Sustainable Growth. Our continuous aim to grow like a tree... S u s t a i n a b l e G r o w t h

Transcription

1

2 Sustainable Growth Our continuous aim to grow like a tree ANNUAL REPORT S u s t a i n a b l e G r o w t h

3 CONTENTS 3 Notice of Annual General Meeting 6 Corporate Information 8 Corporate Structure 9 Profile of Directors 13 Profile of Key Senior Management 14 Group Financial Highlights 16 Management Discussion and Analysis 20 Corporate Governance Overview Statement 28 Statement on Risk Management and Internal Control 32 Audit Committee Report 34 Corporate Social Responsibility 35 Financial Statements 119 List of Properties 122 Analysis of Shareholdings Proxy Form

4 ANNUAL REPORT 2018 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 24th Annual General Meeting of SHL Consolidated Bhd (the Company) will be held at Ballroom 1, Level 1, Corus Hotel Kuala Lumpur, Jalan Ampang, Kuala Lumpur, on Wednesday, 29 August 2018 at a.m. for the purpose of transacting the following businesses:- AS ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the financial year ended 31 March 2018 together with the Reports of the Directors and the Auditors thereon. (Please refer to Explanatory Note 1) 2. To approve a Final Dividend of 8 sen per share in respect of the financial year ended 31 March To approve the payment of Directors fees for the financial year ended 31 March Resolution 1 Resolution 2 4. To re-elect the following Directors who retire in accordance with Article 88 of the Company s Articles of Association: i. Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah ii. Dato Sri Ir. Yap Chong Lee 5. To re-appoint Messrs Khoo Wong & Chan as Auditors of the Company for the financial year ending 31 March 2019 and to authorise the Directors to fix their remuneration. Resolution 3 Resolution 4 Resolution 5 AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following Ordinary Resolutions: 6. Proposed Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature THAT subject always to Bursa Malaysia Securities Berhad s Main Market Listing Requirements, approval be and is hereby given to the Company and its subsidiaries (SHL Group) to enter into recurrent related party transactions of a revenue or trading nature with those related parties as set out in Section 2.3 of the Circular to Shareholders dated 30 July 2018, which are necessary for the day to day operations in the ordinary course of business and are carried out at arms length basis on normal commercial terms of the SHL Group on terms not more favourable to the Related Parties than those generally available to the public and are not detrimental to minority shareholders of the Company and such approval shall continue to be in force until: i. the conclusion of the next Annual General Meeting of the Company (AGM) at which time it will lapse, unless by a resolution passed at the AGM the mandate is again renewed; or ii. the expiration of the period within which the next AGM after the date it is required to be held pursuant to Section 340(2) of the Companies Act, 2016 (the Act) (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Act; or iii. revoked or varied by resolution passed by the shareholders in a general meeting, whichever is the earlier, AND THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things as they may consider expedient or necessary to give effect to the Proposed Shareholders Mandate. (Please refer to Explanatory Note 2) Resolution 6 3

5 SHL CONSOLIDATED BHD NOTICE OF ANNUAL GENERAL MEETING (cont d) 7. Authority to Issue Shares Pursuant to Sections 75 and 76 of the Companies Act 2016 THAT pursuant to Sections 75 and 76 of the Companies Act 2016, the Articles of Association of the Company, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and the approvals of the relevant governmental/ regulatory authorities, where such approval is required, the Directors be and are hereby authorised to issue and allot shares in the Company to such persons, at any time, and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed 10% of the total number of issued shares of the Company for the time being AND THAT the Directors be and also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad AND THAT such authority shall continue in force until the conclusion of the next AGM of the Company. 8. To transact any other business of which due notice shall have been given. NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT (Please refer to Explanatory Note 3) Resolution 7 NOTICE IS ALSO HEREBY GIVEN THAT the Final Dividend of 8 sen per share in respect of the financial year ended 31 March 2018, if approved, will be paid on 5 October 2018 to depositors registered in the Record of Depositors of the Company on 18 September A Depositor shall qualify for entitlement to the dividend only in respect of: - i. Shares transferred into the Depositor s Securities Account before 4.00 p.m. on 18 September 2018 in respect of transfers; and ii. Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad. By Order of the Board CHOK KWEE WAH (MACS 00550) TAN KEAN WAI (MAICSA ) Secretaries Kuala Lumpur 30 July 2018 EXPLANATORY NOTES: 1. Item 1 of the Agenda: Receipt of Audited Financial Statements and Report. This agenda is meant for discussion only as the provision of Section 340(1)(a) of the Act does not require shareholders approval for the Audited Financial Statements. Hence, this Agenda is not put forward for voting. 2. Item 6 of the Agenda: Proposed Shareholders Mandate for recurrent related party transactions of a revenue or trading nature. The Ordinary Resolution 6 is to seek a fresh shareholders mandate for the recurrent related party transactions comprising the shareholders mandate which has been obtained on 24 August 2017 as well as additional recurrent related party transactions. Further information on the Proposed Shareholders Mandate is set out in the Circular to Shareholders dated 30 July 2018, which is despatched together with this Annual Report

6 ANNUAL REPORT 2018 NOTICE OF ANNUAL GENERAL MEETING (cont d) 3. Item 7 of the Agenda: Authority to issue shares pursuant to Sections 75 and 76 of the Companies Act 2016 NOTES: i. The Ordinary Resolution 7 is to seek a fresh general mandate which will empower the Directors to issue shares in the Company up to an amount not exceeding in total ten percent (10%) of the issued capital of the Company for such purposes as the Directors consider would be in the best interest of the Company in order to avoid any delay and cost involved in convening a general meeting to approve such issue of shares. This authority, unless revoked or varied by the Company at a General Meeting, will expire at the conclusion of the next Annual General Meeting of the Company. ii. This general mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placement of shares, for purpose of funding current and/or future investment project(s), working capital and/or acquisitions as well as any strategic opportunities involving equity deals which require the Company to allot and issue new shares on urgent basis. iii. The Company has not issued any shares under the previous general mandate which has been obtained on 24 August 2017 and which will lapse at the conclusion of the 24th AGM to be held on 29 August Appointment of Proxy. (a) (b) (c) (d) (e) (f) (g) Only depositors whose names appear in the Register of Depositors as at 21 August 2018 shall be entitled to attend in person or appoint proxies to attend and/or vote on their behalf at the 24th Annual General Meeting. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two (2) proxies to attend and vote in his stead. A proxy may but does not need to be a member of the Company pursuant to Section 334 of the Act. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. In the event the member(s) duly executes the form of proxy but does not name any proxy, such member(s) shall be deemed to have appointed the Chairman of the Meeting as his/their proxy, provided always that the rest of the form of proxy, other than the particulars of the proxy, have been duly completed by the member(s). In the case of a corporate member, the instrument appointing a proxy must be either executed under its common seal or under the hand of its officer or attorney duly authorised. The corporation may by its resolution of its Board or a certificate of authorisation by the Corporation to appoint a person or persons to act as its representative or representatives to attend and vote on their behalf. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (Omnibus Account), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each Omnibus Account it holds. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 6th Floor, Wisma Sin Heap Lee, 346, Jalan Tun Razak, Kuala Lumpur not less than forty-eight (48) hours before the time set for the Annual General Meeting or at any adjournment thereof. 2. Registration of members/proxies (a) (b) (c) (d) (e) (f) (g) (h) Registration will start at 9.30 a.m. on the day of the 24th AGM. Members/proxies are required to produce original identity cards (IC)/documents during registration for verification. Please remember to collect your IC thereafter. Parking tickets can be validated at the registration counter for members/proxies who park their vehicles in Corus Hotel Kuala Lumpur only. SHL will NOT validate nor reimburse members/proxies for parking charges using Touch N Go card, or the valet parking services at the podium. Each members/proxy will be given a wristband upon registration. No person will be allowed to enter the meeting room without wearing the wristband. There will be no replacement in the event members/ proxies lose or misplace the wristband. Members/proxies are allowed to enter the meeting room at a.m. The registration counter will only process verification of identities and registration. For other queries/ clarification, please proceed to the Help Desk counter. The registration counters will be closed at a.m. Unregistered members/proxies are not allowed to enter the meeting room after the registration is closed. Each member and/or proxy attending the 24th AGM in person will be entitled for one (1) lunch voucher only. Where a member and/or proxy is also appointed as proxy for other members to attend the 24th AGM, he or she will only be entitled to one (1) lunch voucher only regardless of the number of members he or she is representing. If you are attending the meeting as shareholder as well as proxy, you will be registered once and will be given only one identification wristband to enter the meeting hall. 5

7 SHL CONSOLIDATED BHD CORPORATE INFORMATION BOARD OF DIRECTORS Non-Independent Non-Executive Chairman Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Executive Directors Dato Sri Yap Teiong Choon Dato Sri Ir. Yap Chong Lee Non-Independent Non-Executive Directors Wong Tiek Fong Au Lai Koong Senior Independent Non-Executive Director Souren Norendra Independent Non-Executive Director Ng Chin Hoo AUDIT COMMITTEE Souren Norendra (Chairman) Wong Tiek Fong Ng Chin Hoo REMUNERATION COMMITTEE Souren Norendra (Chairman) Dato Sri Yap Teiong Choon Dato Sri Ir. Yap Chong Lee Ng Chin Hoo NOMINATION COMMITTEE Souren Norendra (Chairman) Wong Tiek Fong Ng Chin Hoo REGISTERED OFFICE 6th Floor, Wisma Sin Heap Lee 346, Jalan Tun Razak Kuala Lumpur Tel: Fax: Website: SHARE REGISTRAR Bina Management (M) Sdn Bhd Lot 10, The Highway Centre Jalan 51/205, Petaling Jaya Selangor Darul Ehsan Tel: Fax: AUDITORS Khoo Wong & Chan Chartered Accountants , 8th Floor Plaza First Nationwide 161, Jalan Tun H. S. Lee Kuala Lumpur COMPANY SECRETARIES Chok Kwee Wah (MACS 00550) Tan Kean Wai (MAICSA ) PRINCIPAL BANKERS Malayan Banking Berhad Hong Leong Bank Berhad CIMB Bank Berhad Bangkok Bank Berhad OCBC Bank (Malaysia) Berhad United Overseas Bank (Malaysia) Bhd STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad Stock Name: SHL Stock Code:

8 G a t h e r i n g growth...

9 SHL CONSOLIDATED BHD Corporate Structure 100% Integrated Management Corporation Sdn. Bhd. INVESTMENT AND SERVICES 100% 100% SHL Corporate Services Sdn. Bhd. SHL Realty Sdn. Bhd. 60% Goodstock Land Sdn. Bhd. CONSTRUCTION 100% 100% 100% Sin Heap Lee Construction Sdn. Bhd. * SHL Infra Sdn. Bhd. * Soil-Mech Drillers Sdn. Bhd. 100% Sin Heap Lee Company Sdn. Berhad SUPPLY AND LOGISTICS 100% 100% Sin Heap Lee Brickworks Sdn. Bhd. Kajang Granite Quarry Sdn. Bhd. 100% Senick Sdn. Bhd. 100% 100% Ho Sin & Son Enterprise Sdn. Bhd. Goodstock (Tawau) Sdn. Bhd. DEVELOPMENT 100% Sin Heap Lee Development Sdn. Bhd. 100% SHL-M Sdn. Bhd. 100% Mayang Kiara Sdn. Bhd. 100% Sungai Long Golf Resort Berhad 100% Sukma Pesona Sdn. Bhd. 67% SHL-M Ventures Sdn. Bhd. 100% Wilayah Builders Sdn. Bhd. 30% OPT Ventures Sdn. Bhd. * under the process of Members Voluntary Winding Up pursuant to Section 254(1) of the Companies Act,

10 ANNUAL REPORT 2018 PROFILE OF DIRECTORS Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah (Non-Independent Non-Executive Chairman) (Age 65, Malaysian, Male) Tengku Abdul Samad Shah was appointed to the Board on 1 March He had his early education in Victoria Institution, Kuala Lumpur and attended the Wolaroi College NSW, Australia from 1970 to He is currently the Chairman of the Company and a Director of several subsidiaries of the Company. His directorship in other public company within the SHL Group is Director of Sungai Long Golf Resort Berhad. Tengku Abdul Samad Shah attended four (4) out of five (5) Board Meetings held during the financial year ended 31 March He does not have any family relationship with any Director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences within the past 5 years (other than traffic offences, if any) nor any public sanction or penalty imposed by regulatory bodies during the financial year. Dato Sri Yap Teiong Choon (Executive Director) (Age 65, Malaysian, Male) Dato Sri Yap was appointed to the Board on 1 March He had his early education in Victoria Institution, Kuala Lumpur. He obtained a Bachelor of Commerce with double majors in Economics and Accounting in 1976 and a Master in Commerce with Honours majoring in Advance Accounting from the University of Canterbury, New Zealand in He is a Chartered Accountant by profession and is a member of the Malaysian Institute of Accountants, the New Zealand Society of Accountants, a Fellow of the Institute of Certified Public Accountants of Singapore and the Australian Society of Certified Practicing Accountants. He started his career with Messrs Hanafiah, Raslan and Mohamad in 1977 and subsequently left the accounting profession in 1982 and has since been managing the Sin Heap Lee Group of Companies. He is presently an Executive Director and a Director of all subsidiaries of the Company. His directorship in other public company within the SHL Group is Director of Sungai Long Golf Resort Berhad. Dato Sri Yap is a member of the Remuneration Committee of the Company. He attended all Board Meetings held during the financial year ended 31 March He is the brother of Dato Sri Ir. Yap Chong Lee, an Executive Director of the Company. Save as disclosed herein, he does not have any family relationship with any Director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences within the past 5 years (other than traffic offences, if any), nor any public sanction or penalty imposed by regulatory bodies during the financial year. 9

11 SHL CONSOLIDATED BHD PROFILE OF DIRECTORS (cont d) Dato Sri Ir. Yap Chong Lee (Executive Director) (Age 64, Malaysian, Male) Dato Sri Ir. Yap was appointed to the Board on 1 March He obtained a Bachelor of Technology majoring in Civil and Structural Engineering from Bradford University, England in 1978, a Master of Science majoring in Construction Management from Birmingham University, England in 1979 and a Postgraduate Certified Diploma in Accounting and Finance, England in He is a Fellow of both the Institution of Engineers, Malaysia and the Association of Consulting Engineers, Malaysia. His working career began in 1979, with a consulting engineering firm, Sepakat Setia Perunding (Sendirian) Berhad and was subsequently appointed as a Director of the firm in He has been involved in the management of Sin Heap Lee Group of Companies since May He is presently an Executive Director and a Director of all subsidiaries of the Company. His directorship in other public company within the SHL Group is Director of Sungai Long Golf Resort Berhad. Dato Sri Ir. Yap is a member of the Remuneration Committee of the Company. Dato Sri Ir. Yap attended all Board Meetings held during the financial year ended 31 March He is the brother of Dato Sri Yap Teiong Choon, an Executive Director of the Company. Save as disclosed herein, he does not have any family relationship with any Director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences within the past 5 years (other than traffic offences, if any), nor any public sanction or penalty imposed by regulatory bodies during the financial year. Wong Tiek Fong (Non-Independent Non-Executive Director) (Age 56, Malaysian, Male) Mr. Wong was appointed to the Board on 1 April He obtained a Diploma in Commerce (Financial Accounting) from Tunku Abdul Rahman College, Kuala Lumpur in He is a Chartered Accountant by profession and a member of the Malaysian Institute of Accountants, the Chartered Tax Institute of Malaysia and a fellow of the Association of Chartered Certified Accountants, United Kingdom. His career began in 1985 with a firm of Chartered Accountants, Messrs Khoo Wong & Chan as an Audit Senior where he gained wide experience in corporate auditing and taxation of diverse industries. Prior to joining SHL Group in May 1989 as a Financial Accountant responsible for the financial accounting and management of SHL Group, he was attached to KPMG, a firm of Chartered Accountants, as an Audit Senior. Subsequently, he was promoted as the Financial Controller of SHL Group in May Presently, he is the Chief Financial Officer of SHL Group and a Director of several subsidiaries of the Company. His directorship in other public company within the SHL Group is Director of Sungai Long Golf Resort Berhad. Mr. Wong is a member of the Audit Committee, Nomination Committee and Risk Management Committee of the Company. He attended all Board Meetings held during the financial year ended 31 March He does not have any family relationship with any Director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences within the past 5 years (other than traffic offences, if any) nor any public sanction or penalty imposed by regulatory bodies during the financial year. 10

12 ANNUAL REPORT 2018 PROFILE OF DIRECTORS (cont d) Souren Norendra (Senior Independent Non-Executive Director) (Age 48, Malaysian, Male) Mr. Souren Norendra was appointed to the Board on 24 February He completed his secondary education at the Methodist Boys School, Kuala Lumpur and then proceeded to England where he read law and attained his LLB (Hon) from the University of Hull in He obtained his Certificate of Legal Practice (CLP) from University Malaya and was called to the Malaysian Bar in He has been practicing as an advocate and solicitor in the firm of Messrs Norendra & Yap since being called to the Bar and is now a Partner of the firm. His areas of specialty are in corporate and conveyancing law. Mr. Souren is the Chairman of the Audit Committee, Nomination Committee and Remuneration Committee of the Company. He attended all Board Meetings held during the financial year ended 31 March He does not hold any directorship in any public companies and listed issuers. He does not have any family relationship with any Director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences within the past 5 years (other than traffic offences, if any) nor any public sanction or penalty imposed by regulatory bodies during the financial year. Ng Chin Hoo (Independent Non-Executive Director) (Age 58, Malaysian, Male) Mr. Ng was appointed to the Board on 2 December He obtained his Bachelor of Commerce (Commercial Law & Accounting) from University of Melbourne, Australia in He is a Chartered Accountant by profession and is a member of the Malaysian Institute of Accountants, a member of the Institute of Certified Public Accountants of the Australian Society of Certified Practicing Accountants and a member of the Institute of Chartered Secretaries and Administrators. Mr. Ng has wide experience in management consulting and financial management primarily gained working for KPMG Management Consulting in England and Malaysia. Mr. Ng was an Executive Director of KPMG Management Consulting as well as Limited Partner with KPMG. Since leaving KPMG, Mr. Ng has held various senior positions in listed companies. He does not hold any directorship in any public companies and listed issuers. Mr. Ng is a member of the Audit Committee, Nomination Committee and Remuneration Committee of the Company. He attended all Board Meetings held during the financial year ended 31 March He does not have any family relationship with any Director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences within the past 5 years (other than traffic offences, if any) nor any public sanction or penalty imposed by regulatory bodies during the financial year. 11

13 SHL CONSOLIDATED BHD PROFILE OF DIRECTORS (cont d) Au Lai Koong (Non-Independent Non-Executive Director) (Age 53, Malaysian, Male) Mr. Au was appointed to the Board on 26 May He obtained a Bachelor of Science degree in Civil and Structural Engineering from Bradford University, England in He started his career in 1988 as an Engineer and was promoted as a Project Manager for Sin Heap Lee Construction Sdn Bhd in He has been involved in a wide range of development projects from industrial and housing to commercial buildings such as Wisma Sin Heap Lee, Clubhouse for Sungai Long Golf and Country Club, Menara Taipan, Taman Universiti Indah, Seri Kembangan, Taman Putra Indah, Bandar Sungai Long, Alam Budiman, Sungai Choh Indurtrial Park and Kajang Goodview Heights. Presently, he is the Senior Project Manager of SHL Group and a Director of several subsidiaries of the Company. He does not hold any directorship in any public companies and listed issuers. Mr. Au is a member of Risk Management Committee of the Company. He attended all Board Meetings held during the financial year ended 31 March He does not have any family relationship with any Director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences within the past 5 years (other than traffic offences, if any) nor any public sanction or penalty imposed by regulatory bodies during the financial year. 12

14 ANNUAL REPORT 2018 PROFILE OF KEY SENIOR MANAGEMENT Wong Yew Mei (Project Budget Controller) (Age 60, Malaysian, Female) Ms Wong was appointed as Project Budget Controller of SHL Group in December She obtained a Diploma in Technology (Building) from Tunku Abdul Rahman College, Kuala Lumpur in 1982 and a Master degree in Business Administration, University of East Asia, Macau in In 1982, she joined Messrs Hashim & Lim, a quantity surveying consulting firm in Kuala Lumpur in which she was exposed to all aspects of quantity surveying works on residential, hotels and high-rise buildings. In October 1986, she joined SHL Group as an Estimator and was involved in feasibility studies and estimates for the SHL Group s property development and construction projects. Ms. Wong is a member of Risk Management Committee of the Company. She does not hold any directorship in any public companies and listed issuers. She does not have any family relationship with any Director and/ or major shareholder, nor any conflict of interest with the Company. She has no convictions for any offences within the past 5 years (other than traffic offences, if any) nor any public sanction or penalty imposed by regulatory bodies during the financial year. Leong Chin Cheong (Senior Project Manager) (Age 58, Malaysian, Male) Mr Leong was appointed as Senior Project Manager in He obtained a Bachelor of Science degree in Engineering majoring in Water Resource from University of Guelph, Guelph, Ontario, Canada in He joined Sin Heap Lee Construction Sdn Bhd as an Engineer in October 1984 and has been involved in the project management of several housing development projects including Taman Sri Rawang, Rawang, Taman Hot Spring Jaya, Tawau, Wickham Residence, Ampang, Bandar Sungai Long, Cheras, Alam Budiman, Shah Alam and two smart schools at Putrajaya and Cyberjaya. Mr. Leong is the Chairman of Risk Management Committee of the Company. He does not hold any directorship in any public companies and listed issuers. He does not have any family relationship with any Director and/or major shareholder, nor any conflict of interest with the Company. He has no convictions for any offences within the past 5 years (other than traffic offences, if any) nor any public sanction or penalty imposed by regulatory bodies during the financial year. 13

15 SHL CONSOLIDATED BHD GROUP FINANCIAL HIGHLIGHTS FINANCIAL YEAR ENDED FINANCIAL RESULTS (RM Million) Revenue Profit before Tax Net Profit Net Profit attributable to Shareholders FINANCIAL POSITION (RM Million) Total Assets Share Capital Equity attributable to Shareholders FINANCIAL RATIOS Basic Earnings per Share (sen) Net Tangible Assets per Share (RM) Return on Equity (%) Return on Capital Employed (%) Return on Invested Capital (%) Gross Dividend per Share (sen) Net Dividend per Share (sen) Revenue (RM Million) Profit before Tax (RM Million) Equity attributable to Shareholders (RM Million) Basic Earnings per Share (Sen)

16 SOLID FOUNDATION

17 SHL CONSOLIDATED BHD MANAGEMENT DISCUSSION AND ANALYSIS Financial Year Ended 31 March 2018 Overview of Business Results and Operation In 2017, the Malaysian economy recorded a robust growth of 5.9% (2016: 4.2%), supported by faster expansion in both private and public sector spending. A key highlight for the year was the rebound in gross exports growth as global demand strengthened. This was mainly due to higher demand from major trading partners following the upswing in the global technology cycle, investment expansion in the advanced economies and the turnaround in commodity prices. Altogether, the global technology upturn translated into robust demand for electronics and electrical products while the stronger regional demand and the revival in investment activity in the advanced economies lifted exports of non-electronics and electrical products. Commodity exports also turned around in 2017, supported largely by the recovery in major commodity prices. The principal activity of SHL Consolidated Bhd Group is effectively development of townships with different products to meet the affordability of different target consumer groups. The property development projects are primarily located in Selangor Darul Ehsan. The property development segment is supported by an in-house construction arm, business segments of trading, investment, services, granite quarrying and manufacturing of clay-bricks to enhance the delivery system with respect to efficiency of time management and cost structure. The brick manufacturing plant in Sepang, Selangor Darul Ehsan produces clay facing bricks for the creation of value homes at competitive prices for the property development projects. 16

18 ANNUAL REPORT 2018 MANAGEMENT DISCUSSION AND ANALYSIS (cont d) Financial Year Ended 31 March 2018 For the financial year under review, revenue is reported at RM million, compared to RM million recorded in the previous financial year. The decrease in revenue was mainly attributable to substantial handovers of sold units at Alam Budiman, Shah Alam, Selangor Darul Ehsan in the previous financial year. The encouraging demand for homes at the new township namely Goodview Heights, located at Sungai Long South, Selangor Darul Ehsan, the completion of Rumah Selangorku affordable homes in Alam Budiman, Shah Alam, Selangor Darul Ehsan and Rawang Industrial Corporate Park in Sungai Choh, Selangor Darul Ehsan have contributed significantly to the financial performance of the Company. Profit before tax decreased by 19.8% from RM million reported in the previous year to RM82.36 million for the current year, mainly due to lower revenue generated by the property development segment. The earnings per share for the financial year under review is sen. Group Financial Highlights FINANCIAL YEAR ENDED FINANCIAL RESULTS (RM Million) Revenue Profit before Tax Net Profit Net Profit attributable to Shareholders FINANCIAL POSITION (RM Million) Total Assets Share Capital Equity attributable to Shareholders FINANCIAL RATIOS Basic Earnings per Share (sen) Net Tangible Assets per Share (RM) Return on Equity (%) Return on Capital Employed (%) Return on Invested Capital (%) Trade and other receivables decreased from RM90.22 million at the end of the previous financial year to RM35.96 million at the end of the current financial year. This was mainly due to higher cash collection received from customers. Trade and other payables decreased from RM91.38 million at the end of the previous financial year to RM52.84 million at the end of the current financial year, mainly due to settlement of trade debts made to the creditors. Cash, deposits and short-term investments have increased from RM million to RM million mainly due to substantial increase in net cash inflow arising from operating activities, primarily based on built-then-sell concept under the property development segment. On a consolidated basis, the current ratio is about 1,134.7% as at 31 March 2018, up from 620.6% as at end of the previous financial year, mainly attributable to an increase in cash, deposits and short-term investments and decrease in trade and other payables. SHL Consolidated Bhd is a holding company and a substantial amount of business activities are conducted at the subsidiary companies level resulting in the inter-company business revenue within the group being eliminated at the group level. The contribution of efficiency in the delivery process are participated by the subsidiary companies. 17

19 SHL CONSOLIDATED BHD MANAGEMENT DISCUSSION AND ANALYSIS (cont d) Financial Year Ended 31 March 2018 The property development segment continues to be the key contributor registering a revenue of RM million for the financial year ended 31 March 2018, representing about 92.9% of the consolidated revenue. The property development segment will remain focused on building landed properties and affordable value homes with readily available mortgage financing facilities from banks. The following major property development projects located in Selangor Darul Ehsan are being developed in phases. (a) Goodview Heights in Sungai Long South, Selangor Darul Ehsan Goodview Heights is a premier billion dollar integrated township of a freehold land area of about 200 acres located in the southern part of Bandar Sungai Long with easy access from the SILK Highway. Goodview Heights is a contemporary mixed development of approximately 2,500 units of residential homes, supported by a commercial hub at the town centre next to a recreational park. (b) Alam Budiman in Shah Alam, Selangor Darul Ehsan Alam Budiman is a matured township of about 150 acres comprising of approximately 2,000 units double storey terrace homes, affordable homes and shop offices with ready amenities and infrastructure. Alam Budiman is located near the Guthrie Corridor, the new gateway into Shah Alam. (c) Bandar Sungai Long, Selangor Darul Ehsan Risks Bandar Sungai Long is a thriving RM2 billion township that hosts Universiti Tunku Abdul Rahman, Sungai Long Medical Centre and Sungai Long Golf & Country Club which offers its members a world class golf course designed by golf master Jack Nicklaus, the first Jack Nicklaus signature golf course in Malaysia. There are about 28 acres of land to be developed excluding the golf course land bank. The Group is currently undertaking a development project called Sg Long Residence located at Bandar Sungai Long, Selangor Darul Ehsan comprising of 568 units of condominium with a gross development value of approximately RM million. Phase 1 of Sg Long Residence has been launched in February The current soft economy and weak consumer sentiment may cause uncertainties and apprehension amongst businesses, resulting in further pressure on sales risk and financial performance. The Company is experiencing challenges in the sales of properties due to structural pressure on the property industry such as competition from competitors, delivery risk and cost overrun risk. The process of managing sales risk, delivery risk and cost overrun risk is supported by continuous investment in the training and development of staff, product innovations to fit customers requirements and application of technology for improvement of construction techniques. The Company is able to maintain a high level of liquidity resulting in a very low risk of exposure to changes in interest rate and financing cost. 18

20 ANNUAL REPORT 2018 MANAGEMENT DISCUSSION AND ANALYSIS (cont d) Financial Year Ended 31 March 2018 Outlook In 2018, the Malaysian economy is projected to grow by 5.5% - 6.0%. Domestic demand will continue to be the main driver of growth, underpinned primarily by private sector activity. Private consumption growth is expected to remain sustained, supported by continued growth in employment and income, lower inflation and improving sentiments. Private investment growth is expected to be sustained, underpinned by ongoing and new capital spending in both the manufacturing and services sectors, and strengthened by continued positive business sentiments. Public sector expenditure is projected to decline due to the contraction in public investment amid more moderate growth in public consumption. The housing market in Malaysia has not been able to provide an adequate supply of affordable housing for the masses at affordable prices in relation to the demography of the nation. This undersupply of affordable homes at affordable prices is likely to worsen given the current trends in income and demographic factors. Going forward, a carefully-designed strategy of participation by the private sector for the housing market will ensure that the supply of houses is able to accommodate households of all income groups. Meeting the demand of affordable housing units will require the commitment of both the Government on policies and the private sector for efficiency planning towards the supply side of affordable homes. Despite the current challenging and unpredictable Malaysian economic environment, SHL Consolidated Bhd will remain resilient and focused on building landed properties and affordable value homes at the new townships, namely Goodview Heights at Sungai Long South, Alam Budiman at Shah Alam and Bandar Sungai Long, all property development projects located in Selangor Darul Ehsan, the primary social and economic centre of Malaysia. SHL Consolidated Bhd will continue the process of creating value for all stakeholders, improving the delivery system and enhancing its competitive advantage. With more than 30 years of sustainable track record in the property and construction business sectors, it is anticipated that the Company will be able to navigate the current weak economic condition of Malaysia. Dividend The Board of Directors aim to achieve a dividend payout policy in the range of 50% to 60% of profit after tax. The amount of dividend to be paid will take into consideration of the earnings and capital commitment of the Company. The Company has paid an interim dividend of 8 sen per share, amounting to a net dividend payable of approximately RM19.37 million in April 2018 for the financial year ended 31 March Subject to the approval by our company s shareholders at the forthcoming Annual General Meeting, our Board of Directors is pleased to recommend a final dividend of 8 sen per share in respect of the financial year ended 31 March

21 SHL CONSOLIDATED BHD Corporate Governance Overview Statement The Board of Directors of SHL Consolidated Bhd (SHL) presents this statement to provide shareholders and investors with an overview of the corporate governance (CG) practices of the Company under the leadership of the Board during the financial year This overview takes guidance from the key CG principles as set out in the Malaysian Code on Corporate Governance (MCCG). This statement is prepared in compliance with Bursa Malaysia Securities Berhad Main Market Listing Requirement and it is to be read together with SHL Group s application of each principle set out in the MCCG Corporate Governance Report 2018 (CG Report) for the financial year ended 31 March 2018 which is available on SHL s corporate website at Set out below is a statement on how SHL Group has applied the 3 key principles of good corporate governance as set out in the MCCG. PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS Board Responsibilities The Board is responsible for formulating and reviewing the Company s strategic plans and key policies, charting the course of the Company s business operations. The Board, through the Audit Committee and Risk Management Committee provides effective oversight of the Management s performance, risk assessment and controls over business operations, and compliance with regulatory requirements. The Board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. Roles of Chairman and Executive Directors The Board has established the roles and responsibilities of the Non-Independent Non-Executive Chairman which are distinct and separate from the duties and responsibilities of the Executive Directors. This segregation between the duties of the Non-Executive Chairman and the Executive Directors ensures an appropriate balance of role, responsibility and accountability at Board level. The Non-Independent Non-Executive Chairman provides leadership to the Board. He ensures the smooth functioning of the Board and that the procedures and processes are in place to facilitate effective conduct of business of the Board. The Chairman also ensures that decisions are taken on a sound and well-informed basis, including by ensuring that all strategic and critical issues are considered by the Board. The Chairman does not participate in the day-to-day management of the Group. The Executive Directors are primarily responsible for the day-to-day management of the Company. They are responsible for developing the business direction of the Company and also to ensure that Company s business strategies and policies are effectively implemented. Company Secretaries The Board is supported by the Company Secretaries who are experienced, competent and knowledgeable on new statutes and directives issued by the regulatory authorities. They give clear and sound advice on the measures to be taken and requirements to be observed by Company and the Directors arising from new statutes and guidelines issued by the regulatory authorities. Board Meetings and Access to Information Board meetings for the ensuing financial year are scheduled in advance before the end of the current financial year to enable the Directors to plan ahead and ensure their full attendance at Board meetings. Beside Board meetings, the Directors are also provided with updates via or physical copies of reports as and when there are any new developments on the Group s business or any changes to the latest statutory and/or regulatory requirements. 20

22 ANNUAL REPORT 2018 Corporate Governance Overview Statement (cont d) The Chairman of the Audit Committee, Nomination Committee and Remuneration Committee brief the Board on matters discussed as well as decisions taken in their respective Committee Meetings. A Risk Management Report will be tabled in the Audit Committee meeting for review and subsequently the said Report is presented to the Board by the Chairman of the Audit Committee at least once a year. Board Charter and Whistleblower Policy and Procedures The Board Charter sets out the roles and responsibilities of the Board, Board Committees, individual Directors and Management in upholding sound corporate governance standards and practices. The Board Charter reflects the matters reserved for the Board s consideration and approval. In May 2018, the Company s Whistleblower Policy and Procedures has been established and reviewed by Audit Committee and subsequently approved by the Board. The purpose of the Whistleblower Policy and Procedures is to provide avenue for directors and staff to expose any violation or improper conduct or wrongdoing within the Company. The Board also reviewed the Board Charter and Code of Conduct and Ethics periodically. The Board Charter, Whistleblower Policy and Procedures and Code of Conduct and Ethics are available on SHL s corporate website at Board Composition Currently, The Board of Directors comprises seven (7) members. The size and composition of the Board remains adequate to provide for a diversity of views, facilitate effective decision making, and appropriate balance of executive, independent and non-independent directors. Board Balance and Independence The Board comprises two (2) Executive Directors, three (3) Non-Independent Non-Executive Directors (including the Chairman) and two (2) Independent Non-Executive Directors. The Non-Independent Non-Executive Directors are to provide the Group unbiased and independent view and judgement, after taking into consideration the interest of the shareholders, employees, suppliers and customers. The presence of Independent Non-Executive Directors of the calibre necessary to carry sufficient weight in all decisions made by the Board ensures that there is proper check and balance in the Board. Although all Directors have an equal responsibility for the Group s business and affairs, the role of Independent Non-Executive Directors is particularly important in ensuring that the strategies proposed by the Executive Directors are fully discussed and examined, with due regard to risk management. The Nomination Committee reviews the independence of Directors by taking into account of the individual Director s ability to exercise independent judgment at all times and based on the criteria set out in the Listing Requirements of Bursa Securities. When considering the independence of the Directors, the Nomination Committee also reviews the Independence Directors other directorships, the annual declaration regarding their independence, the Directors disclosures of interests in transactions, and any other relationships between the Group and the Directors which may interfere with the Directors exercise of objective or independent judgment. Based on the assessment carried out during the financial year ended 31 March 2018, the Board is satisfied with the level of independence demonstrated by all the Independent Directors and their ability to act in the best interest of the Company. The Board strongly views that diversity of the Board s composition is important to ensure optimal decisionmaking by harnessing different insights and perspectives. The Board is committed to provide fair and equal opportunities and promoting diversity with due consideration on skills, knowledge, experience, background, age, gender and other qualities in determining the optimum composition of the Board. Currently, the Board does not have any female director and may consider recruiting a female director in the future. 21

23 SHL CONSOLIDATED BHD Corporate Governance Overview Statement (cont d) Tenure of Independent Directors The Board has adopted a nine-year policy for Independent Non-Executive Directors, which is implemented on a gradual basis to ensure the continued effective functioning of the Board. As at the date of this Statement, none of the Independent Non-Executive Directors has served more than 9 years on the Board. Therefore, shareholders approval for the re-appointment at the forthcoming AGM is not required. The Board meets at least five (5) times a year, with additional meetings convened when necessary to review matters that require the Board s urgent attention and decision. Meetings are scheduled at the beginning of each calendar year to enable the Board members to plan their schedules accordingly. During the financial year ended 31 March 2018, the Board met on five (5) occasions, where a formal agenda are forwarded to all Directors at least two (2) weeks before the meetings. All issues raised and discussed and decisions made at the Board Meetings are minuted, and are circulated to all Directors for their perusal prior to the confirmation of such minutes at the following Board Meetings. Besides Board meetings, the Directors also approved various matters requiring the sanction of the Board by way of circular resolutions during the financial year. The attendance of each Director at the Board Meeting held during the financial year ended 31 March 2018 was as follows: Director No. of meetings attended by directors during their tenure in office Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah 4/5 Dato Sri Yap Teiong Choon 5/5 Dato Sri Ir. Yap Chong Lee 5/5 Wong Tiek Fong 5/5 Souren Norendra 5/5 Ng Chin Hoo 5/5 Au Lai Koong 5/5 All the Directors complied with the minimum 50% attendance requirement in respect of Board meetings held during the financial year ended 31 March 2018 pursuant to Paragraph of the Bursa Malaysia Listing Requirements. 22

24 ANNUAL REPORT 2018 Corporate Governance Overview Statement (cont d) Directors Training The Directors have participated and continue to undergo the relevant training programmes to further enhance their skill and knowledge as well as the latest statutory and/or regulatory requirements in discharging their fiduciary duties to the Company. Training programmes attended by the Directors during the financial year ended 31 March 2018 are as follows: Name of Directors Course Title Date Dato Sri Yap Teiong Choon Companies Act 2016 : Practical Insights on Compliance MAICSA Symposium 2017 Companies Act 2016: Nuts and Bolts Dato Sri Ir. Yap Chong Lee Lean Construction How Lean Management Sustains Growth & Profitability for Malaysia Construction Industry Wong Tiek Fong MFRS 9 Financial Instruments: Gearing Up For First-Time Adoption Sustainability Engagement Series: Sector Specific Sustainability Statement Writing Workshop (Property Development/Investment/Construction Sector) Corporate Governance Briefing Sessions: MSSG Reporting & CG Guide Souren Norendra Securities Commission Malaysia s Conversation with Audit Committees New Appointment and Re-Election of Directors The Nomination Committee comprises of two (2) Independent Non-Executive Directors and one (1) Non- Independent Non-Executive Director, as follows: Chairman: Souren Norendra (Senior Independent Non-Executive Director) Member: Ng Chin Hoo (Independent Non-Eecutive Director); and Wong Tiek Fong (Non-Independent Non-Executive Director) The Nomination Committee s responsibility, among others, is to identify and recommend the right candidate with the necessary skills, experience and competencies to be filled in the Board and Board Committees. Recruitment matters are discussed in depth by the Nomination Committee before the entire Board makes the final decision on new appointments. The duties and responsibilities of the Nomination Committee are as follows: i. identifying, reviewing and recommending candidates for appointment as Directors of the Company; ii. re-nominating retiring Directors for re-appointment at Annual General Meeting (AGM) and determining annually the independence of Directors; iii. deciding the assessment process and implementing a set of objective performance criteria to be applied from year to year for evaluation of the Board s performance; iv. evaluating the Board s effectiveness as a whole and each Director s contribution to its effectiveness in accordance with the assessment process and performance criteria; and v. ensuring an appropriate framework and succession plans for members of the Board. 23

25 SHL CONSOLIDATED BHD Corporate Governance Overview Statement (cont d) Selection of candidates to be considered for appointment as Directors is facilitated through recommendations from the Directors, external parties including the Company s contacts in the finance, legal, accounting, construction, advertisements, independent search firms and property development professions. The Nomination Committee interviews the short listed candidates before formally considering and recommending them for appointment to the Board and where applicable, to the Committees. In reviewing and recommending to the Board any new Director appointments, the Nomination Committee considers: a. the candidate s independence, in the case of the appointment of an Independent Non-Executive Director; b. the composition requirements for the Board and Committees (if the candidate is proposed to be appointed to any of the Committees); c. the candidate s age, track record, experience and capabilities and such other relevant factors as may be determined by the Nomination Committee which would contribute to the Board s collective skills; and d. any competing time commitments if the candidate has multiple board representations. During the financial year, the Nomination Committee did not recruit or appoint any director to the Board. In accordance with the Listing Requirements of Bursa Securities and Article 88 of the Company s Articles of Association, at least 1/3 or the number nearest to 1/3 of the Directors shall retire from office each year, such that all directors retire at least once in every 3 years at the AGM. The retiring directors shall be eligible for re-election at the AGM. Upon the recommendation of Nomination Committee, the following Directors retire by rotation at the forthcoming 24th AGM of the Company pursuant to Article 88 of the Company s Articles of Association and being eligible, have offered themselves for re-election: (a) Y.A.M Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah (b) Dato Sri Ir. Yap Chong Lee Annual Assessment The Group has in place a formal process for assessment of the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board. The Nomination Committee assesses the Board s performance as a whole annually, using objective and appropriate quantitative and qualitative criteria which were recommended by the Nomination Committee and approved by the Board. When assessing the overall Board performance, the Nomination Committee takes into consideration the feedback from individual Directors on areas relating to the Board s competencies and effectiveness. The results of the overall evaluation of the Board by the Nomination Committee including its recommendation, if any, for improvements are presented to the Board. The annual evaluation process for the individual Directors performance comprises three parts: a. background information concerning the Directors including their attendance records at Board and Committee meetings; b. questionnaires for completion by all individual Board members; and c. Nomination Committee s evaluation based on certain assessment parameters. The questionnaires and the assessment parameters were recommended by the Nomination Committee and approved by the Board. The completed questionnaires are then reviewed by the Nomination Committee before the Nomination Committee completes its evaluation of the individual Directors. When deliberating on the performance of a particular Director who is also a member of the Nomination Committee, that member abstains from the discussions in order to avoid any conflict of interests. The results of the individual evaluation of the Directors are also used by the Nomination Committee to review, where appropriate, the composition of the Board and Committees, and to support its proposals, if any, for appointment of new members and its recommendations for the re-appointment and re-election of retiring Directors. Comments from the Directors, if any, concerning the Board as a whole and the general performance of the Directors, are also presented to the Board. 24

26 ANNUAL REPORT 2018 Corporate Governance Overview Statement (cont d) Time Commitment When considering the nomination of Directors for appointment or re-election/re-appointment, the Nomination Committee also takes into account the competing time commitments faced by Directors with multiple board representations. An analysis of the directorships held by the Directors is reviewed annually by the Nomination Committee. Based on the analysis and the Directors commitment and contributions to the Group which are also evident in their level of attendance and participation at Board and Committee meetings, the Nomination Committee is satisfied that all Directors are able to carry out and have been adequately carrying out their duties as a Director of the Group. Remuneration The Remuneration Committee consists of two (2) Independent Non-Executive Directors and two (2) Executive Directors, as follows: Chairman: Souren Norendra (Senior Independent Non-Executive Director) Members: Ng Chin Hoo (Independent Non-Executive Director); Dato Sri Yap Teiong Choon (Executive Director); Dato Sri Ir. Yap Chong Lee (Executive Director) The Duties and responsibilities of the Remuneration Committee are as follows: i. to recommend the remuneration framework for Non-Executive Directors; ii. to evaluate, deliberate and recommend the remuneration package of Executive Directors; iii. to ensure individual directors abstain from making decisions in respect of their individual remuneration; and iv. to ensure that the remuneration packages are competitive in attracting and retaining directors capable of meeting the Company s needs. The Remuneration Committee recommends the level and structure of remuneration policies for the Board and Senior Management of the Company to ensure the same remains competitive, appropriate, and in alignment with the prevalent market practices. Remuneration review of the Board and Senior Management is carried out annually to ensure that the Company continues to retain and attract the best talents in the industry. The remuneration of the Board is disclosed in the SHL s Corporate Governance Report 2018 for the financial year ended 31 March 2018 which is available on SHL s corporate website at PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT Audit Committee The Audit Committee comprises the following Directors, all of whom are Non-Executive Directors. Chairman: Souren Norendra (Senior Independent Non-Executive Director) Members: Ng Chin Hoo (Independent Non-Executive Director); and Wong Tiek Fong (Non-Independent Non-Executive Director) 25

27 SHL CONSOLIDATED BHD Corporate Governance Overview Statement (cont d) Annually, the composition of Audit Committee is reviewed by the Nomination Committee and recommended to the Board for its approval. With the relevant skill sets, knowledge and experience, the Audit Committee members are financially literate and are able to understand, analyse and challenge matters under the purview of the Audit Committee including the financial reporting process. The Audit Committee members reviewed the Company s financial statements in the presence of External Auditors prior to recommending the financial statements for the Board s approval and issuance to shareholders. The review was to ensure that the audited financial statements were drawn up in accordance with the provisions of the Companies Act, 2016, the Listing Requirements of Bursa Malaysia Securities Berhad and the applicable approved accounting standards approved by the Malaysian Accounting Standards Board. The Audit Committee members also reviewed the quarterly results of the Company prior to submission to the Board for approval and release to public. Assessment of suitability and independence of external auditors The Audit Committee reviews the independence and objectivity of the external auditors and the services provided, including quality of services, audit planning independence, objectivity and professional skepticism, annual non-audit services and is satisfied that the external auditors is competent and with audit independence. The External Auditors have confirmed in writing that they are, and have been, independent throughout the conduct of the audit engagement with the Company in accordance with the independent criteria set out by the Malaysian Institute of Accountants. The Audit Committee have a private dialogue with the external auditors at least once a year and whenever necessary, without the presence of the other directors or Management, to exchange independent views on matters which require the Audit Committee s attention. Risk Management and Internal Control Framework The Board is responsible for the Group s risk management framework and system of internal control and for reviewing their adequacy and integrity. The Board has established an ongoing process for identifying, evaluating and managing significant risks faced by the Group. The Executive Directors and Management assist the Board on the implementation and maintenance of the risk management process and compliance with Board s policies on risk and control. This process has been in place throughout the year and up to the date of approval of the annual report and financial statements. The Board fully supports the contents of the Internal Control Guidance and through the Audit Committee, continually reviews the adequacy and effectiveness of the risk management process within the various operating business units. The Risk Management Committee assessed and monitored the risk management controls and measures taken. The Audit Committee assists the Board in discharging these responsibilities by overseeing and reviewing the Risk Management Framework and the effectiveness of risk management and internal controls of the Company. Details on the Group s Enterprise Risk Management Framework are set out in this Statement on Risk Management and Internal Control of this Annual Report. Internal Audit Function The Board has established an internal audit function within the Group, which is led by the Head of Internal Audit who reports directly to the Audit Committee. Details of the Group s internal control system and framework are set out in the Statement on Risk Management and Internal Control and Audit Committee Report of this Annual Report respectively. The Board recognises the importance of an effective internal control system in improving risk management, enhancing controls and ensuring compliance with applicable laws and regulations. The internal control system also designed to safeguard the Group s operations and assets and hence protect shareholders investment in the Group. In this regard, the internal audit function of the Group is carried out by the internal audit department. The internal audit function is placed under the preview of the Audit Committee. The Head of Internal Audit present the risk assessment report on the adequacy, efficiency and effectiveness of the Group s internal control system to the Audit Committee. 26

28 ANNUAL REPORT 2018 Corporate Governance Overview Statement (cont d) PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS Effective Stakeholder Communication The Group recognises the importance of being accountable to its investors and as such has maintained an active and constructive communication policy to enable the Board and Management to communicate effectively with its shareholders, stakeholders and the public generally. The Group continuously discloses and disseminates relevant and comprehensive information to the public in a timely manner to keep its stakeholders informed of its growth strategies, business activities, business and financial performance. This facilitates the stakeholders in making informed decisions, be it in their dealings with the Group or in exercising their rights as shareholders. Periodic and Continuous Disclosure To comply with the Bursa Malaysia Listing Requirements, corporate disclosure policies and procedures have been in place to guide all employees pertaining to corporate disclosure requirements. Clear roles and responsibilities of directors, management and employees are provided together with levels of authority. Only authorised spokespersons are allowed to handle and disclose material information. Persons responsible for preparing the disclosure will conduct due diligence and proper verification before disclosure is made to investing public. Annual General Meeting (AGM) SHL dispatches its notice of AGM to shareholders at least 21 days before the AGM by enclosing the notice of AGM, which provides information to the shareholders with regard to, details of the AGM, their entitlement to attend the AGM, the right to appoint a proxy and also the qualifications of a proxy. Since 2013 AGM, SHL has removed the limitation on the number of proxies to be appointed by an exempt authorised nominee with shares in the Company for multiple beneficial owners in one securities account to allow greater participation of beneficial owners of shares at general meetings of the Group. In line with the recent amendments to the Main Market Listing Requirements of Bursa Securities, the Group implements poll voting for all the resolutions set out in the Notice of AGM and appoints a scrutineer to validate the votes cast at AGM. Electronic Communications The Board is mindful of its obligation to provide timely and fair disclosure of material information to shareholders. Shareholders are kept abreast of the financial and other material information concerning the Group through regular and timely dissemination of information. The Group website at my contains information about the Group including all publicly disclosed financial information, corporate announcements, annual reports and profiles of the Group. The Group has established a website at where shareholders can access for information. This CG Overview Statement was approved by the Board of Directors on 30 May

29 SHL CONSOLIDATED BHD STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL The Board is committed to maintaining a sound system of risk management, internal control and good corporate governance practices of the Group in compliance with Paragraph 15.26(b) of the Listing Requirements of Bursa Securities and guided by the Statement on Risk Management & Internal Control Guidelines for Directors of Listed Issuers. Board s Responsibility The Directors acknowledge their ultimate responsibility for the Group s system of internal control and risk management and for reviewing the adequacy and integrity of the system but the purview does not cover its associated company where the Group does not have full management control. However, the Group s interest is served through representation on the board of the associated company. The system of internal control covers risk management, operational, organisational, financial and compliance controls to safeguard the Group s assets and shareholders investments. The Board continually implements and reviews the adequacy and effectiveness of the Group s risk management and internal control system and ensures that risks have been managed within the Group s risk appetite and tolerable ranges and the system is viable and robust. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. KEY FEATURES OF RISK MANAGEMENT AND INTERNAL CONTROL PROCESSES The Group has established a clear line of accountability, authority and responsibility organisational structure for the Board, its committees and operating units. Key processes in reviewing the adequacy and effectiveness of the risk management and internal control are as follows:- The Audit Committee of the Group, with the assistance of the Risk Management Committee, performs risk management assessments and through the Internal Audit Department, reviews the internal control processes, and evaluates the adequacy and effectiveness of the risk management and internal control system. The Risk Management Committee was established to oversee and perform reviews on the Group s risk management processes. The Risk Management Committee is chaired by Chief Risk Officer and includes Head of business units of the Group. The Risk Management Committee reports to the Audit Committee where key risks and mitigating actions are deliberated and implemented. The Nomination Committee assists the Board to review and recommend appropriate remuneration policies for Directors and to ensure their remuneration commensurate with their performance. The Nomination Committee also reviews and recommends candidates to the Board and evaluates the performance of Directors on an annual basis. The Internal Audit Department performs internal audits on various operating units within the Group on a risk based approach and based on the annual audit plan approved by the Audit Committee. The Internal Audit Department checks and tests the effectiveness of the internal control system periodically and highlights significant findings to the Audit Committee. KEY ELEMENTS OF THE RISK MANAGEMENT AND INTERNAL CONTROLS The key elements of the Group s risk management and internal controls are as follows:- Clearly defined authorisation, approval limits and control procedures within the Board and the Senior Management. Top down communication is conducted to all levels pertaining to Group s value and code of ethics. Standard Operating Policies and Procedures are systematically documented, revised and made available to guide staff in their day-to-day work. Senior Management meet on a periodic basis with managers of business units to ensure that the processes for identifying, evaluating, monitoring and reporting of risks and internal control are implemented adequately and effectively. Periodic reporting to the Board and its committees on the results of control assurance, risk management and audit activities of the Group. The Board reviewed the effectiveness of risk management and internal controls annually and ensured that they are effective and efficient. 28

30 ANNUAL REPORT 2018 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont d) RISK MANAGEMENT FRAMEWORK Risk management continues to play an important part in the Group s business activities and is an essential component of its planning process. The Board has overall responsibility to ensure that the Group has the capability and necessary framework to manage risks in new and existing businesses. To assist the Board in its risk management oversight, the Audit Committee has been authorised by the Board to provide oversight and review on matters relating to the risk management policies and systems of the Group. The Board has established an ongoing process for identifying, evaluating and managing significant risks faced by the Group. This process has been in place throughout the year and up to the date of approval of the annual report and financial statements. The Board fully supports the contents of the Internal Control Guidance and through the Audit Committee, continually reviews the adequacy and effectiveness of the risk management process within the various operating business units. The formalisation of the Enterprise Risk Management Framework involves the following initiatives: 1. A formal risk policy and guidelines have been established and communicated to all employees throughout the Group. 2. A risk management structure which outlines the lines of reporting and responsibility at the Board, Audit Committee, Risk Management Committee and management levels have been established. The risk management structure enhances risk oversight and monitoring process. 3. The Audit Committee s risk management function is assisted by the Risk Management Committee, whose members comprise of senior management. The Risk Management Committee is responsible for ensuring the effectiveness of the risk management framework of the Group, the objective of which is to provide enterprise risks involved in property investment, property development, construction, manufacturing, recreation and management activities and a systematic process for identification, assessment, management and reporting of such risks on a consistent and reliable basis. The Risk Management Committee is mandated to focus on key strategic risks whilst also to ensure that the business units are responsible for the day-to-day tracking, monitoring and control of risks within their operations. 4. Chief Risk Officers continuously carry out their responsibilities to identify, assess and prioritise the risks faced by the Group based on the likelihood of occurrence and magnitude of impact and also to assist management in identifying procedures or steps to be taken to manage or control these risks. 5. The Group Management s implementation of a group-wide risk assessment process identifies the key risks facing each business, the potential impact and likelihood of those risks occurring, the control effectiveness and the action plans being taken to manage those risks to the desired level. The risk profile for the Group and individual business units is produced by an automated risk management system, and together with the risk registers, are reported by the Risk Management Committee to the Audit Committee on a yearly basis. The Chairman of the Audit Committee reports the significant risks and control issues to the Board for its consideration. 6. Ongoing risk management education and training is provided at management and staff levels. 29

31 SHL CONSOLIDATED BHD STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont d) RISK ASSESSMENT REVIEWS During the financial year, all divisions conducted their risk management and internal control system reviews which were assessed by the Risk Management Committee and reported to Audit Committee. The Group identified major risk areas of concern and implemented appropriate actions to mitigate those risks as outlined below:- 1. Operational Operational Risks relate to the effectiveness and efficiency of people, the integrity of internal control system and processes and external factors that affect day to day operations. The Group manages operational risks by focusing on prevention and corrective management through compliance with operating manuals, standard operating procedures, internal control and guidelines on limits of authority. At Group level, the residual operational risks are: i. Project Management Risks The Group has clearly defined procedures for monitoring, managing and controlling major projects. The respective operating business heads review and report the progress of major projects and significant business activities to the Executive Directors on a regular basis. Significant issues are brought to the attention of the Risk Management Committee, the Audit Committee and the Board of Directors. ii. Human Resources Risks The Group believes in adopting competitive and attractive human resource practices, especially in the areas of staff recruitment, talent development and compensation. The Group believes in building a talent-pool to increase the availability of experienced and capable employees to fill key business leadership positions in the company. iii. Crisis Risks 2. Competition The Group has business continuity plans in place for responding to crises and emergencies in ways that will ensure quick recovery and resumption of critical business functions. The Group regularly reviews its emergency response and business continuity plans and conducts tests and exercises from time to time to ensure its workability and relevance. The Group regularly reviews the type, scope and adequacy of insurance coverage that it buys, taking into account, the availability of such cover, its costs and the likelihood of occurrence and magnitude of risk involved. The Group is exposed to stiff competition from other construction and property development companies. Intense competition may result in highly competitive pricing in order to secure sales of the Group s property development projects, which may consequently affect the financial performance of the Group. In order to stay competitive, the Group shall constantly update itself on the latest market conditions, sustaining Group s track record and continue to maintain its competitive edge in terms of cost efficiency, service quality, reliability and innovativeness. Applying energy saving and other technologically advanced green features will enhance the Group s niche position in the construction and property development industries. 3. Supply and Cost of Raw Materials The main raw materials used by the Group include steel bars, pre-mixed and ready mixed concrete, sand, aggregates, cement, plywood, timber and other building materials, which are sourced and procured locally and overseas. Any increase of building material prices will affect the property development cost and also the selling price of property. To mitigate the price risk, detailed planning and budgeting prior to calling for tendering of property development projects is put in place to ensure lowest tender price is awarded. However, there is no assurance that any future shortage in raw materials and/or increase in the cost of raw materials will not have a material adverse impact on the Group. 30

32 ANNUAL REPORT 2018 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont d) 4. Cost Overruns The implementation of the property development projects involves the Group carrying out internal costing and budgeting estimates of raw materials, sub-contracting costs and other related costs and overheads based on the indicative pricing or quotations given by our suppliers and sub-contractors as well as our own estimate of costs. However, there are a number of circumstances that could lead to additional costs not previously factored into the contract value or selling price of the properties, which include, unforeseen circumstance such as adverse soil conditions, unfavorable weather conditions or unexpected construction constraints at the worksite and fluctuations in the prices of raw materials and subcontractors services as well as additional costs incurred that may not have been foreseen at the initial stage of planning for the construction or property development project. To mitigate the risk of cost overruns, detailed planning and budgeting are implemented in the Group s property development projects. 5. Government Regulations and Controls The operations of the Group s property development division are subject to government regulations, among others, the Environment, Health and Safety regulations and the requirements of local municipal councils. These regulations, acts and requirements are to control and protect workers and consumers as well as to set minimum standards for the construction and property development industries. Typically, these laws and regulations provide for substantial fines and potential criminal prosecution for any breach of the same. Any breach of these laws can result in permit revocation, cessation of or restriction in operations rendering remedial work required. The Group has strictly complied and will continue to comply with these laws and regulations, however, there can be no assurance that changes to the present laws, regulations or policies or the introduction of new ones will not adversely affect the Group s business. The Board is satisfied that there is an ongoing process of identifying, evaluating and managing significant risks that may affect the achievement of the Group s business objectives. The system of internal control will continue to be reviewed and updated in line with changes in the operating environment. 6. Housing loans financing In view of the slowdown in the local and global economy, strict mortgage lending policies by banking institutions resulting in lower loan approvals have affected the sale of properties and subsequently reduced the profitability of the Group. To mitigate such risk, the Group carries out the following measures:- Switching product focus to affordable housing where demand is still resilient. Maintaining close working relationship with financial institutions to counter the cooling policies. Developing innovative strategies and negotiating attractive interest rate for loans. Review of this Statement Pursuant to paragraph of the Main Market Listing Requirements, the External Auditors have reviewed this Statement for inclusion in the 2018 Annual Report, and reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal control. The statement was approved by the Board on 30 May Conclusion The Board is of the view that the system of internal control and risk management are in place for the year under review, and up to the date of approval of this Statement, is sound and sufficient to safeguard shareholders investment, the interests of customers, regulators, employees and other stakeholders, and the Group s assets. The Board has received assurance from the Executive Directors and the Chief Financial Officer that the Group s risk management and internal control system are operating adequately and effectively, in all material aspects, based on the risk management model adopted by the Group. 31

33 SHL CONSOLIDATED BHD AUDIT COMMITTEE REPORT MEMBERSHIPS AND MEETINGS The Audit Committee comprises the following Directors, all of whom are Non-Executive Directors. Chairman: Souren Norendra (Senior Independent Non-Executive Director) Members: Ng Chin Hoo (Independent Non-Executive Director); and Wong Tiek Fong (Non-Independent Non-Executive Director) The Audit Committee met five (5) times during the financial year ended 31st March The attendances of the Audit Committee Members were as follows: Name of Members No. of meetings attended by directors during their tenure in office Souren Norendra 5/5 Wong Tiek Fong 5/5 Ng Chin Hoo 5/5 The Secretary was present in all the meetings. Representatives of the External Auditors and the Head of Internal Audit also attended the meetings upon invitation. SUMMARY OF ACTIVITIES DURING THE FINANCIAL YEAR The main activities undertaken by the Committee were as follows: i. Reviewed the External Auditors scope of work and audit plans for the year. Prior to the audit, representatives from the external auditors presented their audit strategy and plan. ii. iii. iv. Reviewed the independence and objectivity of the External Auditors and the services provided, including non-audit services. The Audit Committee undertook an annual assessment of the External Auditors including the quality of audit, sufficiency of resources and the External Auditors independence, objectivity and professionalism. The Audit Committee also considered the nature of the provision of the non-audit services and fees and is of the opinion that such non-audit services and fees did not impair or threaten the audit independence. Based on the assessment, the Audit Committee is of the opinion that External Auditors is independent for the purpose of the Group s statutory audit. Recommended to the Board for approval of the audit and non-audit fees payable to the External Auditors as disclosed in Note to the financial statements. Reviewed the internal audit department s resources requirements, programmes and plans for the financial year under review. v. Reviewed the internal audit reports, which highlighted the audit issues, recommendations and management s response. Discussed with management actions taken to improve the system of internal control and ensure that it is efficient and adequate. vi. vii. Recommended to the Board improvement opportunities in internal control, procedures and risk management. Assessed and reviewed the going concern basis for preparing the Group s consolidated financial statements based on principal risks, uncertainties, capital expenditures, future performance and existing financial position of the Group. 32

34 ANNUAL REPORT 2018 AUDIT COMMITTEE REPORT (cont d) viii. Met with the External Auditors and Internal Auditors without the presence of any executive Board member. At the meeting the AC enquired about significant and unusual events, abnormal transactions and conflict of interest on related party transactions. However, there were no areas of concern raised during the year under reviewed. ix. Reviewed the changes in or implementation of major accounting policy, significant financial reporting issues, judgements made by Management, unusual events in the quarterly and annual report prior to submission to the Board for their consideration and approval. The Audit Committee was satisfied that there were no significant changes of major accounting policy, financial reporting issues, judgements made by Management and unusual events during the year under reviewed. x. Reviewed the Company s compliance in particular the quarterly and annual financial statements with the Listing Requirements of Bursa Malaysia Securities Berhad, MASB and other relevant legal and regulatory requirements. xi. xii. xiii. Reviewed with the External Auditors the results of the audit and the audit report for year ended At the meeting, the AC discussed and reviewed key audit matters with the External Auditors and is satisfied with the steps taken by External Auditors to resolve the key audit matters. Reviewed on a quarterly basis the related party transactions entered into by the Group and ensure that the transactions are fair and reasonable, and are not to the detriment of the minority shareholders. Reviewed the Group risk assessment report and ensured that action plans taken are adequate and effective. INTERNAL AUDIT FUNCTION The internal audit department is independent of the activities or operations of other operating units. The principal role of the department is to undertake independent regular and systematic reviews of the systems of internal control, risk management and governance frameworks within the Group so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively. It is the responsibility of the internal audit department to provide the Audit Committee with independent and objective reports on the state of internal control of the various operating units within the Group and the extent of compliance of these units with the Group s established policies and procedures as well as relevant statutory requirements. The internal audit activities carried out during the year are as follow:- Examined and evaluated the effectiveness and efficiency of the Group s internal control system and risk management system based on risk based approach audit plan and recommending improvements to existing system of controls. Regular internal audit visits to ascertain the extent of compliance with established Group policies and procedures and statutory requirements. Conducted follow-up audits to assess if appropriate actions have been taken to address issues highlighted in previous audit reports. Conducted recurrent related party transactions reviews to assess accuracy and completeness of reporting and ensure compliance with Bursa Malaysia Listing Requirements. Attended physical stock count of the Group. During the financial year, the cost involved in performing in-house internal audit function is approximately RM244,000/-. 33

35 SHL CONSOLIDATED BHD CORPORATE SOCIAL RESPONSIBILITY As part of our commitment to be a responsible corporate citizen, the Group continues to place great emphasis on corporate social responsibility and embarked on its mission by focusing on three primary areas namely Workplace, Environment and Community. Workplace We believe that employees are a crucial asset and major contributor to our success. The Group s policies on recruitment, working hours, remuneration and welfare exceed the requirements set forth by the relevant authorities. Employees and managerial staff continue to attend external seminars, occupational safety and health training as well as management and financial skill upgrading programmes to strengthen their competencies, skills and knowledge with the aim to embed the high standard required to enhance work quality and achieve optimal job performance. During the financial year, the employees have attended various training programmes to enhance their skills and knowledge to maximize their effectiveness on their job performance. Health and safety is given the highest priority within the Group s operations. Benefits extended to all employees include accident and disability insurance, maternity/paternity leave and medical coverage for employees non-working spouses. At construction sites, all employees, contractors and sub-contractors are properly attired with safety devices so as to comply with ISO requirements. To encourage unity and teamwork among all employees, sports activities and trips were organised to encourage employees to mingle and interact with one another to foster goodwill and build closer working relationships. Environment As a responsible property developer, the Group is committed to preserve the environment and minimise any harmful environmental impact by conforming to the regulations set by the Department of Environment. Before starting any major property development projects, the Group engages independent consultants to conduct environment impact assessments in accordance with the Environment Quality Act. In order to conserve energy and prevent global warming, the Group has introduced ways of cutting electricity consumption by turning off light and air conditioners during lunch break and to reduce waste by using recycled papers. Community The Group contributed in cash and in kind to underprivileged, disable groups and charity organisations. 34