a n n u a l r e p o r t W e a r e F o c u s e d W e a r e A l e r t W e D e l i v e r

Transcription

1 2004 annual report W e a r e F o c u s e d W e a r e A l e r t W e D e l i v e r

2 CONTENTS 1 Corporate Profile 2 Chairman s Statement 4 Group Structure 5 Regional Network 6 Corporate Information 7 Background of Directors 8 Background of Key Executives 9 Financial Contents 57 Notice of Annual General Meeting 59 Proxy Form

3 CORPORATE PROFILE

4 CHAIRMAN S STATEMENT OVERALL OPERATION PERFORMANCES Despite poor economic conditions and weak business confidence in the region, the Group has won a number of new deals to provide regional services to well known corporate names, by capitalising on our ability and experience to serve multi-national corporations seamlessly across borders. Lantrovision s focus remains on achieving growth moving ahead, creating long-term value for shareholders and establishing itself as the leading provider in the Asia Pacific. DISCUSSION AND ANALYSIS OF AUDITED FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEAR ENDED 30 JUNE 2004 FINANCIAL HIGHLIGHTS (S$ 000) Group turnover - S$74,516 Group total operating expenses - S$20,690 Net profit attributable to shareholders - S$1,929 COMMENTARY ON GROUP RESULTS The Group s turnover for the current financial year increased by 10.5% over the previous year, with Singapore, Malaysia and Hong Kong contributing to the main bulk of the Group s turnover. The competitive environment during the year has led to a slight decline in the gross margin to 32% from previous year of 33%. Total operating expenses as a % of revenue has increased from previous year of 25.4% to 27.8% in the current year. This was due to the following: Increase in selling and distribution expenses as a result of higher provision made for doubtful debts of approximately S$1.1M Increase in general and administrative expenses mainly as a result of higher legal fees incurred in relation to documentation work for the bank term loan secured during the year and higher office rental expenses in Singapore and Hong Kong for additional office space rented. Increase in other operating expenses mainly due to higher personnel costs as a result of higher headcounts. Financial expenses has increased from S$0.2M to S$0.7M as a result of the USD bank term loan obtained during the year. Financial income relates to interest income received from surplus funds placed in deposits. Our share of loss in associates of S$0.1M came about mainly from the loss incurred by our associated company in Thailand. Income tax expense has decreased, in line with the decline in profit before tax during the year. The year ended with a net profit attributable to shareholders, which is a decline of 41% from the previous year. COMMENTARY ON GROUP BALANCE SHEET During the year, the Company declared a Bonus Share Issue of 129.5M new ordinary shares of S$0.02 each on the basis of 1 ordinary share for every 2 ordinary shares held in the share capital 2

5 of the Company. The Bonus Share Issue was made by capitalising S$2.59M out of the share premium account. The work-in-progress and trade debtors have increased significantly over the previous year mainly as a result of a major project secured by the Group in Malaysia for the supply and installation of wireless broadband premise equipment. Increase in trade creditors is due mainly to increased purchases associated with higher turnover. The Group obtained a secured bank term loan of US$13M (S$22.893M) during the year to fund its operations. Bills payable and short term unsecured bank loans were substantially repaid during the year and the remaining surplus funds from the new secured bank term loan were placed in fixed deposits and bank balances. COMMENTARY ON GROUP CASH FLOW S$ 000 S$ 000 Net cash flows used in operating activities 9,469 3,302 Net cash flows used in investing activities 541 1,349 Net cash generated from financing activities 16,863 1,936 Group cash and cash equivalents at beginning of year 5,401 8,116 Group cash and cash equivalents at end of year 12,254 5,401 The increase in the net cash used in operating activities was due mainly to higher working capital as a result of: An increase in trade debtors by S$8.3M, arising from longer credit terms extended to some customers; An increase in work-in-progress by S$6.1M, due mainly to costs incurred during the year for the supply and installation of wireless broadband premise equipment; and Repayment of bills payable in the current period of S$3.5M. During the year, the Company drewdown on its secured bank term loan of US$13M (S$22.893M) and made repayments on its unsecured term loans and bills payables. The surplus funds after funding increase in working capital requirements gave rise to higher balances in cash holdings as at the end of the year. LOOKING AHEAD Lantrovision will continue to maintain its focus on execution and maximising the value of its existing businesses and its regional investments. Ultimately, our aim is to continue delivering on our commitment to creating value for shareholders. ACKNOWLEDGEMENT Many thanks go out to our customers, business partners and shareholders for their continued support and trust. We are confident that, in spite of the challenging environment that we are operating in, Lantrovision is well positioned for the future. LUM CHUE TAT Chairman 3

6 GROUP STRUCTURE 49% Lantro (Malaysia) Sdn Bhd (Malaysia) BCH (Thailand) Co. Ltd (Thailand) 49% 51% Lantro (Thailand) Co. Ltd (Thailand) 100% VRnet (S) Pte Ltd (Singapore) VRnet (Thailand) Co. Ltd (Thailand) Lantro (HK) Limited (Hong Kong) 75% 49% 100% Lantro Co. Ltd (Hangzhou) (People s Republic of China) VRnet (M) Sdn Bhd (Malaysia) Lantro (Japan) Co., Ltd (Japan) 70% 100% LanTroVision (S) Ltd 100% Lantro Korea Co. Ltd (Korea) Bluetel Networks Pte Ltd (Singapore) Lantro Phils. Inc. (Philippines) 70% 30% 40% Lantro (Penang) Sdn Bhd (Malaysia) Spectrum Infocom International Pte Ltd (Singapore) 62.86% Spectrum Infocom (HK) Limited (Hong Kong) 80% BCH (HK) Limited (Hong Kong) 51% Lantro (Taiwan) Ltd (Taiwan) 100% Asia Reach Marketing Pte Ltd (Singapore) 80% 100% I-Contact Solutions Pte Ltd (Singapore) 51% IP-Contact Solutions Phils Inc (Philippines) 40% D AI Automation Ltd (People s Republic of China) 40% IBMS Technology Pte Ltd (Singapore) 90% 4

7 REGIONAL NETWORK The Lantrovision Group has established business presence in 14 cities throughout the Asia Pacific region. These include Beijing, Shanghai, Guangzhou, Hangzhou, Hongkong, Kuala Lumpur, Penang, Bangkok, Ho Chi Minh, Manila, Seoul, Tokyo, Taipei and Singapore. With these regional offices, the Group is well positioned to support its regional customers and tap into the demand for its products and services in each respective local market. 5

8 CORPORATE INFORMATION REGISTERED OFFICE 102F Pasir Panjang Road #03-03 Citilink Warehouse Complex Singapore Tel Fax BOARD OF DIRECTORS Executive Lum Chue Tat Managing Director Chan Thye Yuan Ang Ee Tiong, Kenneth Non Executive Chew Chin Hua Independent Ho Swee Seng Independent AUDIT COMMITTEE Chew Chin Hua Chairman Ho Swee Seng Ang Ee Tiong, Kenneth REMUNERATION COMMITTEE Ho Swee Seng Chairman Chew Chin Hua Ang Ee Tiong, Kenneth NOMINATING COMMITTEE Chew Chin Hua Chairman Ho Swee Seng Chan Thye Yuan COMPANY SECRETARY Lim Lee Choo SHARE REGISTRAR Lim Associates (Pte) Ltd 10 Collyer Quay #19-08 Ocean Building Singapore AUDITORS Ernst & Young 10 Collyer Quay #21-01 Ocean Building Singapore AUDIT PARTNER Max Loh Khum Whai (Appointed with effect from financial ended year 30 June 2002) 6

9 BACKGROUND OF DIRECTORS LUM CHUE TAT, aged 38, is an Executive Director of the Company and is responsible for overseeing the day-to-day operations of the Company and the Group s overall management. He holds a Diploma in Electronics and Communication from the Singapore Polytechnics and has over 10 years of experience in structured cabling design and marketing. Mr Lum will be seeking for re-election to the Board at the forthcoming AGM. ANG EE TIONG, KENNETH, aged 47, is an Executive Director of the Company and is responsible for overseeing our overseas operations (other than those of our Malaysian subsidiaries) as well as our Group s business operations and developments. He is a Registered Communication Distribution Designer and has more than 20 years of experience in structured cabling design and related design. Mr Ang will be seeking for re-election to the Board at the forthcoming AGM. CHAN THYE YUAN, aged 44, is an Executive Director of the Company and is responsible for our Malaysian operations and overall Group business development. He holds a Bachelor of Business in Business Administration and has over 20 years of experience in structured cabling design and related telecommunications expertise. CHEW CHIN HUA, aged 49, is a Non-Executive and Independent Director of the Company and has been a member of the Board since the Company was listed in He is the Chairman of the Audit Committee as well as a member of the Nominating and Remuneration Committees. Mr Chew is currently a practicing certified public accountant and also sits on the board of several other public listed companies. HO SWEE SENG, aged 38, is a Non-Executive and Independent Director of the Company. He joined the Board in February Mr Ho is the Chairman of the Remuneration Committee and also a member of the Audit and Nominating Committee. Mr Ho holds a Graduate Diploma in Technology Management and is currently with Andas Network Inc., USA, a telecom equipment provider as the Vice President of International Operations and Worldwide Program Management, responsible for its international engineering operations. 7

10 BACKGROUND OF KEY EXECUTIVES CHAN SOW HAR, age 34, is our Administrative Manager and has been with the Company since Her main responsibilities are the management and supervision of administrative staff and she oversees the administrative functions of our Company such as payroll and personnel matters. She has a Certificate of Business Studies from the National Institute of Commerce in CHIA KIT TUCK, age 35, is our Business Development Director and has been with the Company since He is involved in the sales, marketing and business development aspects of our business. He also manages our Group s major accounts and is strategically involved in many local and regional projects. He graduated from the National University of Singapore with a Bachelor of Science in LIM BEE SUAT, age 44, is our General Manager and has been with the Company since She is responsible for overseeing our day-to-day and sales operations in Singapore. Ms Lim graduated in 1984 with a Full Technological Certificate from City and Guilds of London Institute and also obtained a Diploma in Electronics and Communications Engineering from Singapore Polytechnics in 1985 and a Diploma in Marketing from Ngee Ann Polytechnic in LIM KHIA HUAT, VINCENT, age 43, joined us as the Head of International Group in October He is responsible for overseeing regional strategic operations and developments. He obtained a Master of Business Administration (International Management) from the Royal Melbourne Institute of Technology in LIM LEE CHOO, age 33, is the Group Financial Controller, responsible for our overall financial accounting and corporate finance matters. She obtained a Bachelor of Accountancy degree from Nanyang Technological University in 1993 and is a Certified Public Accountant (CPA) of the Institute of Certified Public Accountants of Singapore (ICPAS). TAN CHIN LIM, age 42, is our Senior Project Manager and has been with the Company for more than 9 years. He is responsible for the local and regional installation projects. He is also responsible for project management and supervises a team of project engineers in system implementation. He is also responsible for IT support for the Group. He obtained his GCE O levels in TAN KIM HIN, age 41, is our Senior Project Manager and is responsible for site supervision and the deployment of manpower and technical resources such as testing equipment. He is also responsible for sales and project management, and has been involved in several significant projects for our Company. He completed his GCE O levels in

11 FINANCIAL CONTENTS 10 Directors Report 13 Statement by Directors 14 Auditors Report 15 Balance Sheets 17 Consolidated Profit and Loss Account 18 Consolidated Statement of Changes in Equity 19 Consolidated Statement of Cash Flows 22 Notes to the Financial Statements 50 Report on Corporate Governance 55 Group Properties 56 Statistics of Shareholdings 57 Notice of Annual General Meeting 59 Proxy Form

12 DIRECTORS REPORT The directors present their report together with the audited balance sheet of the Company and financial statements of the Group for the financial year ended 30 June DIRECTORS The directors of the Company in office at the date of this report are: Chan Thye Yuan Lum Chue Tat Chew Chin Hua Ho Swee Seng Ang Ee Tiong, Kenneth (appointed on 1 November 2003) ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURE Except pursuant to the Lantrovision Share Option Scheme, neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. DIRECTORS INTERESTS IN SHARES OR DEBENTURES The interests of the directors who held office at the end of the financial year in the shares or debentures of the Company and related corporations, according to the register kept by the Company for the purposes of Section 164 of the Companies Act, were as follows: OTHER SHAREHOLDINGS IN WHICH THE DIRECTOR HELD BY DIRECTORS IS DEEMED TO HAVE AN INTEREST AT 1 JULY AT 1 JULY 2003 OR DATE 2003 OR DATE OF OF APPOINTMENT, AT 30 JUNE AT 21 JULY APPOINTMENT, AT 30 JUNE AT 21 JULY IF LATER IF LATER Name of Director The Company Ordinary shares of $0.02 each Chan Thye Yuan 44,767,500* 34,767,500 34,767,500 4,500,000* 4,500,000 4,500,000 Lum Chue Tat 47,767,500* 41,267,500 41,267,500 1,500,000* 1,500,000 1,500,000 Chew Chin Hua 120,000* 120, ,000 Ho Swee Seng 75,000* 325, ,000 15,000* 15,000 15,000 Options to subscribe for ordinary shares of $0.02 each Chan Thye Yuan 495,000* 825, , ,500* 267, ,500 Lum Chue Tat 495,000* 825, ,000 Chew Chin Hua 45,000* 75,000 75,000 Ho Swee Seng 45,000* 75,000 75,000 Ang Ee Tiong, Kenneth 240,000* 570, ,000 * Adjusted for the effect of the bonus issue in December 2003 of one new ordinary share for every two existing shares held in the capital of the Company. 10

13 DIRECTORS REPORT DIRECTORS CONTRACTUAL BENEFITS Except as disclosed in the financial statements, since the end of the previous financial year, no director of the Company has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which the Director is a member, or with a company in which the director has a substantial financial interest. SHARE OPTIONS The Lantrovision Share Option Scheme ( the Scheme ) was approved by the members of the Company at a shareholders meeting held on 31 August The scheme is administered by the remuneration committee comprising the following members: Ang Ee Tiong, Kenneth Chew Chin Hua Ho Swee Seng All options issued under the Scheme to employees, including executive directors, will have a term no longer than 10 years and options issued to non-executive Directors will have a term no longer than 5 years. The exercise period of the options commences on the first anniversary of the date of the grant. During the financial year, pursuant to the Scheme, the Company granted 5,700,000 (2003: 7,770,000 including 2,590,000 new share options issued as an adjustment in connection with the bonus share issue during the year) share options, which are exercisable based on a subscription price equal to the average of the last dealt prices for the last five consecutive trading days immediately preceding the date of grant, without any discount to the directors, officers and senior managers of the Group, none of whom are controlling shareholders and their associates. Details of the options to subscribe for ordinary shares of $0.02 each are as follows: OPTIONS OUTSTANDING EXERCISE OPTIONS OPTIONS OPTIONS AS AT EXERCISE DATE OF GRANT PERIOD GRANTED LAPSED EXERCISED 30 JUNE 2004 PRICE 10 January January ,000* * * 90,000* $0.173* to 9 January January January ,680,000* 90,000* * 7,590,000* $0.173* to 9 January January January ,640, ,500 5,197,500 $0.167 to 18 January January January ,000 60,000 $0.167 to 18 January 2014 * Adjusted for the effect of the bonus issue in December 2003 of one new ordinary share for every two existing shares held in the capital of the Company. 11

14 DIRECTORS REPORT SHARE OPTIONS (cont d) Other than the 2 executive directors, namely Lum Chue Tat and Chan Thye Yuan who were each granted 6.12% or 825,000 options respectively of the total options granted, there are no other participants who received 5% or more of the options granted. These options do not entitle the holder to participate, by virtue of the options, in any share issue of any other company. The aggregate number of options granted to directors and employees since the commencement of the Scheme is 12,937,500. Except for the above, no other options to take up unissued shares of the Company or its subsidiaries were granted during the year and no shares were issued by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries. Save as disclosed, there were no unissued shares of the Company or its subsidiaries under option at the end of the financial year. AUDIT COMMITTEE The Audit Committee performed the functions specified in the Companies Act. The nature and extent of the functions performed by the Audit Committee pursuant to S201B(5) of the Companies Act are detailed in the Report on Corporate Governance. OTHER INFORMATION REQUIRED BY THE SINGAPORE EXCHANGE SECURITIES TRADING LIMITED No material contracts to which the Company or any subsidiary is a party and which involve directors interests subsisted at, or have been entered into since the end of the previous financial year. AUDITORS Ernst & Young have expressed their willingness to accept re-appointment as auditors. On behalf of the Board, Lum Chue Tat Director Chan Thye Yuan Director Singapore 17 September

15 STATEMENT BY DIRECTORS pursuant to Section 201(15) We, Lum Chue Tat and Chan Thye Yuan, being two of the Directors of Lantrovision (S) Ltd, do hereby state that, in the opinion of the Directors, (i) (ii) the accompanying balance sheets, consolidated profit and loss account, consolidated statement of changes in equity and consolidated cash flow statement together with notes thereto, set out on pages 15 to 49 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 30 June 2004 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended, and at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. On behalf of the Board, Lum Chue Tat Director Chan Thye Yuan Director Singapore 17 September

16 AUDITORS REPORT to the members of Lantrovision (S) Ltd and Subsidiaries We have audited the accompanying financial statements of Lantrovision (S) Ltd (the Company ) and its subsidiaries (the Group ) set out on pages 15 to 49 for the year ended 30 June These financial statements are the responsibility of the Company s directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, (a) (b) the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act ) and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2004 and the results, changes in equity and cash flows of the Group for the financial year ended on that date; and the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. ERNST & YOUNG Certified Public Accountants Singapore 17 September

17 BALANCE SHEETS as at 30 June 2004 NOTE GROUP COMPANY $ $ $ $ Share capital and reserves Share capital 3 7,770,000 5,180,000 7,770,000 5,180,000 Share premium 4 3,328,647 5,918,647 3,328,647 5,918,647 Accumulated profits 22,352,872 20,423,785 12,695,145 10,686,819 Translation reserve (249,938) (15,054) 33,201,581 31,507,378 23,793,792 21,785,466 Minority interests 1,130,429 1,083,014 34,332,010 32,590,392 23,793,792 21,785,466 Fixed assets 5 5,136,246 5,660,993 3,175,160 3,443,809 Subsidiaries 6 1,186,284 1,356,548 Associated companies 7 1,645,213 1,637,381 1,488,317 1,469,482 Other investments 8 7,505 7,505 7,505 7,505 Deferred tax asset , ,794 Negative goodwill, net 9 (480,016) (585,609) Other debtor 13 66, ,117 66, ,117 Current assets Stocks 10 3,716,298 2,997, , ,636 Work-in-progress 11 18,910,567 12,828,285 1,810,315 1,860,423 Trade debtors 12 28,304,818 20,044,472 5,516,345 4,515,474 Other debtors, deposits and prepayments 13 2,142,805 3,097,235 1,074,553 2,390,941 Due from subsidiaries (trade) 21,383,432 12,276,100 Due from subsidiaries (non-trade) 14 4,232,626 4,950,916 Due from affiliated companies (trade) 287, ,771 Due from associated companies (trade) 1,820,936 1,015,784 1,583, ,361 Due from associated companies (non-trade) , , , ,250 Fixed deposits 15 4,727, ,404 3,993,764 13,805 Cash and bank balances 7,526,690 5,066,709 5,210,939 1,587,819 67,817,254 46,584,209 45,878,951 29,805,496 15

18 BALANCE SHEETS as at 30 June 2004 NOTE GROUP COMPANY $ $ $ $ Current liabilities Trade creditors 12,585,879 9,710,170 3,596,387 2,655,403 Bills payable to banks (unsecured) ,520 4,253, ,520 4,253,274 Other creditors and accruals 17 3,737,674 2,000,913 1,491, ,398 Due to a subsidiary (trade) 309,863 Due to a subsidiary (non-trade) 14 2,887,647 Due to affiliated companies (trade) 1,471,251 1,479,808 Due to affiliated companies (non-trade) 14 9,345 9,345 Due to directors (non-trade) 14 2,950 Due to minority shareholder of a subsidiary (non-trade) 14 38,148 78,934 Provision for taxation 779,457 1,182, , ,102 Lease obligations, current portion , , , ,894 Short term loan from third party unsecured) 19 40,000 Short term bank loans (unsecured) 20 2,500,000 2,500,000 Bank term loans (secured), current portion 21 4,396,293 4,396,293 24,085,231 20,153,374 12,125,195 13,989,581 Net current assets 43,732,023 26,430,835 33,753,756 15,815,915 Non-current liabilities Lease obligations, non-current portion , , , ,626 Bank term loans (secured), non-current portion 21 15,424,880 15,424,880 Deferred tax liability 28 78,587 84,696 26,284 26,284 Net assets 34,332,010 32,590,392 23,793,792 21,785,466 The accounting policies and explanatory notes on pages 22 to 49 form an integral part of the financial statements. 16

19 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 30 June 2004 NOTE $ $ Turnover 22 74,515,670 67,412,921 Cost of sales (50,522,013) (45,151,970) 23,993,657 22,260,951 Other operating income ,513 Distribution and selling expenses (3,362,927) (1,851,508) General and administrative expenses (2,243,559) (1,938,411) Other operating expenses (15,574,279) (13,309,805) Profit from operations 24 3,303,405 5,161,227 Financial expenses 27 (724,934) (156,960) Financial income ,277 39,805 Profit before taxation 2,693,748 5,044,072 Share of (loss) profit of associated companies (137,097) 109,779 2,556,651 5,153,851 Taxation 28 (678,439) (1,341,164) Profit after taxation 1,878,212 3,812,687 Minority interests 50,875 (567,667) Net profit attributable to shareholders 1,929,087 3,245,020 Earnings per share (cents) - basic and diluted The accounting policies and explanatory notes on pages 22 to 49 form an integral part of the financial statements. 17

20 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30 June $ $ Issued capital Balance at beginning of year 5,180,000 5,180,000 Issue of bonus shares by way of capitalisation of $2,590,000 (2003: $Nil) from the share premium account 2,590,000 Balance at end of year 7,770,000 5,180,000 Share premium Balance at beginning of year 5,918,647 5,918,647 Issue of bonus shares by way of capitalisation of $2,590,000 (2003: $Nil) from the share premium account (2,590,000) Balance at end of year 3,328,647 5,918,647 Translation reserve Balance at beginning of year (15,054) 4,185 Foreign currency translation adjustment (234,884) (19,239) Balance at end of year (249,938) (15,054) Accumulated profits Balance at beginning of year 20,423,785 17,178,765 Profit for the year 1,929,087 3,245,020 Balance at end of year 22,352,872 20,423,785 Total equity 33,201,581 31,507,378 The accounting policies and explanatory notes on pages 22 to 49 form an integral part of the financial statements. 18

21 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 June $ $ Cash flows from operating activities Profit before taxation 2,693,748 5,044,072 Adjustments: Depreciation of fixed assets 1,069,087 1,073,074 (Gain) loss on disposal of fixed assets (40,573) 2,524 Gain on disposal of investment in a subsidiary (490,513) Amortisation of negative goodwill, net (90,342) (104,360) (Write back of) provision for stock obsolescence (44,155) 58,592 (Write back of) provision for doubtful trade debts 817,556 (259,909) Provision for doubtful non-trade debts 300,000 Provision for doubtful trade debts due from an affiliated company 251,279 Bad trade debts written off 34,387 35,509 Interest expense 594,439 72,084 Interest income (91,144) (39,805) Translation adjustment (37,500) 2,302 Operating profit before working capital changes 4,966,269 5,884,083 Stocks (674,637) 285,071 Trade debtors (9,029,776) (3,042,070) Other debtors, deposits and prepayments 919,837 (1,830,727) Other assets 146,000 Due to directors (2,950) 2,950 Due to minority shareholder of a subsidiary (40,786) 78,934 Work-in-progress (6,082,282) (9,532,918) Trade creditors 2,898,922 4,903,758 Other creditors and accruals 1,783,133 (234,357) Bills payable (3,494,754) 4,253,274 Intercompany balances, net 956,259 (1,209,937) Cash used in operations (7,654,765) (441,939) Interest paid (594,439) (72,084) Income tax paid (1,219,825) (2,788,298) Net cash flows used in operating activities (9,469,029) (3,302,321) 19

22 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 June $ $ Cash flows from investing activities Interest received 91,144 39,805 Investment in associated companies (168,836) (423,215) Disposal/acquisition of subsidiaries, net of cash and cash equivalents disposed/acquired (Note B) 2 (213,574) Additional investment in a subsidiary (1) Acquisition of fixed assets (Note C) (715,122) (782,173) Proceeds from sale of fixed assets 251,475 30,005 Net cash flows used in investing activities (541,338) (1,349,152) Cash flows from financing activities Debt issuance costs (302,827) Repayment of term loans (5,229,000) (210,905) Cash contributed by minority shareholders for incorporation of a subsidiary 86,430 Dividend to minority shareholders (68,005) Repayment of lease obligations (497,806) (371,399) Proceeds from short term bank loan 2,500,000 Proceeds from term loan 22,893,000 Net cash generated from financing activities 16,863,367 1,936,121 Net increase (decrease) in cash and cash equivalents 6,853,000 (2,715,352) Cash and cash equivalents at beginning of year (Note A) 5,401,113 8,116,465 Cash and cash equivalents at end of year (Note A) 12,254,113 5,401,113 A. CASH AND CASH EQUIVALENTS $ $ Fixed deposits (Note 15) 4,727, ,404 Cash and bank balances 7,526,690 5,066,709 Cash and cash equivalents at end of year 12,254,113 5,401,113 20

23 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 June 2004 B. CASH FLOW ON (DISPOSAL) ACQUISITION OF SUBSIDIARIES $ $ Fixed assets 113,054 29,554 Goodwill on consolidation 47,139 Cash and bank balances 35, ,670 Fixed deposits 2,734 Trade and other debtors, deposits and prepayments 40,569 19,405 Stocks 244,652 Intercompany balances, net (381,164) Hire purchase creditors (86,030) Trade and other creditors and accruals (614,642) (126,722) Minority interests (73,500) (454) Net assets (disposed) acquired (584,602) 41,814 Less: Share of net assets attributable to minority shareholders 130,036 Add: Gain on disposal recognised 490,513 Proceed on disposal (purchase consideration) satisfied via cash 2 (41,814) Cash and cash equivalents (disposed) acquired (35,947) 209,404 Less: Intercompany balances, net (381,164) Disposal/acquisition of subsidiaries, net of cash and cash equivalents disposed/acquired 2 (213,574) C. FIXED ASSETS During the financial year, the Group acquired fixed assets with an aggregate cost of $886,122 (2003: $1,391,680) of which $171,000 (2003: $609,507) was acquired by means of hire purchase. Cash payments of $715,122 (2003: $782,173) were made to purchase fixed assets. The accounting policies and explanatory notes on pages 22 to 49 form an integral part of the financial statements. 21

24 NOTES TO THE FINANCIAL STATEMENTS 30 June CORPORATE INFORMATION Lantrovision (S) Ltd is a limited liability company which is incorporated in Singapore. Its registered office and principal place of business is located at 102F Pasir Panjang Road, #03-03, Citilink Warehouse Complex, Singapore The Company s principal activities are those of supplying, designing, installation and provision of consultancy services on network integration and structured cabling and those of electrical contractors and suppliers of electrical hardware and fittings. The principal activities of the subsidiaries are as shown in Note 6. There have been no significant changes in the nature of these activities during the financial year. The Group operates in 9 countries and the Group and Company employed 498 and 214 (2003: 383 and 166) employees as at 30 June 2004, respectively. 2. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation The financial statements which are expressed in Singapore dollars, are prepared in accordance with Singapore Financial Reporting Standards (FRS) as required by the Companies Act. In previous years, the financial statements were prepared in accordance with Singapore Statements of Accounting Standard (SAS). The transition from SAS to FRS did not result in any significant change in accounting policies. The financial statements have been prepared on a historical cost basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous financial year. The financial statements are presented in Singapore Dollars (SGD or $). (b) Principles of consolidation The consolidated financial statements comprise the accounts of Lantrovision (S) Ltd and its subsidiaries, after the elimination of all material intercompany transactions. Subsidiaries are consolidated from the date the parent obtains control until such time as control ceases. Acquisitions of subsidiaries are accounted for using the purchase method of accounting. The results of foreign subsidiaries are translated into Singapore dollars at the average exchange rates for the year and balance sheet items are translated at exchange rates ruling at the balance sheet date except for share capital and reserves which are translated at historical rates of exchange. Foreign currency translation differences arising on consolidation are taken directly to translation reserve until the disposal of the subsidiaries. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to conform any dissimilar material accounting policies that may exist. (c) Subsidiaries A subsidiary is defined as a company, in which the Group has a long-term interest of more than 50% of the equity or in whose financial and operating policy decisions the Group controls. Investments in subsidiaries are stated in the Company s balance sheet at cost. Provision is made for any impairment in value. 22

25 NOTES TO THE FINANCIAL STATEMENTS 30 June SIGNIFICANT ACCOUNTING POLICIES (continued) (d) Associated companies An associated company is defined as a company, not being a subsidiary in which the Group has a long-term equity interest of not less than 20% or in whose financial and operating policy decisions the Group exercises significant influence. The Group s investments in associated companies are recorded at cost and adjusted to recognise the Group s share of the net assets of the associated companies at the balance sheet date. The Group s share of the results of associated companies is included in the consolidated profit and loss account. The Group s share of the post-acquisition reserves of associated companies is included in investments in the consolidated balance sheet. Where the audited financial statements are not co-terminous with those of the Group, the share of profits is arrived at from the last audited financial statements available and unaudited management financial statements to the end of the accounting period. Investment in associated companies is stated in the Company s balance sheet at cost less impairment losses. (e) Affiliated company An affiliated company is a company, not being a subsidiary or an associated company, in which one or more of the directors or shareholders of the Company and the subsidiaries, have a significant equity interest or exercise significant influence. (f) Foreign currencies Foreign currency transactions are converted into Singapore dollars at exchange rates closely approximating those ruling at the transaction dates. Foreign currency monetary assets and liabilities outstanding at the balance sheet date are converted into Singapore dollars at the rates of exchange approximating those ruling at that date. All exchange difference arising on conversion are included in the profit and loss account. (g) Negative goodwill Negative goodwill arising on acquisition represents the excess of the fair value of the identifiable net assets acquired over the cost of acquisition. On the acquisition of a foreign subsidiary, the negative goodwill arising is translated at the exchange rates prevailing at the date of acquisition. To the extent that negative goodwill relates to an expectation of future losses and expenses that are identified in the plan of acquisition and can be measured reliably, but which have not yet been recognised, it is recognised in the profit and loss account when the future losses and expenses are recognised. Any remaining negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognised in the profit and loss account over 10 years, the weighted average useful life of those assets that are depreciable or amortisable. Negative goodwill in excess of fair values of the non-monetary assets acquired is recognised immediately in the profit and loss account. (h) Other investments Other investments held on a long-term basis are stated at cost net of provision made for any impairment loss. 23

26 NOTES TO THE FINANCIAL STATEMENTS 30 June SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Fixed assets Fixed assets are stated at cost less accumulated depreciation and impairment loss. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Expenditure for additions, improvements and renewals are capitalised and expenditure for maintenance and repairs are charged to the profit and loss account. When assets are sold or retired, their cost and accumulated depreciation are removed from the financial statements and any gain or loss resulting from their disposal is included in the profit and loss account. (j) Depreciation Depreciation is calculated on the straight-line method to write off the cost of fixed assets over their estimated useful lives. The estimated useful lives of fixed assets are as follows: Freehold properties Leasehold land and building Renovations Office equipment Tools and equipment Furniture and fittings Motor vehicles Computers 30 years 30 years (lease term) 5-8 years 10 years 10 years 10 years 5 years 3 years Fully depreciated fixed assets are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these assets. (k) Cash and cash equivalents Cash and cash equivalents are defined as cash on hand, cash at bank, fixed deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in values. Cash on hand and in banks and short-term deposits which are held to maturity are carried at cost. (l) Trade and other debtors Trade debtors, which generally have day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. Receivables from related companies are recognised and carried at cost less an allowance for any uncollectible amounts. (m) Stocks Stocks are stated at the lower of cost (determined on a first-in, first-out basis) and net realisable value. Provision is made for deteriorated, damaged, obsolete and slow-moving stocks. (n) Work-in-progress Work-in-progress is valued at cost plus attributable profits net of progress billings and provision for foreseeable losses. Cost includes cost of materials, direct labour, direct and indirect overheads incurred in connection with the contracts. 24

27 NOTES TO THE FINANCIAL STATEMENTS 30 June SIGNIFICANT ACCOUNTING POLICIES (continued) (o) Impairment of assets Fixed assets and long-term investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in income for items of fixed assets and long-term investments carried at cost. The recoverable amount is the higher of an asset s net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm s length transaction. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the asset belongs. Reversal of an impairment loss recognised in prior years is recorded when there is an indication that the impairment loss recognised for an asset no longer exists or has decreased. The reversal is recorded in the profit and loss account. (p) Trade and other creditors Liabilities for trade and other creditors which are normally settled on day terms, are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. Payables to related parties are carried at cost. (q) Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Unutilised leave Unutilised leave is provided based on the amount of annual leave earned and not utilised as at the end of the financial year based on the last drawn salaries of the employees. (r) Loans and borrowings All loans and borrowings are recognised at cost, being the fair value of the consideration received and including acquisition charges associated with the loans and borrowings. Debt issue costs relating to the securing of term loans are accounted in accordance with Note 2(s). (s) Debt issue costs Debt issue costs are costs incurred in connection with obtaining debt financing. These costs comprise primarily front-end fees, agency fees and legal fees. On initial recognition of a financial liability, debt issue costs that are directly attributable to the financial liability are included in the initial measurement of that liability. These costs are amortised over the related life of the debt using the straight-line method and written-off upon repayment of the financial liability, except for those debt issuance costs relating to facilities which remain available for re-drawing after repayment. 25

28 NOTES TO THE FINANCIAL STATEMENTS 30 June SIGNIFICANT ACCOUNTING POLICIES (continued) (t) Leases Finance leases, which effectively transfer to the Group substantially all the risks and benefits incidental to ownership of the lease item, are capitalised at the present value of the minimum lease payments at the inception of the lease term and disclosed as leased fixed assets. 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 directly against the profit and loss account. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term. (u) Borrowing costs Borrowing costs are recognised as expenses in the period in which they are incurred. (v) Revenue recognition 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. (i) (ii) (iii) (iv) (v) Sale of products Revenue from sale of products is recognised upon delivery of products and acceptance by customers. Installation works Revenue from installation works is recognised by reference to the stage of completion when this can be measured reliably. The stage of completion is determined based on the progress of the contract work as determined by certification or acceptance of work done. Maintenance Maintenance income is recognised on a periodic basis over the term of the maintenance contract. Ad-hoc maintenance income is recognised upon the performance of the maintenance services and acceptance by customers. Interest Interest income is recognised on an accrual basis. Dividends Dividend income is recognised when the right to receive the payment is established. (w) Segments For management purposes, the Group is organised on a world-wide basis into three major operating businesses. The businesses are the basis on which the Group reports its primary segment information. Segment revenue, expenses and results excludes transfers between business segments and between geographical segments. Such transfers are accounted for on an arm s length basis. 26

29 NOTES TO THE FINANCIAL STATEMENTS 30 June SIGNIFICANT ACCOUNTING POLICIES (continued) (x) Employee benefits Defined contribution plans As required by the law of its country of incorporation, the Company and certain of its subsidiaries make contributions to the relevant state pension scheme. These contributions are recognised as compensation expense in the same period as the employment that gives rise to the contribution. Equity compensation plan The Company has in place an Executive s Share Option Scheme for granting of options to eligible executives of the Group to subscribe for shares in the Company. There is no charge to the profit and loss upon grant or exercise of the options. When the options are exercised, the proceeds net of any transaction costs are credited to share capital and share premium accounts. (y) Income taxes Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on tax rates enacted or substantively enacted at the balance sheet date. Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries and associated companies, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. At each balance sheet date, the Group reassesses unrecognised deferred tax assets and the carrying amount of deferred tax assets. The Group recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilised. Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised. Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or different period, directly to equity. 27

30 NOTES TO THE FINANCIAL STATEMENTS 30 June SHARE CAPITAL GROUP AND COMPANY $ $ Authorised 2,500,000,000 (2003: 2,500,000,000) ordinary shares of $0.02 each 50,000,000 50,000,000 Issued and fully paid At the beginning of year 259,000,000 (2003: 259,000,000) ordinary shares of $0.02 (2003: $0.02) each 5,180,000 5,180,000 Issued during the financial year Issue of 129,500,000 (2003: Nil) bonus shares by way of capitalisation of $2,590,000 (2003: $Nil) from the share premium account 2,590,000 At end of year 388,500,000 (2003: 259,000,000) ordinary shares of $0.02 each 7,770,000 5,180,000 The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction. 4. SHARE PREMIUM The share premium account may be applied only for the purposes specified in the Companies Act. The balance is not available for distribution of dividends except in the form of shares. 5. FIXED ASSETS LEASEHOLD FREEHOLD LAND AND OFFICE TOOLS AND FURNITURE MOTOR GROUP PROPERTIES BUILDING RENOVATIONS EQUIPMENT EQUIPMENT AND FITTINGS VEHICLES COMPUTERS TOTAL $ $ $ $ $ $ $ $ $ Cost At beginning of year 2,756, , ,005 1,140, , ,308 2,662,710 1,303,098 9,688,373 Attributable to disposal of subsidiaries (1,872) (1,076) (150,388) (21,478) (174,814) Additions 178,525 70,830 24,869 24, , , ,122 Disposals (100,458) (32,575) (130,235) (15,884) (433,916) (100,007) (813,075) Translation difference (13,559) (3,258) (2,895) (2,054) 914 (9,133) (4,255) (34,240) At end of year 2,756, , ,942 1,175, , ,300 2,437,283 1,397,208 9,552,366 28

31 NOTES TO THE FINANCIAL STATEMENTS 30 June FIXED ASSETS (continued) LEASEHOLD FREEHOLD LAND AND OFFICE TOOLS AND FURNITURE MOTOR GROUP PROPERTIES BUILDING RENOVATIONS EQUIPMENT EQUIPMENT AND FITTINGS VEHICLES COMPUTERS TOTAL $ $ $ $ $ $ $ $ $ Accumulated depreciation At beginning of year 598,500 91, , , , ,247 1,421, ,134 4,027,380 Attributable to disposal of subsidiaries (328) (188) (48,904) (12,340) (61,760) Charge for the year 91,786 20,399 60, ,732 16,005 42, , ,670 1,069,087 Disposals (54,717) (31,452) (130,235) (15,884) (269,879) (100,006) (602,173) Translation difference (1,921) (1,623) (1,475) (828) (180) (7,400) (2,987) (16,414) At end of year 690, , , ,380 70, ,132 1,479, ,471 4,416,120 Charge for ,785 20,851 87, ,190 18,183 50, , ,203 1,073,074 Net book value At end of year 2,066, , , ,442 92, , , ,737 5,136,246 At beginning of year 2,157, , , ,887 84, ,061 1,241, ,964 5,660,993 FREEHOLD OFFICE TOOLS AND FURNITURE MOTOR COMPANY PROPERTIES RENOVATIONS EQUIPMENT EQUIPMENT AND FITTINGS VEHICLES COMPUTERS TOTAL $ $ $ $ $ $ $ $ Cost At beginning of year 2,756, , , ,647 79,788 1,620, ,027 5,816,875 Additions 45,393 9,177 19,400 6, , , ,026 Disposals (85,674) (31,735) (130,235) (16,167) (167,499) (100,007) (531,317) At end of year 2,756, ,975 79,707 62,812 69,930 1,640, ,267 5,675,584 Accumulated depreciation At beginning of year 598, ,367 48, ,837 38, , ,234 2,373,066 Charge for the year 91,786 22,511 10,309 4,845 7, , , ,672 Disposals (50,296) (31,735) (130,235) (16,167) (102,874) (100,007) (431,314) At end of year 690, ,582 27,364 19,447 29, , ,998 2,500,424 Charge for ,786 30,431 10,901 4,592 7, , , ,829 Net book value At end of year 2,066, ,393 52,343 43,365 40, , ,269 3,175,160 At beginning of year 2,157, ,889 53,475 28,810 41, , ,793 3,443,809 29