loss of deconsolidation of RM91.459 million and share of losses of equity accounted associate of RM8.410 million as disclosed in the statement of profit or loss and other comprehensive income of the Group; ii. the financial information of the Group’s material associate as disclosed in Note 7 to the financial statements; and iii. the financial information and the effects of deconsolidation of SESB Group as disclosed in Note 21.1 to the financial statements.
3. We are unable to obtain sufficient appropriate audit evidence to determine the appropriateness of the outstanding liabilities amounting to RM5.4 million of the Group as disclosed in Note 16.4 (vii) to the financial statements. These liabilities are mainly related to past related parties’ transactions that are pending substantiation, reconciliation and reclassification to appropriate accounts.
Emphasis of Matter
As disclosed in Note 21.2.4 to the financial statements, our audit opinion dated 31 October 2019 on the financial statements for the financial period ended 30 June 2019 included a qualified opinion.
158
SCOMI GROUP BHD ANNUAL REPORT 2020 158
Independent Auditors’ Report to the members of Scomi Group Bhd
Independence and Other Ethical Responsibilities
We are independent of the Group and of the Company in accordance with the By- Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.
Responsibilities of the Directors for the Financial Statements
The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, 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.
In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the ability of the Group and of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our responsibility is to conduct an audit of the Group and of the Company’s financial statements in accordance with approved standards on auditing in Malaysia and International Standards on Auditing and to issue an auditors’ report. However, because of the matters described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.
Report on Other Legal and Regulatory Requirements
In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that:
(a) the subsidiaries of which we have not acted as auditors are disclosed in Note 6 to the financial statements;
(b) we have not obtained all the information and explanations that we required for the matters as described in the Basis for Disclaimer Opinion.
159
159 ANNUAL REPORT 2020 SCOMI GROUP BHD
Independent Auditors’ Report to the members of Scomi Group Bhd
Other Matter
This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
KPMG PLT Chua See Guan (LLP0010081-LCA & AF 0758) Approval Number: 03169/02/2021 J Chartered Accountants Chartered Accountant
Petaling Jaya, Selangor
Date: 30 November 2020
160
SCOMI GROUP BHD ANNUAL REPORT 2020 160 161 AppendixRegistration No. 200201003549 (571212-A)
Appendix
Directors of subsidiary companies of the Company
The list of directors who served on the boards of the subsidiary companies of the Company during the financial year until the date of the Directors’ Report is set out below.
Name of Subsidiary Company Name of Director Scomi Solutions Sdn. Bhd. Rohaida binti Ali Badaruddin
Scomi Chemicals Sdn. Bhd. Zubaidi Bin Harun Sammy Tse Kwok Fai
Scomi Precision Engineering Sdn. Bhd. Sammy Tse Kwok Fai
Global Learning and Development Sdn. Bhd. Azah binti Othman Sammy Tse Kwok Fai
Scomi Energy Sdn. Bhd. Rohaida binti Ali Badaruddin Sammy Tse Kwok Fai
Scomi Enviro Sdn. Bhd. Sammy Tse Kwok Fai
Scomi OBM Terminal Sdn. Bhd. Kanesan A/L Veluppillai Shah Hakim @ Shahzanim bin Zain
Scomi International Private Limited Shah Hakim @ Shahzanim bin Zain Lee Chun Fai Manoj Mohanka Tatang Tabrani
Scomi Ecosolve Limited Shah Hakim @ Shahzanim bin Zain
Scomi Oiltools Bermuda Limited Mukhnizam bin Mahmud
Scomi Oiltools Overseas (M) Limited Mukhnizam bin Mahmud
Scomi Oiltools (Europe) Ltd Stephen Fredrick Bracker
Scomi Oiltools Inc Abu Zaharoff bin Abu Bakar Michael Kent Walker
Scomi Oiltools de Mexico RL de CV (Mexico) Stephen Fredrick Bracker Michael Kent Walker
KMC Oiltools Algerie EURL John McDonald
Oilfield Services de Mexico S de RL de CV Stephen Fredrick Bracker Michael Kent Walker
161 ANNUAL REPORT 2020 SCOMI GROUP BHD th Analysis of Shareholdings as at 4 November 2020 Analysis of Shareholdings as at 4th November 2020
Share Capital Total Number of Issued Shares : 1,093,907,460 ordinary shares Class of Shares : Ordinary shares Voting Rights : One vote per ordinary share No. of Shareholders : 18,839
Distribution of Shareholdings
Shareholders Shareholding Size of Shareholdings No. of holders % No. of shares held % Less than 100 726 3.85 26,418 Negligible 100 to 1,000 3,266 17.34 2,131,473 0.19 1001 to 10,000 8,856 47.01 41,917,019 3.83 10,001 to 100,000 5,006 26.57 171,254,302 15.66 100,001 to less than 5% of issued shares 984 5.22 644,586,383 58.93 5% and above of issued shares 1 0.01 233,991,865 21.39 Total 18,839 100.00 1,093,907,460 100.00
Shareholdings of Substantial Shareholders
Direct shareholding Indirect shareholding Name of substantial shareholders No. of shares % No. of shares % SBI Spectrum Sdn Bhd 233,991,865 21.39 - - Sammy Tse Kwok Fai 1,000 # 233,991,865(3) 21.39 Kaspadu Sdn Bhd 85,574,842 7.82 562,670(4) 0.05 Shah Hakim @ Shahzanim Bin Zain 3,691,949(1) 0.34 88,726,369(2) 8.11
#Negligible
(1) 2,713,114 shares held through Maybank Nominees (Tempatan) Sdn Bhd and Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain. (2) Deemed interested by virtue of Section 8(4) of the Companies Act, 2016 through his shareholding in Kaspadu Bhd, Rentak Rimbun Sdn Bhd and Onstream Marine Sdn Bhd. (3) Deemed interested by virtue of Section 8(4) of the Companies Act 2016 through his shareholding in SBI Spectrum Sdn Bhd. (4) Deemed interested by virtue of Section 8(4) of the Companies Act 2016 through its shareholding in Onstream Marine Sdn Bhd.
Shareholdings of Directors (As Per the Register of Directors’ Shareholdings)
Direct Interest Indirect Interest Directors No. of shares % No. of shares % Sammy Tse Kwok Fai 1,000 # 233,991,865(3) 21.39 Shah Hakim @ Shahzanim Bin Zain 3,691,949(1) 0.34 88,726,369(2) 8.11
#Negligible
(1) 2,713,114 shares held through Maybank Nominees (Tempatan) Sdn Bhd and Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain. (2) Deemed interested by virtue of Section 8(4) of the Companies Act, 2016 through his shareholding in Kaspadu Sdn Bhd, Rentak Rimbun Sdn Bhd and Onstream Marine Sdn Bhd. (3) Deemed interested by virtue of Section 8(4) of the Companies Act 2016 through his shareholding in SBI Spectrum Sdn Bhd.
SCOMI GROUP BHD ANNUAL REPORT 2020 162 Analysis of Shareholdings as at 4th November 2020 List of Top Thirty (30) Largest Shareholders (Without Aggregating The Securities From Different Securities Accounts Belonging To The Same Depositor)
No. Name of shareholders No. of shares Percentage % 1. SBI Spectrum Sdn Bhd 233,991,865 21.39 UOBM Nominees (Asing) Sdn Bhd 2. 54,318,700 4.97 TAEL One Partners Ltd for Amadia Investments Ltd 3. Multi-Purpose Credit Sdn Bhd 41,526,527 3.80
4. Kaspadu Sdn Bhd 30,548,315 2.79 UOB Kay Hian Nominees (Asing) Sdn Bhd 5. 22,756,240 2.08 Exempt An For UOB Kay Hian Pte Ltd (A/C Clients) RHB Capital Nominees (Tempatan) Sdn Bhd 6. 13,500,000 1.23 Pledged securities account for Kaspadu Sdn Bhd (SBSSB 1311005) 7. Bara Aktif Sdn Bhd 12,784,285 1.17 Maybank Securities Nominees (Tempatan) Sdn Bhd 8. Pledged securities account for 10,008,100 0.91 Mohamed Faroz Bin Mohamed Jakel (STF) Affin Hwang Nominees (Asing) Sdn Bhd 9. 8,850,000 0.81 Lim & Tan Securities Pte Ltd for Leo Lionel Public Nominees (Tempatan) Sdn Bhd 10. Pledged Securities Account for 7,857,142 0.72 Nik Awang @ Wan Azmi bin Wan Hamzah (E-KPG/JRL) 11. Lim Fong Peng @ Lim Fung Feng 7,246,120 0.66
12. Ler Long Exh 6,420,285 0.59 HSBC Nominees (Asing) Sdn Bhd 13. 6,082,500 0.56 Exempt An For Bank Julius Baer & Co. Ltd (Singapore BCH) 14. Rozabil @ Rozamujib Bin Abdul Rahman 5,868,000 0.54 SJ Sec Nominees (Tempatan) Sdn Bhd 15. 5,035,000 0.46 Pledged Securities Account For In Fwn Sin (SMT) 16. Chan Lai Heng 5,004,000 0.46
17. Michael Heng Chun Hong 5,000,000 0.46 Public Nominees (Tempatan) Sdn Bhd 18. 5,000,000 0.46 Pledged Securities Account for Au Kwan Seng (E-KLC) 19. UOBM Nominees (Tempatan) Sdn Bhd 4,985,000 0.46 TOIC Investments Ltd for Zubaidi Bin Harun 20. Citigroup Nominees (Asing) Sdn Bhd 4,742,428 0.43 Exempt An For OCBC Securities Private Limited (Client A/C-NR) 21. Sng Beng Hock Michael 4,250,000 0.39
22. Hee Chooi Keong 3,939,900 0.36 Maybank Securities Nominees (Asing) Sdn Bhd 23. 3,800,000 0.35 Exempt An for Maybank Kim Eng Securities Pte Ltd Maybank Nominees (Tempatan) Sdn Bhd 24. 3,600,000 0.33 Pledged Securities Account for Ong Eng Hock 25. Low Chu Mooi 3,573,571 0.33
26. Au Yong Mun Yue 3,500,000 0.32
27. Lim Kim Hua 3,099,000 0.28
28. Shah Aref Bin Sairi 3,000,000 0.27 Maybank Nominees (Tempatan) Sdn Bhd 29. 2,979,500 0.27 Pledged Securities Account for Vijan Kumaran A/L Chandran 30. Ong Seng Guan 2,880,000 0.26
Total 526,146,478 48.11
163 ANNUAL REPORT 2020 SCOMI GROUP BHD Analysis of Warrantholdings as at 4th November 2020 Analysis of Warrantholdings as at 4th November 2020
Share Capital Total Number of warrants issued : 491,279,410 warrants No. of warrants outstanding : 491,279,410 warrants Exercise price of warrants : RM0.21 Expiry of warrants : 18 February 2023
Distribution of warrant holdings Warrant Holders Warrant Holdings Size of Warrantholdings No. of holders % No. of shares held % Less than 100 1,326 7.35 45,789 0.01 100 to 1,000 5,457 30.26 2,700,232 0.55 1001 to 10,000 8,569 47.52 30,739,818 6.26 10,001 to 100,000 2,287 12.68 68,192,247 13.88 100,001 to less than 5% of issued shares 393 2.18 245,445,206 49.96 5% and above of issued shares 2 0.01 144,156,118 29.34 Total 18,034 100.00 491,279,410 100.00
List of Top Thirty (30) Largest Warrant Holders (Without Aggregating The Securities From Different Securities Accounts Belonging To The Same Depositor) No Name of warrant holders No. of warrant holdings % 1. IJM Corporation Berhad 116,996,768 23.81 UOBM Nominees (Asing) Sdn Bhd 2. 27,159,350 5.53 TAEL One Partners Ltd for Amadia Investments Ltd 3. Multi-Purpose Credit Sdn Bhd 20,763,263 4.23 4. Kaspadu Sdn Bhd 15,274,157 3.11 5. Teh Kai Sing 12,992,857 2.64 UOB Kay Hian Nominees (Asing) Sdn Bhd 6. 11,106,927 2.26 Exempt An For UOB Kay Hian Pte Ltd (A/C Clients) 7. Shah Aref Bin Sairi 8,600,000 1.75 RHB Capital Nominees (Tempatan) Sdn Bhd 8. Pledged securities account for 6,750,000 1.37 Kaspadu Sdn Bhd (SBSSB 1311005) SJ SEC Nominees (Tempatan) Sdn Bhd 9. 6,350,000 1.29 Pledged Securities Account for In Fwn Sin (SMT) 10. Yeoh Chin Hoi 4,489,800 0.91 RHB Capital Nominees (Tempatan) Sdn Bhd 11. 4,000,000 0.81 Lee Leong Lai (T-471274) 12. Lim Fong Peng @ Lim Fung Feng 3,623,060 0.74 13. Wan Zulkifli Bin Wan Abdullah 3,350,000 0.68 Citigroup Nominees (Asing) Sdn Bhd 14. 3,127,400 0.64 Exempt AN for Bank of Singapore Limited (Foreign) Kenanga Nominees (Tempatan) Sdn Bhd 15. 2,960,000 0.60 Rakuten Trade Sdn Bhd for Faizul Ridhwan Bin Abdullah UOBM Nominees (Tempatan) Snd Bhd 16. 2,492,500 0.51 TOIC Investments Ltd for Zubaidi Bin Harun CGS CIMB Nominees (Tempatan) Sdn Bhd 17. 2,234,500 0.45 Pledged Securities Account for Retnarasa A/L Annarasa 18. Syed Mohd Azudin Bin Syed Idrus 2,200,000 0.45 19. Sng Beng Hock Michael 2,125,000 0.43 20. Azmi Bin Muhammad 2,000,400 0.41 21. Tan Sze Kheng 2,000,000 0.41 22. Maybank Securities Nominees (Asing) Sdn Bhd 1,900,000 0.39 Exempt An for Maybank Kim Eng Securities Pte Ltd 23. Yeoh Sooi Bar 1,837,000 0.37 24. Hew Pei-Li 1,800,000 0.37 25. Ler Long Exh 1,662,028 0.34 26. Siah Boon Huat 1,550,000 0.32 27. Teh Siew Hoon 1,500,000 0.31 28. Lim Keng Chuan 1,450,714 0.30 29. Muhammad Muzakkil Bin Jusoh 1,330,000 0.27 30. Yeoh Yeam Lim 1,300,357 0.26 Total 274,926,081 55.96 SCOMI GROUP BHD ANNUAL REPORT 2020 164 This page is intentionally left blank SCOMI GROUP BHD. Registration No. 200201003549 (571212-A)
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To : The Share Registrar Boardroom Share Registrars Sdn. Bhd. (formerly known as Symphony Share Registrars Sdn. Bhd.) 11th Floor, Menara Symphony No. 5, Jalan Prof. Khoo Kay Kim Seksyen 13, 46200 Petaling Jaya Selangor Darul Ehsan Malaysia
Contact Person : Encik Mohammad Helmi Nuri
Email Address : [email protected] or [email protected]
Helpdesk : 03-7890 4700
Facsimile No. : 03-7890 4670
Please send me/us a printed copy of the Annual Report 2020 of Scomi Group Bhd.:
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The Share Registrar of Scomi Group Bhd. Boardroom Share Registrars Sdn. Bhd. (formerly known as Symphony Share Registrars Sdn. Bhd.) 11th Floor, Menara Symphony No. 5, Jalan Prof Khoo Kay Kim Seksyen 13, 46200 Petaling Jaya Selangor Darul Ehsan, Malaysia
1st fold here Scomi Group Bhd 200201003549 (571212-A) Level 15, Menara TSR, No. 12, Jalan PJU 7/3 Mutiara Damansara, 47810 Petaling Jaya Selangor Darul Ehsan, Malaysia W www.scomigroup.com.my