Further details of the Proposed Disposal Mandate are set out in the ensuing sections.

Transcription

1 VERSATILE CREATIVE BERHAD ( VCB OR THE COMPANY ) PROPOSED SHAREHOLDERS MANDATE FOR THE DISPOSAL OF 98,424,033 ORDINARY SHARES IN IRIS CORPORATION BERHAD ( ICB ) ( ICB SHARES ), REPRESENTING 3.98% EQUITY INTEREST IN ICB HELD BY VERSATILE PAPER BOXES SDN BHD ( VPB ), THE WHOLLY-OWNED SUBSIDIARY OF VCB ( PROPOSED DISPOSAL MANDATE ) 1. INTRODUCTION On behalf of the Board of Directors of VCB ( Board ), M&A Securities Sdn Bhd ( M&A Securities ) wishes to announce that the Company proposes to obtain a mandate from its shareholders for the disposal of 98,424,033 ICB Shares held by VPB, subject to the parameters set out in Section 2 of this announcement. Further details of the Proposed Disposal Mandate are set out in the ensuing sections. 2. DETAILS OF THE PROPOSED DISPOSAL MANDATE 2.1 The Proposed Disposal Mandate As at 7 September 2017, being the latest practicable date prior to the date of this announcement ( LPD ), VPB holds 98,424,033 ICB Shares ( Disposal Shares ), representing 3.98% of the total share capital of ICB. The Proposed Disposal Mandate to be sought from VCB s shareholders will be based on the following terms: Mandate period The authority sought from the shareholders under the Proposed Disposal Mandate will be valid for a period of 1 year from the date of approval of the shareholders of VCB at an extraordinary general meeting ( EGM ) to be convened Maximum number of the Disposal Shares to be disposed The Proposed Disposal Mandate authorises and empowers the Board to dispose of the entire Disposal Shares Scope of authority The Board is authorised and empowered to determine, decide, execute and implement with full discretion all matters relating to the disposal, including but not limited to the number of tranches of disposals, the number of Disposal Shares to be sold in each tranche, the timing of each disposal, the manner of disposal, the target purchasers and the disposal price (subject to the parameters as set out in Section 2.1) Manner of disposal The manner in which VPB may dispose of the Disposal Shares includes, but is not limited to, the following: (i) (ii) (iii) via the open market ( Open Market Disposal ); off-market transactions, i.e. transactions which are not conducted through the open market ( Off-Market Disposal ); or a combination of both of the above. 1

2 As the disposal may be implemented in tranches, there could potentially be multiple disposal prices but subject always to the parameters as set out in Section below Potential purchasers The Disposal Shares may be sold to third parties (as defined in the Main Market Listing Requirements ( Listing Requirements ) of Bursa Malaysia Securities Berhad ( Bursa Securities )). The Company has not identified any specific purchaser(s) for the Disposal Shares at this juncture Mechanism for setting the disposal price In the event the ICB Shares are disposed via Open Market Disposal, the disposal price shall be determined based on the prevailing market prices of ICB Shares traded on Bursa Securities. In the event that the ICB Shares are disposed via Off-Market Disposal, the disposal price per Disposal Share shall not be more than 10% discount to the volume weighted average market price of the ICB Shares for the 5 market days immediately prior to the date of disposal or the date the terms of the disposal are agreed upon ( 5DVWAP ) Disposal consideration and settlement of consideration The disposal consideration for the Disposal Shares will be in cash. In the event that the disposal of the Disposal Shares is via an Open Market Disposal, the settlement date of the disposal consideration will be within such settlement period as prescribed by Bursa Malaysia Securities Clearing Sdn Bhd. In the event that the disposal of the Disposal Shares is via an Off-Market Disposal, VPB will have to ensure compliance with the relevant regulatory documentation and procedures prescribed by the Bursa Malaysia Securities Clearing Sdn Bhd on the transfer of shares and the disposal consideration will be received in full on or before the completion of the transfer of shares Capital restructuring of ICB In the event of any events, including alterations to the nominal value of ICB Shares as a result of consolidation, subdivision, issue of ICB Shares by way of capitalisation of profits or reserves, capital distribution, rights issues of shares or warrants or rights to subscribe for or purchase ICB Shares ( Capital Changes ), the number of Disposal Shares shall be adjusted accordingly. If and when there shall be an issue of ICB Shares to VPB by way of a rights issue and/or bonus issue during the mandate period, the number of Disposal Shares shall be adjusted to include such new ICB Shares issued Implementation of the Proposed Disposal Mandate The Disposal Shares will be sold free from all encumbrances, liens, charges and with all rights attaching to them as at the date of sale/transfer. Any disposal to be carried out pursuant to the Proposed Disposal Mandate (including the determination of the manner of disposal and the disposal price) will be conducted in the best interest of the Company and the shareholders as a whole. It should be noted that there is no assurance that VPB is able to proceed with the disposal after obtaining the Proposed Disposal Mandate. Subject always to the parameters as set out in Section 2.1 above, whether and when VPB will embark on the disposal, the actual number 2

3 of ICB Shares to be disposed of as well as the actual disposal price (including the amount of discount to be given, if any), will depend on a number of factors including but not limited to the then prevailing economic and equity market conditions, the mode of disposal as well as the share price of ICB at the relevant time. In this regard, the Company will make the appropriate announcement(s) to inform its shareholders on any material sale of the Disposal Shares in accordance with the Listing Requirements. The Proposed Disposal Mandate is not expected to result in VCB becoming a cash company and a company classified under Practice Note 17 of the Listing Requirements ( PN17 ) in view of the following: (i) The cash position of the Company as at 31 March 2017 is at RM1.54 million. Upon completion of the Proposed Disposal Mandate, the cash position is expected to improve to RM17.78 million (assuming that the ICB Shares are disposed at RM0.165 per Disposal Share). The Company s total consolidated assets of Company as at 31 March 2017 stood at RM90.79 million. As such, VCB is not expected to become cash company as VCB s assets on a consolidated basis will not consist of 70% or more of cash or short term investments after the Proposed Disposal Mandate. (ii) The disposal of the ICB Shares is also not expected to result in VCB becoming a company classified under PN17 as the Company will not trigger any of the prescribed criteria under the Paragraph 2.1 of the PN17 after the Proposed Disposal Mandate. It is the intention of the Board to complete the disposal of the Disposal Shares in the most expeditious manner, after a sale contract or share sale agreement is entered into (if any) Basis and justification in arriving at the disposal consideration The disposal price for ICB Shares disposed via Open Market Disposal shall be based on the market conditions and the market prices of ICB Shares as traded on Bursa Securities on a willing-buyer willing seller basis. The disposal price per ICB Shares disposed via Off-Market Disposal shall not be more than 10% discount to the 5DVWAP of ICB Shares immediately prior to the date of sale or the date the terms of the disposal are agreed upon. The fixing of the disposal price at a discount of not more than 10% to the 5DVWAP of ICB Shares will allow flexibility for the Board to accommodate fluctuations in market conditions in the exercise of the Proposed Disposal Mandate. The actual disposal price will be determined by the Board at a later date subject to the parameters as set out in Section 2.1 above. For illustrative purposes, based on the 5DVWAP of ICB Shares up to the LPD of RM0.179 and a discount of approximately 7.8%, the indicative disposal price of RM0.165 shall be applied Liabilities to be assumed There are no liabilities, including contingent liabilities and guarantees, to be assumed by the buyers pursuant to the disposal of the Disposal Shares. 3

4 Original cost of investment The original costs of investment of VCB in the Disposal Shares is approximately RM0.1875*. VCB and its subsidiaries ( VCB Group ) have recorded the investments in ICB as an available-for-sale financial asset in accordance with Malaysian Financial Reporting Standards 139 Financial Instruments: Recognition and Measurement ( MFRS 139 ). Pursuant to MFRS 139, the investment in ICB is measured at its fair value based on its quoted share price of ICB Shares as at 31 March 2017, of RM0.15 per ICB Share. The impact of such impairment had been reflected in the income statement of the VCB Group. Subsequently, any gain or loss arising from a change in the fair value of the investment in ICB has been recognised directly through the statement of changes in equity of the VCB Group. Based on the indicative disposal price of RM0.165 per ICB Share, the carrying value of the Disposal Shares is RM16.24 million. Note: * Details of the costs of investments for each tranche of ICB shares acquired and original dates of the acquisition of the Disposal Shares cannot be determined Information on ICB ICB was incorporated in Malaysia under the Companies Act, 1965 on 31 May 1994 as TL Technology Research (M) Sdn Bhd as a private limited company and subsequently was converted into a public limited company and assumed its name on 18 August 1999 and 20 August 1999 respectively. ICB was listed on the ACE Market of Bursa Securities on 25 July The principal activity of ICB is of investment holdings whist its subsidiaries are principally engaged in the business of technology consulting, implementation of digital identity and business solutions. Further information on ICB, including financial information are set out in Appendix I of this announcement Proposed utilisation of proceeds As the actual consideration to be received from the disposal will be dependent on the actual disposal price and quantity of the ICB Shares sold, the actual cash proceeds to be received from the disposal cannot be determined at this point in time. For illustrative purposes, assuming that the Disposal Shares are disposed at RM0.165 per ICB Share, the total gross proceeds expected to be raised is RM16.24 million. Assuming that the entire Disposal Shares are disposed of at the indicative disposal price of RM0.165 per ICB Share, the total gross proceeds are proposed to be utilised in the following manner: Details Notes RM 000 Timeframe of utilisation Repayment of bank borrowings (1) 13,011 Within 3 months Purchase of new equipment and machinery (2) 2,629 Within 12 months Estimated expenses in relation to the Proposed Disposal Mandate (3) 600 Within 12 months 16,240 4

5 Notes: (1) Repayment of bank borrowings The total borrowings of VCB Group as at 31 March 2017 are approximately RM17.61 million. The Group proposes to utilise up to RM13.01 million from the gross proceeds to repay substantially its outstanding borrowings. This is expected to generate interest savings of approximately RM0.76 million per annum based on the effective interest rate of approximately 5.82% per annum. (2) Purchase of new equipment and machinery The Group has earmarked RM2.63 million to partially fund the purchase of new equipment and machinery to replace existing equipment and machinery and upgrade of its manufacturing processes in order to expand its paper product manufacturing business. Further details of the Company s plan to replace and upgrade its equipment and machinery are set out in Section 3 of this announcement. Details of the equipment and machinery to be acquired by the Group are as follows: Description Unit RM 000 (a) Offset machine (i) 1 6,980 (b) Clamshell machine (ii) Total 7,080 (i) As at the date of this announcement, VCB operates the offset process of its paper product manufacturing operations using 4 offset machines. The said machines were purchased between 2003 and 2013 and are functioning at approximately 43% of its original capacity as a result of wear and tear, resulting in the overall reduction in production capacity. The purchase of the 1 additional offset machine will replace 3 of the Group s existing offset machinery and is expected to increase the Group s production capacity by 7%, from approximately 295,400 impressions per day to 316,000 impressions per day. (ii) The Company shall acquire 1 unit of clamshell printing machine as part of the Group s plans to expand its range of products to include paper products for use in the food and beverage industry. The total funds required to purchase the equipment and machinery is RM7.08 million, of which RM2.63 million is expected to be funded via the proceeds from the Proposed Disposal Mandate. The remaining amount for the purchase of the above equipment and machinery will be funded via bank borrowings and/or internally generated funds. (3) Estimated expenses in relation to the Proposed Disposal Mandate The estimated expenses consist of professional fees, placement fees for the disposal of the Disposal Shares, fees payable to the relevant authorities and other miscellaneous expenses. In the event that the actual expense is less than the allocated amount, the excess allocated amount shall be utilised for purchase of equipment and machinery. If the actual expenses incurred are higher than the allocated amount, the deficit will be funded out of the portion allocated for the purchase of equipment and machinery. 5

6 3. RATIONALE The Disposal Shares are considered non-core investments and are recorded as available-for sale financial assets in the VCB Group s financial statements. Therefore, the Directors believe that monetising the non-core stake in ICB is beneficial as it is expected to provide the VCB Group with additional funding to pursue other investments. The Proposed Disposal Mandate will provide flexibility in effecting the disposal of the Disposal Shares without having to convene separate general meetings to obtain shareholders approval prior to each disposal. The Proposed Disposal Mandate is expected to contribute positively to the earnings of VCB in view of the following: (i) Repayment of bank borrowings Total gross proceeds raised would provide funds for the repayment of bank borrowings which is expected to improve the Group s cash flow and result in an annual interest savings of approximately RM0.76 million based on the effective interest rate of approximately 5.82% per annum. (ii) Purchase of equipment and machinery The proposed utilisation of the proceeds for the funding of the acquisition of equipment and machinery set out in Section (2), is part of the Group s ongoing efforts in expanding the manufacturing capability and capacity of its current operations. The purchase of offset machine shall increase the Group s production capacity by 7%, from approximately 295,400 impressions per day to 316,000 impressions per day. In addition, the Company plans to expand its paper product range into food and beverage industry by acquiring 1 unit of clamshell printing machine. 4. RISK FACTORS 4.1 Completion and delay in completion of the disposal of ICB Shares The Proposed Disposal Mandate and disposal of the Disposal Shares are not expected to pose any risk which could materially and adversely affect the business operations and financial performance of the Group. Nevertheless, there is no assurance that the Group will be able to proceed with the disposal of the entire Disposal Shares within the 1 year time frame after obtaining the shareholder s approval for the Proposed Disposal Mandate. 4.2 Capital market risks As stated in Section 2.1.6, the total disposal consideration shall not be at a discount of more than 10% to the 5DVWAP of ICB Shares. The market price of ICB Shares are influenced by, among others, the prevailing market sentiments, the volatility of equity markets and the financial performance ICB Group. In view of this, there is no assurance that the ICB Shares will be disposed above the average initial cost of acquisition of the ICB Shares of approximately RM per ICB Share or above its carrying value of RM0.15 per ICB Share. 6

7 4.3 Future earnings from ICB The Disposal of ICB Shares will preclude the Group from benefiting from any potential increase in the market price of ICB Shares and any dividends which may be declared subsequent to the disposal. Nonetheless, undertaking the disposal of the ICB would raise funds to be utilised in the business of the Group as set out in Section 3 above. 5. FINANCIAL EFFECTS 5.1 Share capital and substantial shareholders shareholdings The Proposed Disposal Mandate will not have any effect on the share capital and substantial shareholders shareholdings of VCB. 5.2 NA, NA per share and gearing For illustrative purposes, the pro forma effects of the disposal of the Disposal Shares on the NA, NA per share and gearing of the VCB Group, assuming that the entire Disposal Shares were disposed at an indicative disposal price of RM0.165 per Disposal Share, are as set out below: Audited as at 31 March 2017 RM After the Proposed Disposal Mandate RM Share capital 63,142,372 63,142,372 Fair value reserves (392,683) - Revaluation reserves 16,448,557 16,448,557 Accumulated losses (23,870,311) (1) (23,386,634) Net assets 55,327,935 56,204,295 No. of shares 117,338, ,338,681 Net asset per share Bank borrowings 28,709,063 (2) 15,698,063 Gearing (times) Note: (1) Adjusted for a gain of approximately RM0.48 million arising from the sale of all of the 98,424,033 ICB Shares (taking into consideration the indicative disposal price of RM0.165 per ICB Share, the carrying value of the ICB Shares of RM0.150 per ICB Share as at 31 March 2017, the fair value reserves of RM0.39 million and including the estimated expenses of RM600,000 arising from the Proposed Disposal Mandate). (2) After repayment of bank borrowings amounting RM13.01 million from the proceeds of the Proposed Disposal Mandate. 5.3 Earnings The disposal of the entire Disposal Shares is expected to increase the earnings and earnings per Share of the VCB Group in the financial year the disposal takes place as it is expected to realise a one-off gain on disposal based on the indicative disposal price of RM However, the actual gain to the VCB Group arising from the disposal cannot be determined at this juncture as it is dependent on the actual number of ICB Shares to be disposed of and the respective disposal price(s). 7

8 For illustrative purposes, based on the audited financial statements of the VCB Group for the financial year ended ( FYE ) 31 March 2017 and assuming that the entire Disposal Shares were disposed of on 31 March 2017 at the indicative disposal price of RM0.165, the disposal is expected to realise a one-off gain of about RM0.48 million (taking into consideration the indicative disposal price of RM0.165 per ICB Share, the carrying value of the ICB Shares of RM0.150 per ICB Share as at 31 March 2017, the fair value reserves of RM0.39 million and including the estimated expenses of RM600,000 arising from the Proposed Disposal Mandate). Upon completion of the disposal of the Disposal Shares, the VCB Group will no longer be entitled to dividends attributable to any of the Disposal Shares that are sold, if any. Based on the audited financial statements for the past 3 FYEs 31 March 2015 to 2017, the VCB Group had not received any dividends in respect of the ICB Shares held. With the disposal of the Disposal Shares, the Group will be able to benefit from interest savings after repayment of bank borrowings and the expected increase in revenue and profits resulting from the expansion of its paper product manufacturing business with proceeds from the Proposed Disposal Mandate. 6. APPROVALS REQUIRED The Proposed Disposal Mandate is subject to the approval of the shareholders of VCB at an EGM to be convened. The Proposed Disposal Mandate is not conditional upon any other corporate exercises undertaken or to be undertaken by the Company, if any. 7. INTERESTS OF DIRECTORS AND MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED None of the Directors and/or major shareholders of VCB and persons connected with them have any interests, direct or indirect/deemed, in the Proposed Disposal Mandate. 8. STATEMENT BY THE BOARD After having considered all aspects of the Proposed Disposal Mandate, including the rationale as set out in Section 3 above, the Directors are of the opinion that the Proposed Disposal Mandate is in the best interest of the VCB Group. 9. ADVISER M&A Securities has been appointed as the Adviser for the Proposed Disposal Mandate. 10. HIGHEST PERCENTAGE RATIO In view that the actual disposal consideration for the disposal cannot be determined at this juncture, the Company is unable to determine the highest percentage ratio applicable to the disposal pursuant to paragraph 10.02(g) of the Listing Requirements. For illustrative purposes, assuming that the entire Disposal Shares are disposed of at an indicative disposal price of RM0.165 and based on the audited financial statements of the VCB 8

9 Group for the FYE 31 March 2017, the highest percentage ratio applicable to the disposal pursuant to paragraph 10.02(g) of the Listing Requirements is 29.35%. 11. ESTIMATED TIME FRAME FOR COMPLETION Once the Proposed Disposal Mandate has been approved, VPB will have 1 year from the date of approval of VCB s shareholders at an EGM to be convened to dispose of the Disposal Shares. However, it should be noted that there is no assurance that VPB will be able to proceed with the disposal within any particular time frame after obtaining the Proposed Disposal Mandate. Subject always to the parameters as set out in Section 2.1 above, whether and when VPB will embark on the disposal, the actual number of ICB Shares to be disposed of, as well as the actual disposal price (including the amount of discount to be given, if any), will depend on a number of factors including but not limited to the then prevailing economic and equity market conditions, the mode of disposal as well as the share price of ICB at the relevant time. This announcement is dated 13 September

10 APPENDIX I INFORMATION ON ICB Information relating to ICB in this appendix has been obtained from publically available sources. The responsibility of the Board is limited to ensuring that such information has been accurately reproduced in this announcement. 1. History and business ICB was incorporated in Malaysia under the Companies Act, 1965 on 31 May 1994 as TL Technology Research (M) Sdn Bhd as a public limited company and subsequently was converted into a public limited company and assumed its name on 18 August 1999 and 20 August 1999 respectively. ICB was listed on the ACE Market of Bursa Securities on 25 July The principal activity of ICB is investment holdings. The subsidiaries of ICB are involved in: (i) (ii) (iii) (iv) (v) maintaining and servicing of e-passports, e-identification cards, banking cards, transportation and other related trusted identification s devices and equipment; construction of buildings and modern integrated farms, manufacturing of Koto industrialised building systems; provision of food and agro produce equipment; provision of waste management and power and energy related systems; and provision of academic, tertiary and professional courses. 2. Share capital As at the LPD, ICB has a share capital of RM368,538, comprising 2,471,902,462 ICB Shares. 3. Board of Directors As at the LPD, Directors of ICB are as follows: Name Dato Rozamujib bin Abdul Rahman Datuk Tan Say Jim Dato Poh Yang Hong Hussein bin Ismail Dato Dr. Abu Talib Bin Bachik Chan Feoi Chun Designation Executive Deputy Chairman Managing Director Non-Independent Non-Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director 10

11 APPENDIX I 4. Financial Information The selected financial information as extracted from the audited consolidated financial statements of ICB for the past 3 financial years from FYE 31 March 2015 to 2017 and unaudited financial statements of ICB for the 3 months financial period ended ( FPE ) 30 June 2017 are set out below: Audited FYE 31 March RM 000 RM RM 000 Unaudited FPE 30 June 2017 RM 000 Revenue 519, , , ,711 Profit/(Loss) before taxation (16,316) (12,192) (306,825) 3,991 ( PBT/ (LBT) ) Profit/(Loss) after taxation (22,713) (33,090) (314,475) 4,031 ( PAT/ (LAT) ) Non-current assets 608, , , ,801 Current assets 712, , , ,127 Total assets 1,320,032 1,076, , ,928 Current liabilities 574, , ,550 92,840 Non-current liabilities 181, , , ,642 Total liabilities 755, , , ,482 Net assets 564, , , ,446 Audited FYE 31 March 2015 ICB recorded revenue of RM519.8 million, a decrease from the FYE 31 March 2014 of RM573.2 million. The decrease in revenue was mainly due to reduced revenue from ICB s trust identification division. ICB recorded LBT of RM16.3 million as compared to PAT accorded in FYE 31 March 2014 of RM35.1 million, due to higher pre-operating costs in relation to implementation projects undertaken by the Group including the Bangladesh MRP Passport Outsourcing Project and Malaysia Goods and Services Taxation Tourist Refund Scheme, loss from disposal of a waste-to-energy incineration plant, higher charges related to impairment of goodwill and impairment loss on receivables. (Source: ICB Annual Report, 2015) Audited FYE 31 March 2016 ICB recorded revenue of RM476.3 million, a decrease from the FYE 31 March 2015 of RM519.8 million. The decrease was mainly due to lower delivery of Malaysia epassport project, slow demand for projects under its sustainable development division, and government fiscal stress constraints amid declining oil revenue. ICB recorded a decrease in LBT of RM12.2 million, from the FYE 31 March 2015 of RM16.3 million. The reduction in losses was mainly due to better margin in trusted identification division s overseas projects namely Nigeria epassports, Senegal epassports and Tanzania eid, in addition to lower operating expenses. (Source: ICB Annual Report, 2016) 11

12 APPENDIX I Audited FYE 31 March 2017 For FYE 31 March 2017, ICB recorded revenue of RM437.7 million, a decrease from RM476.3 million recorded in FYE 31 March The decrease is attributed to lower revenue from sustainable development projects namely Rimbunan Kaseh project and Sentuhan Kasih project for the State Government and FELDA respectively and the non-renewal of the Malaysia epassport project. The lower revenue was partially offset by higher revenue from the trusted identification division especially from Senegal eid cards project and delivery of banking cards for local financial institutions. Due to the corporate restructuring plan of ICB, ICB made a one-time non-cash impairment of goodwill and assets from its non-core sustainable development, education divisions and from trade and other receivables for trusted identification division. Due to these impairments, ICB recorded a LBT of RM306.8 million in FYE 31 March 2017 as compared to RM12.2 million recorded in the FYE 31 March (Source: ICB Annual Report, 2017) Unaudited FPE 30 June 2017 ICB recorded revenue of RM102.7 million, an increase from the corresponding FPE 30 June 2016 of RM79.8 million due to higher revenue contributed from trusted identification division. The increase was mainly attributed to higher delivery of Senegal eid cards and Nigeria epassports in the FPE 30 June The revenue from the education division of ICB remained similar to the corresponding FPE 30 June The revenue of sustainable development division is not significant to the ICB Group due to the completion of most of its Rimbunan Kaseh and Sentuhan Kasih projects. ICB achieved a PBT of RM4.0 million, an improvement from the LBT recorded in the corresponding FPE 30 June 2016 of RM3.7 million. 12