Contents. Corporate Information. Group s Financial Highlights. Corporate Structure. Directors Report and Audited Financial Statements

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3 2 3 4 Corporate Information Group s Financial Highlights Corporate Structure Contents 5 Management Discussion & Analysis 27 Directors Report and Audited Financial Statements 8 Directors Profile 10 Profile of Key Management 142 Analysis of Shareholdings 11 Audit Committee Report 144 List of Properties 15 Statement on Corporate Governance 145 Notice of Annual General Meeting 23 Statement on Risk Management and Internal Control 148 Statement Accompanying Notice of AGM 26 Sustainability Statement Form of Proxy

4 Corporate Information CORPORATE & REGISTERED OFFICE Room 209, 2nd Floor, Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman, Kuching, Sarawak. Tel: Fax: BOARD OF DIRECTORS Tiang Ching Kok (Managing Director) Ha Tiuen Kiong (Independent Non-Executive Director) Henry Law Kah Kwong (Independent Non-Executive Director) Pang Kim Soo (Independent Non-Executive Director) Felix Wong Khung Chui (Independent Non-Executive Director) COMPANY SECRETARY Yeo Puay Huang (LS ) Paul Chiam Tau Keen (MIA14900) SHARE REGISTRAR Securities Services (Holdings) Sdn. Bhd. Level 7, Menara Milenium Jalan Damanlela Pusat Bandar Damansara Damansara Heights Kuala Lumpur Tel: Fax: AUDITORS Ernst & Young Chartered Accountants 3rd Floor, Wisma Bukit Mata Kuching Jalan Tunku Abdul Rahman Kuching Tel: Fax: PRINCIPAL BANKERS AmBank (M) Berhad Bank Muamalat Malaysia Berhad Bank of China (M) Berhad CIMB Bank Berhad Hong Leong Bank Berhad Malayan Banking Berhad Public Bank Berhad RHB Islamic Bank Berhad United Overseas Bank (Malaysia) Berhad STOCK EXCHANGE LISTING Main Market Bursa Malaysia Securities Berhad Stock Code: 7544 Stock Name: QUALITY 2 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

5 Group s Financial Highlights QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

6 Corporate Structure 4 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

7 Management Discussion & Analysis Dear Valued Shareholders, On behalf of the Board of Directors of Quality Concrete Holdings Berhad ( QC ), it is my pleasure to present to you the Annual Report and Audited Financial Statements of the Company and the QC Group for the financial year ended 31 January REVIEW OF OPERATIONS AND FINANCIAL RESULTS Generally there is a better economic outlook in year 2017 led by better growth in most of the advanced countries and with China and other emerging countries continuing to perform well. Malaysia has registered a healthy growth rate of 5.9% spurred by strong private sector expenditures. Despite of this positive data, the construction industry in general is still lagging behind in the market recovery in the country and particularly in Sarawak. Private developments have been slow with low take up rates due to rising costs and tighter credit control from financial institutions. Also, government funded projects has been significantly less due to reduction in budget allocation. Our Group has experienced one of its most disappointing performances in recent years with a Loss before taxation ( LBT ) of RM15.3 million. The Group revenue recorded at RM104.9 million represents a drop of 25% compared to the last financial year as the Group s core business activities are mainly related to the construction industry. Property and Construction division The Group s only property development project on hand during the financial year is a development of 32 units of Semi Detached doublestorey Light industrial building at Muara Tuang Phase 2. There was no revenue recognized for the current year as the project was near its full completion stage as at end of the financial year which does not satisfy the revenue recognition criteria as specified by MFRS 118. Sales of the project has not been as good as the Phase 1 with only 50% units sold as of end of the financial year due to the softening property market and also stringent loan requirements by the financial institution for end financing. The construction division has only recorded a marginal revenue of RM0.3 million as the project on hand has been completed. The construction division also did not managed to secure any new projects amid fierce competition among the construction players for the reduced number of government projects available. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

8 The Property & Construction division recorded a lower loss before taxation at RM3.5 million compared to RM5.0 million recorded in the previous year. This was mainly due to previous year s financial result was adversely impacted by a one off adjustment on final contract sum of 8.0 million for one the completed projects due to final measurement and reduction of scope of works. Manufacturing division The Group s revenue mainly derives from the manufacturing division and for the year under review, it contributed around 94% of the total Group revenue. Ready-mixed Concrete During the year, the ready-mixed concrete division has seen its revenue dropped by 22.3% to RM56.8 million. The dwindling construction activities coupled with competition from other suppliers within Sarawak has a significant impact on the revenue generated from ready-mixed concrete which seen its revenue fallen to the lowest in 10 years. It is also burdened with high fixed operating costs and rising raw material and fuel costs. As a result, loss before tax from the ready-mixed concrete division has widened to RM7.3 million compared to RM1.5 million in the last financial year. The prevailing market condition has prompted the management to look at cost rationalization and to consolidate its operation to focus on high growth area. Plants with reduced production volume or under utilised will be relocated to area with higher demand to ensure that the plant utilisation is being optimised. Timber Products The timber products division has recorded revenue of RM17.5 million in the current year, up by RM1.5 million recorded in the previous year buoyed by increase in demand from overseas market such as Philippines and Yemen. However, the timber division has just managed to breakeven as compared to the previous year in which it managed to record a profit of RM0.1 million as appreciation of Ringgit against USD has reduced the profit margins from export sales. Furthermore, the result of the current year has taken into effect a stock impairment of RM0.2 million. HDPE Pipes The HDPE pipes divisions has recorded RM21.6 million in revenue for the current year, which is 6 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

9 8.5% higher than RM19.9 million recorded in the previous year. The commencement of Pan Borneo Highway project has boosted demand for HDPE pipe for relocation of water distribution and other utilities networks. As the Pan Borneo Highway project is still in the early stage of construction, the increase has not been significant. However, profit before tax is lower in the current year at RM0.3 million as compared to RM1.0 million recorded in the previous year. Raw material price has risen sharply during the second half of the year and as a result, the profit margin has eroded in the current year. The loss per share in the current year is at sen compared to loss per share of sen in the last financial year. PROSPECT Whilst the outlook for financial year 2018 for the Group remains challenging and with the change of government after the recently held General Election, changes in policy and focus from the new government is to be expected, we remain optimistic that vital projects especially those that are benefiting the people will continue. We believe that going forward, the Group will come out stronger after a disappointing year with the right marketing strategy in place and continuous efforts to explore new market and products. ACKNOWLEDGEMENT On behalf of the Board of Directors, I also wish to express our appreciation to our shareholders, the management and staff of the Group for their support, dedication, hard work and commitment to the Group. I also wish to convey our appreciation to our customers, suppliers, business associates, bankers, consultants and relevant government authorities for their continued support and confidence in the Group. Lastly, I also wish to extend my sincere appreciation to my fellow Board members for the guidance and contributions to the Group. Raymond Tiang Ching Kok GROUP MANAGING DIRECTOR QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

10 Directors Profile TIANG CHING KOK Managing Director Aged 44, Male, Malaysian Mr. Tiang Ching Kok was appointed to the Board on 2 January He graduated with a Bachelor of Commerce degree from Deakin University, Australia in 1996 and joined Earthmover Group of Companies in 1996 as Executive Director and was responsible for the overall management of the group. His valuable management experience in sawmilling and logging activities is an asset to QC Group as one of QCHB s subsidiaries, Lee Ling Timber Products Sdn. Bhd., is also involved in the timber business. Mr. Tiang is also a director to all of the QCHB s subsidiaries. He has no other personal interest in any business arrangement involving the Company, except for those disclosed on pages 124 to 126 of this Annual Report. He attended all the four (4) Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 5 years. PETER HA TIUEN KIONG Independent Non-Executive Director Aged 50, Male, Malaysian Member of Audit Committee Member of Remuneration & Nomination Committee Mr. Peter Ha was appointed to the Board on 29 October He obtained his Master degree in Engineering Science in Civil Engineering from University of New South Wales in 1993 majoring in structural engineering. He is a qualified engineer and member of the Institution of Engineers Malaysia. Mr Ha has more than 18 years of experience in civil engineering works especially in the design of bridges and has involved in various bridge construction projects in Sarawak. Currently, he is a Director of a construction company and also the Principal of Peter Ha Consulting firm. He does not have any family relationship with any director and/or major shareholder of QCHB, nor any personal interest in any business arrangement involving the Company. He attended three (3) of the four (4) Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 5 years. 8 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

11 Directors Profile HENRY LAW KAH KWONG Independent Non-Executive Director Aged 72, Male, Malaysian Member of Audit Committee Member of Remuneration & Nomination Committee Mr. Henry Law was appointed to the Board on 30 January After obtaining his Senior Cambridge Certificate, Mr. Henry Law joined Standard Chartered Bank and he has extensive banking experience after spending for more than 23 years in the banking industry. Subsequently, he joined a trading company in Singapore for 5 years prior to coming back to Sarawak to work as a Marketing Manager for a timber company. He does not have any family relationship with any director and/or major shareholder of QCHB, nor any personal interest in any business arrangement involving the Company. He attended three (3) of the four (4) Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 5 years. PANG KIM SOO Independent Non-Executive Director Aged 61, Male, Malaysian Member of Audit Committee Member of Remuneration & Nomination Committee Mr. Pang Kim Soo was appointed to the Board on 2 September Mr Pang obtained his Bachelor of Science in Building from the University of South Bank, (formerly known as Polytechnic of South Bank) United Kingdom in He has extensive experience in the building industry having been involved in it for the past 30 years. He is also the shareholder and executive director of several companies that are in trading, property development and services activities. Mr Pang has also previously served in Majlis Bandaraya Kuching Sarawak ( MBKS ) as a councilor and advisor for 12 years. He does not have any family relationship with any director and/or major shareholder of QCHB, nor any personal interest in any business arrangement involving the Company. He has attended all the four (4) Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 5 years. FELIX WONG KHUNG CHUI Independent Non-Executive Director Aged 47, Malaysian Member of Audit Committee Mr. Felix Wong was appointed to the Board on 20 April Mr Felix Wong graduated from Monash University, Melbourne, Australia with a degree in Bachelor of Commerce majoring in Accounting. He is a qualified member of Malaysia Institute of Accountants, CPA Australia, Malaysian Institute of Certified Public Accountant and Chartered Tax Institute of Malaysia. He has been in public practice for more than 20 years mostly dealing with matters pertaining to audit and tax. Currently, Mr. Felix Wong is the Managing Partner of Felix Wong & Co., an approved licensed audit firm. He does not have any family relationship with any director and/or major shareholder of QCHB, nor any personal interest in any business arrangement involving the Company. He has not attended any Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 5 years. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

12 Profile of Key Management DAVID GOH HONG CHIANG Group Chief Operating Officer Aged 49, Male, Malaysian Mr. David Goh graduated with a Bachelor Degree in Economics at Macquarie University, Australia. He began his career as an Officer with Arab-Malaysian Finance Bhd. He joined QCHB in May 1999, and was promoted to Group Chief Operating Officer on 2nd January He is the brother in law to Mr Tiang Ching Kok, the Managing Director of QCHB. He has no convictions for any offences within the past 5 years. PAUL CHIAM TAU KEEN Group General Manager (Admin & Finance) Aged 48, Male, Malaysian Mr. Paul Chiam holds a Master of Business Administration from Heriot-Watt University, UK and is a member of Malaysian Institute of Accountants and CPA Australia. He joined Quality Concrete Holdings Berhad ( QCHB ) as Group Finance Manager on 7th January He worked for an international accounting firm for more than 8 years prior to joining QCHB. He does not have any family relationship with any director and/or major shareholder of QCHB. He has no convictions for any offences within the past 5 years. SIM KIN HUI General Manager, Pipes Division Aged 54, Female, Malaysian Mdm Sim Kin Hui joined Polyflow as Admin & Account Executive in She completed Diploma in Human Resource Management from American National University in She has a wide range of Administration, Human Resource, Sales & Marketing experiences covering the management system. She was promoted to Admin & HR Manager in-charge of Admin & HR Department & Sales Coordination in 2010 & again promoted to Senior Admin & HR Manager cum Sales Manager in She was subsequently promoted to General Manager on January She was appointed as the Management Representative incharge of the company s Quality Management System, ISO9001 certification program since Prior joining Polyflow, she worked with construction firms & trading companies as Admin & Account Assistant from 1982 to She does not have any family relationship with any director and/or major shareholder of QCHB. She has no convictions for any offences within the past 5 years. IR. LAU KIING CHUONG General Manager, Property Division Aged 66, Male, Malaysian Ir. Lau Kiing Chuong graduated with a Bachelor of Civil Engineering Degree from University of Roorke, India. He is a Professional Engineer to the Board of Engineers Malaysia and also member of Institute of Engineers, Malaysia. He was appointed as General Manager of the Property Development Division on 1st December He has vast experiences in the construction and civil works having been involved in variuos residential and commercial development project, and infrastructure work. He does not have any family relationship with any director and/or major shareholder of QCHB. He has no convictions for any offences within the past 5 years. TIANG CHING WHU General Manager, Timber Division Aged 47, Male, Malaysian Mr Tiang Ching Whu graduated with a degree in Marketing & Finance from Curtin University, Australia. He joined the Company in 1997 as Marketing Executive to prepare yearly and other periodic marketing plan. He is also assisting General Manager in carrying out marketing strategies and undertake market research on competitor s products. In September 2007, he was promoted to General Manager to oversee the operations of the company. He is also responsible for marketing to develop sales and marketing strategies for the company, analyse the current market trends and result, production planning and determine manpower, equipment and raw materials needed to cover production demand. He does not have any family relationship with any director and/or major shareholder of QCHB. He has no convictions for any offences within the past 5 years. 10 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

13 Audit Committee Report The Board of Directors of Quality Concrete Holdings Berhad is pleased to present the report of the Audit Committee of the Board for the year ended 31 January The Audit Committee was established by a resolution of the Board on 7 October MEMBERS AND MEETINGS The members of the Audit Committee during the year comprised the directors listed below. During the year ended 31 January 2018, the Audit Committee held a total of four (4) meetings. Name Status of directorship Independent Attendance of meetings Henry Law Kah Kwong Independent Non-Executive Director Yes Attended 3 out of 4 meetings held David Wong Siew Chow Independent Non-Executive Director Yes Attended 4 out of 4 meetings held Ha Tiuen Kiong Independent Non-Executive Director Yes Attended 3 out of 4 meetings held Pang Kim Soo Independent Non-Executive Director Yes Attended 4 out of 4 meetings held Felix Wong Khung Chui Independent Non-Executive Director Yes Not applicable TERMS OF REFERENCE Membership The Audit Committee shall be appointed by the Board from amongst their number and shall consist of not less than three (3) members, all of whom shall be non-executive directors. The majority of the Committee members shall be independent directors with at least one of whom shall be a member of the Malaysian Institute of Accountants or a member who fulfils the requirements stated in Paragraph (1) (c) (ii) and Practice Note No. 13/2002, (Paragraph 7) of the listing requirements of the Bursa Malaysia Securities. The Chairman of the Audit Committee shall be an independent non-executive director appointed by the Board. Meetings and minutes Meetings shall be held not less than four (4) times a year and the Group Executive Director, Group Internal Auditor and a representative of the external auditors shall normally be invited to attend the meetings. Other members of the Board may attend the meetings upon the invitation of the Audit Committee. At least once a year, the Audit Committee shall meet the external auditors without any executive directors present. A quorum shall be two (2) members present and a majority of whom must be independent directors. Minutes of each meeting shall be kept and distributed to each number of the Audit Committee and of the Board. The Chairman of the Audit Committee shall report on each meeting to the Board. The Secretary to the Audit Committee shall be the Company Secretary. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

14 Audit Committee Report Authority In carrying out their duties and responsibilities, the Audit Committee shall have the authority: i. to investigate any activity within its terms of reference and shall have unrestricted access to both the internal and external auditors and to all employees of the Group; ii. iii. iv. to have the resources which are required to perform its duties and to obtain independent professional or other advice it deems necessary; to have full and unrestricted access to information pertaining to the Company and the Group; to have direct communication channels with the internal and external auditors; and v. to obtain external legal or other independent professional advice as necessary. Notwithstanding anything to the contrary hereinbefore stated, the Audit Committee does not have executive powers and shall report to the Board of Directors on matters considered and its recommendations thereon, pertaining to the Company and the Group. Responsibility Where the Audit Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Listing Requirements of Bursa Malaysia Securities, the Audit Committee has the responsibility to promptly report such matter to the Bursa Malaysia Securities Berhad. REVIEW OF THE COMPOSITION OF THE AUDIT COMMITTEE The term of office and performance of the Audit Committee and each of the members shall be reviewed by the Board of Directors at least once every three (3) years to determine whether the Audit Committee and its members have carried out their duties in accordance with their terms of reference. Key Functions and Duties The key functions and duties of the Audit Committee are: i. to consider the appointment, resignation and dismissal of external auditors and the audit fee; ii. iii. to review the nature and scope of the audit with the internal and external auditors before the audit commences; to review the quarterly and annual financial statements of the Company and the Group focusing on the matters set out below, and thereafter to submit them to the Board: any changes in accounting policies and practices; significant adjustments arising from the audit; the going concern assumption; and compliance with accounting standards and regulatory requirements. iv. to discuss problems and reservations arising from the interim and final audits, and any matter the external auditors may wish to discuss; 12 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

15 Audit Committee Report v. to review the audit reports prepared by the internal and external auditors, the major findings and management s responses thereto; vi. vii. to review the adequacy of the scope, functions and resources of the internal and management audit department and whether it has the necessary authority to carry out its work; to consider the report, major findings and management s response thereto on any internal investigations carried out by the internal auditors; viii. to review any appraisal or assessment of the performance of executive(s) in the internal and management audit department; ix. to approve any appointment or termination of senior executive(s) in the internal and management audit department; x. to be informed of any resignation of executives in the internal and management audit department and to provide the resigning executive an opportunity to submit his/her reason for resignation; xi. to review the evaluation of the systems of internal control with the auditors; xii. to review the assistance given by the Company s and the Group s employees to the auditors; xiii. to review related party transactions entered into by the Company and the Group to ensure that such transactions are undertaken on the Group s normal commercial terms and that the internal control procedures with regards to such transactions are sufficient; and xiv. any such other functions as may be agreed to by the Audit Committee and the Board. ACTIVITIES OF THE AUDIT COMMITTEE DURING THE YEAR In line with the terms of reference of the Audit Committee, the following activities were carried out by the Audit Committee during the year ended 31 January 2018 in the discharge of its functions and duties: i. review of the audit plans for the year for the Company and the Group prepared by the internal and external auditors; ii. iii. iv. review of the audit reports for the Company and the Group prepared by the internal and external auditors and consideration of the major findings by the auditors and management s responses thereto; review of the quarterly and annual reports of the Company and the Group prior to submission to the Board of Directors for consideration and approval; review of the disclosure on related party transactions entered into by the Company and the Group in the annual report of the Company; v. review of the Circular to shareholders in relation to the General Mandate for recurring related party transactions before recommending it for the Board of Directors approval; vi. commissioning of special reviews on specific areas of financial operations of the Group; and vii. meet with the external auditors in the absence of management except the Company Secretary. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

16 Audit Committee Report INTERNAL AUDIT FUNCTIONS The Company has an Internal and Management Audit Department whose principal responsibility is to undertake regular and systematic reviews of the systems of controls so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively in the Company and the Group. The Department is also responsible for the conduct of regular and systematic reviews of environmental, safety and health issues in the Company and the Group. The attainment of such objective involves the following activities being carried out by the Department: i. reviewing and appraising the soundness, adequacy and application of accounting, financial and other controls and promoting effective control in the Company and the Group at reasonable cost; ii. iii. iv. ascertaining the extent of compliance with established policies, procedures and statutory requirements; ascertaining the extent to which the Company s and the Group s assets are accounted for and safeguarded from losses of all kinds; appraising the reliability and usefulness of information developed within the Company and the Group for management; v. recommending improvements to the existing systems of controls; vi. carrying out audit work in liaison with the external auditors to maximise the use of resources and for effective coverage of audit risks; vii. carrying out investigations and special reviews requested by management and/or the Audit Committee of the Company; and viii. identifying opportunities and recommend to improve the operations of and processes in the Company and the Group. The costs incurred for the internal audit function of the Group for financial year ended 31 January 2018 was RM38,516. This Audit Committee Report was approved by the Board on 28 May QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

17 Statement on Corporate Governance The Board of Directors ( Board ) of Quality Concrete Holdings Berhad ( the Company ) is committed in ensuring that the practice of good corporate governance in the conduct of the businesses and affairs of the Company and its subsidiaries ( the Group ). The Board views the maintenance of good corporate governance is essential for sustainable long-term performance and value creation. This statement is prepared in compliance with Bursa Malaysia Securities Berhad Main Market Listing Requirements ( MMLR ) and mainly describes the approaches that the Group has taken with respect to the principles and recommended practices in the Malaysian Code on Corporate Governance 2017 ( MCGG 2017 ). The Corporate Governance Report ( CG Report ) which discloses the Company s application of each recommended practice in the MCCG 2017 is available on the Company s website at BOARD LEADERSHIP AND EFFECTIVENESS Board Responsibilities The Board is responsible for the oversight and overall management of the Group. The principal responsibilities are as follows: review and adopt strategic plan, as developed by Management of the Group, annual budgets and long-term business plans, taking into account the sustainability of the Group s business; oversee the conduct and governance of the Group s business and evaluating whether or not its businesses are being properly managed; identify principal business risks faced by the Group, and ensuring the implementation of appropriate internal control systems to manage such risks; overseeing the succession planning and human resource plan; maintaining shareholder and investor relations for the Company; and review the adequacy and integrity of the Group s internal control systems. The Board has delegated specific responsibilities to three (3) Board Committees, namely the Audit Committee, Nominating Committee and Remuneration Committee, to examine specific issues within their respective terms of reference. The final decision is the responsibility of the Board after considering the recommendations of the respective committee. Board charter The Company has adopted a Board Charter, setting out, inter-alia, the roles of the Board, Board Committees, Executive and Non-Executive Directors and Management. The Charter, which serves as a reference point for Board s activities to enable Directors to carry out their stewardship role and discharge their fiduciary duties towards the Company, also contains a formal schedule of matters reserved to the Board for deliberation and decision so that the control and direction of the Company s businesses are in its hands. The Board Charter is published on the Group s website at Composition of the Board There are currently five (5) Directors on the Board comprising of one (1) Executive Director and four (4) Independent Non-Executive Directors. This provides the desired level of objectivity and independence in Board deliberations and decision making. The Board composition complies with Chapter of the Main Market Listing Requirements which require a minimum of 2 or 1/3 of the Board to be independent directors. The profile of each Director is set out in this Annual Report. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

18 Statement on Corporate Governance Independence of the Board The Board is in the midst of identifying a Director to helm the Board Chairman position following the demise of its former Chairman. At each meeting of the Board, the Directors appoint from amongst them a Director to chair the meeting. The current composition of Independent Non-Executive Directors in the Board, which comprises a majority of Board members, provides for pertinent check and balance in the Board such that no one Director has unfettered powers in decision making. The Chairman of the meeting is responsible for ensuring the adequacy and effectiveness of the Board s governance process and acts as a facilitator at Board meetings to ensure that contributions from Directors are forthcoming on matters being deliberated and that no Board member dominates discussion. As the Managing Director, he implements the Group s strategic initiatives, policies and decision adopted by the Board and oversees the operations and business development of the Group. The Independent Non-Executive Directors bring to bear objective and independent views, advice and judgement on interests, not only of the Company, but also of shareholders and stakeholders. Independent Non-Executive Directors are essential for protecting the interests of shareholders and can make significant contributions to the Company s decision making by bringing in the quality of detached impartiality. The Board recognizes the importance of establishing criteria on independence to be used in the annual assessment of its Independent Non-Executive Directors. The definition on independence accords with the MMLR of Bursa Tenure of Independent Directors Practice 4.2 of the MCCG 2017 states the tenure of an independent director to be not exceeding a cumulative term limit of nine (9) years. However, the Board believes that a director s independence should not be determined through the length of services as there are significant advantages to be gained from long-serving directors who over the years have developed deeper understanding of the Group s business and process insight and in-depth knowledge of the Group s business affairs. During the financial year, 1 independent director namely, Mr Henry Law Kah Kwong has been on the Board for more than nine (9) years and the Board holds the opinion that his independence has not been compromised and impaired in anyway. The Board strongly recommends his retention and will be tabling the relevant Ordinary Resolution to the shareholders at the forthcoming Annual General Meeting. Board Meetings The Board meets at least four times (4) annually, with additional meetings being convened as and when necessary. For the Board to deliberate effectively on agenda of meetings, relevant meeting papers or proposals will be furnished prior to and in advance of each meeting. This enables the Board to study the facts and have productive discussion and make informed decision at the meeting. At each Board meetings, the Board reviews the business performance of the Group and discusses major strategic, operational, compliance and financial issues. The Chairman of the Audit Committee briefs the Directors at each Board meeting the salient matters deliberated by the Audit Committee and which require the Board s attention or direction, including approval, as the case may be. All pertinent issues discussed at Board meetings in arriving at decisions and conclusions are properly recorded by the Company Secretary by way of minutes of meetings, which are confirmed by the Chairman at the next meeting. Minutes of proceedings and resolutions passed at each Board and Board Committees Meetings are kept in the minutes book at the registered office of the Company. In the event of a potential conflict of interest, the Director in such position will make a declaration to that effect as soon as practicable. The Director concerned will then abstain from any decisionmaking process in which he has an interest in. 16 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

19 Statement on Corporate Governance During the financial year under review, four (4) Board meetings were held. Details of the attendance of the Directors at the Board Meetings are disclosed in their respective personal profiles set out as follows:- Directors No. of meetings attended Tiang Ching Kok 4 out of 4 Henry Law Kah Kwong 3 out of 4 David Wong Siew Chow (Resigned on 20th April 2018) 4 out of 4 Ha Tiuen Kiong 3 out of 4 Pang Kim Soo 4 out of 4 Felix Wong Khung Chui (Appointed on 20th April 2018) Not applicable Supply of, and access to, information All Directors are provided with an agenda and a set of Board papers prior to Board meetings. This is issued in sufficient time to enable the Directors to prepare and deliberate on the issues prior to the meeting. Senior Management members are also invited to attend Board Meetings to provide the Board with their views and explanation on certain agenda items tabled to the Board, and to clarify on issues that have been raised by Directors. All Directors have access to the advice and services of the Company Secretaries, who are responsible for ensuring that Board Meeting procedures are adhered to and that applicable rules and regulations are complied with. The Board is updated and advised by the Company Secretaries from time to time on new statutes and directives issued by the regulatory authorities. In addition, the Directors may obtain independent professional advice in the furtherance of their duties, at the Company s expense. Selection and assessment of Directors The Nominating Committee, established by the Board with specific terms of reference, comprises the following Independent Non-Executive Directors as its members: Mr Pang Kim Soo (Chairman); Mr Henry Law Kah Kwong; Mr Ha Tiuen Kiong; and Mr Felix Wong Khung Chui. The Nominating Committee is primary responsible for recommending suitable appointments to the Board, taking into consideration the Board structure, size, composition and the required mix of expertise and experience which the director should bring to the Board. It assesses the effective of the Board as a whole, the Board Committees and the contribution of each director. Where considered appropriate, the Nominating Committee considers recommendation for directorship by shareholders or existing directors. Based on its terms of reference, the Nominating Committee carries out the assessment process regardless of whether the candidate is for new appointment or re-appoinment. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

20 Statement on Corporate Governance The final decision on the appointment of a candidate recommended by the Nominating Committee rests with the Board. The Company Secretary ensures that all appointments are properly made upon obtaining all necessary information from the Director. During the financial year under review, the Nominating Committee met once, attended by all members. During the meetings and as at the date of this Statement, the Nominating Committee has carried out the following activities within its terms of reference and reported the outcome to the Board: evaluated the re-appointment of Directors, and recommended to the Board for approval; reviewed training undertaken by Directors as well as those training that are available for Directors for the ensuing year; discussed the search for a Board Chairman and female director; conducted annual evaluation of the Board s effectiveness and performance covering the assessment of the Board, each individual Director, each Board Committee, and independence of the Independent Directors; and assessed and recommended the retention of Mr Henry Law Kah Kwong, who has served for a cumulative term of more than nine years but less than 12 years, to continue to act as Independent Director of the Company. The Board has no specific policy on diversity of its members in terms of gender, age or ethnicity or target set to achieve a blend of these attributes, but believes that the Company should be appointing Directors who have the relevant skills, experience, knowledge, integrity, character and time to contribute towards realising the Company s objectives. Directors remuneration The Remuneration Committee, is responsible for determining the level and make up of Executive Directors remuneration for Quality Concrete Holdings Berhad and its subsidiaries so as to ensure that the Group attracts and retains the Directors of the necessary caliber, experience and quality needed to run the Group successfully. The current members of the Remuneration Committee are Mr Felix Wong Khung Chui, Mr Henry Law Kah Kwong, Mr Ha Tiuen Kiong and Mr Pang Kim Soo. During the financial year ended 31 January 2018, no meeting was held. Details of Directors remuneration for the financial year ended 31 January 2018 are as follows: Company Category Fees Salaries & Bonus Defined Benefits Total Allowances Contribution in Kind Remuneration Plan RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Executive Directors Tiang Ching Kok Non-Executive Directors David Wong Siew Chow Henry Law Kah Kwong Ha Tiuen Kiong Pang Kim Soo Felix Wong Khung Chui Total QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

21 Statement on Corporate Governance Group Category Fees Salaries & Bonus Defined Benefits Total Allowances Contribution in Kind Remuneration Plan RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Executive Directors Tiang Ching Kok Non-Executive Directors David Wong Siew Chow Henry Law Kah Kwong Ha Tiuen Kiong Pang Kim Soo Felix Wong Khung Chui Total Directors Training Continuing Education Programmes The Board is mindful of the importance for its members to undergo continuous training to be apprised of changes to regulatory requirements and the impact such regulatory requirements have on the Group. All the Directors of the Company have attended the Mandatory Accreditation Programme conducted by Bursa Malaysia Training Sdn Bhd within the stipulated timeframe required by the MMLR of Bursa. During the financial year under review, Directors attended the following training: Review of Strategic Planning by Directors Business Requirements Esteem 10.0 Launch (Seismic Modal Response Spectrum Analysis, Detailing According to EC8 Malaysia NA and Transfer Plate) Bursa Compliance 2017-Annual Reports & Listing Requirements Malaysia For PLC Directors & Financial for Non- Financial Directors The Directors are notified periodically by the Company Secretary on the types of training courses available in the market that the Directors may consider attending in order to enhance their skills and knowledge in the discharge of their stewardship role. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

22 Statement on Corporate Governance AUDIT AND RISK MANAGEMENT Uphold integrity in financial reporting by the Company The Board is committed to providing a balanced, clear and representative assessment of the Group s financial performance and prospects at the end of each reporting period and financial year, primarily through the quarterly announcement of Group s results to Bursa, the annual financial statements of the Group and Company as well as the message to shareholders in the Annual Report. Audit Committee In assisting the Board to discharge its duties on financial reporting, the Board has established an Audit Committee, comprising exclusively Independent Non-Executive Directors, chaired by Mr Felix Wong Khung Chui, who is a member of the Malaysian Institute of Accountants. The composition of the Audit Committee, including its roles and responsibilities, are set out in the Audit Committee Report included in this Annual Report. One of the key responsibilities of the Audit Committee in its specific terms of reference is to ensure that the financial statements of the Group and Company comply with applicable financial reporting standards in Malaysia. Such financial statements comprise the quarterly financial report announced to Bursa and the annual statutory financial statements. The terms of reference of the Audit Committee include a policy on the types of non-audit services permitted to be provided by the external auditors of the Company so as not to compromise their independence and objectivity. In assessing the independence of external auditors, the Audit Committee obtains assurance by the external auditors, confirming that they are, and have been, independent throughout the conduct of the audit engagement with the Company in accordance with the independence criteria set out by the Malaysian Institute of Accountants and International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants. Recognise and manage risks of the Group The Board acknowledges its responsibility of maintaining a good system of internal control and risk management, and for reviewing regularly the adequacy and effectiveness of the risk management and internal control system to ensure that shareholders investment and the Group s assets are safeguarded. This system can only provide reasonable, but not absolute assurance against any material misstatements, fraud or loss. The Statement on Risk Management and Internal Control in this Annual Report provides an overview of the management of risk and state of internal controls within the Group. The Internal Audit funcition reports directly to the Audit Committee. The activities carried out by the Internal Audit Department are set out in the Audit Committee Report of this Annual Report. 20 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

23 Statement on Corporate Governance CORPORATE REPORTING AND RELATIONSHIP WITH STAKEHOLDERS Shareholder participation at general meeting The Annual General Meeting ( AGM ), which is the principal forum for shareholder dialogue, allows shareholders to review the Group s performance via the Company s Annual Report and pose questions to the Board for clarification. At the AGM, shareholders participate in deliberating resolutions being proposed or on the Group s operations in general. At the last AGM, a question and answer session was held where the Chairman invited shareholders to raise questions with responses from the Board. The Notice of AGM is circulated at least twenty one (21) days before the date of the meeting to enable shareholders to go through the Annual Report and papers supporting the resolutions proposed. Shareholders are invited to ask questions both about the resolutions being proposed before putting a resolution to vote as well as matters relating to the Group s operations in general. All the resolutions set out in the Notice of the last AGM were put to vote by show of hands and duly passed. The outcome of the AGM was announced to Bursa on the same meeting day. Communication and engagement with shareholders The Board recognises the importance of being transparent and accountable to the Company s investors and, as such, has various channels to maintain communication with them. The various channels are through the quarterly announcements on financial results to Bursa, relevant announcements and circulars, when necessary, the Annual and Extraordinary General Meetings and through the Group s website where shareholders can access pertinent information concerning the Group. Code of conduct and whistle-blower policy The Board Charter sets out a Code of Ethics to be observed by Directors. As for the conduct of employees, the Board has formalized an Employees Handbook to be observed by employees in the Group. The Board has also adopted Whistle- Blowing Policies and Procedures, which outline when, how and to whom a concern may be properly raised about the actual or potential corporate fraud or breach of regulatory requirements involving employee, Management or Director in the Group. The Board is aware of the need for adherence to the Code of Conduct and Employees Handbook by Directors of the Company and employees in the Group respectively, and will take measures to put in place a process to ensure its compliance. Ensure timely and high quality disclosure The Board recognises the importance of an effective communication channel and timely dissemination of accurate information pertaining to the Group s business activities and financial performance to its shareholders, investors and other stakeholders. The Group s financial results, announcements, annual report and circulars are the primary modes of disseminating information in relation to the Group s business activities and financial information and this can be assessed from the Company s website at or Bursa Malaysia Securities Berhad s website at QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

24 Statement on Corporate Governance Additional Information Utilisation of Proceeds During the financial year, there were no proceeds raised from any corporate proposal. Share Buybacks The Company did not carry out any share buy-backs during the financial year. Options, Warrants or Convertible Securities There was no exercise of Options or Convertible Securities or conversion of warrants during the financial year. American Depository Receipt ( ADR ) or Global Depository Receipt ( GDR ) Programme The Company did not sponsor any ADR or GDR programme during the financial year. Imposition of Sanctions/Penalties There were no material sanction or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies during the financial year. Non-Audit Fees The amount of audit and non-audit fees paid and payable to external auditors by the Group for the financial year ended 31 January 2018 is as follows: Company Group RM RM Audit Fees 60, ,000 Non Audit Fees - Tax advisory & compliance 6,020 75,320 - Review of Statement on Risk Management & Internal control 9,900 9,900 15,920 85,220 Variation in Results There is no material variance between the financial results and the unaudited results previously made for the financial year ended 31 January Profit Guarantee There was no profit guarantee given by the Company during the financial year. Material Contracts There were no material contracts outside the ordinary course of business entered into by the Company and its subsidiaries involving Director s and major shareholder s interest which were still subsisting at the end of the financial year or entered into since the end of the previous financial year. 22 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

25 Statement on Risk Management and Internal Control The Board of Directors of Quality Concrete Holdings Berhad ( Board ) is pleased to provide the following statement outlining the nature and scope of risk management and internal control of the Group pursuant to paragraph 15.26(b) of the Bursa Malaysia Securities Berhad s Main Market Listing Requirements and Principle B of the Malaysian Code on Corporate Governance. Board Responsibility The Board acknowledges the importance of having an effective internal control system and a well structured risk management framework to safeguard the interest of shareholders, customers, employees and as well as the Group s assets. The Board understands its overall responsibility for establishing an efficient and effective system of internal control covering not only financial controls but also relating to operational, compliance and risk management and for reviewing the adequacy and integrity of the system. However, due to the limitations that are inherent in any system of risk management and internal control, those systems are 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. The Board has established an ongoing process for identifying, evaluating and managing the principal risks faced, or potentially exposed to, by the Group in pursuing its business objectives. The process is being continually monitored and reviewed for its adequacy and effectiveness to ensure it is in accordance with the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers. Risk Management Framework The Board and Management are proactive in identifying significant risks associated with its business processes. The Risk Management Committee was established in April 2004 to coordinate the implementation of an enterprise-wide risk management programme for the Group. The Committee is made up of two (2) representatives from the Board and the Management representatives from the respective subsidiaries. During the year, reviews have been conducted to assess and re-evaluate the risk profiles identified by the respective business units within the Group as well as assessing the effectiveness of the controls in place to address those risks. Internal Audit Function The Board acknowledges the importance of internal audit function and has in place an internal audit unit which is to report directly the Audit Committee on a quarterly basis. The internal audit function adopts a risk-based approach in developing its audit strategy and plan which focuses on identifying principal risks affecting the achievement of the Group s business objectives, assessing the likelihood and impact of these risks, evaluating the effectiveness of the existing controls in place and formulating action plans to improve the internal control system. During the year, scheduled internal audit visits were carried out by the internal audit unit based on the audit plan presented to and approved by the Audit Committee. The Internal Auditor usually reports to the Audit Committee on areas for improvement and will subsequently follow up to ensure that corrective actions on reported weaknesses are remedied within the required time frame by Management of the respective subsidiaries. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

26 Statement on Risk Management and Internal Control As part of the ongoing process, the Internal Auditor has conducted detailed risk audits on the following areas as identified in the approved audit plan: (a) Review of Credit Assessment, Granting of Credit Terms and Collections (b) Review of Sales, Purchases and Expenses documentation (c) Review of Invoicing Control (d) Review on Raw Material Management (e) Review on Inventories Management Key Elements of Internal Control The Group has also put in place the following key elements of internal control: An organisational structure with well-defined scope of responsibilities, accountabilities and appropriate level of delegated authorities with clear line of reporting; Regular and comprehensive information provided to Management covering both financial and operational performance and key business indicators, for effective monitoring and decision making; Regular visits to operating units and close involvement in daily operations of the Group by Managing Director and senior management; Regular Board and Audit Committee meetings are held to identify and resolve operational and financial issues; An independent Audit Committee comprising non-executive members of the Board, all being independent directors; The Audit Committee reviews and holds meetings with Management on the proposed action to be taken on significant internal control issues identified by internal and external auditors; Certain parts of the Group s operations or subsidiaries have received ISO certification for their products and/ or work processes, these operating units are committed to maintaining their certification by ensuring strict compliance with their respective ISO requirements which include periodic reviews from ISO; and Training requirements are identified and reviewed on annual basis based on individual needs, departmental recommendations and certification bodies requirements. 24 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

27 Statement on Risk Management and Internal Control Conclusion Based on the processes set out above, the Board is of the view that the Group s system of risk management and internal control are adequate to safeguard the shareholders investment and the Group s assets and has received assurance from both the Managing Director and Group General Manager- Finance & Admin in this respect. Nevertheless, the Board and Management are committed towards operating a sound system of risk management and internal control and this system will continuously be reviewed and updated in line with the changes in the operating environment. In the year under review, the Board is not aware of any material losses, contingencies or uncertainties that would require a separate disclosure in this Annual Report. The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Audit and Assurance Practice Guide 3, Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report ( AAPG 3 ) issued by the Malaysian Institute of Accountants ( MIA ) for inclusion in the annual report of the Group for the year ended 31 January 2018, and reported to the Board that nothing has come to their attention that cause them to believe that the statement intended to be included in the annual report of the Group, in all material respects: has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers, or is factually inaccurate. AAPG 3 does not require the external auditors to consider whether the Directors Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group s risk management and internal control system including the assessment and opinion by the Directors and management thereon. The report from the external auditor was made solely for, and directed solely to the Board in connection with their compliance with the listing requirements of Bursa Malaysia Securities Berhad and for no other purposes or parties. The external auditors do not assume responsibility to any person other than the board of directors in respect of any aspect of this report. This statement is issued in accordance with a resolution of the Directors dated 28 May QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

28 Sustainability Statement We are committed to be a successful and responsible corporate citizen, not only just about delivering quality products and services and generating attractive economic returns to our customers and shareholders. We also recognize that it is our corporate social responsibility to ensure that we conduct our business activities ethically and professionally. In order to achieve this aim, we will periodically review our policies, monitor and where necessary improve on our performance. We are committed to continuous improvements in our corporate social responsibility program. Our commitment toward our social responsibility is reflected through the following policies: Workforce We aim to be employer of choice in the industries that we operate in. We believe that dedicated and competent workforce is paramount to the success of the businesses of our Group. Therefore, we will continue to invest in human resource developments to ensure proper trainings are given to the employees to further enhance their skills and knowledge. Safety and Health We are committed to provide a safer and healthier environment for our employees and customers and minimise any preventable accidents and health hazards that may occur at our business premises. Environment We are committed to seek in our operation continuous improvements in our operations to minimise any negative impact on the environment. We will ensure that our business activities are conducted in compliance with the applicable environmental rules and regulations. Community We are committed to provide continuous support to various activities carried out by local charities and organizations. 26 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

29 Directors Report and Audited Financial Statements Directors Report Statement by Directors and Statutory Declaration Independent Auditors Report Statement of Profit or Loss and Other Comprehensive Income Statements of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Statements of Cash Flows

30 Directors Report The directors hereby present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 January Principal activities The principal activities of the Company are investment holding and the provision of management services. The principal activities of the subsidiaries are set out in Note 18 to the financial statements. There have been no significant changes in the nature of the principal activities during the financial year. Results Loss for the year attributable to: Group RM 000 Company RM Owners of the Company 13,773 2,418 - Non-controlling interests ,377 2,418 ===== ===== In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. Reserves and provision There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. Dividends No dividend has been paid or declared by the Company since the end of the previous financial year. The directors do not recommend any dividend payment in respect of the current financial year. Directors The names of the directors of the Group and of the Company in office since the beginning of the financial year to the date of this report are: Directors of the Company: David Wong Siew Chow (Resigned on 20 April 2018) Felix Wong Khung Chui (Appointed on 20 April 2018) Ha Tiuen Kiong (also a director of a subsidiary) Henry Law Kah Kwong Pang Kim Soo Tiang Ching Kok (also a director of certain subsidiaries) 28 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

31 Directors Report Directors (contd.) The names of the directors of the Group and of the Company in office since the beginning of the financial year to the date of this report are: (contd.) Directors of the subsidiaries: Chin Yoke Lian Datuk Hajjah Rodiah Binti Mahmud Datin Ha Ai Ing David Goh Hong Chiang Kua Boo Tua Lee Ho Jin Paul Chiam Tau Keen Tiang Chiin Ling Tiang Chiin Yew Directors benefits Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown below) by reason of a contract made by the Company or a related corporation with any 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 34 to the financial statements. Directors remuneration Included in the analysis below is remuneration for directors of the Company and its subsidiaries in accordance with the requirements of Companies Act Executive: Group Company RM 000 RM 000 RM 000 RM 000 Salaries and other emoluments Fees Contributions to defined contribution plans Total executive directors remuneration (excluding benefits-in-kind) Estimated money value of benefits-in-kind Total executive directors remuneration (including benefits-in-kind) QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

32 Directors Report Directors remuneration (contd.) Non-executive: Group Company RM 000 RM 000 RM 000 RM 000 Fee s Other emoluments Total non-executive directors remuneration (excluding benefits-in-kind) Estimated money value of benefits-in-kind Total non-executive directors remuneration (including benefits-in-kind) Total directors remuneration 1,238 1, ==== ==== ==== ==== Included in the analysis above is remuneration for Directors of the Company and its subsidiaries in accordance with the requirements of Companies Act Directors interests According to the register of directors shareholdings, the interest of a director in office at the end of the financial year in shares in the Company or its related corporations during the financial year was as follows: Direct interest: Number of ordinary shares At 1 February 2017 and 31 January 2018 Tiang Ching Kok 3,282,500 Indirect interest*: Tiang Ching Kok 14,726,500 * Deemed interest pursuant to Section 59(11)(c) of the Companies Act None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year. Indemnification of directors and officers No indemnity was given to or insurance effected for any director and officers of the Company during the financial year. 30 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

33 Directors Report Other statutory information (a) Before the statements of profit or loss and other comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps: (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that no known bad debts had been written off and that adequate provision had been made for doubtful debts; and to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances which would render: (i) (ii) it necessary to write off any bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and the values attributed to the current assets in the financial statements of the Group and of the Company misleading. (c) (d) (e) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. As at the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or any contingent liability of the Group or of the Company which has arisen since the end of the financial year. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

34 Directors Report Other statutory information (contd.) (f) In the opinion of the directors: (i) (ii) 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 will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made. Auditors The auditors, Ernst & Young, have expressed their willingness to continue in office. Auditors remuneration are disclosed in Note 8 to the financial statements. To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. Signed on behalf of the Board in accordance with a resolution of the directors dated 31 May Tiang Ching Kok Pang Kim Soo 32 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

35 Statement by Directors Pursuant to Section 251(2) of the Companies Act 2016 We, Tiang Ching Kok and Pang Kim Soo, being two of the directors of Quality Concrete Holdings Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages to are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 January 2018 and of the financial performance and the cash flows for the year then ended. Signed on behalf of the Board in accordance with a resolution of the directors dated 31 May Tiang Ching Kok Pang Kim Soo Statutory Declaration Statutory Declaration pursuant to Section 251(1)(b) of the Companies Act 2016 Pursuant To Section 251(1)(B) Of The Companies Act 2016 I, Paul Chiam Tau Keen, being the officer primarily responsible for the financial management of Quality Concrete Holdings Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages to are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by the abovenamed Tiang Paul Chiam Ching Tau Kok Keen at Kuching in the State of Sarawak on 31 May 2018 Paul Chiam Tau Keen (MIA 14900) Before me, EVELYN LAU SIE JIONG (No. Q137) Commissioner For Oaths QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

36 Independent Auditors Report to the members of Quality Concrete Holdings Berhad (Incorporated in Malaysia) Report on the audit of the financial statements Opinion We have audited the financial statements of Quality Concrete Holdings Berhad, which comprise the statements of financial position as at 31 January 2018 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages to In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 January 2018, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence and other ethical responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By- Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. 34 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

37 Independent Auditors Report to the members of Quality Concrete Holdings Berhad (Incorporated in Malaysia) Report on the audit of the financial statements (contd.) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. We have determined that there are no key audit matters to communicate in our report on the financial statements of the Company. The key audit matter for the audit of the financial statements of the Group is described below. This matter was addressed in the context of our audit of the financial statements of the Group as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. For the matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditors responsibilities for the audit of the financial statements section of our report, including in relation to this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis of our audit opinion on the accompanying financial statements. Impairment of trade receivables As at the reporting date, as disclosed in Note 22 to the financial statements, the carrying amount of trade receivables of the Group was RM35.4 million net of allowance for impairment. Total impairment for trade receivables recognised in the statements of profit or loss and other comprehensive income for the year ended 31 January 2018 amounted to RM531,000. The determination as to whether a trade receivable is collectable involves management judgement. Specific factors management considers include the age of the balance, existence of disputes, recent historical payment patterns and any other available information concerning the creditworthiness of counterparties. Management uses this information to determine whether a provision for impairment is required. We focused on this area because it requires a high level of management judgement and due to the materiality of the amounts involved. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

38 Independent Auditors Report to the members of Quality Concrete Holdings Berhad (Incorporated in Malaysia) Report on the audit of the financial statements (contd.) Key audit matters (contd.) Impairment of trade receivables (contd.) We tested aged balances where no provision was recognised to ascertain if there were any indicators of impairment. This included considering payments received since the year-end, reviewing historical payment patterns and any correspondence with customers on expected settlement dates. We selected a sample of trade receivable balances where a provision for impairment of trade receivables was recognised and considered the rationale behind management's judgement. In order to evaluate the appropriateness of these judgements, we assessed whether balances were overdue, the customer's historical payment patterns and whether any post year-end payments had been received up to the date of completing our audit procedures. We also obtained corroborative evidence including correspondence supporting any disputes between the parties involved, attempts by management to recover the amounts outstanding and on the credit status of significant counterparties where available. We had reviewed subsequent collections, settlement agreements and historical payment patterns from long overdue debtors to satisfy ourselves that the impairment amount provided by management is adequate. We considered the consistency of management's application of policy for recognising provisions with the prior year. Specifically we considered how much of prior years' provisions had been utilised for bad debts written off during the year; and reversal of prior year s provision amounts when a debt has been collected. The aging analysis of trade receivables is disclosed in Note 22 to the financial statements. Information other than the financial statements and auditors report thereon The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. 36 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

39 Independent Auditors Report to the members of Quality Concrete Holdings Berhad (Incorporated in Malaysia) Report on the audit of the financial statements (contd.) Information other than the financial statements and auditors report thereon (contd.) In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial statements The directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the Group s and the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

40 Independent Auditors Report to the members of Quality Concrete Holdings Berhad (Incorporated in Malaysia) Report on the audit of the financial statements (contd.) Auditors responsibilities for the audit of the financial statements (contd.) As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s and the Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s or the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation. 38 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

41 Independent Auditors Report to the members of Quality Concrete Holdings Berhad (Incorporated in Malaysia) Report on the audit of the financial statements (contd.) Auditor s Responsibilities for the Audit of the Financial Statements (contd.) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Other matters This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. ERNST & YOUNG AF: 0039 Chartered Accountants YONG VOON KAR 1769/04/20 (J/PH) Chartered Accountant Kuching, Malaysia Date: 31 May 2018 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

42 Statement of Profit or Loss and Other Comprehensive Income Group Company Note RM 000 RM 000 RM 000 RM 000 Revenue 4 104, , Cost of sales 5 (95,763) (116,610) - - Gross profit 9,197 24, Other income 6 4,365 3, Selling and marketing expenses (8,604) (9,604) - - Administrative expenses (9,269) (16,938) (2,334) (2,155) Other expenses (5,963) (5,435) (545) (541) Operating loss (10,274) (3,805) (1,976) (1,954) Finance costs 7 (5,020) (4,706) (442) (273) Loss before tax 8 (15,294) (8,511) (2,418) (2,227) Income tax expense (268) - - Loss net of tax (14,377) (8,779) (2,418) (2,227) Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods*: Foreign currency translation (22) Loss net of tax, representing total comprehensive income for the year (14,399) (8,717) (2,418) (2,227) ====== ====== ===== ===== * There is no tax effect arising from each of the components of the other comprehensive income. 40 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

43 Statement of Profit or Loss and Other Comprehensive Income (contd.) Loss attributable to: Group Company Note RM 000 RM 000 RM 000 RM 000 Equity holders of the parent (13,773) (8,267) (2,418) (2,227) Non-controlling interests (604) (512) - - (14,377) (8,779) (2,418) (2,227) ====== ====== ===== ===== Loss net of tax, representing total comprehensive income for the year Equity holders of the parent (13,795) (8,205) (2,418) (2,227) Non-controlling interests (604) (512) - - (14,399) (8,717) (2,418) (2,227) ====== ====== ===== ===== Loss per share attributable to equity holders of the parent (sen): Basic and diluted 12 (23.76) (14.26) ===== ===== The accompanying accounting policies and explanatory notes form an integral part of the financial statements. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

44 Statement of Financial Position As at 31 January 2018 ASSETS Group Company Note RM 000 RM 000 RM 000 RM 000 Non-current assets Property, plant and equipment 13 44,794 45,929 1,073 1,511 Prepaid land lease payments 14 13,346 13,666 2,765 2,819 Land held for property development 15 36,321 36, Investment properties 16 13,088 13, Goodwill on consolidation Investment in subsidiaries ,027 86,528 Investment in an associate Other investments ,581-1,100 Deferred tax asset , , ,865 91,958 Current assets Property development costs 15 22,547 21, Other investments Inventories 21 31,848 29, Trade and other receivables 22 45,060 54,498 27,288 64,640 Prepayments 3, Amount due from customers on contracts 23 3,152 8, Tax recoverable 3,036 2, Other assets 24 1, Cash and bank balances 25 14,644 14, Non-current asset classified as held for sale 26-1, , ,401 27,795 65,179 TOTAL ASSETS 234, , , ,137 ====== ====== ====== ====== 42 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

45 Statement of Financial Position As at 31 January 2018 (contd.) EQUITY AND LIABILITIES Group Company Note RM 000 RM 000 RM 000 RM 000 Current liabilities Loans and borrowings 27 70,954 76,483 20,673 25,040 Trade and other payables 29 36,686 29,544 3,598 4,290 Income tax payable , ,297 24,271 29,330 Net current assets 18,279 28,104 3,524 35,849 Non-current liabilities Loans and borrowings 27 8,974 9, Deferred tax liabilities 32 2,017 1, ,991 10, Total liabilities 118, ,982 24,271 29,330 Net assets 116, , , ,807 Equity attributable to owners of the parent Share capital 30 82,956 82,956 82,956 82,956 Other reserves Retained earnings 31,721 45,494 42,433 44, , , , ,807 Non-controlling interests TOTAL EQUITY 116, , , ,807 TOTAL EQUITY AND LIABILITIES 234, , , ,137 ====== ====== ====== ====== The accompanying accounting policies and explanatory notes form an integral part of the financial statements. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

46 Consolidated Statement of Changes in Equity Group Attributable to owner of the parent Non- Total Share Share Other Retained Controlling equity Total capital premium reserves earnings interests (Note 30) (Note 30) (Note 31) RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 February , ,835 82, , Loss net of tax (14,377) (13,773) (13,773) (604) Other comprehensive income (22) (22) - - (22) - - Total comprehensive income (14,399) (13,795) - - (22) (13,773) (604) Issuance of ordinary shares 1, ,499 At 31 January , ,040 82, , ====== ====== ===== ===== ===== ====== ====== The new Companies Act 2016 (the Act ), which came into operation on 31 January 2017, abolished the concept of authorised share capital and par value of share capital. Consequently, the amounts standing to the credit of the share premium account and capital redemption reserves become part of the Company s share capital pursuant to the transitional provisions set out in Section 618(2) of the Act. Notwithstanding this provision, the Company may within 24 months from the commencement of the Act, use the amount standing to the credit of its share premium account of RM24,994,279 for purposes as set out in Sections 618(3) of the Act. There is no impact on the numbers of ordinary shares in issue or the relative entitlement of any of the members as a result of this transition. 44 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

47 Consolidated Statement of Changes in Equity (contd.) Attributable to equity holders of the parent Group Non- Total Share Share Other Retained Controlling equity Total capital premium reserves earnings interests (Note 30) (Note 30) (Note 31) RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 February , ,040 57,962 24, , Loss net of tax (8,779) (8,267) (8,267) (512) Other comprehensive income Total comprehensive income (8,717) (8,205) (8,267) (512) Transition to no-par value regime on 31 January ,994 (24,994) At 31 January , ,835 82, , ====== ====== ===== ===== ====== ====== ====== The accompanying accounting policies and explanatory notes form an integral part of the financial statements. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

48 Company Statement of Changes in Equity Company Share Share Retained Total capital premium earnings equity (Note 30) (Note 30) RM 000 RM 000 RM 000 RM 000 At 1 February ,956-44, ,807 Total comprehensive income - - (2,418) (2,418) At 31 January ,956-42, ,389 ===== ===== ===== ====== At 1 February ,962 24,994 47, ,034 Total comprehensive income - - (2,227) (2,227) Transition to no-par value regime on 31 January ,994 (24,994) - - At 31 January ,956-44, ,807 ===== ===== ===== ====== The new Companies Act 2016 (the Act ), which came into operation on 31 January 2017, abolished the concept of authorised share capital and par value of share capital. Consequently, the amounts standing to the credit of the share premium account and capital redemption reserves become part of the Company s share capital pursuant to the transitional provisions set out in Section 618(2) of the Act. Notwithstanding this provision, the Company may within 24 months from the commencement of the Act, use the amount standing to the credit of its share premium account of RM24,994,279 for purposes as set out in Sections 618(3) of the Act. There is no impact on the numbers of ordinary shares in issue or the relative entitlement of any of the members as a result of this transition. The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 46 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

49 Statements of Cash Flows Cash flows from operating activities Group Company Note RM 000 RM 000 RM 000 RM 000 Loss before tax (15,294) (8,511) (2,418) (2,227) Adjustments for: Amortisation of prepaid land lease payments Amortisation of properties held for sale Depreciation of property, plant and equipment 8 6,530 5, Dividend income 8 (12) (12) - - Gain on disposal of property, plant and equipment 8 - (34) - - Gain disposal of other investments 8 (285) (275) (285) (275) Impairment loss on receivables , Impairment of goodwill Interest income 8 (576) (390) (11) (25) Interest expense 8 4,877 4, Inventories written down Net fair value loss/(gain) on other investments (250) 273 (250) Property, plant and equipment written off Reversal of impairment loss on receivables 8 (1,143) (7) (368) - Reversal of impairment loss on inventories 8 (195) Net unrealised foreign exchange loss/(gain) 8 41 (87) - - Operating (loss)/profit before working capital changes (3,311) 1,980 (1,892) (2,069) (Increase)/decrease in land held for property development and property development costs (804) 13, Increase in inventories (2,830) (562) - - Increase in other assets (1,327) Decrease/(increase) in receivables 9,755 (137) (467) (619) (Increase)/decrease in prepayments (3,064) Increase/(decrease) in payables 7,222 (20,416) 9 40 Decrease in amount due from customers for contracts work 5,245 7, QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

50 Statements of Cash Flows (contd.) Cash flows from operating activities (contd.) Group Company Note RM 000 RM 000 RM 000 RM 000 Cash generated from/(used in) operations 10,886 1,890 (2,350) (2,648) Interest paid (4,877) (4,562) (425) (214) Taxes paid, net of refund (92) (1,086) Net cash generated from/(used in) operating activities 5,917 (3,758) (2,728) (2,694) Cash flows from investing activities Acquisition of other investments (2) (827) (2) (827) Proceeds from disposal of other investments 1, , Acquisition of property, plant and equipment 13 (1,931) (8,529) - (2) Proceeds from disposal of property, plant and equipment Proceeds from issuance of shares to non-controlling interest 1, (Placement)/withdrawal in short term deposits with maturity more than 3 months Investment in subsidiaries - - (31,499) (7,501) Interest received Additions to cash deposits pledged (2,022) (1,995) - - Net cash used in investing activities (767) (9,765) (30,378) (7,345) 48 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

51 Statements of Cash Flows (contd.) Cash flows from financing activities Group Company Note RM 000 RM 000 RM 000 RM 000 Decrease in amount due from subsidiary companies ,187 6,749 (Decrease)/increase in amount due to subsidiary companies - - (701) 1,845 Drawdown/(repayment) of term loan 757 (1,810) - - Repayment of hire purchase (1,315) (1,288) - - Repayment of revolving credit (2,700) (1,800) (5,000) (3,000) (Repayment)/drawdown of bankers acceptances (3,256) 6, Net cash (used in)/generated from financing activities (6,514) 1,964 32,486 5,594 Net decrease in cash and cash equivalents (1,364) (11,559) (620) (4,445) Effect of exchange rate changes 3 (30) - - Cash and cash equivalents at the beginning of the year (6,332) 5,257 (4,977) (532) Cash and cash equivalents at the end of the year 25 (7,693) (6,332) (5,597) (4,977) ===== ===== ===== ===== The accompanying accounting policies and explanatory notes form an integral part of the financial statements. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

52 1. Corporate information The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Room 209, 2nd Floor, Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman, Kuching. The principal activities of the Company are investment holding and the provision of management services. The principal activities of the subsidiaries are set out in Note 18 to the financial statements. There have been no significant changes in the nature of the principal activities during the financial year. 2. Basis of preparation and summary of significant accounting policies 2.1 Basis of preparation The financial statements of the Group and the Company have been prepared in accordance with Malaysia Financial Reporting Standards ( MFRS ), International Financial Reporting Standards ( IFRS ) and the requirements of the Companies Act 2016 in Malaysia. The financial statements of the Group and the Company have also been prepared on the historical cost basis except as disclosed in accounting policies below. The financial statements of the Group and the Company are presented in Ringgit Malaysia ( RM ) and all values are rounded to the nearest of thousand ( RM 000 ) except when otherwise indicated. 2.2 Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year except as follows: On 1 February 2017, the Group and the Company adopted the following new and amended MFRSs mandatory for annual financial periods beginning on or after 1 January Effective for annual periods beginning on or after Description 1 January 2017 Amendments to MFRS 107: Disclosures Initiatives 1 January 2017 Amendments to MFRS 112: Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017 Annual Improvements to MFRS Standards Cycle: Amendments to MFRS 12: Disclosure of Interests in Other Entities - Clarification of the Scope of Disclosure Requirements in MFRS QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

53 2. Basis of preparative and summary of significant accounting policies (contd.) 2.2 Changes in accounting policies (contd.) (a) Amendments to MFRS 107: Disclosure Initiative The amendments to MFRS 107 Statement of Cash Flows requires an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of these amendments, entities are not required to provide comparative information for preceding periods. The application of these amendments has had no impact on the Group and the Company. (b) Amendments to MFRS 112: Recognition of Deferred Tax Assets for Unrealised Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. The application of these amendments has had no impact on the Group and on the Company as the Group and the Company already assess the sufficiency of future taxable profits in a way that is consistent with these amendments. 2.3 Standards issued but not yet effective The standards and interpretations that are issued but not yet effective up to the date of issuance of the Group s and the Company s financial statements are disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective. Effective for annual periods beginning on or after Description Annual Improvements to MFRS Standards Cycle: 1 January 2018 (i) Amendments to MFRS 1: First-time Adoption of Malaysian Financial Reporting Standards 1 January 2018 (ii) Amendments to MFRS 128: Investments in Associates and Joint Ventures QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

54 2. Basis of preparative and summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) Effective for annual periods beginning on or after Description 1 January 2018 Amendments to MFRS 2: Classification and Measurement of Share-based Payment Transactions 1 January 2018 Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts 1 January 2018 Amendments to MFRS 140: Transfers of Investment Property 1 January 2018 MFRS 9: Financial Instruments 1 January 2018 MFRS 15: Revenue from Contracts with Customers 1 January 2018 IC Interpretation 22: Foreign Currency Transactions and Advance Consideration Annual Improvements to MFRS Standards Cycle: 1 January 2019 (i) Amendments to MFRS 3: Business Combinations 1 January 2019 (ii) Amendments to MFRS 11: Joint Arrangements 1 January 2019 (iii) Amendments to MFRS 112: Income Taxes 1 January 2019 (iv) Amendments to MFRS 123: Borrowing Costs 1 January 2019 Amendments to MFRS 9: Prepayment Features with Negative Compensation 1 January 2019 Amendments to MFRS 119: Plan Amendments, Curtailment or Settlement 1 January 2019 Amendments to MFRS 128: Long-term Interests in Associates and Joint Ventures 1 January 2019 MFRS 16: Leases 1 January 2019 IC Interpretation 23: Uncertainty over Income Tax Treatment 1 January 2021 MFRS 17: Insurance Contracts Deferred Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 52 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

55 2. Basis of preparation and summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) (a) Amendments to MFRS 140: Transfers of Investment Property The amendments clarify that when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management s intentions for the use of a property does not provide evidence of change in use. Entities can apply these amendments either retrospectively (if this is possible without the use of hindsight) or prospectively. Earlier application of the amendments is permitted and must be disclosed. The Group will apply these amendments when they become effective. However, since the Group s current practice is in line with the clarifications issued, the Group does not expect any effect on its consolidated financial statements. (b) MFRS 9: Financial Instruments MFRS 9 introduces new requirements for classification and measurement, impairment and hedge accounting. MFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. During 2017, the Group has performed an assessment of all aspects of MFRS 9. The assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Group in 2019 when the Group adopts MFRS 9. Based on the analysis of the Group s and the Company s financial assets and financial liabilities as at 31 January 2018 on the basis of facts and circumstances that exist at that date, the directors of the Company have assessed the impact of MFRS 9 to the Group s and the Company s financial statements as follows: (i) Classification and measurement The Group does not expect a significant impact on its statement of financial position or equity on applying the classification and measurement requirements of MFRS 9. It expects to continue measuring at fair value all financial assets currently held at fair value. Quoted equity shares currently held as available-for-sale (AFS) with gains and losses recorded in OCI will, instead be measured at fair value through profit or loss, which will increase volatility in recorded profit or loss. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

56 2. Basis of preparation and summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) (b) MFRS 9: Financial Instruments (contd.) (i) Classification and measurement (contd.) The equity shares in a non-listed company are intended to be held for the foreseeable future. The Group will apply the option to present fair value changes in OCI, and therefore, the application of MFRS 9 will not have a significant impact. (ii) Impairment The Group will apply the simplified approach and record lifetime expected losses on all trade and other receivables. The Group and the Company are currently finalising the quantitative effects of applying the standard on the financial statements of the Group and of the Company. (c) MFRS 15: Revenue from Contracts with Customers MFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. MFRS 15 will supersede the current revenue recognition guidance including MFRS 118 Revenue, MFRS 111 Construction Contracts and the related interpretations when it becomes effective. The core principle of MFRS 15 is that an entity should recognise revenue which depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under MFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. The Group and the Company plan to adopt the new standard on the required effective date using the full retrospective method. The directors have assessed the effects of applying the new standard on the Group s and the Company s financial statements and have identified the following areas that will be affected: 54 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

57 2. Basis of preparation and summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) (c) MFRS 15: Revenue from Contracts with Customers (contd.) (i) Property development The Group is in the business developing residential and commercial properties. The Group currently recognises revenue from the sale of development properties under construction using the completion method. Under MFRS 15, performance obligations for the sale of development properties are satisfied over time where the Group is restricted contractually from directing the properties for alternative use as they are being developed and has an enforceable right to payment for performance completed to date. Accordingly, the revenue currently recognised using the completed contract method will be adjusted upon adoption of MFRS 15 to recognised the revenue over time. (ii) Presentation and disclosure requirements The presentation and disclosure requirements in MFRS 15 are more detailed than the current standard. Many of the disclosure requirements in MFRS 15 are new and the Group has assessed that the impact of some of these disclosures will be significant. In particular, the Group expects that the notes to the financial statements will be expanded because of the disclosure of significant judgments made, i.e. when determining the transaction price of those contracts that include variable consideration, how the transaction price has been allocated to each performance obligation and the assumptions made to estimate the stand-alone selling prices of each performance obligation. MFRS 15 also requires revenue recognised to be disaggregated into categories that depict the nature, amount, timing and uncertainty of revenue and cash flows. The Group and the Company are currently finalising the quantitative effects of applying the standard on the financial statements of the Group and of the Company. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

58 2. Basis of preparation and summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) (d) MFRS 16: Leases MFRS 16 will replace MFRS 117 Leases, IC Interpretation 4 Determining whether an Arrangement contains a Lease, IC Interpretation 115 Operating Lease-Incentives and IC Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. MFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under MFRS 117. At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions), less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications. Classification of cash flows will also be affected as operating lease payments under MFRS 117 are presented as operating cash flows, whereas under MFRS 16, the lease payments will be split into a principal (which will be presented as financing cash flows) and an interest portion (which will be presented as operating cash flows). Lessor accounting under MFRS 16 is substantially the same as the accounting under MFRS 117. Lessors will continue to classify all leases using the same classification principle as in MFRS 117 and distinguish between two types of leases: operating and finance leases. MFRS 16 also requires lessees and lessors to make more extensive disclosures than under MFRS 117. MFRS 16 is effective for annual periods beginning on or after 1 January Early application is permitted but not before an entity applies MFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The Group plans to assess the potential effect of MFRS 16 in its financial statements in year QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

59 2. Basis of preparation and summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) (e) Annual Improvements to MFRS Standards Cycle The Annual Improvements to MFRS Standards Cycle include a number of amendments to various MFRSs, which are summarised below. These amendments do not have a significant impact on the Group s and the Company s financial statements. (i) Amendments to MFRS 3: Business Combinations The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation. An entity applies these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January Earlier application is permitted. (ii) Amendments to MFRS 112: Income Taxes The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events. An entity applies these amendments for annual reporting periods beginning on or after 1 January Earlier application is permitted. When an entity first applies these amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

60 2. Basis of preparation and summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) (e) Annual Improvements to MFRS Standards Cycle (contd.) (iii) Amendments to MFRS 123: Borrowing Costs The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. An entity applies these amendments to borrowing costs incurred on or after the beginning of the annual reporting periods beginning on or after 1 January Earlier application is permitted. (f) IC Interpretation 23: Uncertainty over Income Tax Treatments The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of MFRS 112 and does not apply to taxes or levies outside the scope of MFRS 112, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The interpretation specifically addresses the following: - whether an entity considers uncertain tax treatments separately; - the assumptions an entity makes about the estimation of tax treatments by taxation authorities; - how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and - how an entity considers changes in facts and circumstances. An entity must determine whether to consider each uncertain tax treatment separately or together with one or more uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. The Group and the Company will apply the interpretation from its effective date. 58 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

61 2. Basis of preparation and summary of significant accounting policies (contd.) 2.4 Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied for like transactions and events in similar circumstances. The Company controls an investee if and only if the Company has all the following: (a) (b) (c) Power over the investee (i.e existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its investment with the investee; and The ability to use its power over the investee to affect its returns. When the Company has less than a majority of the voting rights of an investee, the Company considers the following in assessing whether or not the Company s voting rights in an investee are sufficient to give it power over the investee: (a) (b) (c) (d) The size of the Company s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; Potential voting rights held by the Company, other vote holders or other parties; Rights arising from other contractual arrangements; and Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meetings. Subsidiaries are consolidated when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Losses within a subsidiary are attributed to the non-controlling interests even if that results in a deficit balance. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

62 2. Basis of preparation and summary of significant accounting policies (contd.) 2.4 Basis of consolidation (contd.) Changes in the Group s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. The resulting difference is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, a gain or loss calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets and liabilities of the subsidiary and any non-controlling interest, is recognised in profit or loss. The subsidiary s cumulative gain or loss which has been recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss or where applicable, transferred directly to retained earnings. The fair value of any investment retained in the former subsidiary at the date control is lost is regarded as the cost on initial recognition of the investment. Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. The Group elects on a transaction-by-transaction basis whether to measure the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets. Acquisition-related costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. 60 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

63 2. Basis of preparation and summary of significant accounting policies (contd.) 2.4 Basis of consolidation (contd.) Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with MFRS 139 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. All other contingent consideration shall be measured at fair value and such changes shall be recognised in profit or loss. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. The accounting policy for goodwill is set out in Note Subsidiaries A subsidiary is an entity over which the Group has all the following: (a) (b) (c) Power over the investee (i.e existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its investment with the investee; and The ability to use its power over the investee to affect its returns. In the Company s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit and loss. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

64 2. Basis of preparation and summary of significant accounting policies (contd.) 2.6 Foreign currency (a) Functional and presentation currency The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company s functional currency. (b) Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity. 62 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

65 2. Basis of preparation and summary of significant accounting policies (contd.) 2.6 Foreign currency (contd.) (c) Foreign operations On consolidation, the assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profit or loss. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date. 2.7 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, property, plant and equipment, except for freehold land, are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets at the following rates: Buildings 2% - 25% Quarry reserve 5% Plant, machinery and operating equipment 6.67% - 25% Motor vehicles 10% - 25% Office furniture and equipment 10% % Barges 10% Renovation 10% QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

66 2. Basis of preparation and summary of significant accounting policies (contd.) 2.7 Property, plant and equipment (contd.) Work-in-progress is not depreciated as these assets are not available for use. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised. 2.8 Non-current asset held for sale The Company classifies non-current assets held for sale if their carrying amounts will be recovered principally through sale rather than through continuing use. Such non-current assets held for sale is measured at the lower of their carrying amount and fair value less costs to sell or to sale. Costs to sale are the incremental costs directly attributable to the sale, excluding the finance cost and income tax expense. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sales in its present condition. Actions required to complete the sales should indicate that it is unlikely that significant changes to sales will be made or that the decision to sale will be withdrawn. Management must be committed to the sales expected within one year from the date of the classification. 2.9 Investment properties Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Such properties are initially recorded at cost, including transaction costs. Subsequent to initial recognition, freehold investment properties are stated at cost less impairment losses. Investment properties are derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in profit or loss. 64 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

67 2. Basis of preparation and summary of significant accounting policies (contd.) 2.10 Intangible assets Goodwill Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group s cash-generating units that are expected to benefit from the synergies of the combination. The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cashgenerating unit may be impaired, by comparing the carrying amount of the cashgenerating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cashgenerating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods. Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained Prepaid land lease payments Prepaid land lease payments were initially measured at cost. Following initial recognition, prepaid land lease payments were measured at cost less accumulated amortisation and accumulated impairment losses. The prepaid land lease payments were amortised over their lease terms. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

68 2. Basis of preparation and summary of significant accounting policies (contd.) 2.12 Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units ( CGU )). In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period. 66 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

69 2. Basis of preparation and summary of significant accounting policies (contd.) 2.13 Financial assets Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. (a) Financial assets at fair value through profit or loss The Group s and the Company s other financial assets at fair value through profit or loss include investment securities. Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income. Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

70 2. Basis of preparation and summary of significant accounting policies (contd.) 2.13 Financial assets (contd.) (b) Loans and receivables The Group s and the Company s loans and receivables include trade and other receivables and amount due from customers on contracts. Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current. (c) Held-to-maturity investments Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process. Held-to-maturity investments are classified as non-current assets, except for those having maturity within 12 months after the reporting date which are classified as current. There were no held-to-maturity investments during the reporting date. 68 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

71 2. Basis of preparation and summary of significant accounting policies (contd.) 2.13 Financial assets (contd.) (d) Available-for-sale financial assets The Group s and the Company s available-for-sale financial assets include investment securities. Available-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-forsale equity instrument are recognised in profit or loss when the Group and the Company s right to receive payment is established. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss. Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date. A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

72 2. Basis of preparation and summary of significant accounting policies (contd.) 2.14 Impairment of financial assets The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. (a) Trade and other receivables and other financial assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group s and the Company's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. 70 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

73 2. Basis of preparation and summary of significant accounting policies (contd.) 2.14 Impairment of financial assets (contd.) (b) Unquoted equity securities carried at cost If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group s cash management Construction contracts Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date bear to the estimated total contract costs. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. Contract costs are recognised as expense in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

74 2. Basis of preparation and summary of significant accounting policies (contd.) 2.16 Construction contracts (contd.) When the total of costs incurred on construction contracts plus recognised profits (less recognised losses) exceeds progress billings, the balance is classified as amount due from customers for contract work. When progress billings exceed costs incurred plus, recognised profits (less recognised losses), the balance is classified as amount due to customers for contract work Land held for property development and property development costs (a) Land held for property development Land held for property development consists of land where no development activities have been carried out or where development activities are not expected to be completed within the normal operating cycle. Such land is classified within non-current assets and is stated at lower of cost and net realisable value. Land held for property development is reclassified as property development costs at the point when development activities have commenced and where it can be demonstrated that the development activities can be completed within the normal operating cycle. (b) Property development costs Property development costs include properties acquired or being constructed for sale in the ordinary course of business, rather than to be held for the Group s own use, rental or capital appreciation. Properties held as inventories are measured at the lower of cost and net realisable value. The property development costs include: - Freehold and leasehold rights for land; - Amounts paid to contractors for construction; and - Borrowing costs, planning and design costs, costs of site preparation, professional fees for legal services, property transfer taxes, construction overheads and other related costs. 72 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

75 2. Basis of preparation and summary of significant accounting policies (contd.) 2.17 Land held for property development and property development costs (contd.) (b) Property development costs (contd.) 2.18 Inventories Net realisable value of property inventories is the estimated selling price in the ordinary course of the business, based on market prices at the end of the reporting period and discounted for the time value of money if material, less the estimated costs of completion and the estimated costs necessary to make the sale. The costs of development properties recognised in profit or loss on disposal are determined with reference to the specific costs incurred on the property sold and an allocation of any non-specific costs based on the relative size of the property sold. Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows: - Raw materials: purchase costs on a weighted average cost basis. - Consumables: purchase costs on a weighted average cost formula. - Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. These costs are assigned on a weighted average cost basis. - Properties held for sale: cost associated with the acquisition of land, direct costs and appropriate proportions of common costs. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

76 2. Basis of preparation and summary of significant accounting policies (contd.) 2.19 Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the ability takes place either: In the principal market for the asset or liability, or In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible to by the Group and the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair values in measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurements as a whole: Level 1 - Quoted prices in active markets for identical assets or liabilities; Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs). For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. 74 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

77 2. Basis of preparation and summary of significant accounting policies (contd.) 2.20 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. (a) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences. The Group and the Company have not designated any financial liabilities as at fair value through profit or loss. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

78 2. Basis of preparation and summary of significant accounting policies (contd.) 2.21 Financial liabilities (contd.) (b) Other financial liabilities The Group s and the Company's other financial liabilities include trade payables, other payables, amount due to related companies and loans and borrowings. Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group and the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due. Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs using the expected loss method. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation. 76 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

79 2. Basis of preparation and summary of significant accounting policies (contd.) 2.23 Borrowing costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds Employee benefits Defined contribution plans The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. The Malaysian companies in the Group make contributions to the Employees Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed Leases (a) As lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

80 2. Basis of preparation and summary of significant accounting policies (contd.) 2.25 Leases (contd.) (a) As lessee (contd.) Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. (b) As lessor 2.26 Revenue Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.26(f). Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. (a) Sale of goods Revenue from sale of goods is recognised upon the transfer of significant risks and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of consideration due, associated costs or the possible return of goods. 78 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

81 2. Basis of preparation and summary of significant accounting policies (contd.) 2.26 Revenue (contd.) (b) Construction and service contracts Revenue from construction and service contracts is accounted for by the stage of completion method as described in Note (c) Development properties (i) Sale of completed development property A development property is regarded as sold when the significant risks and rewards have been transferred to the buyer, which is normally on unconditional exchange of contracts. For conditional exchanges, sales are recognised only when all the significant conditions are satisfied. (ii) Sale of development property under construction Where development property is under construction and agreement has been reached to sell such property when construction is complete, the directors consider whether the contract comprises: - A contract to construct a property; or - A contract for the sale of completed property Where a contract is judged to be for the construction of a property, revenue is recognised using the percentage of completion method as construction progresses. The percentage of work completed is measured based on the costs incurred up until the end of the reporting periods as a proportion of total costs expected to be incurred. Where the contract is judged to be for the sale of a completed property, revenue is recognised when the significant risks and rewards of ownership of the real estate have been transferred to the buyer (i.e. revenue is recognised using the completed contract method). QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

82 2. Basis of preparation and summary of significant accounting policies (contd.) 2.26 Revenue (contd.) (d) Dividend income Dividend income is recognised when the Group s right to receive payment is established. (e) Interest income Interest income is recognised on an accrual basis using the effective interest method. (f) Rental income Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis Taxes (a) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. (b) Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. 80 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

83 2. Basis of preparation and summary of significant accounting policies (contd.) 2.27 Taxes (contd.) (b) Deferred tax (contd.) Deferred tax liabilities are recognised for all temporary differences, except: - where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and - in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: - where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and - in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

84 2. Basis of preparation and summary of significant accounting policies (contd.) 2.27 Taxes (contd.) (b) Deferred tax (contd.) The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. (c) Goods and Services Tax ( GST ) Revenues, expenses and assets are recognised net of the amount of GST except: - Where the GST incurred in a purchase of assets or services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and - Receivables and payables that are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of other current assets or liabilities in the statements of financial position. 82 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

85 2. Basis of preparation and summary of significant accounting policies (contd.) 2.28 Segment reporting For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 37, including the factors used to identify the reportable segments and the measurement basis of segment information Share capital and share issuance expenses An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group. Contingent liabilities and assets are not recognised in the statements of financial position of the Group. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

86 3. Significant accounting judgements and estimates The preparation of the Group s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. 3.1 Critical judgements made in applying accounting policies In the process of applying the Group s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements. (a) Classification of leases The Group has entered into lease arrangements for the leases of land. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a substantial portion of the economic life of the commercial property, that it does not retain the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. The lands are classified as prepaid land lease payments. (b) Property development under construction The Group has assessed and determined that the sales of property development under construction are not in substance construction contracts and do not lead to a continuous transfer of work in progress. The Group recognises the sale of property development under construction based on sale of completed contract method where revenue is recognised when the significant risks and rewards of ownership of the real estate have been transferred to the buyer. 84 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

87 3. Significant accounting judgements and estimates (contd.) 3.2 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Construction contracts The Group recognises contract revenue based on percentage of completion method. The stage of completion is measured by reference to either the costs incurred to-date to the estimated total cost or the completion of a physical proportion of work to-date. Significant judgement is required in determining the stage of completion, the extent of the costs incurred and the estimated total revenue (for contracts other than fixed contracts) and costs. Total contract revenue also includes an estimation of the variation works that are recoverable from the customers. In making the judgement, the Group relies on past experience and work of specialists. The carrying amounts of assets and liabilities of the Group arising from construction activities are disclosed in Note 23. (b) Impairment of receivables The Group and the Company assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group s receivable at the reporting date is disclosed in Note 22. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

88 4. Revenue Group Company RM 000 RM 000 RM 000 RM 000 Construction contracts 284 4, Property development - 24, Manufacturing and premix 98, , Trading 4, Quarry operations 1, , , ====== ====== ===== ===== 5. Cost of sales Cost of construction 263 2, Cost of property development (Note 15) - 19, Cost of inventories sold 95,500 95, , , ====== ====== ===== ===== 6. Other income Interest income Rental income 1,436 2, Gain on disposal of property, plant and equipment Reversal of impairment loss on receivables 1, Bad debts recovered Dividend income Sundry income Fair value gain on other investments Realised foreign currency exchange gain Unrealised foreign exchange gain Gain on disposal of other investments ,365 3, ====== ====== ===== ===== 86 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

89 7. Finance costs Interest expense on: Group Company RM 000 RM 000 RM 000 RM 000 Bank borrowings 4,650 4, Hire purchase liabilities ,877 4, Add: Bank charges ,020 4, ====== ====== ===== ===== 8. Loss before tax The following amounts have been included in arriving at loss before tax: Group Company RM 000 RM 000 RM 000 RM 000 Amortisation of prepaid land lease payments (Note 14) Amortisation of properties held for sale Auditors remuneration: - current year under provision in prior years Depreciation of property, plant and equipment (Note 13) 6,530 5, Employee benefits expense (Note 9) 13,957 14,040 1,164 1,122 Impairment loss on goodwill (Note 17) Interest expense (Note 7) 4,877 4, Inventories written down (Note 21) Impairment loss on trade receivables (Note 22) 531 1, Impairment loss on other receivables (Note 22) Gain on disposal of other investments (285) (275) (285) (275) QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

90 8. Loss before tax (contd.) The following amounts have been included in arriving at loss before tax: (contd.) Group Company RM 000 RM 000 RM 000 RM 000 Property, plant and equipment written off Minimum operating lease payments: - equipment factory office Non-executive directors remuneration (Note 10) Realised foreign exchange (gain)/loss (192) Reversal of impairment loss on trade receivables (Note 22) (583) (1) - - Reversal of impairment loss on other receivables (Note 22) (560) (6) Reversal of impairment loss on inventories (195) Net unrealised foreign exchange loss/(gain) 41 (87) - - Net fair value loss/(gain) on investment securities 273 (250) 273 (250) ===== ===== ===== ===== 9. Employee benefits expense Group Company RM 000 RM 000 RM 000 RM 000 Salaries, allowances and bonus 12,189 12,307 1, Contributions to defined contribution plan 1,452 1, Social security contributions Other benefits ,957 14,040 1,164 1,122 ===== ===== ==== ===== Included in employee benefits expense of the Group and of the Company are Executive Directors remuneration (excluding benefits-in-kind) amounting to RM552,400 (2017: RM557,600) and RM281,629 (2017: RM280,000) respectively, as further disclosed in Note QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

91 10. Directors remuneration The remuneration of the directors of the Company during the financial year are set out below: Executive: Group Company RM 000 RM 000 RM 000 RM 000 Salaries and other emoluments Fees Contributions to defined contribution plans Total executive directors remuneration (excluding benefits-in-kind) Estimated money value of benefits-in-kind Total executive directors remuneration (including benefits-in-kind) Non-executive: Fees Other emoluments Total non-executive directors remuneration (Note 8) Total directors remuneration (Note 34) ==== ==== ==== ==== The Directors remuneration in the current financial year represents remuneration for the Directors of the Company and its subsidiaries to comply with the requirements of Companies Act 2016 (as disclosed in the Directors Report). The comparative figures have not been restated to include the remuneration for Directors in the subsidiaries of the Company. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

92 11. Income tax expense Group Company RM 000 RM 000 RM 000 RM 000 Income tax: - Current year income tax Over provision in respect of previous years (674) (670) - - (674) (106) - - Deferred tax (Note 32): - Origination and reversal of temporary differences (279) Under provision in respect of previous years (243) Income tax expense recognised in profit or loss (917) ===== ===== ==== ==== Current income tax is calculated at the Malaysia statutory tax rate of 24% (2017: 24%) of the estimated assessable profit for the year. 90 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

93 11. Income tax expense (contd.) A reconciliation of income tax expense applicable to loss before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows: Group RM 000 RM 000 Loss before tax 15,294 8,511 ===== ===== Tax at Malaysian statutory tax rate of 24% (2017: 24%) (3,670) (2,043) Income not subject to tax (3) (2) Expenses not deductible for tax purposes 1,632 2,944 Deferred tax assets not recognised 1, Utilisation of previously unrecognised tax losses - (75) Utilisation of previously unrecognised unabsorbed capital allowances (156) (257) Utilisation of previously unrecognised other deductible temporary differences - (653) Over provision of income tax in respect of previous years (674) (670) Under provision of deferred tax in respect of previous years Income tax expense recognised in profit or loss (917) 268 ===== ===== Company Loss before tax 2,418 2,227 ===== ===== Tax at Malaysian statutory tax rate of 24% (2017: 24%) (580) (534) Expenses not deductible for tax purposes Deferred tax assets not recognised Income tax expense recognised in profit or loss - - ===== ===== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

94 12. Earnings per share ( EPS ) (a) Basic Basic earnings per share amounts are calculated by dividing loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares in issue during the financial year. (b) Diluted Diluted EPS amounts are calculated by dividing the loss attributable to ordinary equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The Group did not issue any diluted financial instruments as at the reporting date and therefore, diluted loss per share is presented as equal to basic loss per share Loss attributable to owner of the parent (RM 000) (13,773) (8,267) ===== ===== Weighted average number of ordinary shares in issue ( 000) 57,962 57,962 ===== ===== Basic and diluted loss per share (sen) (23.76) (14.26) ===== ===== 92 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

95 13. Property, plant and equipment Group Plant, machinery, Office operating furniture equipment Motor and Work-in- Buildings Renovation and barge vehicles equipment progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM Cost At 1 February , ,116 24,514 2, ,232 Additions ,333 1, ,821 Disposals (88) - - (88) Written off (93) - (1,350) - (97) - (1,540) Exchange difference - (6) (39) (10) (2) - (57) Reclassification (39) - Reclassified from non-current asset held for sale (Note 26) - - 1, ,663 At 31 January , ,762 26,386 2, ,031 ===== ===== ===== ===== ==== ==== ====== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

96 13. Property, plant and equipment (contd.) Group (contd.) Plant, machinery, Office operating furniture equipment Motor and Work-in- Buildings Renovation and barge vehicles equipment progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM Accumulated depreciation and impairment At 1 February , ,083 16,970 2,095-76,303 Depreciation charge for the year (Note 8) ,960 1, ,530 Disposals (87) - - (87) Written off (90) - (1,311) - (75) - (1,476) Exchange differences - (4) (17) (10) (2) - (33) At 31 January , ,715 18,420 2,182-81,237 ===== ===== ===== ===== ==== ===== ===== Net carrying amount At 31 January , ,047 7, ,794 ===== ===== ===== ===== ==== ===== ===== 94 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

97 13. Property, plant and equipment (contd.) Group Plant, machinery, Office operating furniture Quarry equipment Motor and Work-in- Buildings Renovation reserve and barge vehicles equipment progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM Cost At 1 February , ,161 23,551 2, ,813 Additions ,544 1, ,004 Disposals (1) - - (353) - - (354) Written off (43) - (3,041) (140) (84) - (3,308) Exchange difference Reclassification (319) - (368) - At 31 January , ,116 24,514 2, ,232 ===== ===== ===== ===== ==== ==== ====== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

98 13. Property, plant and equipment (contd.) Group (contd.) Plant, machinery, Office operating furniture Quarry equipment Motor and Work-in- Buildings Renovation reserve and barge vehicles equipment progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM Accumulated depreciation and impairment At 1 February , ,155 16,071 1,989-74,604 Depreciation charge for the year: Recognised in profit or loss (Note 8) ,833 1, ,245 Disposals (352) - - (352) Written off (28) - (2,979) (137) (83) - (3,227) Exchange differences Transfer (1) - 59 (58) At 31 January , ,083 16,970 2,095-76,303 ===== ===== ===== ===== ==== ===== ===== Net carrying amount At 31 January , ,033 7, ,929 ===== ===== ===== ===== ==== ===== ===== 96 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

99 13. Property, plant and equipment (contd.) Company Office Furniture Plant Motor and Office and vehicles equipment renovation machineries Total RM 000 RM 000 RM 000 RM 000 RM Cost At 1 February 2017 and 31 January , ,250 4,638 ==== ==== ==== ==== ===== Accumulated depreciation At 1 February , ,645 3,127 Depreciation charge for the year (Note 8) At 31 January , ,870 3,565 ==== ==== ==== ==== ===== Net carrying amount At 31 January ,073 ==== ==== ==== ==== ==== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

100 13. Property, plant and equipment (contd.) Company (contd.) Office Furniture Plant Motor and Office and vehicles equipment renovation machineries Total RM 000 RM 000 RM 000 RM 000 RM Cost At 1 February , ,250 4,835 Additions Disposal (199) (199) At 31 January , ,250 4,638 ==== ==== ==== ==== ===== Accumulated depreciation At 1 February , ,420 2,886 Depreciation charge for the year (Note 8) Disposal (199) (199) At 31 January , ,645 3,127 ==== ==== ==== ==== ===== Net carrying amount At 31 January ,511 ==== ==== ==== ==== ==== (a) During the financial year, the Group acquired property, plant and equipment with an aggregate cost of RM3,820,563 (2017: RM10,003,731) of which RM1,890,000 (2017: RM1,475,000) respectively were acquired by means of hire purchase. The carrying amount of property, plant and equipment of the Group held under hire purchase arrangements at the reporting date were RM6,096,329 (2017: RM6,034,743). Property, plant and equipment are pledged as security for the related hire purchase liabilities (Note 28). 98 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

101 14. Prepaid land lease payments Group Company RM 000 RM 000 RM 000 RM 000 At February 2017/ ,666 13,985 2,819 2,873 Amortisation for the year (Note 8) (320) (319) (54) (54) At 31 January 2018/ ,346 13,666 2,765 2,819 ===== ===== ==== ==== (i) (ii) The title to a parcel of leasehold land of the Group has yet to be issued by the relevant authority. Certain parcels of leasehold land of the Group and of the Company have been pledged as security for borrowings as disclosed in Note Land held for property development and property development costs A summary of movement in land held for property development and property development cost is set out below. Land held for property development Group RM 000 RM 000 At 1 February 2017/ ,321 36,319 Additions - 2 At 31 January 2018/ ,321 36,321 ===== ===== Property development cost At 1 February 2017/ ,743 35,563 Construction cost incurred 5,441 5,310 Cumulative cost recognised in profit or loss (Note 5) - (19,130) Transfer to inventories (4,637) - At 31 January 2018/ ,547 21,743 ===== ===== Certain parcels of vacant land and shophouses of the Group have been pledged as security for borrowings as disclosed in Note 27. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

102 16. Investment properties Cost Group RM 000 RM 000 At 1 February 2017/2016 and 31 January 2018/ ,088 13,088 ===== ===== The Group s investment properties consist of freehold land in Pontian, Johor. The fair value of the investment properties as at 31 January 2018 is approximately RM45 million (2017: RM45 million). The fair values of the properties are based on valuation of similar properties performed by an accredited independent valuer. Fair value hierarchy disclosures for investment properties are in Note 35. Certain parcels of vacant lands of the Group have been pledged as security for borrowings as disclosed in Note Goodwill on consolidation Group RM 000 RM 000 At 1 February 2017/ Impairment loss on goodwill (Note 8) (799) (171) At 31 January 2018/ ===== ===== Goodwill arising from business combinations has been allocated to cash-generating units ( CGU ) for impairment testing. The carrying amount of goodwill allocated to the Group s GCU is as follows: Group RM 000 RM 000 Quarry Operations ===== ===== 100 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

103 17. Goodwill on consolidation (contd.) Key assumptions used in value-in-use calculations in respect of the previous financial year were: The recoverable amount of a CGU was determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a two-year period. The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill: (a) Budgeted gross margin The budgeted gross margin was determined based on value achieved in the immediate year before the beginning of the budget period. The budgeted gross margin applied to cash flow projections was 18.28%. (b) Discount rates Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The pre-tax discount rate applied to cash flow projections was 12%. (c) Terminal value Terminal value was the net present value of all of the forecast free cash flows that were expected to be generated by the CGU after the explicit forecast period. There was no terminal value for Quarry Operations as the licence required for the Quarry Operations will expire in Investment in subsidiaries Company RM 000 RM 000 Unquoted shares at cost At 1 February 2017/ ,528 79,027 Additions 31,499 7,501 At 31 January 2018/ ,027 86,528 ====== ====== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

104 18. Investment in subsidiaries (contd.) Details of the subsidiaries are as follows: Proportion of Country of ownership interest Name of subsidiaries incorporation Principal activities % % Held by the Company: Quality Concrete Malaysia Manufacture and sale of Sdn. Bhd. ready-mixed concrete, sale of concrete products and trading of goods Polyflow Pipes Sdn. Bhd. Malaysia Manufacture and sale of polyethylene pipes Kutex Sdn. Bhd. Malaysia Manufacture and sale of woven polypropylene bags and polyethylene liners Hong Wei Holdings Malaysia Property development and Sdn. Bhd. construction Lee Ling Timber Products Malaysia Sawmilling and manufacture Sendirian Berhad of downstream timber products Agrowell Sdn. Bhd. Malaysia Quarry operations and sale of aggregates and related products Polyflow (B) Sdn. Bhd.* Brunei Manufacture and sale of Darussalam polyethylene pipes Seri Bumijaya Sdn. Bhd. Malaysia Trading in building products Enrich Fortress Sdn. Bhd. Malaysia Dormant QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

105 18. Investment in subsidiaries (contd.) Details of the subsidiaries are as follows: Proportion of Country of ownership interest Name of subsidiaries incorporation Principal activities % % Held by the Company: (contd.) Casa Usaha Sdn. Bhd. Malaysia Dormant QC Construction & Engineering Sdn. Bhd. Malaysia Construction Quality Concrete Malaysia Dormant (Mukah) Sdn. Bhd. EXL Pipe (Borneo) Malaysia Manufacture and sale of Sdn. Bhd. multilayer PVC pipes * Audited by firms other than Ernst & Young QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

106 18. Investment in subsidiaries (contd.) (a) The Group s subsidiaries that have material non-controlling interest ( NCI ) are set out below. The summarised financial information presented below is the amount before inter-company elimination. (i) Summarised statements of financial position Polyflow (B) Sdn. Bhd. EXL Pipes (Borneo) Sdn. Bhd RM 000 RM 000 RM 000 RM 000 Non-current assets ,358 4,504 Current assets 1,408 1,701 1, Total assets 2,377 2,566 6,170 4,630 Current liabilities (1,290) (1,182) (1,448) (5,036) Non-current liabilities - - (1,725) - Total Liabilities (1,290) (1,182) (3,173) (5,036) Net assets/(liabilities) 1,087 1,384 2,997 (406) ======= ======= ======= ======= (i) Summarised statements of profit or loss and other comprehensive income Polyflow (B) Sdn. Bhd. EXL Pipes (Borneo) Sdn. Bhd RM 000 RM 000 RM 000 RM 000 Revenue 1,339 1, Net loss (276) (352) (1,596) (406) ======= ======= ======= ======= 104 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

107 18. Investment in subsidiaries (contd.) (a) The Group s subsidiaries that have material non-controlling interest ( NCI ) are set out below. The summarised financial information presented below is the amount before inter-company elimination. (contd.) (iii) Summarised statements of cash flows Polyflow (B) Sdn. Bhd. EXL Pipes (Borneo) Sdn. Bhd RM RM RM RM Net cash generated from/(used in) operating activities (7,368) 4,657 Net cash used in investing activities - - (351) (4,652) Net cash used in financing activities - - 7, Effect of exchange rate 48 (19) - - Cash and cash equivalents of the beginning of the year (131) (96) 5 - Cash and cash equivalent at the end of the year 33 (131) ======= ======= ======= ======= QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

108 19. Investment in an associate Group RM RM Unquoted shares at cost Less: Accumulated impairment loss (49) (49) - - ====== ====== Details of the associate are as follows: Proportion of Country of ownership interest Name incorporation Principal activity % % Held by the Group: Konsortium Wira Jaya Malaysia Dormant Sdn. Bhd. ( KWJ ) The Group has not recognised losses relating to KWJ where its share of losses exceeds the Group s interest in this associate. The Group s cumulative share of unrecognised losses at the reporting date was RM5,006 (2017: RM3,302), of which is also the share of the current year s losses. The Group has no obligation in respect of these losses. 20. Other investments Group Company RM 000 RM 000 RM 000 RM 000 Non-current Financial assets at fair value through profit or loss Equity instruments (quoted in Malaysia) 45 1,144-1, QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

109 20. Other investments (contd.) Non-current (contd.) Group Company RM 000 RM 000 RM 000 RM 000 Available-for-sale Equity instruments (unquoted) Less: Accumulated impairment loss (223) (223) ,581-1,100 Current Available-for-sale Investment in money market fund Total investments 880 1, ,170 ===== ===== ===== ===== Market value: Equity instruments (quoted in Malaysia) 45 1,144-1,100 ===== ===== ===== ===== 21. Inventories Cost Group RM 000 RM 000 Raw materials 5,739 6,239 Sawn timber 3,250 3,498 Semi-finished and finished goods 12,421 15,669 Spare parts and consumables Properties held for sale 8,259 3,622 Goods-in-transit 1,652 - Others ,848 29,395 ====== ====== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

110 21. Inventories (contd.) A write down of inventories of RM377,439 (2017: RM93,547) was recognised as an expense for inventories carried at net realisable value. 22. Trade and other receivables Current Group Company RM 000 RM 000 RM 000 RM 000 Trade receivables Third parties 45,844 54, Amount due from related parties 2,785 6, ,629 61, Less: Allowance for impairment (13,253) (13,520) (720) (720) Trade receivables, net 35,376 47, Other receivables Amount due from subsidiary companies ,577 62,764 Deposits paid to related parties 1,049 1, Sundry receivables 14,112 7,935 2,974 2,500 Less: Allowance for impairment (6,110) (6,312) (357) (725) 8,002 1,623 2,617 1,775 Advance to subcontractors 167 2, Deposits ,684 6,789 27,257 64,602 Total trade and other receivables 45,060 54,498 27,288 64,640 Add: Cash and bank balances (Note 25) 14,644 14, Total loans and receivables 59,704 69,421 27,364 64,703 ===== ====== ===== ===== 108 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

111 22. Trade and other receivables (contd.) (a) Credit risk The Group s primary exposure to credit risk arises through its trade receivables. The Group s trading terms with its customers are mainly on credit. The credit period is generally for a period of 14 to 120 days (2017: 14 to 120 days). Other credit terms are assessed and approved on a case-by-case basis. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables and has a credit limit. The Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. (b) Trade receivables Included in trade receivables of the Group is an amount of RM2,785,087 (2017: RM6,823,546) due from companies in which certain directors of the Group have substantial financial interest. The amount is unsecured, non-interest bearing and has credit period of 30 to 60 days. (c) Deposits paid to related parties The amount is deposits paid to a supplier of logs and sawn timber, which is a director related company. (d) Sundry receivables Included in sundry receivables of the Group is an amount of RM1,091,718 (2017: RM20,839) due from companies in which certain directors of the Group have substantial financial interest. The amount is unsecured, non-interest bearing and is repayable on demand. Further details on related party transactions are disclosed in Note 34. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

112 22. Trade and other receivables (contd.) Ageing analysis of trade receivables The ageing analysis of the Company s total trade receivables is as follows: Group Company RM 000 RM 000 RM 000 RM 000 Neither past due nor impaired 22,440 28, to 30 days past due not impaired 164 3, to 60 days past due not impaired 4 1, to 90 days past due not impaired More than 90 days past due not Impaired 498 8, , ,110 42, Impaired 25,519 18, ,629 61, ===== ===== ==== ==== Trade receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group and the Company. In the previous financial year, the Group s trade receivables that are past due whose terms have been renegotiated amounted to RM5,505,540. The trade receivables would have been past due or impaired as at the reporting date if the terms had not been renegotiated during the financial year. Receivables that are past due but not impaired The Group and the Company has trade receivables amounting to RM670,114 (2017: RM14,663,035) and RM26,712 (2017: RM34,344) respectively that are past due at the reporting date but not impaired. 110 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

113 22. Trade and other receivables (contd.) Trade receivables that are impaired The Group s and Company s trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows: Individually Collectively impaired impaired Total RM 000 RM 000 RM 000 Group 2018 Trade receivables 25,519-25,519 Less: Allowance for impairment (13,253) - (13,253) Trade receivables, net 12,266-12,266 ======== ======== ======== 2017 Trade receivables 16,352 2,116 18,468 Less: Allowance for impairment (12,888) (632) (13,520) Trade receivables, net 3,464 1,484 4,948 ======== ======== ======== Company 2018 Trade receivables Less: Allowance for impairment (720) - (720) Trade receivables, net ======== ======== ======== 2017 Trade receivables Less: Allowance for impairment (720) - (720) Trade receivables, net ======== ======== ======== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

114 22. Trade and other receivables (contd.) Trade receivables that are impaired (contd.) Movement in allowance accounts: Group Company RM 000 RM 000 RM 000 RM 000 At 1 February 13,520 12, Charge for the year (Note 8) 531 1, Reversal of impairment (Note 8) (583) (1) - - Write off (187) (21) - - Bad debt recovered (28) (12) - - Exchange difference At 31 January 13,253 13, ===== ===== ==== ==== Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. Other receivables that are impaired The Group and the Company s other receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Other receivables - nominal amounts 10,918 6, Less: Allowance for impairment (6,110) (6,312) (357) (725) Other receivables, net 4, ==== ==== ==== ==== Movement in allowance accounts At 1 February 6,312 6, Chargeable for the year (Note 8) Reversal of impairment (Note 8) (560) (6) (368) - Write off (11) At 31 January 6,110 6, ==== ==== ==== ==== 112 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

115 23. Amount due from customers for contracts work Group RM 000 RM 000 Construction contract costs incurred to date 340, ,896 Attributable profits 15,067 15, , ,947 Less: Progress billings (352,079) (346,550) Amount due from customers for contracts work 3,152 8,397 ====== ====== 24. Other assets Group RM 000 RM 000 Properties held for sale At 1 February 2017/ Addition 1,327 - Amortisation for the year (Note 8) (13) - Disposal - (363) At 31 January 2018/2017 1, ===== ===== Included in the properties held for sale of the Group is an amount of RM92,423 (2017: RM92,423) in which a third party has interest. 25. Cash and bank balances Group Company RM 000 RM 000 RM 000 RM 000 Cash on hand and at bank 5,983 8, Deposit with a licenced bank 8,661 6, Cash and bank balances 14,644 14, ===== ===== ==== ==== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

116 25. Cash and bank balances (contd.) The weighted average effective interest rate (WAEIR) of short term deposits with licensed banks of the Group at the reporting date is per annum 3.16% (2017: 3.16%). The maturities of the Group s deposits at the reporting date are between 30 days to 1 year (2017: 30 days to 1 year). For the purpose of the statements of cash flows, cash and cash equivalents comprise the following as at the reporting date: Group Company RM 000 RM 000 RM 000 RM 000 Cash and bank balances (Note 22) 14,644 14, Bank overdrafts (Note 27) (13,677) (14,617) (5,673) (5,040) Cash deposits pledged (8,360) (6,338) - - Short term deposits with maturity more than 3 months (300) (300) - - Total cash and cash equivalents (7,693) (6,332) (5,597) (4,977) ===== ==== ==== ==== Cash deposits of a subsidiary have been pledged as security for borrowings as disclosed in Note Non-current asset held for sale Plant and machinery Group RM 000 RM 000 At 1 February 2017/2016 1,663 1,663 Less: Reclassified to property, plant and equipment (Note 13) (1,663) - At 31 January 2018/2017-1,663 ====== ====== 114 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

117 27. Loans and borrowings Current Group Company RM 000 RM 000 RM 000 RM 000 Secured: Bank overdrafts 11,659 11,868 5,673 5,040 Bankers acceptances 8,542 6, Term loans 3,107 1, Hire purchase liabilities (Note 28) 1,237 1, Revolving credit 27,000 29,700 15,000 20,000 51,545 51,336 20,673 25,040 Unsecured: Bank overdrafts 2,018 2, Bankers acceptances 17,391 22, ,409 25, ,954 76,483 20,673 25,040 ===== ===== ===== ===== Non-current Secured: Term loans 6,098 6, Hire purchase liabilities (Note 28) 2,876 2, ,974 9, ===== ===== ===== ===== Total loans and borrowings Bank overdrafts (Note 25) 13,677 14,617 5,673 5,040 Term loans 9,205 8, Hire purchase liabilities (Note 28) 4,113 3, Bankers acceptances 25,933 29, Revolving credit 27,000 29,700 15,000 20,000 79,928 85,492 20,673 25,040 ===== ===== ===== ===== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

118 27. Loans and borrowings (contd.) The remaining maturities of the loans and borrowings were as follows: Group Company RM 000 RM 000 RM 000 RM 000 On demand or within 1 year 70,954 76,483 20,673 25,040 More than one or less than two years 6,663 7, More than two or less than five years 2,311 1, ,928 85,492 20,673 25,040 ===== ===== ===== ===== Bank overdrafts Bank overdrafts of the Company are denominated in RM which are secured by a third party first legal charge over 6 parcels of vacant land as disclosed in Note 16. Bank overdrafts of a certain subsidiary are denominated in RM which are secured by a third party first legal charge over a property as disclosed in Note 14, a first party first and second legal charge over 2 parcels of vacant land as disclosed in Note 15, a first party, first legal charge over 10 units of shophouses as disclosed in Note 15 and a corporate guarantee from the Company. Bankers acceptances Bankers acceptances of a certain subsidiary are denominated in RM and secured by a corporate guarantee from the Company. Revolving credit Revolving credit of the Company is secured by a third party first legal charge over 6 parcels of vacant land as disclosed in Note 16. Revolving credit of a subsidiary is secured by first party first and second legal charge over one parcel of vacant land as disclosed in Note 15, a first party first legal charge over 5 parcels of vacant land as disclosed in Note 15, cash deposits pledged as disclosed in Note 25 and corporate guarantees from the Company. 116 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

119 27. Loans and borrowings (contd.) Term loans Term loan of a certain subsidiary is secured by a first party first and second legal charge over 2 parcels of vacant land as disclosed in Note 15, a first party, first legal charge over 10 units of shophouses as disclosed in Note 15 and a corporate guarantee of the Company. This loan is to be repaid over a period of 10 years inclusive of the first three years grace period of interest servicing. Other information on financial risks of loans and borrowings are disclosed in Note Hire purchase liabilities Group Company RM 000 RM 000 RM 000 RM 000 Future minimum lease payments: Not later than 1 year 1,461 1, Later than 1 year and not later than 2 years 1,377 1, Later than 2 years and not later than 5 years 1,750 1, Total future minimum lease payments 4,588 3, Less: Future finance charges (475) (425) - - Present value of hire purchase liabilities (Note 27) 4,113 3, ===== ===== ===== ===== Analysis of present value of hire purchase liabilities: Not later than 1 year 1,237 1, Later than 1 year and not later than 2 years 1, Later than 2 years and not later than 5 years 1,642 1, ,113 3, Less: Amount due within 12 months (Note 27) (1,237) (1,019) - - Amount due after 12 months (Note 27) 2,876 2, ===== ===== ===== ===== Other information on financial risks of hire purchase liabilities are disclosed in Note 36. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

120 29. Trade and other payables Current Group Company RM 000 RM 000 RM 000 RM 000 Trade payables Third parties 11,572 12, Retention sum - third parties 1,103 1, Retention sum - related parties - 1, Amount due to related parties 5,522 3, ,197 18, Other payables Accruals 2, Amount due to directors Amount due to subsidiary companies - - 3,353 4,054 Sundry payables 4,319 6, Deposits ,246 8,251 3,598 4,290 Deferred revenue 11,243 2, Total trade and other payables 36,686 29,544 3,598 4,290 Add: Loans and borrowings (Note 27) 79,928 85,492 20,673 25,040 Less: Deferred revenue (11,243) (2,466) - - Total financial liabilities carried at amortised cost 105, ,570 24,271 29,330 ====== ====== ====== ====== (a) Trade payables Trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from 30 to 120 days (2017: 30 to 120 days). Included in trade payables of the Group is an amount of RM5,522,163 (2017: RM4,784,052) due to companies in which certain directors of the Group and the Company have substantial financial interest. The amount is unsecured, non-interest bearing and has no fixed term of repayment. 118 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

121 29. Trade and other payables (contd.) (b) Other payables Included in sundry payables of the Group is an amount of RM525,682 (2017: RM666,511) due to companies in which certain directors of the Group and the Company have substantial financial interest. The amount is unsecured, noninterest bearing and has no fixed term of repayment. Other information on financial risk of the other payables are disclosed in Note 36. (c) Amount due to subsidiary companies These amounts are unsecured, non-interest bearing and are repayable on demand. (d) Deferred revenue Deferred revenue relates to advance payment received from purchasers of development properties. 30. Share capital and share premium Group/Company Number of ordinary shares Amount Share Total share Share capital capital capital (Issued and (Issued and Share and share fully paid) fully paid) premium premium 000 RM 000 RM 000 RM 000 At 1 February 2017 and 31 January ,962 82,956-82,956 ===== ===== ===== ===== At 1 February ,962 57,962 24,994 82,956 Transition to no-par value regime on 31 January ,994 (24,994) - At 31 January ,962 82,956-82,956 ===== ===== ===== ===== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

122 30. Share capital and share premium (contd.) The new Companies Act 2016 (the Act ), which came into operation on 31 January 2017, abolished the concept of authorised share capital and par value of share capital. Consequently, the amounts standing to the credit of the share premium account and capital redemption reserves become part of the Company s share capital pursuant to the transitional provisions set out in Section 618(2) of the Act. Notwithstanding this provision, the Company may within 24 months from the commencement of the Act, use the amount standing to the credit of its share premium account of RM24,994,279 for purposes as set out in Sections 618(3) of the Act. There is no impact on the numbers of ordinary shares in issue or the relative entitlement of any of the members as a result of this transition. 31. Other reserves Group Foreign exchange reserve RM 000 RM 000 At 1 February 2017/ Foreign currency translation (22) 62 At 31 January 2018/ ==== ==== Foreign exchange reserve The foreign exchange reserve is used to record exchange differences arising from the translation of the financial statements of a foreign subsidiary whose functional currency is different from that of the Group s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group s net investment in foreign subsidiary, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign subsidiary. 32. Deferred tax (asset)/liabilities Group Company RM 000 RM 000 RM 000 RM 000 At beginning of year 1,548 1, Recognised in statements of profit or loss and other comprehensive income (Note 11) (243) At end of year 1,305 1, ==== ==== ==== ==== 120 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

123 32. Deferred tax (asset)/liabilities (contd.) Presented after appropriate offsetting as follows: Group Company RM 000 RM 000 RM 000 RM 000 Deferred tax assets (712) (128) - - Deferred tax liabilities 2,017 1, ,305 1, ==== ==== ==== ==== Deferred tax assets and liabilities prior to offsetting are summarised as follows: Group Company RM 000 RM 000 RM 000 RM 000 Deferred tax assets (2,272) (2,110) - - Deferred tax liabilities 3,577 3, ,305 1, ==== ==== ==== ==== Deferred tax assets of the Group Unutilised business losses and Impairment unabsorbed loss on capital receivables allowances Others Total RM 000 RM 000 RM 000 RM 000 At 1 February 2017 (285) (1,588) (237) (2,110) Recognised in statements of profit or loss and other comprehensive income (64) 400 (498) (162) At 31 January 2018 (349) (1,188) (735) (2,272) ==== ==== ==== ==== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

124 32. Deferred tax (asset)/liabilities (contd.) Deferred tax assets of the Group (contd.) Unutilised business losses and Impairment unabsorbed loss on capital receivables allowances Others Total RM 000 RM 000 RM 000 RM 000 At 1 February 2016 (285) (1,816) (97) (2,198) Recognised in statements of profit or loss and other comprehensive income (140) 88 At 31 January 2017 (285) (1,588) (237) (2,110) ==== ==== ==== ==== Deferred tax liabilities of the Group Property plant and equipment RM 000 At 1 February ,658 Recognised in statements of profit or loss and other comprehensive income (81) At 31 January ,577 ===== At 1 February ,372 Recognised in statements of profit or loss and other comprehensive income 286 At 31 January ,658 ===== 122 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

125 32. Deferred tax (asset)/liabilities (contd.) Deferred tax assets have not been recognised in respect of the following items: Group Company RM 000 RM 000 RM 000 RM 000 Unutilised tax losses 5,051 1,679 1,272 1,205 Unabsorbed capital allowances 6,713 2, Other deductible temporary differences 2,551 2, ,315 6,972 1,272 1,205 ===== ===== ===== ===== As at 31 January 2018 and 2017, the deferred tax assets are not recognised as it is not probable that future taxable profit will be available against which the deferred tax assets can be utilised. The availability of the deferred tax assets for offsetting against future profits of the Group is subject to the guidelines issued by the tax authority under the Income Tax Act, Commitments Operating lease commitments - The Group as lessee The Group has entered into non-cancellable operating lease arrangements for the use of buildings. These leases have an average life of 3 years with no renewal or purchase option included in the contracts. The contracts include fixed rentals for an average of 3 years. There are no restrictions placed upon by the Group by entering into these leases. The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the reporting date but not recognised as liabilities and the total of future aggregate minimum sublease receipts expected to be received under non-cancellable subleases, are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Not later than 1 year ==== ==== ==== ==== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

126 33. Commitments (contd.) The lease payments recognised in profit and loss during the financial year are disclosed in Note 8. Capital commitments Group RM 000 RM 000 Approved and contracted for - Motor vehicles - 1,896 - Plant and machineries ,172 ====== ====== 34. Related party disclosures In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year, in the normal course of business and transacted on terms agreed by both parties: (a) Sale and purchase of goods and services (i) Transactions with subsidiaries: Income Company RM 000 RM 000 Rental income ==== ==== Information regarding outstanding balances with subsidiaries as at 31 January 2018 is disclosed in Note QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

127 34. Related party disclosures (contd.) (a) Sale and purchase of goods and services (contd.) (ii) Transactions with companies in which certain Directors of the Company and/or persons connected to them have a substantial financial interest and/or are directors: Group Company RM 000 RM 000 RM 000 RM 000 Income Sale of concrete, cement, steel bars, R.C. piles, sawn timber and stones to: - Lee Ling Construction & Development Sdn. Bhd. (i) (6,734) (13,746) - - Sale of pipes/fittings to: - Lee Ling Construction & Development Sdn. Bhd. (i) (48) (60) - - Rental income from: - Lee Ling Construction & Development Sdn. Bhd. (i) - - (43) (36) Expenditure Construction works from: - Lee Ling Construction & Development Sdn. Bhd. (i) 5,954 5, Purchase of logs and sawn timber from: - Lee Ling Timber Sdn. Bhd. (ii) 11,497 9, Rental paid to: - BMK Developments Sdn. Bhd. (iii) ====== ====== ====== ====== (i) (ii) (ii) Tiang Ching Kok is a shareholder and director of Lee Ling Construction & Development Sdn. Bhd.. Tiang Ching Kok is a shareholder and director of Lee Ling Timber Sdn. Bhd.. Tiang Ching Kok is a shareholder and director of BMK Developments Sdn. Bhd.. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

128 34. Related party disclosures (contd.) (b) Year-end balances arising from sale and purchase of goods and services Group Company RM 000 RM 000 RM 000 RM 000 (Payable)/receivable from Lee Ling Construction & Development Sdn. Bhd. (i) (3,118) 2, Receivable from Lee Ling Timber Sdn. Bhd. (ii) 1,049 1,674 1,049 1,674 Payable to BMK Development Sdn. Bhd. (iii) (14) (10) (14) (10) ======= ======= ======= ======= Information regarding outstanding balances arising from related party transactions as at 31 January 2018 are disclosed in Note 22 and 29. (c) Compensation of key management personnel The remuneration of directors during the year was as follows: Executive: Group Company RM 000 RM 000 RM 000 RM 000 Salaries and other emoluments Fees Contributions to defined contribution plans Total executive directors remuneration (excluding benefits-in-kind) Estimated money value of benefits-in-kind Total executive directors remuneration (including benefits-in-kind) QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

129 34. Related party disclosures (contd.) (c) Compensation of key management personnel (contd.) The remuneration of directors during the year was as follows: (contd.) Non-executive: Group Company RM 000 RM 000 RM 000 RM 000 Fee s Other emoluments Total non-executive directors remuneration (Note 8) Total directors remuneration (Note 10) ==== ==== ==== ==== 35. Fair value of financial instruments (a) Determination of fair value The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: (i) Cash and bank deposits, other receivables and other payables The carrying amounts of these balances approximate their fair values due to the relatively short term nature of these financial instruments. (ii) Trade receivables and trade payables The carrying amounts of trade receivables and trade payables approximate their fair values because they are subject to normal trade credit terms. The fair value of the non-current receivables are estimated by discounting expected future cash flows at market incremental rate for similar types of arrangement. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

130 35. Fair value of financial instruments (contd.) (a) Determination of fair value (contd.) (iii) Amounts due from/to related companies The carrying values of amounts due from/to related companies in current assets and current liabilities approximate their fair values due to the short term nature. No disclosure of fair value is made for non-current amounts due from/to related companies as it is not practicable to determine their fair values with sufficient reliability since these balances have no fixed terms of repayment. (iv) Other investments The fair values of quoted investment securities are determined by reference to their stock exchange quoted closing bid price at the end of the reporting period. (v) Bank borrowings and term loan The carrying values of bank borrowings approximate their fair values as they bear interest rates which approximate the current incremental borrowing rates for similar types of lending and borrowing arrangements. (vi) Financial guarantees Fair value is determined based on the probability weighted discounted cash flow method. The probability has been estimated and assigned for the following key assumptions: - The likelihood of the guaranteed party defaulting within the guaranteed period; - The exposure on the portion that is not expected to be recovered due to the guaranteed party s default; - The estimated loss exposure if the party guaranteed were to default. 128 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

131 35. Fair value of financial instruments (contd.) (b) Fair value hierarchy The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1 - Level 2 - Level 3 - Quoted prices in active markets for identical assets or liabilities, Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and Inputs for the asset or liability that are not based on observable market data (unobservable inputs). The following table shows an analysis of financial instruments carried at fair values by level of fair value hierarchy: Group Level 1 Level 2 Level 3 Total RM 000 RM 000 RM 000 RM Assets measured at fair value Investment securities - quoted equity instruments money market fund ===== ===== ===== ===== Assets for which fair values are disclosed Investment properties ,000 45,000 ===== ===== ===== ===== 2017 Assets measured at fair value Investment securities - quoted equity instruments 1, ,144 - money market fund ===== ===== ===== ===== Assets for which fair values are disclosed Investment properties ,000 45,000 ===== ===== ===== ===== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

132 35. Fair value of financial instruments (contd.) (b) Fair value hierarchy (contd.) Company Level 1 Level 2 Level 3 Total RM 000 RM 000 RM 000 RM Assets measured at fair value Investment securities - money market fund ===== ===== ===== ===== 2017 Assets measured at fair value Investment securities - quoted equity instruments 1, ,100 - money market fund ===== ===== ===== ===== Description of valuation techniques used and key inputs to valuation on Level 3 fair value measurements Fair Value Valuation Unobservable Description RM 000 techniques inputs Range Investment properties 45,000 Market Sales -35% comparable transactions to 31%* approach on similar properties around the locality * The underlying assumptions are derived from four most recent sales transactions after considering the discretionary adjustments in location, accessibility, terrain, size and shape of land, tenure, planning status, title restrictions if any and other relevant characteristics to arrive at the market value 130 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

133 35. Fair value of financial instruments (contd.) (b) Fair value hierarchy (contd.) Description of valuation techniques used and key inputs to valuation on Level 3 fair value measurements (contd.) The Company engages external professional property valuers to perform valuation and fair value determination of all its real properties on a discretional basis. Changes in Level 3 fair values are analysed and evaluated by the management after obtaining the valuation report from the external valuation experts for impairment assessment purpose. 36. Financial risk management objectives and policies The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The Group s and the Company s principal financial instruments comprise bank overdrafts, other borrowings and cash and short-term deposits. The main purpose of these financial instruments is to manage the Group s funding and liquidity requirements. The Group and the Company has other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The Board of Directors, with the assistance of professionals and advisers such as Internal Auditors, Management Executive Committee and Risk Management Committee, has the overall responsibility for the establishment and oversight of the Group s risk management framework. The Management Executive Committee, represented by the Group Managing Director, Group Executive Director, Executive Director and Chief Financial Officer are the key management personnel responsible for the implementation of decisions and policies formulated by the Board. The Risk Management Committee comprising Executive Directors and senior management staff who are responsible under their respective scope of work for the day-to-day operations carries out risks identification, evaluate, monitor and formulate mitigation strategies on risks identified and periodically review risk management processes and policies. The Audit Committee provides independent oversight to the effectiveness of the risk management process. The key financial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

134 36. Financial risk management objectives and policies (contd.) The following sections provide details regarding the Group s and Company s exposure to the above-mentioned financial risks and the objective, policies and processes for the management of these risks. Credit risk is the risk of loss that may arise from the outstanding financial instruments should a counterparty default on its obligations. At the reporting date, the Group s and the Company s exposure to credit risk arises primarily from trade and other receivables. (a) Credit risk The Group s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivables balances are monitored on an ongoing basis to minimize the Group s exposure to bad debts. It is the Group s policy that contractual deposits are collected and scheduled progress payments are received from the buyers when due. Titles to properties are only transferred upon full settlement. Management does not expect any counterparties to fail to meet their obligations. At the reporting date, the Group s and the Company s maximum exposure to credit risk is represented by: (i) The carrying amount of each class of financial assets recognised in the statement of financial position; (ii) A nominal amount of RM198,400,000 (2017: RM147,514,000) relating to corporate guarantee provided by the Company to bank on subsidiaries loans and borrowings. Information regarding financial assets that are either past due or impaired and aging analysis is disclosed on Note 22. Management believes that no additional credit risk beyond that provided for is inherent in the Group s trade and other receivables. (b) Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group s and the Company s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group adopts a prudent approach to managing its liquidity risk. The Group always maintains sufficient cash and cash equivalents, and has available funding through a diverse source of committed and uncommitted credit facilities from various banks. 132 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

135 36. Financial risk management objectives and policies (contd.) (b) Liquidity risk (contd.) Analysis of financial instruments by remaining contractual maturities The table below analyses the maturity profile of the Group s and the Company s financial liabilities based on contractual undiscounted repayment obligations On demand or within One to Over one year five years five years Total RM 000 RM 000 RM 000 RM 000 Group Financial liabilities Trade and other payables (excluding deferred revenue) 25, ,443 Loans and borrowings 73,655 9,843-83,497 Total undiscounted financial liabilities 99,098 9, ,941 ====== ===== ===== ====== Company Financial liabilities Other payables 3, ,598 Loans and borrowings 21, ,493 Financial guarantee contract * 198, ,400 Total undiscounted financial liabilities 224, ,301 ===== ===== ==== ===== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

136 36. Financial risk management objectives and policies (contd.) (b) Liquidity risk (contd.) 2017 On demand or within One to Over one year five years five years Total RM 000 RM 000 RM 000 RM 000 Group Financial liabilities Trade and other payables (excluding deferred revenue) 27, ,078 Loans and borrowings 79,843 9,986-89,829 Total undiscounted financial liabilities 106,921 9, ,907 ====== ===== ===== ====== Company Financial liabilities Other payables 4, ,290 Loans and borrowings 26, ,422 Financial guarantee contracts * 147, ,514 Total undiscounted financial liabilities 178, ,226 ===== ===== ==== ===== * Based on the maximum amount that can be called under the financial guarantee contract (c) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group s and the Company s financial instruments will fluctuate because of changes in market interest rates. The Group s and the Company s exposure to market risk for changes in interest rates arise primarily from their fixed/treasury deposits and loans and bank borrowings. The Group and the Company s fixed/treasury deposits and borrowings at floating rates are contractually re-priced at intervals of less than 6 months (2017: less than 6 months) from the reporting date. 134 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

137 36. Financial risk management objectives and policies (contd.) (c) Interest rate risk (contd.) Sensitivity analysis for interest rate risk At the reporting date, it is estimated that a hundred basis points increase in interest rate, with all other variables held constant, would decrease the Group s profit net of tax by approximately RM108,908 (2017: RM377,163), arising mainly as a result of higher interest expense on net floating borrowing position. A decrease in interest rate would have had the equal but opposite effect on the aforesaid amount, on the basis that all other variables remain constant. (d) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily RM. The foreign currencies in which these transactions are denominated are mainly US Dollars ( USD ). The Group s trade receivable balances at the reporting date have similar exposures. The Group is also exposed to currency translation risk arising from its net investments in foreign operations Brunei Darussalam ( Brunei ). The Group s net investments in Brunei are not hedged as currency positions in Brunei Dollars is considered to be long-term in nature. Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Group s profit net of tax to a reasonably possible 10% strengthening of the USD exchange rates against the functional currency of the Group, with all other variables held constant. Group RM 000 RM 000 United States Dollar (201) 63 ==== ==== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

138 36. Financial risk management objectives and policies (contd.) (d) Foreign currency risk (contd.) A 10% weakening of the above foreign currencies against the underlying functional currencies at the reporting date would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. (e) Market price risk Market price risk is the risk that the fair value or future cash flows of the Group s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to market price risk and the risk of impairment in the value of investments held. The Company manages the risk of impairment by evaluation of investment securities, continuously monitoring the performance of investments held and assessing market risk relevant to which the investments operate. Sensitivity analysis for equity price risk At the reporting date, if prices for equity securities increase by 10% with all other variables being held constant, the profit net of tax will be RM37,075 (2017: RM152,915) higher as a result of higher fair value gain on fair value through profit or loss investments in equity instruments. A 10% decrease in the underlying equity prices would have had the equal but opposite effect to the amounts shown above. 37. Capital management The primary objective of the Group s and the Company s capital management is to ensure that it maintains healthy capital ratios to support its business and maximise shareholders value. No changes were made in the objective, policies and processes during the years ended 31 January 2018 and The Group and the Company review their capital structure and make adjustments to reflect economic conditions, business strategies and future commitments on a continuous basis. The Group and the Company monitor capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group and the Company includes within net debt, trade and other payables, and hire purchase liabilities, less cash and bank balances. Capital includes equity attributable to the equity holders of the parent less translation adjustment account. 136 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

139 37. Capital management (contd.) The Group and the Company are in compliance with all externally imposed capital requirements in respect of certain external borrowings for the financial years ended 31 January 2018 and Group Company Note RM 000 RM 000 RM 000 RM 000 Loans and borrowings 27 79,928 85,492 20,673 25,040 Trade and other payables (excluding deferred revenue) 29 25,443 27,078 3,598 4,290 Less: Cash and bank balances 25 (14,644) (14,923) (76) (63) Net debt 90,727 97,647 24,195 29,267 Equity attributable to owner of the parent 115, , , ,807 Capital and net debt 205, , , ,074 ====== ====== ====== ====== Gearing ratio 44% 43% 16% 19% ====== ====== ====== ===== 38. Segment information For management purposes, the Group is organised into business based on their strategic business units, and has five reportable operating segments as follows: (i) (ii) Property development and construction - sale of properties and construction; Manufacturing and premixing - manufacture and sale of ready-mixed concrete, concrete products, polyethylene pipes, woven polypropylene bags and polyethylene liners, sawmilling and manufacture of downstream timber products; (iii) Trading - general trading; (iv) Quarry operations - extracting and sale of aggregates; and (v) Investment and management services - investment holding and advisory. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

140 38. Segment information (contd.) Except as indicated above, no operating segments has been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to operating segments. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, liabilities, income and expenses. Transfer prices between business segments are on an arm s length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transactions between business segments. These transactions are eliminated on consolidation. Segment analysis by geographical locations has not been presented as the Group s operations are predominantly conducted in Malaysia. 138 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

141 38. Segment information (contd.) Property Manufacturing Investment and Adjustments development and Quarry management Total and & construction premixing Trading operations services segments eliminations Consolidated 2018 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Revenue Sales to external customers ,824 4,527 1, , ,960 Inter-segment sales ,966 2,219-24,185 (24,185) - Total revenue ,824 26,493 3, ,145 (24,185) 104,960 ====== ====== ====== ===== ===== ====== ===== ======= Results Segment operating (loss)/profit (1,015) (7,184) (1,975) (9,680) (864) (10,544) Finance costs (2,450) (1,858) - (1) (441) (4,750) - (4,750) Income tax expense 917 Loss for the year (14,377) ====== Assets Segment assets 93, ,545 23,444 5, , ,051 (159,389) 234,662 ====== ====== ====== ====== ====== ====== ====== ====== Liabilities Segment liabilities 67,504 58,239 9, , ,681 (41,050) 118,631 ====== ====== ====== ===== ===== ====== ====== ======= Other information Capital expenditure - 3, ,821-3,821 ====== ====== ====== ===== ===== ====== ===== ======= Depreciation of property, plant and equipment 166 5, ,530-6,530 Amortisation of prepaid land lease payments Amortisation of properties held for sale Inventories written down Impairment loss on receivables Reversal of impairment loss on receivables - (775) - - (368) (1,143) - (1,143) ====== ====== ====== ===== ===== ====== ===== ====== QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

142 38. Segment information (contd.) Property Manufacturing Investment and Adjustments development and Quarry management Total and & construction premixing Trading operations services segments eliminations Consolidated 2017 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Revenue Sales to external customers 28, , , ,040 Inter-segment sales ,743 1,662-30,873 (30,873) - Total revenue 28, ,568 29,606 2, ,913 (30,873) 141,040 ====== ====== ====== ===== ===== ====== ===== ======= Results Segment operating profit/(loss) (2,513) (1,953) (3,634) (171) (3,805) Finance costs (2,532) (1,897) - (3) (274) (4,706) - (4,706) Income tax expense (268) Loss for the year (8,779) ====== Assets Segment assets 91, ,303 17,782 4, , ,656 (159,743) 245,913 ====== ====== ====== ====== ====== ====== ====== ====== Liabilities Segment liabilities 80,436 63,861 16, , ,413 (73,431) 116,982 ====== ====== ====== ===== ===== ====== ====== ======= Other information Capital expenditure 349 9, ,004-10,004 ====== ====== ====== ===== ===== ====== ===== ======= Depreciation of property, plant and equipment 184 4, ,245-5,245 Amortisation of prepaid land lease payments Inventories written down Impairment loss on receivables - 1, ,074-1,074 Reversal of impairment loss on receivables - (7) (7) - (7) ====== ====== ====== ===== ===== ====== ===== ====== 140 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

143 39. Authorisation of financial statements for issue The financial statements for the year ended 31 January 2018 were authorised for issue by the Board in accordance with a resolution of the directors on 31 May QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

144 Analysis of Shareholdings As at 08 May 2018 Issued Share Capital : RM57,962,000 comprising 57,962,000 Ordinary Shares Class of Shares : Ordinary Shares Voting Rights : One Vote Per Ordinary Share Distribution Schedule Size of Shareholdings No. of Holders % of Holders No. of Shares % of Holders less than to 1, , ,001 to 10, ,990, ,001 to 100, ,190, ,001 to less than 5% of issued shares ,717, % and above of issued shares ,228, , ,962, Substantial Shareholders as at 08 May 2018 According to the Register of substantial shareholders, the substantial shareholders of the Company as at 08 May 2018 are as follows: Name of Substantial Shareholders Direct % Deemed interest % 1. CIMSEC Nominees (Asing) Sdn. Bhd. CIMB Securities (Singapore) Pte Ltd for Entrequest Holdings Limited 10,500, Cahaya Besi (Sarawak) Sdn. Bhd. 8,149, Datin Ha Ai Ing 7,001, ,008, Tiang Chiin Yew 5,282, ,726, Tiang Ching Kok 3,282, ,726, List of Directors Interest According to the Register of Directors Shareholdings, the interest of Directors in the ordinary shares of the Company as at 08 May 2018 are as follows: Direct % Deemed interest % 1. Tiang Ching Kok 3,282, ,726, Henry Law Kah Kwong Felix Wong Khung Chui Ha Tiuen Kiong Pang Kim Soo QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

145 Thirty Largest Shareholers As at 08 May 2018 No. of Shares % of shareholdings 1. CIMSEC Nominees (Asing) Sdn. Bhd. Exempt AN for CIMB Securities (Singapore) Pte Ltd (Retail Clients) 10,517, Ha Ai Ing 7,001, Kenanga Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Cahaya Besi (Sarawak) Sdn. Bhd. 6,145, Tiang Chiin Yew 3,282, Tiang Ching Kok 3,282, Affin Hwang Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Wangsa Bumimas Timber Sdn. Bhd. 2,804, Alliance Group Nominees (Tempatan) Sdn. Bhd. Quality Podium Sdn. Bhd. 2,700, Affin Hwang Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Yesgains Sdn. Bhd. 2,682, Maybank Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Wee Song Ching 2,452, Cahaya Besi (Sarawak) Sdn. Bhd. 2,004, HLB Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Tiang Chiin Yew 2,000, CIMSEC Nominees (Tempatan) Sdn. Bhd. CIMB Bank for Sincere Success Sdn. Bhd. 1,918, Amsec Nominees (Tempatan) Sdn. Bhd. Pledged Securities account for Bong Lee Min 1,248, D Hamskor Trading Co. Sdn. Bhd. 1,000, Amsec Nominees (Tempatan) Sdn. Bhd. 830, Pledged Securities account for Chiaw Lik Chiat 16. Amsec Nominees (Tempatan) Sdn. Bhd. 591, Pledged securities account for Koh Pee Seng 17. Kenanga Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Tiang Chiin Ling 525, Encorp Properties Sdn. Bhd. 448, Datuk Hajjah Rodiah Binti Mahmud 260, CIMSEC Nominees (Tempatan) Sdn. Bhd. CIMB Bank for Bong Lee Min 214, Maybank Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Too Boon Siong 199, Datuk Mazelan Bin Bugo 164, CIMSEC Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Abdul Aziz Bin Husain 156, Kenanga Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Too Boon Siong 141, Chieng Ngee Ong 136, Maybank Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Wong You Kee 125, Ngu Kee Tiong 115, Abdul Hamed Bin Sepawi 100, Inmost Tech Sdn. Bhd. 80, Ngui Siew Ngui Hua Yen 80, ,206, QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

146 List of Properties As at 31 January 2018 Address Brief Description Existing use Tenure & Age of Net Book Date of last Expiry Date Buildings Value (RM) revaluation/ acquisition Lot 706, Block 7, Industrial Land with Factory ,069,117 Land acquired on MTLD, Sejingkat factory buildings of & staff Buildings completed on Industrial Park, approx quarter December 1997 New Kuching hectares extension completed in 2002 Land & buildings revalued on Lot 1910, 1960, 2372, Agricultural Land of Vacant Land Freehold - 13,087,746 Land acquired in , 2406, Mukim approx acres Jeram Batu, Daerah Pontian, Johor. Lot 27, Blk 4 Industrial land & Factory Leasehold 10 & 18 7,963,889 Land acquired on Muara Tebas factory buildings of 2069 Land lease renewed Land District. approx on Building hectares completed on nd building completed in 2008 Lot 602, Blk 20 Kemena Plant office, laboratory, Office, Leasehold ,329 Land acquired on Land District Kidurong cement store & worker laboratory, Industrial Area, Bintulu quarter store & worker Building completed in approx hectares quarter Worker quarter extension completed in Industrial Lot#103, Industrial land Vacant Leasehold - 478,378 Land acquired in 1997 Tanjung Manis of approx Timber processing zone hectares Lot 368, Blk 53, Mukah Industrial land Office, Leasehold ,941 Land acquired on Land District, Mukah of approx acre laboratory, Building store & workers completed in 2009 quarter Lot , Industrial land Vacant Leasehold - 1,151,505 Land acquired in , Blk 5, of approx. 7, years KBLD D.Senadin, sq. meter from title Miri issue M3-324, Mixed Zone Land of Vacant land Leasehold - 44,888 Land acquired Seniawan Sbrang, Bau approx hectares 2034 on No. 8, Level 10 1 unit Condominium Staff usage Leasehold 17 1 Building acquired Chonglin Plaza, of approx. 1,226 sq on Kuching feet 43,031, QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

147 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Twenty-Second Annual General Meeting of QUALITY CONCRETE HOLDINGS BERHAD will be held at Room 209, 2nd Floor, Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman, Kuching, Sarawak, on Friday, 29 June 2018 at a.m. for the following purposes :- AS ORDINARY BUSINESS AGENDA 1. To receive the Audited Financial Statements for the financial year ended 31 January 2018 together with the Reports of the Directors and Auditors thereon. 2. To re-elect Mr Pang Kim Soo, who is due to retire in accordance with Article 75 of the Company s Articles of Association and being eligible, has offered himself for re-election. 3. To re-elect Mr Felix Wong Khung Chui, who is due to retire in accordance with Article 67 of the Company s Articles of Association and being eligible, has offered himself for re-election. 4. To approve Directors fees of RM48, in respect of the financial year ended 31 January To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration. Note 1 Resolution 1 Resolution 2 Resolution 3 Resolution 4 AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following as ordinary resolutions: 6. Authority to issue Shares Pursuant to Sections 75 and 76 of the Companies Act 2016 Resolution 5 That subject always to the Companies Act 2016, the Articles of Association of the Company and approvals of the relevant authorities, the Directors be and are hereby authorised pursuant to Sections 75 and 76 of the Companies Act 2016, to issue and allot shares in the Company 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 does not exceed ten per centum (10%) of the issued share capital of the Company for the time being and the Directors be and are 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 to be in force until the conclusion of the next Annual General Meeting of the Company. 7. Proposed Renewal of Shareholders Mandate For Recurrent Related Party Transaction Of A Revenue Or Trading Nature Resolution 6 That subject always to the Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and its subsidiaries to enter into any of the category of recurrent transactions of a revenue or trading nature as set out in Paragraph 2.2 of the Company s Circular to Shareholders dated 31 May 2018 with the related parties mentioned therein which are necessary for Quality Concrete Holdings Berhad Group s day-to-day operations subject to the following:- QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

148 Notice of Annual General Meeting a) the transactions are in the ordinary course of business and are on normal commercial terms which are not more favourable to the related parties than those available to the public and on terms not to the detriment of the minority shareholders; and b) disclosure is made in the annual report of the breakdown of the aggregate value of transactions conducted pursuant to the Shareholders Mandate during the financial year based on the following information: i) The types of recurrent related party transactions made; and ii) The names of the related parties involved in each type of the recurrent related party transactions made and their relationship with the Company. AND THAT such approval shall continue to be in force until:- a) the conclusion of the next Annual General Meeting ( AGM ) of the Company following the forthcoming AGM at which such Proposed Renewal of Shareholders Mandate was passed, at which time it will lapse, unless by a resolution passed at an AGM whereby the authority is renewed; b) the expiration of the period within which the next AGM of the Company subsequent to the date it is required to be held pursuant to the provisions of the Act; or c) revoked or varied by resolution passed by the shareholders in an AGM or Extraordinary General Meeting, whichever is earlier; And the Directors and/or any of them be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) to give effect to the transactions contemplated and/or authorised by this resolution. 8. Retention of Independent Non-Executive Director Resolution 7 That approval be and is hereby given to Mr Henry Law Kah Kwong, who has served as an Independent Non-Executive Director for a cumulative term of more than nine (9) years, to continue to act as an Independent Non-Executive Director of the Company until the conclusion of the next Annual General Meeting. 9. To transact any other business for which due notice shall have been given in accordance with the Companies Act, 2016 and the Articles of the Company. By Order of the Board, Yeo Puay Huang (LS ) Paul Chiam Tau Keen (MIA14900) Company Secretaries Dated : 31 May QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

149 Notice of Annual General Meeting Explanatory Note to Ordinary Business a) Ordinary Resolution 5 Authority to allot shares pursuant to Sections 75 and 76 of the Companies Act The Ordinary Resolution proposed under Resolution 5, if passed, will give a renewed mandate to the Directors of the Company, pursuant to Sections 75 and 76 of the Companies Act 2016 ( Renewed Mandate ) for such purposes as the Directors may deem fit and in the interest of the Company. The Renewed Mandated, unless revoked or varied by the Company in a general meeting will expire at the conclusion of next the next Annual General Meeting of the Company. As at the date of this notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the Twenty-First Annual General Meeting held on 30 June 2017 and which will lapse at the conclusion of the Twenty-Second Annual General Meeting to be held on 29 June The General Mandate sought will enable the Directors of the Company to issue and allot shares, including but not limited to further placing of shares for purpose of funding investment(s), working capital and/or acquisitions. b) Proposed General Mandate for Recurrent Related Party Transactions For further information on Ordinary Resolution No. 6, please refer to the Circular to Shareholders dated 31 May c) Ordinary Resolution 7-Retention of Independent Non-Executive Director Then Nomiating Committee and the Board of Directors have assessed the independence of Mr Henry Law Kah Kwong, who have served as Independent Non-Executive Directors of the Company for a cumulative term of more than nine (9) years, but less than 12 years. Based on the assessment, the Board is satisfied that Mr Henry Law Kah Kwong continues to be independent and the Board recommended that he continues to act as Independent Non- Executive Directors of the Company based on the following justifications: a) He is able to exercise independent and objective judgement and to act in the best interest of the Company, notwithstanding his tenure of service; b) He has met the independence guidelines set out in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad; c) He has contributed sufficient time and efforts and exercised due care in all undertakings of the Company during his tenure as Independent Director; d) He is independent of Management and free from any business or other relationship which could interfere with the exercise of independent judgement or the ability to act in the best interest of the Company; and e) He has vast experience and in depth knowledge of the timber industry. His in depth knowledge of the industry, understanding of the Company s objectives, strategies and business operations and his commitment, experience and competency will continue to benefit the Board in discharging its duties and provide advice and critical oversight to Management effectively. The proposed Ordinary Resolution 7 is in line with Practice 4.2 of the Malaysian Code on Corporate Governance 2017, will enable Mr Henry Law Kah Kwong to hold office as Independent Non-Executive Director until the conclusion of the next AGM of the Company. QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT

150 Notice of Annual General Meeting Notes : 1. Agenda 1 is meant for discussion only as the provision of Section 340(1)(a) of the Companies Act, 2016 does not require a formal approval of the members for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting. 2. Only Depositors whose names appear in the General Meeting Record of Depositors as at 22 June 2018 be regarded as Members and shall be entitled to attend, speak and vote at the Annual General Meeting. 3. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his/her place. A proxy need not be a member of the Company. Where a holder appoints two or more proxies, he/she shall specify the proportion of his/her shareholdings to be represented by each proxy. 4. Where a member of the Company is an exempt authorized nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the exempt authorized nominee may appoint in respect of each omnibus account it holds. 5. A corporation which is a member may by resolution of its directors authorise such person as it thinks fit to act as its representative at the meeting. 6. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his/her attorney, and the person so appointed may attend and vote at the meeting at which the appointer is entitled to vote. 7. The instrument appointing a proxy or representative must be deposited at the registered office, Room 209, 2nd Floor, Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman, Kuching, Sarawak not less than twenty-four hours before the time appointed for the taking of the poll, and in default the instrument of proxy shall not be treated as valid. Statement Accompanying Notice of AGM 1. Directors standing for re-election Pursuant to Paragraph 7.26 of the Main Market Listing Requirements, the Directors who are standing for reelection at the Twenty-second Annual General Meeting of the Company are as follows: Pang Kim Soo Felix Wong Khung Chui 2. Details of attendance of Directors at Board Meetings Please refer to page 17 for details 3. Place, date and hour of Annual General Meeting Room 209, 2nd Floor, Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman, Kuching, Sarawak on Friday, 29 June 2018 at a.m. 4. Further details of Directors seeking re-election at the Twenty-second Annual General Meeting can be found in page 9 of the Annual Report. 148 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2018

151 QUALITY CONCRETE HOLDINGS BERHAD (Company No D) Incorporated in Malaysia Form of Proxy No. of Shares Held: I/We of IC No. / Company No. being a member/members of QUALITY CONCRETE HOLDINGS BERHAD hereby appoint IC No. of (Full Name in Capital Letters) (Full Name in Capital Letters) (Full Address in Capital Letters) (Full Address in Capital Letters) or failing him/her, the Chairman of the meeting as my/our proxy/proxies to vote for me/us on my/our behalf, at the Annual General Meeting of the Company to be held at Room 209, 2nd Floor, Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman, Kuching, Sarawak, on Friday, 29 June 2018 at a.m. for the following purposes :- (Please indicate with an X in the appropriate spaces above how you wish your votes to be cast. If you do not indicate how you wish your proxy to vote on any resolution, the proxy shall vote as he thinks fit, or at his discretion, abstain from voting.) NO. RESOLUTION FOR AGAINST 1. To re-elect Mr Pang Kim Soo, who is due to retire in accordance with Article 75 of the Company s Articles of Association and being eligible, has offered himself for re-election. 2. To re-elect Mr Felix Wong Khung Chui, who is due to retire in accordance with Article 67 of the Company s Articles of Association and being eligible, has offered himself for re-election. 3. To approve Directors fees of RM48, in respect of the financial year ended 31 January To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration. 5. To authorise Directors to allot and issue Shares Pursuant to Sections 75 and 76 of the Companies Act Proposed Renewal of Shareholders Mandate For Recurrent Related Party Transaction Of A Revenue Or Trading Nature. 7. Retention of Mr Henry Law Kah Kwong as Independent Non-Executive Director. Signed this day of, 2018 Signature / Common Seal of Shareholder NOTES: 1. Agenda 1 is meant for discussion only as the provision of Section 340(1)(a) of the Companies Act, 2016 does not require a formal approval of the members for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting. 2. Only Depositors whose names appear in the General Meeting Record of Depositors as at 22 June 2018 be regarded as Members and shall be entitled to attend, speak and vote at the Annual General Meeting. 3. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his/her place. A proxy need not be a member of the Company. Where a holder appoints two or more proxies, he/she shall specify the proportion of his/her shareholdings to be represented by each proxy. 4. Where a member of the Company is an exempt authorized nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the exempt authorized nominee may appoint in respect of each omnibus account it holds. 5. A corporation which is a member may by resolution of its directors authorise such person as it thinks fit to act as its representative at the meeting. 6. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his/her attorney, and the person so appointed may attend and vote at the meeting at which the appointer is entitled to vote. 7. The instrument appointing a proxy or representative must be deposited at the registered office, Room 209, 2nd Floor, Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman, Kuching, Sarawak not less than twenty-four hours before the time appointed for the taking of the poll, and in default the instrument of proxy shall not be treated as valid.

152 1st fold here STAMP QUALITY CONCRETE HOLDINGS BERHAD (Company No D) Incorporated in Malaysia Room 209, 2nd Floor, Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman, Kuching, Sarawak. Tel: Fax: nd fold here

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