Financial Statement 2007

8/6/2019 Financial Statement 2007

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Financials t a t e m e n t s


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62 Directors Report

67 Balance Sheets

69 Income Statements

70 Consolidated Statement of

Changes in Equity

72 Company Statement of

Changes in Equity

73 Cash Flow Statements

75 Notes to the

Financial Statements

140 Statement by Directors

140 Statutory Declaration

141 Report of the Auditors


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The Directors have pleasure in presenting their report and the audited financial statements of the Group and Company for the financial year

ended 31 December 2007.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and the provision of management services.

The principal activities of the Group consist of the provision of integrated drilling fluids, drilling waste management solutions, distribution of

oilfield products and services; machine shop services, design and manufacture of monorail, special purpose vehicles, urban transportation

solutions and rail solutions; provision of marine vessel transportation service; industrial and production chemicals and gas business.

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

FINANCIAL RESULTS

Group Company

RM000 RM000

Profit for the financial year 282,155 180,653

Attributable to:

Companys equity holders 257,129 180,653

Minority interest 25,026

DIVIDENDS

The dividends on ordinary shares paid or declared by the Company since the end of the previous financial year were as follows:

RM000

In respect of the financial year ended 31 December 2006, a final gross dividend of 15%, less income tax of 27%,

paid on 20 September 2007 11,036

In respect of the financial year ended 31 December 2007, an interim gross dividend of 7.5%,

less income tax of 27% paid on 31 October 2007 5,506

16,542

The Directors now recommend the payment of a final dividend of 12.5%, less income tax of 26%, amounting to approximately RM9,298,850

in respect of the financial year ended 31 December 2007. This proposed final dividend is subject to the approval of shareholders at the

forthcoming Annual General Meeting and will be reflected in the financial statements for the financial year ending 31 December 2008 upon

approval by the shareholders.

RESERVES AND PROVISIONS

Material transfers to or from reserves or provisions during the financial year are as disclosed in the financial statements.

directors report


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SHARE CAPITAL

Details of movements in share capital are disclosed in Note 23(a) to the financial statements.

TREASURY SHARES

Details of the Treasury shares are set out in Note 23(b) to the financial statements.

EMPLOYEES SHARE OPTION SCHEME

The Company implemented an Employees Share Option Scheme (ESOS) on 28 April 2003 for a period of 10 years. The ESOS is governed by

the By-Laws which were approved by the shareholders on 28 March 2003.

Details of the ESOS are set out in Note 23(c) to the financial statements.

The Company has been granted an exemption by the Companies Commission of Malaysia from having to disclose the names of options

holders who were granted less than 1,000,000 options under the ESOS during the financial year. This information has been separately filed withthe Companies Commission of Malaysia.

Details of options granted during the financial year under the ESOS over the ordinary shares of RM0.10 each in the Company for option holders

with options exceeding 1,000,000 are as follows:

Number

ESOS ESOS of options

grant date price granted

RM 000

Chuah Mei Lin 20/08/2007 1.21 1,080

24/12/2007 1.21 700

Syahrunizam Samsudin 20/08/2007 1.21 1,080

24/12/2007 1.21 700

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

Significant events during the financial year are disclosed in Note 39 to the financial statements.

SIGNIFICANT EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

Significant events subsequent to the balance sheet date are disclosed in Note 40 to the financial statements.

DIRECTORS

The Directors who have held office during the period since the date of the last report are as follows:

Tan Sri Datuk Asmat bin Kamaludin

Tan Sri Nik Mohamed bin Nik Yaacob

Datuk Hamzah bin Bakar

Datuk Haron bin Siraj

Dato Mohamed Azman bin Yahya

Dato Mohammed Azlan bin Hashim

Foong Choong Hong

Sreesanthan A/L Eliathamby

Shah Hakim @ Shahzanim bin Zain


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DIRECTORS INTERESTS

According to the Register of Directors Shareholdings, particulars of interests of Directors who held office at the end of the financial year in

shares and options over shares in the Company are as follows:

Number of ordinary shares of RM0.10 each in the Company

At At

1.1.2007 Bought Sold 31.12.2007

000 000 000 000

Direct interest in the Company

Tan Sri Datuk Asmat bin Kamaludin 200 300 (300) 200

Datuk Haron bin Siraj 120 120

Dato Mohamed Azman bin Yahya 500 (500)

Foong Choong Hong 160 250 410

Shah Hakim @ Shahzanim bin Zain 2,089 (1,560) 529

Indirect interest in the Company

+ Dato Mohamed Azman bin Yahya 10,500 (500) 10,000

# Shah Hakim @ Shahzanim bin Zain 345,337 345,337

* Tan Sri Datuk Asmat bin Kamaludin 140 (110) 30

Number of ordinary shares of RM1.00 each in a subsidiary

At At

1.1.2007 Bought Sold 31.12.2007

000 000 000 000

Direct interest in Scomi Engineering Bhd

Shah Hakim @ Shahzanim bin Zain 100 (100)

Indirect interest in the Scomi Engineering Bhd

# Shah Hakim @ Shahzanim bin Zain 192,568 192,568

* Tan Sri Datuk Asmat bin Kamaludin 100 100

+ Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Dato Mohamed Azman bin Yahya and his spouses direct

shareholdings in Gajahrimau Capital Sdn Bhd, of which 10,000,000 shares are held through CIMSEC Nominees (Tempatan) Sdn Bhd at the

end of the financial year.

# Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Shah Hakim @ Shahzanim bin Zains shareholding in

Kaspadu Sdn Bhd, which holds an interest in Scomi Group Bhd, which in turn is a substantial shareholder of Scomi Engineering Bhd.

* Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 as amended by the Companies (Amendment) Act, 2007

which took effect on 15 August 2007 through Tan Sri Datuk Asmat bin Kamaludins childs direct shareholding in Scomi Group Bhd.

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DIRECTORS INTERESTS (CONTD.)

Number of options over ordinary shares of RM0.10 each in the Company

Exercise At Atprice 1.1.2007 Granted Exercised 31.12.2007

RM/share 000 000 000 000

Direct interest in the Company

Tan Sri Datuk Asmat bin Kamaludin 1.24 1,000 (300) 700

Tan Sri Nik Mohamed bin Nik Yaacob 1.34 600 600

Datuk Hamzah bin Bakar 1.24 600 600

Datuk Haron bin Siraj 1.24 600 600

Dato Mohamed Azman bin Yahya 1.24 600 600

Dato Mohammed Azlan bin Hashim 1.34 600 600

Foong Choong Hong 1.24 600 (250) 350

Shah Hakim @ Shahzanim bin Zain 0.17 1,357 1,357

1.12 6,000 6,000Sreesanthan A/L Eliathamby 1.21 420 420

Indirect interest in the Company

* Tan Sri Datuk Asmat bin Kamaludin 0.94 280 (140) 140

* Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 as amended by the Companies (Amendment) Act, 2007

which took effect on 15 August 2007 through Tan Sri Datuk Asmat bin Kamaludins childs direct shareholding in Scomi Group Bhd.

Number of options over ordinary shares of RM1.00 each in a subsidiary

Exercise At At

price 1.1.2007 Granted Exercised 31.12.2007

RM/share 000 000 000 000

Direct interest in Scomi Engineering Bhd

Shah Hakim @ Shahzanim bin Zain 1.00 2,000 2,000

By virtue of his interests in the shares and options in the Company as disclosed above, Shah Hakim @ Shahzanim bin Zain is deemed to have

interest in the shares of all its subsidiaries.

Other than as disclosed above, according to the Register of Directors Shareholdings, the Directors in office at the end of the financial year did

not hold any interest in the shares and options over shares in the Company or shares, options over shares and debentures of its related

corporations during the financial year.

DIRECTORS BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object

or objects 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, except for options over shares granted by the Company and a subsidiary, Scomi Engineering Bhd, to eligible

employees including certain Directors of the Company pursuant to the Companys and Scomi Engineering Bhds respective Employees Share

Option Schemes.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors

remuneration as disclosed in Note 31 to the financial statements) by reason of a contract made by the Company or a related corporation with

the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in

Note 36 to the financial statements.


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STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the income statements and balance sheets were made out, the Directors took reasonable steps:

(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debtsand satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts;

and

(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown

in the accounting records of the Group and Company had been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:

(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements

of the Group and Company inadequate to any substantial extent; or

(b) which would render the values attributed to current assets in the financial statements of the Group and Company misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company

misleading or inappropriate.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end

of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or Company to meet their obligations

when they fall due.

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

(a) any charge on the assets of the Group or Company which has arisen since the end of the financial year which secures the liability of any

other person; or

(b) any contingent liability of the Group or Company which has arisen since the end of the financial year.

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements

which would render any amount stated in the financial statements misleading.

In the opinion of the Directors:

(a) other than as disclosed in Notes 39 and 43 to the financial statements, the results of the operations of the Group and Company during

the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(b) other than as disclosed in Note 40 to the financial statements, there has not arisen in the interval between the end of the financial year

and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the

operations of the Group or Company for the financial year in which this report is made.

AUDITORS

The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

Signed on behalf of the Board of Directors in accordance with their resolution dated 30 April 2008.

TAN SRI DATUK ASMAT BIN KAMALUDIN SHAH HAKIM @ SHAHZANIM BIN ZAIN

CHAIRMAN CHIEF EXECUTIVE OFFICER

directors report (contd.)


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Group Company

Note 2007 2006 2007 2006

Restated

RM000 RM000 RM000 RM000

NON-CURRENT ASSETS

Property, plant and equipment 5 524,883 409,319 2,234 1,731

Intangible assets 6 506,242 552,888

Investment properties 7 1,638 1,782

Prepaid land lease payments 8 7,604 4,332

Investments in subsidiaries 9 579,978 654,852

Investments in associates 10 357,046 367,818 360,124 360,124

Investments in jointly controlled entities 11 19 19

Amount due from a jointly controlled entity 12 5,171

Other investments 13 1,330 990

Deferred tax assets 26 41,521 16,729

Derivative financial instruments 14 19,378

1,459,661 1,359,048 942,336 1,016,707

CURRENT ASSETS

Inventories 15 327,307 294,454

Receivables, deposits and prepayments 16 733,480 624,273 64,920 660,041

Tax recoverable 13,810 7,161 4,888 2,253

Short term investment 17 700 7,750

Short term deposits, cash and bank balances 18 156,709 300,787 18,484 11,400

1,232,006 1,234,425 88,292 673,694

Non-current assets classified as held for sale 34 15,823

1,247,829 1,234,425 88,292 673,694

LESS: CURRENT LIABILITIES

Payables 20 578,748 484,279 71,689 633,623

Borrowings 21 156,348 245,865 160 84,773

Provision for redundancy 22 2,502 3,304

Current tax liabilities 40,529 39,728

778,127 773,176 71,849 718,396

Liabilities associated with assets classif ied as held for sale 34 10,523

788,650 773,176 71,849 718,396

NET CURRENT ASSETS/(LIABILITIES) 459,179 461,249 16,443 (44,702)

1,918,840 1,820,297 958,779 972,005

balance sheets as at 31 december 2007


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Group Company

Note 2007 2006 2007 2006

Restated

RM000 RM000 RM000 RM000

CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY

HOLDERS OF THE COMPANY

Share capital 23 101,971 100,535 101,971 100,535

Share premium 24 242,929 233,823 242,929 233,823

Treasury shares 23 (18,694) (3,364) (18,694) (3,364)

Other reserves (76,354) (45,964) 12,864 9,498

Retained earnings 552,074 315,215 303,300 139,189

Equity and reserves attributable to the Companys

equity holders 801,926 600,245 642,370 479,681

Minority interest 146,349 44,622

TOTAL EQUITY AND RESERVES 948,275 644,867 642,370 479,681

NON-CURRENT LIABILITIES

Payables 20 67,358 76,045 67,358 67,236

Borrowings 21 890,535 1,084,882 248,890 424,927

Provision for redundancy 22 2,192

Provision for retirement benefits 25 3,982 4,162

Deferred tax liabilities 26 8,690 8,149 161 161

970,565 1,175,430 316,409 492,324

1,918,840 1,820,297 958,779 972,005

The notes set out on pages 75 to 139 form an integral part of, and should be read in conjunction with, these financial statements.

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balance sheets as at 31 december 2007 (contd.)


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Group Company

Note 2007 2006 2007 2006

Restated

RM000 RM000 RM000 RM000

Revenue 27 1,955,530 1,577,495 33,118 52,916

Cost of sales (1,399,212) (1,126,508)

Gross profit 556,318 450,987 33,118 52,916

Other operating income 167,490 28,573 229,638 166,225

Administrative expenses (226,648) (176,713) (33,675) (25,416)

Selling and distribution expenses (128,787) (125,992)

Other operating expenses (17,581) (7,782) (22,771) (12,474)

Finance cost 29 (87,946) (78,207) (29,174) (33,103)

Share of results of associates 23,570 30,084

Share of results of jointly controlled entities (228)

Profit before taxation 28 286,416 120,722 177,136 148,148

Taxation 30 (4,261) (12,982) 3,517 (7,505)

Profit for the financial year 282,155 107,740 180,653 140,643

Attributable to:

Companys equity holders 257,129 92,414 180,653 140,643

Minority interest 25,026 15,326


Group

Note 2007 2006

Restated

sen sen

Earnings per ordinary share of RM0.10 each attributable to the Companys equity holders: 32

Basic 25.59 9.29

Fully diluted 24.79 9.08


income statements for the financial year ended 31 december 2007


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E xchange Share

Share Share Treasury fluctuation option Hedge Retained Minority Total

Group Note capital premium shares reserve reserve reserve earnings Total interest equityRM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

At 1 January 2007

as previously reported 100,535 233,823 (3,364) (57,881) 11,917 307,346 592,376 44,622 636,998

prior year adjustment 43(d) 7,869 7,869 7,869

as restated 100,535 233,823 (3,364) (57,881) 11,917 315,215 600,245 44,622 644,867

Currency translation differences

arising during the year

subsidiaries (1,867) (1,867) (3,556) (5,423)

associates (23,287) (23,287) (23,287)

Cash flow hedges: Fair value gains 14,564 14,564 14,564

Transfer to income statement (27,213) (27,213) (27,213)

Net loss recognised directly

in equity (25,154) (12,649) (37,803) (3,556) (41,359)


Total recognised (loss)/income

for the financial year (25,154) (12,649) 257,129 219,326 21,470 240,796

Share options:

proceeds from shares issued 23, 24 1,436 6,950 8,386 8,386

value of employee services 23(d) 6,631 6,631 6,631 transfer upon exercise 23(d) 2,156 (3,005) (849) 849

Purchase of Treasury shares 23(b) (15,330) (15,330) (15,330)

Share of reserves in

subsidiaries and associates 435 3,352 (3,728) 59 (1,397) (1,338)

Dilution of interest in

subsidiaries due to share

options exercised 4,416 4,416

Other dilution (net) of

interest in subsidiaries 37(a) 78,842 78,842

Dividend 33 (16,542) (16,542) (2,453) (18,995)

At 31 December 2007 101,971 242,929 (18,694) (83,035) 15,978 (9,297) 552,074 801,926 146,349 948,275

consolidated statement of changes in equityfor the financial year ended 31 december 2007


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E xchange Share

Share Share Treasury fluctuation option Retained Minority Total

Group Note capital premium shares reserve r eserve earnings Total interest equityRM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

At 1 January 2006 99,208 231,748 (13,888) 6,028 227,129 550,225 41,136 591,361

Net loss recognised directly in equity

currency translation differences (43,993) (43,993) (43,993)


Total recognised (loss)/income for the

financial year (43,993) 92,414 48,421 15,326 63,747

Share options:

proceeds from shares issued 23, 24 1,327 1,737 3,064 1,322 4,386 value of employee services 23(d) 6,808 6,808 6,808

transfer upon exercise 23(d) 338 (637) (299) 299

Purchase of Treasury shares 23(b) (3,364) (3,364) (3,364)

Share of reserves in subsidiaries

and associates (282) (282) (509) (791)

Acquisition of subsidiaries 37(c) 14,919 14,919

Accretion of interest in subsidiaries 37(c) (27,871) (27,871)

Dividend 33 (4,328) (4,328) (4,328)

At 31 December 2006 100,535 233,823 (3,364) (57,881) 11,917 315,215 600,245 44,622 644,867



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Distributable

Share

Share Share Treasury option Retained

Note capital premium shares reserve earnings TotalRM000 RM000 RM000 RM000 RM000 RM000

Company

At 1 January 2007 100,535 233,823 (3,364) 9,498 139,189 479,681

Profit for the year 180,653 180,653

Total recognised income for the

financial year 180,653 180,653

Share options:

proceeds from shares issued 23, 24 1,436 6,950 8,386

value of employees services 23(d) 5,522 5,522

transfer upon exercise 23(d), 24 2,156 (2,156)

Purchase of treasury shares 23(b) (15,330) (15,330)

Dividend 33 (16,542) (16,542)

At 31 December 2007 101,971 242,929 (18,694) 12,864 303,300 642,370

At 1 January 2006 99,208 231,748 6,028 2,874 339,858

Profit for the year 140,643 140,643

Total recognised income for the

financial year 140,643 140,643

Share options:

proceeds from share issued 23, 24 1,327 1,737 3,064

value of employees services 23(d) 3,808 3,808

transfer upon exercise 23(d), 24 338 (338)

Purchase of treasury shares 23(b) (3,364) (3,364)

Dividend 33 (4,328) (4,328)

At 31 December 2006 100,535 233,823 (3,364) 9,498 139,189 479,681


company statement of changes in equityfor the financial year ended 31 december 2007


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Group Company

Note 2007 2006 2007 2006

Restated

RM000 RM000 RM000 RM000

CASH FLOWS FROM OPERATING ACTIVITES

Profit before taxation 286,416 120,722 177,136 148,148

Adjustments for:

Depreciation

property, plant and equipment 5 65,842 53,839 1,101 981

investment properties 7 145 145

Amortisation

intangible assets 6 218 216

prepaid rent lease payment 8 710

Impairment 6 375 Allowance for doubtful debts 28 3,271 3,650

Allowance for obsolete stocks 28 701 1,992

Inventories written down 28 209

Unrealised gain on foreign exchange 28 (8,576) (16,285) (4,348) (5,293)

Gain on disposal of property, plant and equipment 28 (1,353) (1,347)

Write back of investment losses 28 (340)

Property, plant and equipment written off 28 2

Gain on dilution of interest in/disposal of

subsidiary companies 28 (140,046) (218,039) (159,198)

Provision for profit guarantee 28 22,771 8,500

Provision for redundancy 28 855 1,939

Provision for retirement benefits 28 353 1,950

Share of profit in associated companies (23,570) (30,084) Share of loss in jointly controlled entity 228

Share option expense 23(d) 6,631 6,808 2,156 3,410

Financing costs 29 87,946 78,207 29,174 33,103

Interest income 28 (6,032) (4,009) (1,637) (963)

Dividend income 28 (17,516) (34,188)

Operating cash flows before working capital changes 273,380 218,348 (9,202) (5,500)

Changes in working capital:

Increase in inventories (33,764) (90,624)

(Increase)/decrease in receivables, deposits and prepayments (108,340) (185,171) 10,982 (1,529)

Increase/(decrease) in payables 105,709 141,336 (22,414) (1,649)

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from/(used in) operations 236,985 83,889 (20,634) (8,678)

Tax (paid)/refund (37,379) (16,366) 882 (7,721)

Redundancy paid (3,920) (5,354)

Retirement benefits paid (250) (1,037)

Net cash generated from/(used in) operating activities 195,436 61,132 (19,752) (16,399)

cash flow statements for the financial year ended 31 december 2007


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Group Company

Note 2007 2006 2007 2006

Restated

RM000 RM000 RM000 RM000

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in an associated company (124)

Additional investment in subsidiaries (31,508) (71,692) (12,377) (272,989)

Proceeds from dilution on interest in/disposal of

subsidiaries companies 308,990 342,533 164,250

Purchase of property, plant and equipment (203,998) (102,844) (1,604) (1,227)

Proceeds from disposal of property, plant and equipment 3,748 6,143

Investment in a jointly controlled entity (141)

Proceeds from sale/(purchase) of other investments 7,050 (8,113)

Additions to intangible assets 6 (15,011) (1,576)

Decrease in amount due from joint venture

Repayment of other payables (25,427) (4,586) (16,474)

Dividend received 28 11,739 6,184 17,516 6,184

Interest received 28 6,032 4,009 1,637 963Prepayment of land lease 8 (4,047) (159)

Net cash generated from/(used in) investing activities 57,568 (172,775) 331,231 (102,943)

CASH FLOWS FROM FINANCING ACTIVITIES

Treasury shares 23(b) (15,330) (3,364) (15,330) (3,364)

Issue of share capital arising from the exercise of ESOS 23(a), 24 8,386 3,064 8,386 3,064

Subsidiarys issuance of share capital from the exercise

of ESOS 4,416 1,324

Proceeds from bank borrowings 27,288 825,133 159,954

Repayment of bank borrowings (304,675) (472,222) (260,650) (28,547)

Interest paid on borrowings (78,130) (71,365) (20,259) (22,608)

Dividends paid (16,542) (4,328) (16,542) (4,328)

(Increase)/decrease in short-term deposits pledged as security (5,960) (4,871) 474 12,869

Dividend paid to minority shareholders of subsidiaries (2,453)

Net cash (used in)/generated from financing activities (383,000) 273,371 (303,921) 117,040

NET (DECREASE)/INCREASE IN CASH AND

CASH EQUIVALENTS (129,996) 161,728 7,558 (2,302)

CASH AND CASH EQUIVALENTS AT BEGINNING OF

FINANCIAL YEAR 217,879 58,160 5,469 7,771

CURRENCY TRANSLATION DIFFERENCES (13,197) (2,009)

CASH AND CASH EQUIVALENTS AT END OF

FINANCIAL YEAR 74,686 217,879 13,027 5,469

CASH AND CASH EQUIVALENTS COMPRISE:Short term deposits with licensed banks 18 55,875 196,087 15,004 5,269

Cash and bank balances 18 100,834 104,700 3,480 6,131

Bank overdrafts 21 (50,428) (57,037)

106,281 243,750 18,484 11,400

Add: Cash and cash equivalents of disposal group

held for sale 34 236

Less: Short-term deposits pledged as security 18 (31,831) (25,871) (5,457) (5,931)

74,686 217,879 13,027 5,469


cash flow statements for the financial year ended 31 december 2007 (contd.)


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1 PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and the provision of management services.

The principal activities of the Group consist of the provision of integrated drilling fluids, drilling waste management solutions, distribution

of oilfield products and services; machine shop services, design and manufacture of monorail, special purpose vehicles, urban

transportation solutions and rail solutions; provision of marine vessel transportation service; industrial and production chemicals and gas

business.

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

2 BASIS OF ACCOUNTING

The financial statements of the Group and Company have been prepared under the historical cost convention except as disclosed in the

summary of significant accounting policies. The financial statements comply with Financial Reporting Standards, the Malaysian

Accounting Standards Board (MASB) Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the

provisions of the Companies Act, 1965.

The preparation of financial statements in compliance with the MASB Approved Accounting Standards in Malaysia for Entities Other than

Private Entities requires the Directors to use certain critical accounting estimates and assumptions that affect the reported amounts of

assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts

of revenue and expenses during the financial year. It also requires Directors to exercise their judgement in the process of applying the

Groups accounting policies. Although these estimates and judgement are based on the Directors best knowledge of current events and

actions, actual results may differ.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial

statements, are disclosed in Note 42 to the financial statements.

During the financial year, the Directors of the Group adopted the following Financing Reporting Standards (FRS) issued by the MASB:

(a) Standards and amendments to published standards that are effective and have been adopted The new accounting standards and amendments to published standards that are effective for the Groups financial year ended

31 December 2007 are as follows:

FRS 6 Exploration for and Evaluation of Mineral Resources

FRS 117 Leases

FRS 124 Related Party Disclosures

FRS 6 is not relevant to the Groups operations as the Group does not carry out exploration activities. The effects of the adoption

of FRS 117 and FRS 124 have been disclosed in Note 43.

(b) Standards and amendments to published standard that is early adopted

The Group has adopted the following standard with effect from 1 January 2007 although this standard only requires application

with effect from the financial period commencing on or after 1 July 2007:

FRS 112 Income Taxes. This revised standard has removed the requirements that prohibit the recognition of deferred tax on

reinvestment allowances or other allowances in excess of capital allowances.

A summary of the impact of this new accounting standard to the financial statements of the Group is set out in Note 43.

notes to the financial statements for the financial year ended 31 december 2007


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2 BASIS OF ACCOUNTING (CONTD.)

(c) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have

not been early adopted

The new standards, amendments to published standards and interpretations that are mandatory for the Groups financial periods

beginning on or after 1 January 2008, but which the Group has not early adopted, are as follows:

FRS 107 Cash Flow Statements. This revised standard has no significant changes as compared to the original standard.

FRS 111 Construction Contracts. This revised standard has no significant changes as compared to the original standard.

FRS 118 Revenue. This revised standard has no significant changes as compared to the original standard.

FRS 120 Accounting for Government Grants and Disclosure of Government Assistance. This revised standard allows the

alternative treatment of recording non-monetary government grant at nominal amount on initial recognition.

Amendment to FRS 121 The Effects of Changes in Foreign Exchange Rates Net Investment in a Foreign Operations. This

amendment requires exchange differences on monetary items that form part of the net investment in a foreign operation to be

recognised in equity instead of in profit or loss regardless of the currency in which these items are denominated in.

FRS 134 Interim Financial Reporting. This revised standard has no significant changes as compared to the original standard.

FRS 137 Provisions, Contingent Liabilities and Contingent Assets. This revised standard has no significant changes as compared

to the original standard.

FRS 139 Financial Instruments: Recognition and Measurement. This new standard establishes principles for recognising and

measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Other than hedge

accounting which has been adopted by the Group during the last financial year, the Group will apply this standard when

effective.

IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities. This interpretation deals with

changes in the estimated timing or amount of the outflow of resources required to settle the obligation, or a change in the

discount rate.

IC Interpretation 2 Members Shares in Co-operative Entities and Similar Instruments. This interpretation deals with liabilities or

equity classification of financial instruments which give the holder the right to request redemption, but subject to limits on

whether it will be redeemed.

IC Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds. This

interpretation deals with accounting in the financial statements of a contributor for its interests arising from decommissioning

funds.

IC Interpretation 6 Liabilities arising from Participating in a Specific Market-Waste Electrical and Electronic Equipment. This

interpretation provides guidance on the recognition, in the financial statements of producers, of liabilities for waste

management under EU Directive in respect of sales of historical household equipment.

IC Interpretation 7 Applying the Restatement Approach under the FRS 1292004 Financial Reporting in Hyperinflationary

Economies. This interpretation provides guidance on how to apply the requirement of FRS 129 in a reporting period in which

an entity identifies the existence of hyperinflation in the economy of its functional currency, when that economy was not

hyperinflationary in the prior period.

IC Interpretation 8 Scope of FRS 2. This Interpretation clarifies that FRS 2 Share-based payment applies even in the absence of

specifically identifiable goods or services.

The above standards, amendments to published standards and interpretations to existing standards that are not yet effective are

not expected to have a significant impact on the financial statements of the Group and the Company.

The effective date for FRS 139 Financial Instruments: Recognition and Measurement has yet to be determined by the MASB. Entities

are exempted from disclosing the impact of FRS 139 prior to its effective date.

notes to the financial statements for the financial year ended 31 december 2007 (contd.)


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3 GENERAL INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia. The Company is listed on the Main Board of

Bursa Malaysia Securities Berhad.

The address of the registered office of the Company is Suite 5.03, 5th Floor, Wisma Chase Perdana, Off Jalan Semantan, Damansara

Heights, 50490 Kuala Lumpur.

The principal place of business of the Company is located at Suite 10.2 10.3, 10th Floor, Wisma Chase Perdana, Off Jalan Semantan,

Damansara Heights, 50490 Kuala Lumpur.

4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, the following accounting policies have been used consistently in dealing with items that are considered material

in relation to the financial statements.

4.1 Basis of consolidation

The consolidated financial statements incorporate the audited financial statements of the Company and its subsidiaries made up to

the end of the financial year.

Subsidiaries are those corporations, partnerships or other entities (including special purpose entities) in which the Group has power

to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a

shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently

exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are consolidated using the purchase method of accounting. Under the purchase method of accounting, subsidiaries are

fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control

ceases. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred

or assumed at the date of exchange, plus costs directly attributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their

fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the

fair value of the Groups share of the identifiable net assets required is recorded as goodwill. If the cost of acquisition is less than

the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. See

accounting policy Note 4.5(iii) on goodwill on consolidation.

The Group has taken advantage of the exemption provided by FRS 3 Business Combinations to apply the Standard prospectively.

Accordingly, business combinations entered into prior to the effective date have not been restated to comply with this Standard.

Intragroup transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses

are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been

changed where necessary to ensure consistency with the policies adopted by the Group.

Minority interest represents the portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are

not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities share of the fair value of the

subsidiaries identifiable assets and liabilities at the acquisition date and the minorities share of changes in the subsidiaries equity

since that date.


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4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

4.1 Basis of consolidation (contd.)

Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiarys identifiable assets,

liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation.

The gain or loss on disposal of a subsidiary which is the difference between net disposal proceeds and the Groups share of its net

assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary, is

recognised in the consolidated income statement.

4.2 Transactions with minority interest

The Group applies a policy of treating transactions with minority interest as transactions with parties external to the Group.

Disposals to minority interest result in gains and losses for the Group that are recorded in the income statement. Purchases from

minority interest result in goodwill, being the difference between any consideration paid and the relevant share acquired of the

carrying value of net assets of the subsidiary.

4.3 Investments in associates

Associates are those corporations, partnerships or other entities in which the Group exercises significant influence, but which it does

not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power

to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those

policies.

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Groups

investments in associates include goodwill identified on acquisition, net of any accumulated impairment losses. See accounting

policy Note 4.6 on impairment of non-financial assets.

The Groups share of its associates post-acquisition profits or losses is recognised in the income statement, and its share of post-

acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the

carrying amount of the investment. When the Groups share of losses in an associate equals or exceeds its interest in the associate,

including any other unsecured receivables, the Groups interest is reduced to nil and recognition of further losses is discontinued

except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the

associates; unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred.

Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure

consistency of accounting policies with those of the Group.

Dilution gains and losses in associates are recognised in the income statement.

4.4 Investments in jointly controlled entities

Jointly controlled entities are corporations, partnerships or other entities over which there is contractually agreed sharing of control

by the Group with one or more parties where the strategic financial and operating decisions relating to the entities require

unanimous consent of the parties sharing control.

The Groups interest in jointly controlled entities is accounted for in the consolidated financial statements by the equity method of

accounting. Equity accounting involves recognising the Groups share of the post-acquisition results of jointly controlled entities in

the income statement and its share of post-acquisition movements within reserves in reserves. The cumulative post-acquisition

movements are adjusted against the cost of the investment and includes goodwill on acquisition, net of accumulated impairment

losses. See accounting policy Note 4.6 on impairment of non-financial assets.



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4.4 Investments in jointly controlled entities (contd.)

The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that is attributable to

the other venturers. The Group does not recognise its share of profits or losses from the joint venture that result from the purchase

of assets by the Group from the joint venture until it resells the assets to an independent party. However, a loss on the transaction

is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment

loss.

Where necessary, adjustments have been made to the financial statements of jointly controlled entities to ensure consistency of

accounting policies with those of the Group.

4.5 Intangible assets

(i) Patents

Patent rights are stated at cost less accumulated impairment losses. These costs are amortised on a straight-line basis over the

useful economic life of the patent rights or over 20 years, whichever is lower.

(ii) Research and development

Research expenditure is recognised as an expense when incurred. Costs incurred on development projects (relating to the

design and testing of new or improved products) are recognised as intangible assets when the following criteria are fulfilled:

(a) it is technically feasible to complete the intangible asset so that it will be available for use or sale;

(b) management intends to complete the intangible asset and use or sell it;

(c) there is an ability to use or sell the intangible asset;

(d) it can be demonstrated how the intangible asset will generate probable future economic benefits;

(e) adequate technical, financial and other resources to complete the development and to use or sell the intangible asset

are available; and

(f) the expenditure attributable to the intangible asset during its development can be reliably measured.

Other development expenditure that do not meet these criteria are recognised as an expense when incurred. Development

costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development

costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis

over its useful life, not exceeding five years.

Development assets are tested for impairment annually, in accordance with FRS 136 Impairment of Assets. See accounting

policy Note 4.6 on impairment of non-financial assets.

(i ii) Goodwill

Goodwill represents the excess of the purchase consideration over the fair value of the Groups share of the identifiable net

assets of subsidiaries, jointly controlled entities and associates at the date of acquisition. Goodwill is tested annually for

impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Negative

goodwill is recognised immediately in the income statement. Gains and losses on the disposal of an entity include the carrying

amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-

generating units or groups of cash-generating units that are expected to benefit from synergies of the business combination

in which the goodwill arose. Each of those cash-generating units represents the Groups investment in each primary reporting

segment (Note 38).

In respect of acquisitions of joint ventures and associates, the carrying amount of goodwill is included in the carrying amount

of the investment in joint ventures and associates respectively. Such goodwill is also tested for impairment as part of the

overall balance.


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4.6 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are

subject to amortisation are reviewed for impairment whenever event or changes in cirumstances indicate that the carrying amount

may not be recoverable. Impairment is measured by comparing the carrying value of an asset with its recoverable amount. An

impairment loss is recognised for the amount by which the carrying amount may not be recoverable. Recoverable amount is the

higher of net realisable value and value in use, which is measured by reference to discounted future cash flows. Recoverable

amounts are estimated for individual assets or, if it is not possible, for the relevant cash generating units.

Impairment losses on goodwill are not reversed. Non-financial assets other than goodwill that suffered an impairment are reviewed

for possible reversal of the impairment at each reporting date.

An impairment loss is charged to the income statement immediately. Any subsequent increase in the recoverable amount of an asset

is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that

would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is

recognised in the income statement immediately.

4.7 Investments

Investments in subsidiaries, jointly controlled entities and associates are shown at cost less accumulated impairment losses. Where

an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its

recoverable amount. See accounting policy Note 4.6 on impairment of non-financial assets.

Investments in other non-current investments are shown at cost and an allowance for diminution in value is made where, in the

opinion of the Directors, there is a decline other than temporary in the value of such investments. Where there has been a decline

other than temporary in the value of an investment, such a decline is recognised as an expense in the period in which the decline

is identified.

On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged/credited to the

income statement.

4.8 Property, plant and equipment

Property, plant and equipment, other than freehold land and capital work-in-progress, are stated at cost less accumulated

depreciation or amortisation and impairment losses, if any. Cost includes expenditure that is directly attributable to the acquisition

of the items.

Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is

probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured

reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are charged to the

income statement during the financial year in which they are incurred.

Freehold land is not amortised as it has an infinite life. Capital work-in-progress is stated at cost. Expenditure relating to capital work-

in-progress is capitalised when incurred and will be depreciated only when they are available for intended use.



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4.8 Property, plant and equipment (contd.)

Other property, plant and equipment are depreciated on a straight line basis calculated to write off the cost of the assets to their

residual values over their estimated useful lives. The principal annual rates used for this purpose are as follows:

Freehold buildings 2 20%

Leasehold buildings 2 331/3%

Tools, plant and machinery 8 1/3 20%

Office equipment, fittings and computers 20 331/3%

Motor vehicles 20 331/3%

Vessels 4%

Monorail test track 31/3%

Renovation 331/3%

Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each balance sheet date.

At each balance sheet date, the Group assesses whether there is any indication of impairment. Where an indication of impairmentexists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. See accounting policy

Note 4.6 on impairment of non-financial assets.

When property, plant and equipment are disposed of, the resultant gain or loss on disposal is determined by comparing the

disposal proceeds with the carrying amount and is included in the income statement.

4.9 Investment properties

Investment properties, principally comprising freehold office buildings, are held for long term rental yields or for capital appreciation

or both, and are not occupied by the Group. Investment properties are carried at cost less any accumulated depreciation and

impairment losses. Investment properties are depreciated on a straight line basis to write off the costs of the assets to their residual

values over their estimated useful life of 20 years.

On disposal of an investment property, or when it is permanently withdrawn from use and no future economic benefits areexpected from its disposal, it is derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds

and the carrying amounts is recognised in profit or loss in the period of the retirement or disposal.

4.10 Receivables

Trade and other receivables are carried at invoiced amount less allowance for doubtful debts. Bad debts are written off in the period

in which they are identified. Allowance for doubtful debts is determined based on estimates of probable losses which may arise

from non-collection of receivables upon review of all material outstanding amounts at the balance sheet date.

4.11 Assets acquired under lease arrangements

Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified

as finance leases.

Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the presentvalue of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve

a period constant rate of interest on the balance outstanding. The corresponding rental obligations, net of finance charges, are

included in borrowings. The interest element of the finance charge is charged to income statement over the lease period so as to

achieve a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment

acquired under finance lease arrangements are depreciated over the shorter of the estimated useful life of the asset and the lease

term.


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4.11 Assets acquired under lease arrangements (contd.)

Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as

operating leases. Lease rental payments in respect of operating leases (net of any incentives received from the lessor) are charged

to the income statement on the straight line basis over the lease term.

4.12 Assets acquired under hire purchase financing

Assets acquired under hire purchase financing are included in property, plant and equipment and are depreciated over their useful

lives. Outstanding obligations, after deducting attributable finance expenses, are included as liabilities in the financial statements.

Finance expenses are charged to the income statement on a straight line basis over the period of financing.

4.13 Prepaid land lease payment

Leasehold land that normally has a finite economic life and title is not expected to pass to the lessee by the end of the lease term

is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted as prepaid land

lease payment that is amortised over the lease term in accordance with the pattern of benefits provided.

The Group had previously classified the prepaid land lease payment within its property, plant and equipment. On adoption of FRS

117, Leases, the Group treats such a lease as an operating lease, with the unamortised carrying amount classified as prepaid land

lease payment.

The prepaid lease payments are amortised evenly to the income statement over the respective lease terms of the land which range

from 7 to 999 years.

4.14 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average or first-in-first-out

basis.

For work-in-progress and manufactured inventories, cost consists of direct materials, incidental costs in bringing the inventories to

their present location, direct labour and an appropriate proportion of fixed and variable manufacturing overheads (based on normal

operating capacity).

Net realisable value is the estimated selling price in the ordinary course of business less the costs of completion and applicable

variable selling expenses.

4.15 Foreign currencies

(a) Functional and presentation currency

Items included in the financial statements of each of the Groups entities are measured using the currency of the primary

economic environment in which the entity operates (the functional currency). The financial statements are presented in

Ringgit Malaysia, which is the Companys functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of

the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the

translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in

the income statement.



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4.15 Foreign currencies (contd.)

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy)

that have a functional currency different from the presentation currency are translated into the presentation currency as

follows:

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

income and expenses for each income statement are translated at average exchange rates (unless this average is not a

reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income

and expenses are translated at the rate on the dates of the transactions); and

all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to

shareholders equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in

equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of theforeign entity and translated at the closing rate.

4.16 Income tax

Income tax on the profit or loss for the financial year comprises current and deferred tax. Current tax is the expected amount of

income taxes payable in respect of the taxable profit for the financial year and is measured using the tax rates that have been

enacted at the balance sheet date.

Deferred tax is recognised in full, using the liability method, on temporary differences at the balance sheet date between the tax

base of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it

arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the

transaction affects neither accounting nor taxable profit or loss. In principle, deferred tax liabilities are recognised for all taxable

temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused

tax credits to the extent that it is probable that taxable profits will be available against which the deductible temporary differences,unused tax losses and unused tax credits can be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled,

based on tax rates that have been enacted or substantially enacted at the balance sheet date.

Deferred tax is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures except

where the timing of the reversal of temporary difference can be controlled and if is probable that the temporary difference will not

reverse in the foreseeable future.

Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity,

in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is

an acquisition, in which case the deferred tax is included in the resulting goodwill.


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4.17 Revenue recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise

and the amount of the revenue can be measured reliably. Revenue is shown net of value-added tax, returns, rebates and discounts,

and after eliminating sales within the Group.

(i) Sale of goods

Sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer.

(ii) Rendering of services

Revenue from rendering of services is recognised in the accounting period in which the services are rendered, by reference to

completion of the specific transaction, assessed on the basis of the actual service provided as a proportion of the total services

to be provided.

(iii) Interest income

Interest is recognised on a time proportion basis that reflects the effective yield on the asset, taking into account the principal

outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the

Group.

(iv) Rental income

Rental income from operating leases is recognised on a straight-line basis over the term of the lease.

(v) Charter income

Revenue from charter hire is recognised on accrual basis but is deferred when the terms of billings have not been agreed by

third parties or when certain conditions necessary for realisation have yet to be fulfilled.

(vi) Dividend income

Dividend income is recognised when the right to receive payment is established.

(vii) Management fee income

Management fee income is recognised on an accrual basis, based on services rendered.

(viii) Commission income

Commission income is recognised in the accounting period in which goods of principals are sold.

4.18 Cash and cash equivalents

For purposes of the cash flow statements, cash and cash equivalents comprise cash in hand, bank balances, deposits held at call

with banks excluding deposits which are pledged for banking facilities, and other short-term, highly liquid investments with original

maturities of three months or less, and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the

balance sheet.

4.19 Employee benefits

(i) Short term benefits

Wages, salaries and bonuses are recognised as an expense in the financial year in which the associated services are rendered

by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when

services are rendered by employees that increase their entitlement to future compensated absences, and short term non-

accumulating compensated absences such as sick leave are recognised when the absences occur.



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4.19 Employee benefits (contd.)

(ii) Defined contribution plan

As required by law, companies in Malaysia make contributions to the Employees Provident Fund (EPF). Some of the Groups

foreign subsidiaries make contributions to publicly or privately administered pension insurance plans on a mandatory,

contractual or voluntary basis. Such contributions are recognised as employee benefit expense when they are due. Prepaid

contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(iii) Defined benefit plan

A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an

amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as

age, years of service and compensation.

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined

benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for actuarial gains or

losses and past service costs. The defined benefit obligation is calculated by independent actuaries using the projected unit

credit method. The Group determines the present value of the defined benefit obligation and the fair value of any plan assetswith sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the

amounts that would be determined at the balance sheet date. The present value of the defined benefit obligation is

determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are

denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms

of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater

of 10% of the value of plan assets or 10% of the defined benefit obligation are charged or credited to income over the

employees expected average remaining working lives.

Past-service costs are recognised immediately in income, unless the changes to the plan are conditional on the employees

remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a

straight-line basis over the vesting period.

(iv) Termination benefits

Certain foreign subsidiaries of the Group recognise termination benefits when they are demonstrably committed to either:

terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or

providing termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits are

payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts

voluntary redundancy in exchange for these benefits. Benefits falling due more than 12 months after the balance sheet date

are discounted to present value.

(v) Share-based compensation

The Company operates an equity-settled, share-based compensation plan for the Directors and employees of the Company

and its subsidiaries (ESOS).

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense in the

income statement. The total amount to be recognised over the vesting period is calculated by reference to the fair value of

the options granted. At each balance sheet date, the Company revises its estimates of the number of options that are

expected to become exercisable and the effect of any revision of the original estimates is recognised in the income statement

and a corresponding adjustment is made to equity over the remaining vesting period. When the options are exercised, the

proceeds received (net of directly attributable transaction costs) are credited to share capital and share premium respectively.

The proceeds received net of any directly attributable transactions costs are credited to share capital (nominal value) and share

premium when the options are exercised.

Salient features of the Companys share option scheme are disclosed in Note 23(c) to the financial statements.


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4.20 Financial instruments

(i) Description

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity

instrument of another enterprise.

A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise,

a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable,

or an equity instrument of another enterprise.

A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise,

or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable.

(ii) Financial instruments recognised on the balance sheet

The particular recognition method adopted for other financial instruments recognised on the balance sheet is disclosed in the

individual accounting policy note associated with each item.

(iii) Fair value estimation for disclosure purposes

The fair value of publicly traded derivatives and securities is based on quoted market prices at the balance sheet date. The fair

value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward

foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.

In assessing the fair value of other derivatives and financial instruments, the Group uses a variety of methods and makes

assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes

for the specific or similar instruments are used for long term debt. Other techniques, such as option pricing models and

estimated discounted value of future cash flows, are used to determine fair value for the remaining financial instruments. In

particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current

market interest rate available to the Group for similar financial instruments.

4.21 Derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasuredat their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a

hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:

(a) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or

(b) hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow

hedge).

The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well

as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its

assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are

highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of derivative instruments used for hedging purposes are disclosed in Note 14. Movements on the hedging reserveare shown in the statement of changes in equity. The full fair value of a hedging derivative is classified as a non-current asset or

liability when the remaining hedged item is more than 12 months and as a current asset or liability when the remaining maturity

of the hedged item is less than 12 months. Trading derivatives are classified as current asset or liability.



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4.21 Derivative financial instruments and hedging activities (contd.)

(i) Fair value hedge

The Group has entered in Cross Currency Interest Rate Swaps (CCIRS) that are designated as fair value hedges for interest

rate risk and foreign exchange risk on its Murabahah Medium Term Notes, which were issued by a subsidiary. The CCIRS involve

the exchange of principals and floating interest payments in the subsidiarys functional currency for principals and fixed

interest receipts in the foreign currency, in which the issued Murabahah Medium Term Notes are denominated.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income

statement within finance costs, together with any changes in the fair value of the hedged asset or liability that are attributable

to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for

which the effective interest method is used is amortised to the income statement over the period to maturity.

(i i) Cash flow hedge

The Group has entered in Cross Currency Interest Rate Swaps (CCIRS) that are designated as cash flow hedges for the Groups

exposure to foreign exchange risk on its Murabahah Medium Term Notes, which were issued by a subsidiary. The CCIRS involve

the exchange of principals and fixed interest receipts in the foreign currency, in which the issued Murabahah Medium Term

Notes are denominated, for principals and fixed interest payments in the subsidiarys functional currency.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are

recognised in the hedging reserve within equity and transferred to the income statement within finance costs in the periods

when the underlying hedged items affect the income statement. The changes in fair value relating to the ineffective portion

of the CCIRS are recognised immediately in the income statement within other operating income/expenses.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any

cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is

ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative

gain or loss that was reported in equity is immediately transferred to the income statement within other operating

income/expenses.

(iii) Derivatives that do not qualify for hedge accounting

Certain derivatives do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not

qualify for hedge accounting are recognised immediately in the income statement.

4.22 Segmental information

Segment reporting is presented for enhanced assessment of the Groups risks and returns. A business segment is a group of assets

and operations engaged in providing products or services that is subject to risk and returns that are different from those of other

business segments. A geographical segment is engaged in providing products or services within a particular economic environment

that is subject to risks and returns that are different from those components operating in other economic environments.

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where

a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash,

receivables, inventories and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. Most

segment assets can be directly attributed to the segments on a reasonable basis. Segment assets and liabilities do not include

income tax assets and liabilities respectively.


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4.28 Non-current assets (or disposal groups) classified as assets held for sale

Non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair

value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through a continuing

use.

5 PROPERTY, PLANT AND EQUIPMENT

Renovation,

office

Tools, equipment,

Freehold Freehold L easehold plant and fittings and Motor Monorail

Group land buildings buildings machinery computers vehicles Vessels test track Total

RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

Cost

At 1 January 2007 8,673 19,131 16,073 599,486 29,683 31,864 25,416 14,800 745,126

Additions 12,413 14,348 17,726 151,758 5,879 2,644 204,768

Disposals (91) (8,720) (210) (1,434) (10,455)

Reclassification (2,888) 2,885 708 (420) (285)

Reclassified as held for

sale (Note 34) (629) (390) (20,210) (21,229)

Currency translation

differences (41) (392) (401) (23,190) (490) (278) (1,585) (26,377)

At 31 December 2007 21,045 30,199 35,563 720,042 34,052 12,301 23,831 14,800 891,833

Accumulated depreciation

At 1 January 2007 2,755 4,285 292,551 19,464 12,654 3,852 246 335,807

Charge for the financial

year (Note 28) 1,066 3,484 49,951 4,394 5,118 1,242 587 65,842

Disposals (23) (6,878) (192) (967) (8,060)

Reclassification (962) 916 (348) 381 13

Reclassified as held for

sale (Note 34) (626) (324) (9,573) (10,523)

Currency translation

differences (239) (326) (14,636) (441) (180) (294) (16,116)

At 31 December 2007 2,620 7,710 320,640 23,282 7,065 4,800 833 366,950

Net book value

At 31 December 2007 21,045 27,579 27,853 399,402 10,770 5,236 19,031 13,967 524,883



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5 PROPERTY, PLANT AND EQUIPMENT (CONTD.)

Office

Motor equipment

vehicles and fittings Renovation Total

RM000 RM000 RM000 RM000

Company

Cost

At 1 January 2007 360 2,088 1,151 3,599

Additions 963 459 182 1,604

At 31 December 2007 1,323 2,547 1,333 5,203


At 1 January 2007 139 1,224 505 1,868

Charge for the financial year (Note 28) 212 524 365 1,101

At 31 December 2007 351 1,748 870 2,969

Net book value at 31 December 2007 972 799 463 2,234

Cost

At 1 January 2006 360 1,681 331 2,372

Additions 407 820 1,227

At 31 December 2006 360 2,088 1,151 3,599


At 1 January 2006 68 646 173 887

Charge for the financial year (Note 28) 71 578 332 981

At 31 December 2006 139 1,224 505 1,868

Net book value at 31 December 2006 221 864 646 1,731

(i) The net book values of property, plant and equipment of the Group acquired under hire purchase are as follows:

Group

2007 2006

RM000 RM000

Hire purchase

Motor vehicles 12,190 13,828

Tools, plant and machinery 3,864 5,809

Office equipment, fittings and computers 9 325

Included in the net book values of motor vehicles acquired under hire purchase above is an amount of RM10,487,000 (2006:

RM13,667,000) in respect of motor vehicles acquired under hire purchase arrangements of disposal group classified as held for sale.



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5 PROPERTY, PLANT AND EQUIPMENT (CONTD.)

(ii) Certain property, plant and equipment of the group are charged as security for banking facilities as disclosed in Note 21 to the

financial statements.

(iii) During the financial year, the Group acquired property, plant and equipment at aggregate costs of RM204,768,000 (2006:

RM110,296,000), of which RM770,000 (2006: RM7,293,000) is by means of hire purchase arrangements.

(iv) Included in the leasehold buildings of the Group was an amount of RM2,235,000 (2006: Nil) relating to expenditure for buildings in

the course of construction.

6 INTANGIBLE ASSETS

Development

Goodwill Patents costs Total

RM000 RM000 RM000 RM000

Group

CostAt 1 January 2007 547,496 3,670 4,362 555,528

Additions (Note 37(a)) 17,667 15,011 32,678

Disposal of business (Note 37(a)) (76,261) (76,261)

Reclassification of asset held for sale (Note 34) (2,007) (2,007)

Currency translation differences (793) (153) (14) (960)

At 31 December 2007 486,102 3,517 19,359 508,978

Accumulated impairment and amortisation

At 1 January 2007 360 2,280 2,640

Amortisation for the financial year (Note 28) 218 218

Currency translation differences (122) (122)

At 31 December 2007 360 2,376 2,736

Net book value

At 31 December 2007 485,742 1,141 19,359 506,242

Cost

At 1 January 2006 515,452 3,464 518,916

Additions 1,576 1,576

Adjustment to cost of business combination 2,000 2,000

Acquisition of subsidiaries (Note 37(c)) 30,168 470 2,786 33,424

Currency translation differences (124) (264) (388)

At 31 December 2006 547,496 3,670 4,362 555,528

Accumulated impairment and amortisation

At 1 January 2006 2,243 2,243

Amortisation for the financial year (Note 28) 216 216

Impairment for the financial year (Note 28) 375 375

Currency translation differences (15) (179) (194)

At 31 December 2006 360 2,280 2,640

Net book value

At 31 December 2006 547,136 1,390 4,362 552,888


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7 INVESTMENT PROPERTIES

Group

2007 2006RM000 RM000

Net book value

At start of financial year 1,782 1,926

Depreciation for the financial year (Note 28) (145) (145)

Currency translation differences 1 1

At end of financial year 1,638 1,782

Cost 2,889 2,889

Accumulated depreciation (1,251) (1,107)

Net book value 1,638 1,782

The fair value of the properties was estimated at RM2.18 million (2006: RM2.10 million) based on a valuation by an independent

professionally qualified valuer. Valuations were based on current price in an active market.

The following amounts have been recognised in the income statement:

Group

2007 2006

RM000 RM000

Rental income 97 151Direct operating expenses of investment properties that did not generate rental income 10 30

8 PREPAID LAND LEASE PAYMENTS

Group

2007 2006

RM000 RM000

At 1 January (Note 43) 4,332 2,619

Additions 4,047 159

Amortisation for the year (Note 28) (710)

Currency translation differences (65) 1,554

As 31 December 7,604 4,332

Analysed as:

Long-term leasehold land 3,176 1,706

Short-term leasehold land 4,428 2,626

7,604 4,332


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Financial Statement 2007

Documents

Transcript of Financial Statement 2007