QUALITY CONCRETE HOLDINGS BERHAD. Company No D ANNUAL REPORT

Transcription

1 QUALITY CONCRETE HOLDINGS BERHAD Company No D ANNUAL REPORT 2016

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3 Contents Corporate Information Group s Financial Highlights Corporate Structure Group Managing Director s Statement Directors Profile Statement on Directors Responsibility Audit Committee Report Statement on Corporate Governance Statement on Risk Management and Internal Control Corporate Social Responsibility Statement 25 Directors Report and Audited Financial Statements Analysis of Shareholdings List of Properties Notice of Annual General Meeting Statement Accompanying Notice of AGM Proxy Form

4 2 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 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) David Wong Siew Chow (Independent Non-Executive Director) Henry Law Kah Kwong (Independent Non-Executive Director) Ha Tiuen Kiong (Independent Non-Executive Director) Pang Kim Soo (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 Oversea Bank (Malaysia) Berhad STOCK EXCHANGE LISTING Main Market Bursa Malaysia Securities Berhad Stock Code: 7544 Stock Name: QUALITY

5 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Group s Financial Highlights For The Financial Year ,000 Revenue (RM 000) 300,000 Total Assets (RM 000) 200,000 Shareholders Funds (RM 000) 250, , , ,000 50, , , , , , , , , ,000 50, , , , , , , ,000 50, , , , , ,648 Earnings Per Share (SEN) 8,000 6, ,000 4,000 2, ,000 2, ,000-2, ,000-6,000-8,000-10,000-12,000-4,000-6,000-8,000-10, ,905 1,170 7, , ,829-10,950-9,884-8,

6 4 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Corporate Structure 100% QUALITY CONCRETE SDN. BHD. ( D) Manufacture and sale of ready-mixed concrete, sale of concrete products and trading of goods 100% POLYFLOW PIPES SDN. BHD. ( H) Manufacture and sale of polyethylene pipes and fittings 100% KUTEX SDN. BHD. (12880-T) Manufacture and sale of woven polypropylene bags and polyethylene liners 100% LEE LING TIMBER PRODUCTS SDN. BHD. ( K) Sawmilling and manufacture of downstream timber products 70% QUALITY CONCRETE (MUKAH) SDN. BHD. ( P) Dormant 100% HONG WEI HOLDINGS SDN. BHD. (90015-K) Property development and construction 100% SERI BUMIJAYA SDN. BHD. ( K) Trading in Cement QUALITY CONCRETE HOLDINGS BERHAD Incorporated in Malaysia (Company No D) 100% AGROWELL SDN. BHD. ( V) Quarry operations and sale of aggregates and related products 100% ENRICH FORTRESS SDN. BHD. ( M) Investment in property 100% CASA USAHA SDN. BHD. ( X) Investment in property 100% QC CONSTRUCTION & ENGINEERING SDN. BHD. ( K) Construction 55% POLYFLOW (B) SDN. BHD. ** (AGO/RC/6372/05) Manufacture of polyethylene pipes for purposes of supply, sale and trade of the same ** Incorporated in Brunei Darussalam 49% KONSORTIUM WIRA JAYA SDN. BHD. ( P) Dormant

7 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Group Managing Director s Statement Dear Valued Shareholders, On behalf of the Board, 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 In the past 12 months, Malaysia economy has faced with many challenges among others the unexpected prolonged plummets of crude oil price and significant devaluations of Ringgit Malaysia. Amidst this challenging business environment the Group managed to registered better financial performance with Group revenue of RM187.2 million (2015: RM174.2 million) and a much improved Group s profit before taxation of RM7.1 million compared to the loss before taxation of RM10.9 million recorded in the preceding year. The turnaround was mainly attributed to higher profit generated from the construction and property division whilst the Group has also managed to narrow the losses from its manufacturing division through better costs control and production efficiency. Tiang Ching Kok Group Managing Director

8 6 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Group Managing Director s Statement Property and Construction division The Property development & Construction division has registered revenue of RM62.8 million during the year up by RM5.9 million compared to the last financial year mainly due to the revenue of RM35.4 million from the sale of its completed commercial shop unit however, revenue from construction was lower at RM27.4 million from RM50.1 million due to completion of project in hand. Profit before taxation was up by RM4.0 million compared to the RM0.7 million recorded in the preceding year. Manufacturing division For year under review, the Manufacturing division has recorded revenue of RM121.6 million up compared to RM114.7 million the year earlier. The Ready-mixed concrete division experienced a slight decrease in revenue as the construction industry is experiencing a slow down with revenue at RM81.4 million (2015: RM83.1 million). Due to the decrease revenue and increase in costs of production the loss before taxation has increased from RM0.2 million to RM1.2 million for the year. The Timber product division has also experienced negative growth as revenue was down at RM17.1 million from RM18.8 million recorded in the last financial year due to weaker oversea market. However, it registered a smaller loss before taxation for the year at RM0.3 million compared to last year s RM4.9 million arising from the adjustment on inventory write down. The revenue from HDPE pipes division has gone up by RM6.5 from the RM14.7 million recorded in the previous financial year. This has helped to shrink its loss before taxation from RM2.5 million from last financial year to RM1.1 million in the current year. PROSPECT It is expected that both world and Malaysia economies will continue to grow on a moderate rate with Malaysia s GDP projected to hover somewhere between 4.0% to 4.5% next year. Market uncertainty will continue to linger in the coming year with costs of doing business continue to rise and more competitions is expected. Nonetheless, with the recent launching of the RM16.6 billion Pan Borneo Highway and as one of the major construction material suppliers in the State, the Group is optimistic that it would be able to capitalize on this initiative. The Group s property and construction division will roll out its new property development project in the coming year and at the same time seeking opportunity to participate in profitable projects. Going forward, the Group will step up its efforts to be more competitive and continue to identify new business strategies for future growth and expansion. 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 continue support and confident 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. Tiang Ching Kok GROUP MANAGING DIRECTOR The earnings per share in the current year is at 9.63 sen compared to loss per share of sen in the last financial year.

9 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Directors Profile TIANG CHING KOK Managing Director Aged 42, Malaysian Mr. Tiang Ching Kok was appointed to the Board of 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 116 to 117 of this Annual Report. He attended all the two (2) Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 10 years. PETER HA TIUEN KIONG Independent Non-Executive Director Aged 48, 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 all the two (2) Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 10 years.

10 8 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Directors Profile DAVID WONG SIEW CHOW Independent Non-Executive Director Aged 66, Malaysian Member of Audit Committee Member of Remuneration & Nomination Committee Mr. David Wong was appointed to the Board on 18 May Mr David Wong graduated with a Bachelor s Degree in Commerce from Nanyang University, Singapore and is a Chartered Accountant and Fellow member of Chartered Association of Certified Accountants, England. He is currently the Senior Partner of Messrs Moore Rowland International, Chartered Accountants. He has over 30 years of experience involving audit, tax and advisory matters. 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 all the two (2) Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 10 years. HENRY LAW KAH KWONG Independent Non-Executive Director Aged 70, 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 all the two (2) Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 10 years.

11 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Directors Profile PANG KIM SOO Independent Non-Executive Director Aged 59, 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 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 not attended one of the two Board Meetings held in the financial year ended 31 January He has no convictions for any offences within the past 10 years.

12 10 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statement on Directors Responsibility The Directors are required by the Companies Act, 1965 ( the Act ) to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year and the profit or loss of the Group and the Company for the financial year. As required by the Act and the Listing Requirements of Bursa Malaysia Securities, the financial statements have been prepared in accordance with the applicable MASB Approved Accounting Standards in Malaysia and the provision of the Act. The Directors consider that in preparing the financial statements for the year ended 31 January 2016 set out on pages 34 to 132, the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates. The Directors have responsibility for ensuring that the Group and the Company keep accounting records which disclose with reasonable accuracy the financial position of the Group and the Company which enable them to ensure that the financial statements comply with the Act. The Directors have general responsibility for taking such steps as are reasonably available to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

13 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 2016, 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 2 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 TERMS OF REFERENCE The terms of reference of the Audit Committee are as follows: 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.

14 12 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Audit Committee Report Authority The Audit Committee is authorised by the Board: 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 in order to perform its duties as set out in its terms of reference; 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. Duties The 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;

15 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 2016 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.

16 14 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 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 2016 was. This Audit Committee Report was approved by the Board on 27 May 2016.

17 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Statement on Corporate Governance The Board of Quality Concrete Holdings Berhad ( Board ) is committed in ensuring that the principles and best practices on structures and processes as sets out in the Malaysian Code on Corporate Governance 2012 ( Code ) are practiced throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholder value and financial performance of the Group and the Company. Details on how the Company has applied the principles and complied with the best practices set out in part I and II of the Code, pursuant to Paragraph of the Main Market Listing Requirements ( MMLR ) of Bursa Malaysia Securities are reported as below. Principle 1 - Establish clear roles and responsibilities of the Board and Management 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 Company, annual budgets and long-term business plans, taking into account the sustainability of the Company s business; oversee the conduct and governance of the Company 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 resourse plan; maintaining shareholder and investor relations for the Company; and review the adequacy and intergrity 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 reponsibility of the Board after considering the recommendations of the respective committee. Board charter The 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. 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 Employee 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.

18 16 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statement on Corporate Governance 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 is 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 statues 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. Principle 2 - Strengthen composition of the Board There are currently five (5) Directors on the Board comprising of one (1) Executive Directors 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. Nominating Committee 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 David Wong Siew Chow (Chairman); Mr Henry Law Kah Kwong; Mr Ha Tiuen Kiong; and Mr Pang Kim Soo. The terms of reference, duties and responsibilities of the Nominating Committee are summarised as follows: The terms of reference of the Nominating Committee are as follows: a. To review regularly the Board structure, size and composition, and make recommendations to the Board with regard to any adjustments that are deemed necessary and to recommend Directors to Committees of the Board; b. To be responsible for identifying and nominating candidates for the approval of the Board to fill Board vacancies as and when they arise; c. To review the required mix of skills and to assess the effectiveness of the Board, Committees of the Board and contributions of Directors of the Board; d. To review the balance between Executive and Non-Executive Directors and to ensure at least one third (1/3) of the Board is comprised of Independent Directors in compliance with the Listing Requirements; e. To recommend to the Board for the continuation (or not) in service of an Executive Director as an Executive or Non-Executive Director; f. To recommend to the Board for the continuation (or not) in service of any Director who has reached the age of 70; g. To recommend Directors who are retiring by rotation to be put forward for re-election; and h. To recommend to the Board the employment of the services of such advisers as it deems necessary to fulfill its responsibilities. i. To assess the effectiveness of the Board and Board Committees as a whole and the contribution of the Directors.

19 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 an Independent Non-Executive Director who is over age of 70, namely Henry Law Kah Kwong, 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; initiated the discussion for the on-boarding for a female Director as part of Board diversity on gender in line with the Recommendation of the Malaysian Code on Corporate Governance 2012; reviewed and approved the Directors /Key Officers Evaluation Form, Board Skills Matrix Form and Board & Board Committee Evaluation Form used in the annual assessment and evaluation of the Board, Board Committees and individual Directors. These evaluation forms take into consideration the competency, experience, character, integrity and time availability of the officers concerned. For the purpose of assessing the independence of Independent Non-Executive Directors, the criteria set out in Paragraph 1.01 of the MMLR of Bursa were used; and following the assessment of the Board, Board Committees and individual Directors, recommended for the Board s consideration to move for shareholders approval the re-appointment and/or re-election of those Directors retiring at the forthcoming Annual General Meeting. 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. David Wong Siew Chow, Mr Henry Law Kah Kwong, Mr Ha Tiuen Kiong and Mr Pang Kim Soo. During the financial year ended 31 January 2016, no meeting was held. Details of Directors remuneration for the financial year ended 31 January 2016 are as follows: Defined Salaries Contribution Benefits Total Fees & Bonus Plan in Kind Remuneration Category RM 000 RM 000 RM 000 RM 000 RM 000 Executive Directors Non-Executive Directors Total

20 18 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statement on Corporate Governance The number of Directors whose total remuneration falls within the following bands is as follows:- Executive Directors Non-Executive Directors Below RM50,000-4 RM50,001-RM100, RM100,001-RM200, RM200,001-RM250, RM250,001-RM300, RM300,001-RM350, RM350,001-RM400, RM400,001-RM450, Principle 3 Reinforce 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 judgment 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 Securities. At end of the financial year, none of the Independent Non- Executive Directors has served for a cumulative period exceeding nine (9) years. Principle 4 Foster commitment of Directors The Board meets at least twice (2) 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.

21 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Statement on Corporate Governance During the financial year under review, two (2) 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 2 out of 2 Edmund Goh Chze Jin (Resigned on ) 2 out of 2 Henry Law Kah Kwong 2 out of 2 David Wong Siew Chow 2 out of 2 Ha Tiuen Kiong 2 out of 2 Pang Kim Soo* 2 out of 2 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 Securities. During the financial year under review, Directors attended the following training: Enforcement of Latest Bursa Revamp Listing Requirements (RLR) 2015 Risk Management & Internal Control: Workshops for Audit Committee Members Analysing Your Annual Report for Mitigation Risk 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. Principle 5 Uphold integrity in financial reporting by the Company The Board is commited 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 Securities, 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 David Wong Siew Chow, 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 Securities 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 International Federation of Accountants and the Malaysian Institute of Accountants.

22 20 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statement on Corporate Governance Principle 6 Recognise and manage risks of the Group The Board acknowledges its responsibility of maintaining a good system of internal controls and risk management, and for reviewing regularly the adequacy and effectiveness of the internal control and risk management systems to ensure that shareholders; investment and the Group;s assests are safeguarded. This system can only provide reasonable, but not absolute assurance angainst any material misstatements, fraud or loss. The Statement of 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. Principle 7 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 diseeminating 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 Principle 8 Strengthen relationship between the Company and its shareholders 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 Securities, 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.

23 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Statement on Corporate Governance Additional Compliance 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 non-audit fees paid and payable to external auditors by the Group for the financial year ended 31 January 2016 amounted to RM105,500. 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.

24 22 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statement on Risk Management and Internal Control Pursuant to paragraph 15.26(b) of the Bursa Malaysia Securities Berhad s Main Market Listing Requirements The Board of Directors of Quality Concrete Holdings Berhad ( Board ) is pleased to provide the following statement on the extent of compliance with the Principles and Best Practices of good corporate governance as set out in the Malaysian Code of Corporate Governance by the Group. 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 reports 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. On a quarterly basis, the Internal Auditor 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. 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) (b) (c) (d) (e) (f) (g) (h) Review of Credit Assessment, Granting of Credit Terms and Collections Review of Invoicing Control Review of Capital Asset Management Policies and Procedure Review on Raw Material and Spare Part Management Policies and Procedure Review on Engineering and Maintenance Review of Human Resource Management Control Review on Rejects and Wastage Management Policies and Procedures Review on Inventories Management

25 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Statement on Risk Management and Internal Control 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, Executive 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. 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 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, there are no 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 Recommended Practice Guide ( RPG ) 5 (Revised), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants ( MIA ) for inclusion in the annual report of the Group for the year ended 31 January 2016, 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. RPG 5 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 27 May 2016.

26 24 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Corporate Social Responsibility 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 improved on our performance. We are committed to continuous improvement 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 business 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 in our business premises. Environment We are committed to seek in our operation continuous improvements to minimise any negative impact on the environment. We will ensure that our business activities are conducted in compliance with the applicable environment rules and regulations. Community We are committed to provide continuous support to various activities carried out by local charities and organizations.

27 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Directors Report and Audited Financial Statements Directors Report Statement by Directors and Statutory Declaration Independent Auditors Report Statements of Comprehensive Income Statements of Financial Position Consolidated Statement of Changes in Equity Statement of Changes in Equity Statements of Cash Flows Supplementary Information

28 26 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 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 Group RM 000 Company RM 000 Profit/(loss) net of tax 5,466 (3,605) ===== ===== Attributable to: Equity holders of the parent 5,584 (3,605) Non-controlling interests (118) - 5,466 (3,605) ===== ===== There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. 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. 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.

29 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Directors Report Directors The names of the directors of the Company in office since the date of the last report and at the date of this report are: Tiang Ching Kok Edmund Goh Chze Jin (Resigned on 31 December 2015) Henry Law Kah Kwong David Wong Siew Chow Ha Tiuen Kiong Pang Kim Soo 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 in Notes 9 and 10 to the financial statements) 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 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: Indirect Interest: Number of ordinary shares of RM1 each Acquired Sold Tiang Ching Kok 18,009, ,009,000 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.

30 28 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Directors Report Other statutory information (a) Before the statements of 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 allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance 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) the amount written off for bad debts or the amount of the allowance 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.

31 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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. Signed on behalf of the Board in accordance with a resolution of the directors dated 27 May Tiang Ching Kok Pang Kim Soo

32 30 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965 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 34 to 131 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 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 2016 and of their financial performance and cash flows for the year then ended. The supplementary information set out in Note 40 on page 132 to the financial statements have been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. Signed on behalf of the Board in accordance with a resolution of the directors dated 27 May Tiang Ching Kok Pang Kim Soo Statutory Declaration pursuant to Section 169(16) of the Companies Act, 1965 I, Tiang Ching Kok, being the director 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 34 to 132 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 Ching Kok at Kuching in the State of Sarawak on 27 May 2016 Tiang Ching Kok Before me, Tang King Hung (No. Q019) Commissioner of Oaths

33 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Independent Auditors Report To the Members of Quality Concrete Holdings Berhad (Incorporated in Malaysia) Report on the financial statements We have audited the financial statements of Quality Concrete Holdings Berhad, which comprise the statements of financial position as at 31 January 2016 of the Group and of the Company, and the statements of 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 a summary of significant accounting policies and other explanatory information, as set out on pages 34 to 131. Directors responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

34 32 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Independent Auditors Report to the Members of Quality Concrete Holdings Berhad (Incorporated in Malaysia) Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 January 2016 and of their financial performance and 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 1965 in Malaysia. Report on other legal and regulatory requirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following: (a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. (b) We have considered the financial statements and the auditors reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 18 to the financial statements, being financial statements that have been included in the consolidated financial statements. (c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. (d) The auditors reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.

35 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Independent Auditors Report to the Members of Quality Concrete Holdings Berhad (Incorporated in Malaysia) Other reporting responsibilities The supplementary information set out in Note 40 on page 132 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 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 HOH YOON HOONG 2990/08/16 (J) Chartered Accountant Kuala Lumpur, Malaysia Date: 30 May 2016

36 34 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statements of Comprehensive Income Group Company Note RM 000 RM 000 RM 000 RM 000 Revenue 4 187, , Cost of sales 5 (152,910) (155,259) - - Gross profit 34,331 18, Other income 6 3,674 3, Selling and marketing expenses (10,464) (10,100) - - Administrative expenses (11,616) (11,031) (2,842) (2,507) Other expenses (4,230) (8,723) (857) (755) Operating profit/(loss) 11,695 (6,929) (3,338) (2,919) Finance costs 7 (4,617) (4,021) (271) (294) Profit/(loss) before tax 8 7,078 (10,950) (3,609) (3,213) Income tax (expense)/benefit 11 (1,612) 2, Profit/(loss) net of tax 5,466 (8,796) (3,605) (2,979) Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods*: Foreign currency translation Profit/(loss) net of tax, representing total comprehensive income for the year 5,613 (8,763) (3,605) (2,979) ====== ====== ===== ===== * There is no tax effect arising from each of the components of the other comprehensive income.

37 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Statements of Comprehensive Income Profit/(loss) attributable to: Group Company Note RM 000 RM 000 RM 000 RM 000 Equity holders of the parent 5,584 (8,666) (3,605) (2,979) Non-controlling interests (118) (130) - - 5,466 (8,796) (3,605) (2,979) ====== ====== ===== ===== Profit/(loss) net of tax, representing total comprehensive income for the year Equity holders of the parent 5,731 8,893 (3,605) (2,979) Non-controlling interests (118) (130) - - 5,613 (8,763) (3,605) (2,979) ====== ====== ===== ===== Earnings per share attributable to equity holders of the parent (sen): Basic and diluted (14.95) ===== ===== The accompanying notes form an integral part of the financial statements.

38 36 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statement of Financial Position as at 31 January 2016 ASSETS Group Company Note RM 000 RM 000 RM 000 RM 000 Non-current assets Property, plant and equipment 13 41,209 42,731 1,949 2,390 Prepaid land lease payments 14 13,985 14,304 2,873 2,926 Land held for property development 15 36,319 36, Investment properties 16 13,088 13, Goodwill on consolidation Investment in subsidiaries ,027 79,027 Investment in an associate Investment securities 20 1,189 1, ,418 Deferred tax asset 32 2, Trade and other receivables 22-1, , ,575 84,559 85,761 Current assets Property development costs 15 35,563 36, Inventories 21 29,226 28, Trade and other receivables 22 55,311 58,921 70,770 54,615 Prepayments Due from customers on contracts 23(a) 17,624 12, Income tax recoverable 1,536 2, ,033 Cash and bank balances 24 19,171 15, ,377 Non-current asset classified as held for sale 25 1, , ,046 71,714 57,028 TOTAL ASSETS 269, , , ,789 ====== ====== ====== ======

39 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Statement of Financial Position as at 31 January 2016 EQUITY AND LIABILITIES Group Company Note RM 000 RM 000 RM 000 RM 000 Equity attributable to equity holders of the parent Share capital 26 57,962 57,962 57,962 57,962 Share premium 26 24,994 24,994 24,994 24,994 Other reserves Retained earnings 28 53,761 48,177 47,078 50, , , , ,639 Non-controlling interests Total equity 137, , , ,639 Non-current liabilities Loans and borrowings 29 10,701 11, Deferred tax liabilities 32 3,678 1, ,379 12, Current liabilities Loans and borrowings 29 65,433 61,687 23,834 7,212 Trade and other payables 31 49,960 57,961 2,405 1,938 Income tax payable Amount due to customers on contracts 23(b) 2,115 1, , ,766 26,239 9,150 Total liabilities 132, ,586 26,239 9,150 TOTAL EQUITY AND LIABILITIES 269, , , ,789 ====== ====== ====== ====== The accompanying notes form an integral part of the financial statements.

40 38 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Consolidated Statement of Changes in Equity Group Attributable to equity holders of the parent Non-controlling Total Non-distributable Distributable interests equity Share Share Other Retained capital premium reserves earnings (Note 26) (Note 26) (Note 27) (Note 28) Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 February ,962 24, , , ,035 Loss net of tax ,584 5,584 (118) 5,466 Other comprehensive income Total comprehensive income ,584 5,731 (118) 5,613 At 31 January ,962 24, , , ,648 ===== ===== ===== ===== ====== ====== ====== At 1 February ,962 24, , , ,798 Loss net of tax (8,666) (8,666) (130) (8,796) Other comprehensive income Total comprehensive income (8,666) (8,356) (8,323) (130) (8,453) At 31 January ,962 24, , , ,035 ===== ===== ===== ===== ====== ====== ====== The accompanying notes form an integral part of the financial statements.

41 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Company Statement of Changes in Equity Non-distributable Distributable Company Share Share Retained Total capital premium earnings equity (Note 26) (Note 26) (Note 28) RM 000 RM 000 RM 000 RM 000 At 1 February ,962 24,994 50, ,639 Loss net of tax, representing total comprehensive income for the year - - (3,605) (3,605) At 31 January ,962 24,994 47, ,034 ===== ===== ===== ====== At 1 February ,962 24,994 53, ,618 Loss net of tax, representing total comprehensive income for the year - - (2,979) (2,979) At 31 January ,962 24,994 50, ,639 ===== ===== ===== ====== The accompanying notes form an integral part of the financial statements.

42 40 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statements of Cash Flows Cash flows from operating activities Group Company Note RM 000 RM 000 RM 000 RM 000 Profit/(loss) before tax 7,078 (10,950) (3,609) (3,213) Adjustments for: Amortisation of prepaid land lease payments Bad debts written off Depreciation of property, plant and equipment 8 4,961 4, Dividend income 8 (26) (11) (25) (10) Gain on disposal of property, plant and equipment 8 (17) (202) - - Impairment loss on available-for-sale investment securities Impairment loss on investment in an associate* Impairment loss on receivables , Impairment on property, plant and equipment Interest income 8 (157) (40) (3) (3) Interest expense 7 4,357 3, Inventories written down , Loss on disposal of investment securities Net fair value (gain)/loss on investment securities 8 (177) 183 (177) 187 Property, plant and equipment written off Reversal of impairment loss on receivables 8 (599) (54) - - Unrealised foreign exchange loss/(gain) (74) - -

43 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Statements of Cash Flows Cash flows from operating activities (contd.) Group Company Note RM 000 RM 000 RM 000 RM 000 Operating profit/(loss) before working capital changes 17,352 7,457 (2,910) (2,362) Land held for property development and property development costs 674 (19,960) - - Inventories (788) 5, Receivables 5,063 (633) (904) - Prepayments 71 1, Payables (8,001) 20, Due from customers on contracts (4,775) 5, Cash generated from/(used in) operations 9,596 19,968 (3,800) (2,328) Interest paid (4,357) (3,823) (104) (61) Tax (paid)/refund (321) (880) Net cash generated from/(used in) operating activities 4,918 15,265 (3,441) (1,684) Cash flows from investing activities Purchases of investment securities (686) (660) (686) - Proceeds from disposal of investment securities 1,265-1,265 - Purchase of property, plant and equipment 13 (2,480) (2,314) - (12) Proceeds from disposal of property, plant and equipment Proceeds from disposal of prepaid land lease Placement in short term deposits with maturity more than 3 months (200) (300) - - Dividend received Investment in an associate* Interest received Additions to cash deposits pledged (4,243) Net cash (used in)/generated from investing activities (6,097) (2,724) 605 -

44 42 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Statements of Cash Flows Cash flows from financing activities Group Company Note RM 000 RM 000 RM 000 RM 000 Increase in amount due from subsidiary companies - - (15,251) (4,875) Increase in amount due to subsidiary companies Repayment of term loan (1,677) (2,266) - - Repayment of hire purchase (1,521) (2,579) (26) (201) Drawdown/(repayment) of revolving credit 10,000 (1,000) 16,000 7,000 Repayment of bankers acceptances (7,810) (2,800) - - Net cash (used in)/generated from financing activities (1,008) (8,645) 1,179 6,799 Net (decrease)/increase in cash and cash equivalents (2,187) 3,896 (1,657) 438 Effect of exchange rate changes (145) (17) - - Cash and cash equivalents at the beginning of the year 7,589 3,710 1, Cash and cash equivalents at the end of the year 24 5,257 7,589 (532) 1,125 ===== ===== ===== ===== * Amount is below RM1,000 The accompanying notes form an integral part of the financial statements.

45 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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. 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 Companies Act, 1965 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 are presented in Ringgit Malaysia (RM). 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 2015, the Group and the Company adopted the following new and amended MFRSs and IC Interpretation mandatory for annual financial periods beginning on or after 1 January Description Effective for annual periods beginning on or after Amendments to MFRS 119: Defined Benefit Plans: Employee Contributions 1 July 2014 Annual Improvements to MFRSs Cycle 1 July 2014 Annual Improvements to MFRSs Cycle 1 July 2014 The adoption of the above standards and interpretations did not have any effect on the financial performance or position of the Group and the Company.

46 44 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.2 Changes in accounting policies (contd.) Annual Improvements to MFRSs Cycle The Annual Improvements to MFRSs Cycle include a number of amendments to various MFRSs, which are summarised below. MFRS 3 Business Combinations The amendments to MFRS 3 clarifies that contingent consideration classified as liabilities (or assets) should be measured at fair value through profit or loss at each reporting date, irrespective of whether the contingent consideration is a financial instrument within the scope of MFRS 9 or MFRS 139. The amendments are effective for business combinations for which the acquisition date is on or after 1 July This is consistent with the Group s current accounting policy and thus, this amendment did not impact the Group. MFRS 8 Operating Segments The amendments are to be applied retrospectively and clarify that: - an entity must disclose the judgements made by management in applying the aggregation criteria in MFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics used to assess whether the segments are similar; and - the reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker. The Group has not applied the aggregation criteria as mentioned above. The Group continues to present the reconciliation of segment assets to total assets. MFRS 116 Property, Plant and Equipment and MFRS 138 Intangible Assets The amendments remove inconsistencies in the accounting for accumulated depreciation or amortisation when an item of property, plant and equipment or an intangible asset is revalued. The amendments clarify that the asset may be revalued by reference to observable data by either adjusting the gross carrying amount of the asset to market value or by determining the market value of the carrying value and adjusting the gross carrying amount proportionately so that the resulting carrying amount equals the market value. In addition, the accumulated depreciation or amortisation is the difference between gross and carrying amounts of the asset. This amendment did not have any impact on the Group.

47 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.2 Changes in accounting policies (contd.) MFRS 124 Related Party Disclosures The amendments clarify that a management entity providing key management personnel services to a reporting entity is a related party of the reporting entity. The reporting entity should disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. Annual Improvements to MFRSs Cycle The Annual Improvements to MFRSs Cycle include a number of amendments to various MFRSs, which are summarised below. MFRS 3 Business Combinations The amendments to MFRS 3 clarify that the standard does not apply to the accounting for formation of all types of joint arrangement in the financial statements of the joint arrangement itself. This amendment is to be applied prospectively. The Group is not a joint arrangement and thus this arrangement is not relevant to the Group. MFRS 13 Fair Value Measurement The amendments to MFRS 13 clarify that the portfolio exception in MFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of MFRS 139. MFRS 140 Investment Property The amendments to MFRS 140 clarify that an entity acquiring investment property must determine whether: - the property meets the definition of investment property in terms of MFRS 140; and - the transaction meets the definition of a business combination under MFRS 3, to determine if the transaction is a purchase of an asset or is a business combination. In previous financial years, the Group has applied MFRS 3 and not MFRS 140 in determining whether an acquisition is of an asset or is a business combination. Accordingly, this amendment did not have any impact to the Group.

48 46 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 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 intends to adopt these standards, if applicable, when they become effective. Description Effective for annual periods beginning on or after Annual Improvements to MFRSs Cycle 1 January 2016 Amendments to MFRS 116 and MFRS 138: Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016 Amendments to MFRS 116 and MFRS 141: Agriculture: Bearer Plants 1 January 2016 Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an investor and its Associate or Joint Venture Deferred Amendments to MFRS 10, MFRS 12 and MFRS 128: Investment Entities: Applying the Consolidation Exception 1 January 2016 Amendments to MFRS 11: Accounting for Acquisitions of Interests in Joint Operations 1 January 2016 Amendments to MFRS 101: Disclosure Initiatives 1 January 2016 Amendments to MFRS 127: Equity Method in Separate Financial Statements 1 January 2016 MFRS 14 Regulatory Deferral Accounts 1 January 2016 MFRS 15 Revenue from Contracts with Customers 1 January 2018 MFRS 9 Financial Instruments 1 January 2018

49 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) The directors expect that the adoption of the above standards and interpretations will have no material impact on the financial statements in the period of initial application except as discussed below: Amendments to MFRS 116 and MFRS 138: Clarification of Acceptable Methods of Depreciation and Amortisation The amendments clarify that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset forms part of the business) rather than the economic benefits that are consumed through the use of an asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group as the Group has not used a revenuebased method to depreciate its non-current assets. Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments clarify that: - gains and losses resulting from transactions involving assets that do not constitute a business, between investor and its associate or joint venture are recognised in the entity s financial statements only to the extent of unrelated investors interests in the associate or joint venture; and - gains and losses resulting from transactions involving the sale or contribution of assets to an associate of a joint venture that constitute a business is recognised in full. The amendments are to be applied prospectively to the sale or contribution of assets occurring in annual periods beginning on or after a date to be determined by Malaysian Accounting Standards Board. Earlier application is permitted. These amendments are not expected to have any impact on the Group.

50 48 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) Amendments to MFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests in Joint Operations The amendments to MFRS 11 require that a joint operator which acquires an interest in a joint operations which constitute a business to apply the relevant MFRS 3 Business Combinations principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, a scope exclusion has been added to MFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party. These amendments are to be applied prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted. The Directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group s consolidated financial statements. Amendments to MFRS 127: Equity Method in Separate Financial Statements The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associate in their separate financial statements. Entities already applying MFRS and electing to change to the equity method in its separate financial statements will have to apply this change retrospectively. For first-time adopters of MFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to MFRS. The amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments will not have any impact on the Group s and the Company s financial statements.

51 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) Amendments to MFRS 101: Disclosure Initiatives The amendments to MFRS 101 include narrow-focus improvements in the following five areas: - Materiality - Disaggregation and subtotals - Notes structure - Disclosure of accounting policies - Presentation of items of other comprehensive income arising from equity accounted investments The Directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group s and the Company s financial statements. Amendments to MFRS 10, MFRS 12 and MFRS 128: Investment Entities: Applying the Consolidation Exception The amendments clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value. The amendments further clarify that only a subsidiary that is not an investment entity itself and provides support services to the investment entity is consolidated. In addition, the amendments also provides that if an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate s or joint venture s interests in subsidiaries. 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 MFR 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.

52 50 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) MFRS 15 Revenue from Contracts with Customers (contd.) 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. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted. The Directors anticipate that the application of MFRS 15 will have a material impact on the amounts reported and disclosures made in the Group s and the Company s financial statements. The Group is currently assessing the impact of MFRS 15 and plans to adopt the new standard on the required effective date. MFRS 9 Financial Instruments In November 2014, MASB issued the final version of MFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces MFRS 139 Financial Instruments: Recognition and Measurement and all previous versions of MFRS 9. The standard 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. The adoption of MFRS 9 will have an effect on the classification and measurement of the Group s financial assets, but no impact on the classification and measurement of the Group s financial liabilities. Annual Improvements to MFRSs Cycle The Annual Improvements to MFRSs Cycle include a number of amendments to various MFRSs, which are summarised below. The directors of the Company do not anticipate that the application of these amendments will have a significant impact on the Group s and the Company s financial statements.

53 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.3 Standards issued but not yet effective (contd.) Annual Improvements to MFRSs Cycle (contd.) MFRS 5 Non-current Assets Held for Sale and Discontinued Operations The amendment to MFRS 5 clarifies that changing from one disposal methods to the other should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. There is therefore no interruption of the application of the requirements in MFRS 5. The amendment also clarifies that changing the disposal method does not change the date of classification. This amendment is to be applied prospectively to changes in methods of disposal that occur in annual periods beginning on or after 1 January 2016, with earlier application permitted. MFRS 7 Financial Instruments: Disclosures The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and arrangement against the guidance for continuing involvement in MFRS 7 in order to assess whether the disclosures are required. In addition, the amendment also clarifies that the disclosures in respect of offsetting of financial assets and financial liabilities are not required in the condensed interim financial report. MFRS 119 Employee Benefits The amendment to MFRS 119 clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used.

54 52 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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.

55 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.4 Basis of consolidation (contd.) Losses within a subsidiary are attributed to the non-controlling interests even if that results in a deficit balance. 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 noncontrolling 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 noncontrolling interests in the acquiree. The Group elects on a transaction-bytransaction 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.

56 54 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.4 Basis of consolidation (contd.) Business combinations (contd.) 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. 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. In instances where the contingent consideration does not fall within the scope of MFRS 139, it is measured in accordance with the appropriate MFRS. 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.

57 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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.

58 56 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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.

59 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.7 Property, plant and equipment (contd.) 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% 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.

60 58 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 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 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 cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating 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.

61 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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.

62 60 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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.

63 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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.

64 62 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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-for-sale 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.

65 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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.

66 64 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 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.

67 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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) Development properties Development properties are 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. Development properties are held as inventories and are measured at the lower of cost and net realisable value. The costs of development properties 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.

68 66 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.17 Land held for property development and property development costs (contd.) (b) Development properties (contd.) 2.18 Inventories Net realisable value of development properties 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.

69 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.19 Fair value measurement The Group and the Company measure financial instruments such as investment securities (fair value through profit or loss), at fair value at each reporting date. Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed, are summarised in the following notes: Investment properties Note 16 Investment securities Note 20 Financial instruments (including those carried at amortised cost) Note 35(a) Quantitative disclosures of fair value measurement hierarchy Note 35(b) 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.

70 68 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.19 Fair value measurement (contd.) 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 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.

71 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.21 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. (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.

72 70 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.21 Financial liabilities (contd.) (b) Other financial liabilities (contd.) 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.

73 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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.

74 72 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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. (b) Construction and service contracts Revenue from construction and service contracts is accounted for by the stage of completion method as described in Note 2.16.

75 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.26 Revenue (contd.) (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. 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). If, however, the legal terms of the contract are such that the construction represents the continuous transfer of work in progress to the purchaser, the percentage of completion method of revenue recognition is applied and revenue is recognised as work progresses. In the above situation, 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.

76 74 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 2.27 Income taxes 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. (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.

77 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.27 Income 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. 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.

78 76 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.27 Income taxes (contd.) (b) Deferred tax (contd.) 2.28 Segment reporting 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. 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 38, 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.

79 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Summary of significant accounting policies (contd.) 2.30 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. 3. Significant accounting estimates and judgements 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. Judgements 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 sales 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.

80 78 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Significant accounting estimates and judgements (contd.) 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) Depreciation of property, plant and equipment Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of the property, plant and equipment (excluding land and buildings) to be within 3 to 20 years. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The carrying amount of the Group s plant and equipment at the reporting date is disclosed in Note 13. A 5% difference in the expected useful lives of these assets from management s estimates would result in approximately 5% (2015: 3%) variance in the Group s loss for the year. (b) 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. A 10% difference in the estimated total construction contracts revenue or costs would result in approximately 10% (2015: 11%) variance in the Group s revenue. (c) 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.

81 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Significant accounting estimates and judgements (contd.) Key sources of estimation uncertainty (contd.) (d) Impairment of goodwill Goodwill is tested for impairment annually and at other times when such indicators exist. This requires an estimation of the value in use of the cashgenerating units to which goodwill is allocated. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in the assumptions are given in Note Revenue Group Company RM 000 RM 000 RM 000 RM 000 Construction contracts 27,417 50, Property development 35,373 6, Manufacturing and premix 121, , Trading 1, Quarry operations 1,579 1, Dividend income from investment securities , , ====== ====== ===== ===== 5. Cost of sales Cost of construction 23,578 50, Cost of property development (Note 15) 22,058 1, Cost of inventories sold 107, , , , ====== ====== ===== =====

82 80 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Other income Group Company RM 000 RM 000 RM 000 RM 000 Interest income (Note 8) Rental income (Note 8) 2,152 1, Gain on disposal of property, plant and equipment (Note 8) Management fee Reversal of impairment loss on receivables Bad debts recovered Commission received Dividend income Sundry income Fair value gain on investment securities (Note 8) Delivery charges Realised foreign currency exchange gain (Note 8) Unrealised foreign currency exchange gain (Note 8) ,674 3, ====== ====== ===== ===== 7. Finance costs Interest expense on: Bank borrowings 4,154 3, Hire purchase liabilities ,357 3, Less: Interest expense capitalised in qualifying assets Property development costs (Note 15) - (115) - - Net interest expense 4,357 3, Add: Bank charges ,617 4, ====== ====== ===== =====

83 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT (Loss)/profit before tax The following amounts have been included in arriving at (loss)/profit before tax: Group Company RM 000 RM 000 RM 000 RM 000 Amortisation of prepaid land lease payments (Note 14) Auditors remuneration: - current year underprovision in prior year Bad debts written off Depreciation of property, plant and equipment (Note 13) 4,961 4, Dividend income (Notes 4and 4 6) 6) (26) (11) (25) (10) Gain on disposal of property, plant and equipment (17) (202) - - Employee benefits expense (Note 9) 14,826 14,377 1,503 1,265 Interest expense 4,357 3, Interest income (157) (40) (3) (3) Inventories written down (Note 21) 329 2, Impairment loss on available-for-sale investment securities Impairment loss on investment in an associate* Impairment loss on trade receivables (Note 22) 763 4, Impairment loss on other receivables (Note 22) 98 1, Impairment of property, plant and equipment Loss on disposal of investment securities Property, plant and equipment written off Minimum operating lease payments: - land and buildings equipment factory office Net fair value (gain)/loss on investment securities (177) 183 (177) 187 Non-executive directors remuneration (Note 10) Realised foreign currency exchange loss/(gain) 99 (44) - - Rental income (2,152) (1,860) (156) (156) Reversal of impairment loss on trade receivables (Note 8) (581) (54) - -

84 82 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT (Loss)/profit before tax (contd.) The following amounts have been included in arriving at (loss)/profit before tax (contd.): Group Company RM 000 RM 000 RM 000 RM 000 Reversal of impairment loss on other receivables (Note 8) (18) Unrealised foreign currency exchange loss/(gain) 110 (74) - - ===== ===== ===== ===== 9. Employee benefits expense Group Company RM 000 RM 000 RM 000 RM 000 Salaries, allowances and bonus 12,943 12,427 1,296 1,101 Contributions to defined contribution plan 1,493 1, Social security contributions Other benefits ,826 14,377 1,503 1,265 ===== ===== ==== ===== Included in employee benefits expense of the Group and of the Company are Executive Directors remuneration (excluding benefits-in-kind) amounting to RM1,298,903 (2015: RM1,317,711) and RM606,028 (2015: RM580,680) respectively, as further disclosed in Note Directors remuneration 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) 1,299 1, Estimated money value of benefits-in-kind

85 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Directors remuneration (contd.) Group Company RM 000 RM 000 RM 000 RM 000 Executive (contd.): Total executive directors remuneration (including benefits-in-kind) 1,350 1, Non-executive: Fee Other emoluments Total non-executive directors remuneration (Note 8) Total directors remuneration 1,614 1, ==== ==== ==== ==== The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below: Executive directors: Number or directors RM RM RM50,000 - RM100,000-1 RM250,001 - RM300, RM300,001 - RM350,000-1 RM350,001 - RM400, Non-executive directors: Below RM50, === === 11. Income tax expense/(benefit) Group Company RM 000 RM 000 RM 000 RM 000 Income tax: - Current year income tax 1,662 1, Over provision in respect of previous years (5) (1,793) (4) (219) 1,657 (307) (4) (176)

86 84 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Income tax expense/(benefit) (contd.) Deferred tax (Note 32): - Origination and reversal of temporary differences 223 (1,984) (20) (63) - Effects of reduction in tax rate - (72) (Over)/under provision in respect previous years (268) (45) (1,847) - (58) Income tax expense/(benefit) recognised in profit or loss 1,612 (2,154) (4) (234) ===== ===== ==== ==== Current income tax is calculated at the Malaysia statutory tax rate of 24% (2015: 25%) of the estimated assessable profit for the year. A reconciliation of income tax expense/(benefit) applicable to profit/(loss) before tax at the statutory income tax rate to income tax expense/(benefit) at the effective income tax rate of the Group and of the Company is as follows: RM 000 RM 000 Group Profit/(loss) before tax 7,078 (10,950) ===== ===== Taxation at Malaysian statutory tax rate of 24% (2015: 25%) 1,699 (2,738) Income not subject to tax (1,893) (2) Expenses not deductible for tax purposes 1,590 1,590 Effect of reduction in tax rate - (72) Deferred tax assets not recognised on current year unutilised tax losses Utilisation of previously unrecognised unabsorbed capital allowances (2) - Deferred tax assets not recognised on current year other deductible temporary differences 15 - Over provision of income tax in prior years (5) (1,793) (Over)/under provision of deferred tax in prior years (268) 209 Income tax expense /(benefit) recognised in profit or loss 1,612 (2,154) ===== =====

87 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Income tax expense/(benefit) (contd.) Company Loss before tax (3,609) (3,213) ===== ===== Taxation at Malaysian statutory tax rate of 24% (2015: 25%) (866) (803) Income not subject to tax - - Expenses not deductible for tax purposes Effect of reduction in tax rate - 3 Over provision of income tax in prior years (4) (219) Deferred tax assets not recognised on unutilised business losses Under provision of deferred tax in prior years 20 2 Income tax benefit recognised in profit or loss (4) (234) ===== ===== 12. Earnings per share ( EPS ) (a) Basic Basic earnings per share amounts are calculated by dividing profit/(loss) for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year. (b) Diluted Diluted EPS amounts are calculated by dividing the profit/(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 does not issue any diluted financial instruments as at the reporting date and therefore, diluted earnings per share is presented as equal to basic earnings/(loss) per share Profit/(loss) attributable to ordinary equity holders of the parent (RM 000) 5,584 (8,666) Weighted average number of ordinary shares in issue ( 000) 57,962 57,962 Basic and diluted earnings/(loss) per share (sen) 9.63 (14.95) ===== =====

88 86 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Property, plant and equipment 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 , ,400 57,587 21,969 2,661 2, ,491 Additions ,788 1, ,068 Disposals (157) - - (157) Reclassification (Note 25) (1,663) (1,663) Written off - - (2,400) (304) - (23) (358) (3,085) Exchange difference At 31 January , ,161 23,551 2, ,813 ===== ===== ==== ===== ===== ==== ==== ======

89 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 , ,400 44,816 14,791 1, ,760 Depreciation charge for the year: Recognised in profit or loss (Note 8) ,630 1, ,961 Disposals (97) - - (97) Written off - - (2,400) (302) - (20) (358) (3,080) Exchange differences At 31 January , ,155 16,071 1,989-74,604 ===== ===== ===== ===== ===== ==== ===== ===== Net carrying amount At 31 January , ,006 7, ,209 ===== ===== ===== ===== ===== ==== ===== =====

90 88 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 Cost At 1 February , ,400 56,610 21,703 2,520 2, ,905 Additions ,609 1, ,199 Disposals (14) - - (488) (474) - - (976) Written off (1) - - (173) (457) (47) - (678) Exchange difference At 31 January , ,400 57,587 21,969 2,661 2, ,491 ===== ===== ==== ===== ===== ==== ==== ======

91 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 , ,400 42,494 14,398 1,597-68,761 Depreciation charge for the year: Recognised in profit or loss (Note 8) ,678 1, ,882 Impairment for the year Disposals (248) (420) - - (668) Written off (116) (439) (35) - (590) Exchange differences At 31 January , ,400 44,816 14,791 1, ,760 ===== ===== ===== ===== ===== ==== ===== ===== Net carrying amount At 31 January , ,771 7, ,663 42,731 ===== ===== ===== ===== ===== ==== ===== =====

92 90 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Property, plant and equipment (contd.) Office Furniture Plant Motor and Office and vehicles equipment renovation machineries Total RM 000 RM 000 RM 000 RM 000 RM 000 Company 2016 Cost At 1 February 2015/ 31 January , ,250 4,835 ==== ==== ==== ==== ===== Accumulated depreciation At 1 February ,195 2,445 Depreciation charge for the year (Note 8) At 31 January , ,420 2,886 ==== ==== ==== ==== ==== Net carrying amount At 31 January ,949 ==== ==== ==== ==== ====

93 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 4,823 Additions At 31 January , ,250 4,835 ==== ==== ==== ==== ===== Accumulated depreciation At 1 February ,003 Depreciation charge for the year (Note 8) At 31 January ,195 2,445 ==== ==== ==== ==== ==== Net carrying amount At 31 January , ,055 2,390 ==== ==== ==== ==== ==== (a) During the financial year, the Group and the Company acquired property, plant and equipment with an aggregate cost of RM5,068,013 (2015: RM3,199,410) and RMNil (2015: RM11,747) respectively of which RM2,587,800 and RMNil (2015: RM885,000 and RMNil) respectively were acquired by means of hire purchase. The carrying amount of property, plant and equipment held under hire purchase arrangements at the reporting date were RM6,939,249 (2015: RM6,724,645) and RMNil (2015: RM691,474) respectively. Property, plant and equipment are pledged as security for the related hire purchase liabilities (Note 29). (b) The net carrying amount of buildings, plant and machinery pledged as security for borrowings is RM1,141,914 (2015: RM1,146,325).

94 92 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Prepaid land lease payments Group Company RM 000 RM 000 RM 000 RM 000 At beginning of year 14,304 14,623 2,926 2,979 Amortisation for the year (Note 8) (319) (319) (53) (53) At end of year 13,985 14,304 2,873 2,926 ===== ===== ==== ==== (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 RM 000 RM 000 At beginning of year 36,319 35,776 Additions At end of year 36,319 36,319 ===== ===== Property development cost At beginning of year 36,237 16,705 Construction cost incurred 21,384 20,534 Interest expense (Note 7) Cumulative cost recognised in profit or loss (Note 5) (22,058) (1,117) At end of year 35,563 36,237 ===== ===== Certain parcels of vacant land and shophouses of the Group have been pledged as security for borrowings as disclosed in Note 29.

95 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Investment properties Cost Group RM 000 RM 000 At beginning and end of year 13,088 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 2016 is approximately RM45,000,000. 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 beginning and end of year ==== ==== 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 ==== ====

96 94 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Goodwill on consolidation (contd.) Key assumptions used in value-in-use calculations: The recoverable amount of a CGU is determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a five-year period. The assumption used for value-in-use calculations is: 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 of is 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 31.32% (2015: 20.89%). (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 is 12% (2015: 12%). (c) Terminal Value Terminal value is the net present value of all of the forecast free cash flows that are expected to be generated by the CGU after the explicit forecast period. The terminal value for Quarry Operations is RM Nil (2015: RM Nil) as the licence required for the Quarry Operations will expire on The Group believes that any reasonable possible change in the above key assumptions applied is unlikely to materially cause the recoverable amount to be lower than its carrying amount. 18. Investment in subsidiaries Company RM 000 RM 000 Unquoted shares at cost 79,027 79,027 ===== =====

97 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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

98 96 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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: Enrich Fortress Sdn. Bhd. Malaysia Dormant Casa Usaha Sdn. Bhd. Malaysia Dormant QC Construction & Engineering Sdn. Bhd. Malaysia Construction Quality Concrete Malaysia Dormant (Mukah) Sdn. Bhd. * Audited by firms other than Ernst & Young (a) Summarised financial information of Polyflow (B) Sdn. Bhd. The Group s material non-controlling interests relate to its subsidiary, Polyflow (B) Sdn. Bhd.. Hence, the summarised financial information of Polyflow (B) Sdn. Bhd., before elimination of any intra-group transactions, are presented below RM 000 RM 000 Accumulated balances of material non-controlling interest Loss allocated to material non-controlling interest (118) (130) (i) Summarised statements of financial position Non-current assets 1,173 1,196 Current assets 1,822 2,001 Total assets 2,995 3,197 Current liabilities (1,644) (1,584) Net assets 1,351 1,613 ===== =====

99 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Investment in subsidiaries (a) Summarised financial information of Polyflow (B) Sdn. Bhd. (contd.) (ii) Summarised statements of profit or loss and other comprehensive income RM 000 RM 000 Revenue 2,158 2,162 Loss for the year (262) (290) ===== ===== (iii) Summarised cash flows Net cash generated from operating activities 71 1,112 Net cash used in investing activities (13) (8) Net cash used in financing activities - (14) Net increase in cash and cash equivalents 58 1,090 Effect of exchange rate (11) 12 Cash and cash equivalents at the beginning of the year (143) (1,245) Cash and cash equivalents at the end of the year (96) (143) ===== ===== 19. Investment in an associate Group RM RM Unquoted shares at cost 49 - Less: Impairment loss on investment (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 49 - Sdn. Bhd.

100 98 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Investment in an associate (contd.) Acquisition of associate On 6 August 2015, the Group acquired 49% equity interest in Konsortium Wira Jaya Sdn. Bhd. ( KWJ ), a company incorporated in Malaysia, for a total cash consideration of RM49. KWJ is currently a dormant company and its intended principal activity is to engage in construction. 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 RM2,407 (2015: RMNil), of which is also the share of the current year s losses. The Group has no obligation in respect of these losses. 20. Investment securities Non-current Group Company RM 000 RM 000 RM 000 RM 000 Financial assets at fair value through profit or loss Equity instruments (quoted in Malaysia) 752 1, ,418 Available-for-sale Equity instruments (unquoted) Less: Impairment loss (223) (223) Total investment securities 1,189 1, ,418 ===== ===== ===== ===== Market value: Equity instruments (quoted in Malaysia) 752 1, ,418 ===== ===== ===== ===== The Group has recognised an impairment of Nil (2015: RM223,748) on available-forsale unquoted equity instruments in profit or loss.

101 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Inventories Cost Group RM 000 RM 000 Raw materials 5,034 6,400 Sawn timber 5,627 4,123 Semi-finished and finished goods 13,010 12,279 Spare parts and consumables Properties held for sale 4,311 4,390 Others ,320 27,631 Net realisable value Sawn timber - 1 Semi-finished and finished goods 906 1,083 29,226 28,715 ===== ===== A write down of inventories of RM329,362 (2015: RM2,970,562) RM2,970,56259) was was recognised as as an expense an for for inventories carried at at net net realisable value. 22. Trade and other receivables Current Group Company RM 000 RM 000 RM 000 RM 000 Trade receivables Third parties 59,535 64, Related parties 1,324 1, ,859 65, Less: Allowance for impairment (12,490) (12,990) (720) (720) Trade receivables, net 48,369 52,

102 100 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Trade and other receivables (contd.) Current (contd.) Group Company RM 000 RM 000 RM 000 RM 000 Other receivables Amount due from subsidiary companies ,513 54,262 Deposits paid to related companies 1,596 3, Sundry receivables 8,294 7,297 1,919 1,015 Less: Allowance for impairment (7,302) (7,222) (725) (725) , Advance to subcontractors 3,754 2, Deposits ,942 6,334 70,770 54,615 55,311 58,921 70,770 54,615 Non-current Trade receivables Third parties - 1, Total trade and other receivables 55,311 60,607 70,770 54,615 Add: Cash and bank balances (Note 24) 19,171 15, ,377 Total loans and receivables 74,482 75,808 71,140 55,992 ===== ====== ===== =====

103 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 (2015: 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 RM1,324,150 (2015: RM1,133,514) due from companies in which certain directors of the Group and the Company have substantial financial interest. The amount is unsecured, noninterest bearing and has credit period of 30 to 60 days. (c) Due from related companies Included in the balance due from related companies is deposits paid to a supplier of the logs and sawn timber, which is a director related company, amounting to RM1,118,869 (2015: RM2,846,144). Also included is amount due from a related company of RM476,937 (2015: RM471,502) relating to payments made on behalf of a director related company. Further details on related party transactions are disclosed in Note 34.

104 102 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 26,949 31, to 30 days past due not impaired 5,104 3, to 60 days past due not impaired 1,964 2, to 90 days past due not impaired 2, More than 91 days past due not impaired 5,046 7, ,414 14, ,363 45, Impaired 19,496 21, ,859 67, ===== ===== ==== ==== 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. The Group s trade receivables that are past due whose terms have been renegotiated amounted to RM446,858 (2015: RM607,799). 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.

105 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Trade and other receivables (contd.) Receivables that are past due but not impaired The Group has trade receivables amounting to RM14,413,681 (2015: RM14,171,073) that are past due at the reporting date but not impaired. The Group s trade receivables that are past due whose terms have been renegotiated after the year amounting to RMNil (2015: RM6,518,284). At the reporting date, trade receivables arising from export sales amounting to RM1,350,088 (2015: RM158,532) have been arranged to be settled via letters of credit issued by reputable banks in countries where the customers are based. 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: Total RM 000 RM 000 Group Trade receivables 19,496 21,334 Less: Allowance for impairment (12,490) (12,990) 7,006 8,344 ===== ====== Company Trade receivables Less: Allowance for impairment (720) (720) - - ===== ======

106 104 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Trade and other receivables (contd.) Movement in allowance accounts: Group Company RM 000 RM 000 RM 000 RM 000 At 1 February 12,990 12, Charge for the year (Note 8) 763 4, Reversal of impairment (Note 8) (581) (54) - - Write off (682) (3,338) - - At 31 January 12,490 12, ===== ===== ===== ==== Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that have defaulted on payments as well as certain renegotiated trade receivables amounting to RMNil (2015: RM2,636,501) where the renegotiated settlements are expected to exceed one year. 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 7,302 7, Less: Allowance for impairment (7,302) (7,222) (725) (725) Other receivables, net ==== ==== ==== ==== Movement in allowance accounts At 1 February 7,222 5, Chargeable for the year (Note 8) 98 1, Reversal of impairment (Note 8) (18) At 31 January 7,302 7, ==== ==== ==== ====

107 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Amount due from/(to) customers on contracts (a) Amount due from customers on contract Group RM 000 RM 000 Construction contract costs incurred to date 286, ,541 Attributable profits 6,707 5, , ,876 Less: Progress billings (276,026) (273,277) Due from customers on contracts 17,624 12,599 ====== ====== (b) Amount due to customers on contract Construction contract costs incurred to date 50,693 30,451 Attributable profits 6,454 2,788 57,147 33,239 Less: Progress billings (59,262) (35,104) Due to customers on contracts (2,115) (1,865) ====== ====== 24. Cash and bank balances Group Company RM 000 RM 000 RM 000 RM 000 Cash on hand and at bank 13,754 14, ,311 Deposit with a licenced bank 5, Investment in money market fund Cash and bank balances 19,171 15, ,377 ===== ===== ==== ==== The weighted average effective interest rate (WAEIR) of short term deposits with licensed banks of the Group at the reporting date is per annum 3.44% (2015: 3.19%). The maturities of the Group s deposits at the balance sheet date are between 30 days to 1 year (2015: 30 days to 1 year).

108 106 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Cash and cash equivalents (contd.) Other information on financial risks of cash and cash equivalents are disclosed in Note 36. For the purpose of the cash flow statements, 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) 19,171 15, ,377 Bank overdrafts (Note 29) (8,698) (6,851) (834) (186) Cash deposits pledged (4,343) (100) - - Short term deposits with maturity more than 3 months (500) (300) - - Investment in money market fund (373) (361) (68) (66) Total cash and cash equivalents 5,257 7,589 (532) 1,125 ===== ==== ==== ==== 25. Non-current asset held for sale Group RM 000 RM 000 Plant and machinery (Note 13) 1,663 - ====== ====== 26. Share capital and share premium Number of ordinary shares of RM1 each Amount Group/Company Share Total Share capital share capital (Issued capital (Issued and and fully Share and share fully paid) paid) premium premium 000 RM 000 RM 000 RM 000 At 1 February 2014/ 31 January 2015/ 31 January ,962 57,962 24,994 82,956 ===== ===== ===== =====

109 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Share capital and share premium (contd.) Authorised share capital Number of ordinary shares of RM1 Each Amount RM 000 RM 000 At 1 February 2014/ 31 January 2015/ 31 January , , , ,000 ====== ====== ====== ====== The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company s residual assets. 27. Other reserves Group Foreign exchange reserve RM 000 RM 000 At 1 February Foreign currency translation At 31 January ==== ==== The nature and purpose of each category of reserve are as follows: 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. 28. Retained earnings The Company may distribute dividends out of its entire retained earnings as at 31 January 2016 and 31 January 2015 under the single- tier system.

110 108 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Loans and borrowings Current Group Company Maturity RM 000 RM 000 RM 000 RM 000 Secured: Bank overdrafts On demand 6,975 4, Bankers acceptances days 102 7, Term loans ,804 1, Hire purchase liabilities (Note 30) ,104 1, Revolving credit 1-6 months 31,500 21,500 23,000 7,000 41,485 36,434 23,834 7,212 Unsecured: Term loans Bank overdrafts On demand 1,723 2, Bankers acceptances days 22,225 22, ,948 25, ,433 61,687 23,834 7,212 ===== ===== ===== ===== Non-current Secured: Term loans ,454 9, Hire purchase liabilities (Note 30) ,247 1, ,701 11, ===== ===== ===== ===== Total loans and borrowings Bank overdrafts (Note 24) 8,698 6, Term loans 10,258 11, Hire purchase liabilities (Note 30) 3,351 2, Bankers acceptances 22,327 30, Revolving credit 31,500 21,500 23,000 7,000 76,134 72,707 23,834 7,212 ===== ===== ===== =====

111 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Loans and borrowings (contd.) Bank overdrafts Bank overdrafts are denominated in RM, bear interest of 7.35% (2015: 7.35%) per annum and is 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 is denominated in RM, bear interest ranging from 8.10% to 8.35% (2015: 8.10% to 8.35%) per annum and are secured by a corporate guarantee from the Company. Bank overdrafts of a certain subsidiary is denominated in RM, bear interest ranging from 7.85% to 8.6% (2015: 7.85% to 8.35%) per annum and are secured by a third party first legal charge over a property as disclosed in Note 14 and a corporate guarantee from the Company. Bank overdrafts of a certain subsidiary is denominated in RM, bear interest of 7.85% (2015: 7.85% to 8.35%) per annum and are 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 from the Company. Bankers acceptances Bankers acceptances of a certain subsidiary is denominated in RM, bears interest of 1% (2015: 1%) per annum and is secured by a corporate guarantee from the Company. Bankers acceptances of a certain subsidiary is denominated in RM, bears interest ranging from 3.40% to 4.16% (2015: 3.21% to 3.64%) per annum and are secured by a corporate guarantee of the Company. Revolving credit Revolving credit bears interest of 5.4% (2015: 5.4%) per annum and 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 bears interest of 5.4% (2015: 5.09%) per annum and 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 and corporate guarantees from the Company.

112 110 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Loans and borrowings (contd.) Term loans Term loans of a certain subsidiary is denominated in RM, bear interest ranging from 7.85% (2015: 7.85%) per annum and are 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 Future minimum lease payments: Group Company RM 000 RM 000 RM 000 RM 000 Not later than 1 year 1,286 1, Later than 1 year and not later than 2 years Later than 2 years and not later than 5 years 1, Total future minimum lease payments 3,765 2, Less: Future finance charges (414) (174) - (1) Present value of hire purchase liabilities 3,351 2, ===== ===== ===== ===== Analysis of present value of hire purchase liabilities: Not later than 1 year 1,104 1, Later than 1 year and not later than 2 years Later than 2 years and not later than 5 years 1, ,351 2, Less: Amount due within 12 months (Note 29) (1,104) (1,237) - (26) Amount due after 12 months (Note 29) 2,247 1, ===== ===== ===== ===== Other information on financial risks of hire purchase liabilities are disclosed in Note 36. Hire purchase liabilities Hire purchase liabilities of subsidiaries are denominated in RM, bear interest ranging from 2.31% to 6.60% (2015: 2.31% to 6.60%) per annum.

113 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Trade and other payables Current Group Company RM 000 RM 000 RM 000 RM 000 Trade payables Third parties 13,787 16, Retention sum 6,680 9, Amount due to related companies 2,117 2, ,584 27, Other payables Accruals 1,059 1, Amount due to directors Amount due to subsidiary company - - 2,209 1,754 Amount due to related company Sundry payables 4,029 2, Deposits Provision for warranties ,806 5,069 2,405 1,938 Deferred revenue 21,570 24, Total trade and other payables 49,960 57,961 2,405 1,938 Add: Loans and borrowings (Note 29) 76,134 72,707 23,834 7,212 Less: Provision for warranties - (12) - - Less: Deferred revenue (21,570) (24,988) - - Total financial liabilities carried at amortised cost 104, ,668 26,239 9,150 ====== ====== ====== ====== (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 (2015: 30 to 120 days). Included in trade payables of the Group is an amount of RM2,117,071 (2015: RM2,005,731) 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.

114 112 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Trade and other payables (contd.) (b) Other payables Included in sundry payables of the Group is an amount of RM82,777 (2015: RM526,053) 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 related 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. 32. Deferred tax (asset)/liabilities Group Company RM 000 RM 000 RM 000 RM 000 At beginning of year 1,219 3, Recognised in profit or loss (Note 11) (45) (1,847) - (58) At end of year 1,174 1, ==== ==== ==== ==== Presented after appropriate offsetting as follows: Deferred tax assets (2,504) (581) - - Deferred tax liabilities 3,678 1, At 31 January 2016/2015 1,174 1, ==== ==== ==== ====

115 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Deferred tax (asset)/liabilities (contd.) 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 2015 (328) (2,592) (105) (3,025) Recognised in profit or loss At 31 January 2016 (285) (1,816) (97) (2,198) ==== ==== ==== ==== At 1 February 2014 (291) (1,560) - (1,851) Recognised in profit or loss (37) (1,032) (105) (1,174) At 31 January 2015 (328) (2,592) (105) (3,025) ==== ==== ==== ==== Deferred tax liabilities of the Group Property plant and equipment RM 000 At 1 February ,244 Recognised in profit or loss (872) At 31 January ,372 ===== At 1 February ,917 Recognised in profit or loss (673) At 31 January ,244 =====

116 114 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Deferred tax (asset)/liabilities (contd.) Deferred tax liabilities of the Company Property, plant and equipment RM 000 At 1 February Recognised in profit or loss - At 31 January ==== At 1 February Recognised in profit or loss (58) At 31 January ==== 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 2, ,832 - Unabsorbed capital allowances Other deductible temporary differences ,869 1,833 1,832 - ===== ===== ===== ===== As at 31 January 2016, the deferred tax assets are not recognised as it is not probable that future taxable profit will be available against which the unutilised tax losses and unabsorbed capital allowances can be utilised. The availability of the unutilised tax losses and unabsorbed capital allowances for offsetting against future profits of the Group is subject to the provisions of the Income Tax Act, 1967.

117 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 noncancellable subleases, are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Not later than 1 year Later than 1 year and not later than 5 years === === === === The lease payments recognised in profit and loss during the financial year are disclosed in Note 8. Capital commitments At 31 January 2016, the Group had commitments of RM204,050 relating to the purchase of property, plant and equipments which was approved and contracted. (2015: RM2,437,000).

118 116 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Related party disclosures (i) 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) Transactions with subsidiaries: Income Company RM 000 RM 000 Rental income ==== ==== Information regarding outstanding balances with subsidiaries as at 31 January 2016 is disclosed in Note 22. (b) 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: Income Group Company RM 000 RM 000 RM 000 RM 000 Sales of pipes/fittings Sales of concrete, cement, steel bars, stones and R.C. piles Sales of sawn timber ===== ==== ==== ==== Expenditure Rental paid Purchase of sawn timber 12,937 11, Construction works 20,678 19, ===== ===== ==== ====

119 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Related party disclosures (contd.) (ii) Compensation of key management personnel The remuneration of directors during the year was as follows: Group Company RM 000 RM 000 RM 000 RM 000 Fees Other emoluments 1,147 1, Total (Note 10) 1,614 1, ===== ===== ===== ===== 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. (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.

120 118 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Fair value of financial instruments (contd.) (a) Determination of fair value (contd.) (iv) Investment securities 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. (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 ===== ===== ===== ===== Assets for which fair values are disclosed Investment properties ,000 45,000 ===== ===== ===== =====

121 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Fair value of financial instruments (contd.) (b) Fair value hierarchy (contd.) The following table shows an analysis of financial instruments carried at fair values by level of fair value hierarchy: (contd.) Group (contd.) Level 1 Level 2 Level 3 Total RM 000 RM 000 RM 000 RM Assets measured at fair value Investment securities - quoted equity instruments 1, ,459 ===== ===== ===== ===== Assets for which fair values are disclosed Investment properties ,000 45,000 ===== ===== ===== ===== Company 2016 Assets measured at fair value Investment securities -quoted equity instruments ===== ===== ===== ===== 2015 Assets measured at fair value Investment securities -quoted equity instruments 1, ,418 ===== ===== ===== =====

122 120 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Fair value of financial instruments (contd.) (b) Fair value hierarchy (contd.) Level 3 fair value measurements i) Information about significant unobservable inputs used in Level 3 fair value measurements The following table shows the information about fair value measurements using significant unobservable inputs (Level 3) as at 31 January 2016: Fair Value Valuation Unobservable Description RM 000 techniques inputs Range Recurring fair value measurements Investment properties Freehold land 45,000 Market Sales -55% -24% comparable transactions to to 24%* 54%* 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 ii) Valuation policies and procedures The Group 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.

123 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 shortterm 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. 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.

124 122 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Financial risk management objectives and policies (contd.) (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 the carrying amount of each class of financial assets recognised in the statement of financial position. There was no significant concentration of credit risk with any entity. 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.

125 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 and provision for warranties) 28, ,390 Loans and borrowings 69,223 10,930 1,379 81,532 Total undiscounted financial liabilities 97,613 10,930 1, ,922 ====== ===== ===== ====== Company Financial liabilities Other payables 2, ,405 Loans and borrowings 25, ,758 Total undiscounted financial liabilities 28, ,163 ===== ===== ==== =====

126 124 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Financial risk management objectives and policies (contd.) (b) Liquidity risk (contd.) 2015 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 and provision for warranties) 32, ,961 Loans and borrowings 63,948 11,121 1,442 76,511 Total undiscounted financial liabilities 96,909 11,121 1, ,472 ====== ===== ===== ====== Company Financial liabilities Other payables 1, ,938 Loans and borrowings 7, ,226 Total undiscounted financial liabilities 9, ,164 ===== ===== ==== ===== (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 (2015: less than 6 months) from the reporting date.

127 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 RM353,110 (2015: RM316,721), 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 ==== ====

128 126 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 RM115,521 (2015: RM145,892) 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 2016 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.

129 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 2016 and Group Company Note RM 000 RM 000 RM 000 RM 000 Loans and borrowings 29 76,134 72,707 23,834 7,212 Trade and other payables (excluding deferred revenue and provision for warranties) 31 28,390 32,961 2,405 1,938 Less: Cash and bank balances 24 (19,171) (15,201) (370) (1,377) Net debt 85,353 90,467 25,869 7,774 Equity attributable to equity holders of the parent 137, , , ,639 Capital and net debt 222, , , ,413 ====== ====== ====== ====== Gearing ratio 38% 41% 17% 5% ====== ====== ====== ===== 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.

130 128 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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. Segment revenue, expenses and results include transactions between business segments. These transactions are eliminated on consolidation.

131 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Segment information (contd.) Property Manufacturing Investment and Adjustments development and Quarry management Total and & construction premixing Trading operations services segment eliminations Consolidated 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Revenue Sales to external customers 62, ,556 1,291 1, , ,241 Inter-segment sales ,979 2,400-33,636 (33,636) - Total revenue 62, ,813 32,270 3, ,877 (33,636) 187,241 ====== ====== ====== ===== ===== ====== ===== ======= Results Segment operating profit/(loss) 7,126 (965) (3,338) 3,843 7,852 11,695 Finance costs (2,431) (1,911) - (5) (270) (4,617) - (4,617) Income tax expense (1,612) Loss for the year 5,466 ====== Assets Segment assets 116, ,627 18,032 4, , ,559 (157,763) 267,796 ====== ====== ====== ====== ====== ====== ====== ====== Liabilities Segment liabilities 105,556 59,588 17, , ,273 (79,125) 130,148 ====== ====== ====== ===== ===== ====== ====== ======= Other information Capital expenditure - 4, ,068-5,068 ====== ====== ====== ===== ===== ====== ===== ======= Depreciation of property, plant and equipment 283 4, ,961-4,961 Amortisation of prepaid land lease payments Inventories written down Impairment loss on receivables Reversal of impairment loss on receivables - (478) (22) (99) - (599) - (599) ====== ====== ====== ===== ===== ====== ===== ======

132 130 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Segment information (contd.) Property Manufacturing Investment and Adjustments development and Quarry management Total and & construction premixing Trading operations services segment eliminations Consolidated 2015 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Revenue Sales to external customers 56, , , , ,189 Inter-segment sales - 4,483 29,269 2,258-36,010 (36,010) - Total revenue 56, ,232 30,183 3, ,199 (36,010) 174,189 ====== ====== ====== ===== ===== ====== ===== ======= Results Segment operating profit/(loss) 2,613 (7,008) (2,919) (6,929) - (6,929) Finance costs (1,919) (1,806) - (2) (294) (4,021) - (4,021) Loss for the year (10,950) ======= Assets Segment assets 125, ,628 16,483 4, , ,756 (156,135) 266,621 ======= ======= ======= ======= ======= ======= ======= ======= Liabilities Segment liabilities 118,224 60,047 16, , ,320 (69,734) 134,586 ====== ====== ====== ===== ===== ====== ====== ======= Other information Capital expenditure 379 2, ,199-3,199 ====== ====== ====== ===== ===== ====== ===== ======= Depreciation of property, plant and equipment 277 4, ,882-4,882 Amortisation of prepaid land lease payments Inventories written down - 2, ,971-2,971 Impairment loss on receivables 1,000 4, ,056-6,056 Reversal of impairment loss on receivables - (54) (54) - (54) ====== ====== ====== ===== ===== ====== ===== ======

133 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Segment information (contd.) Reconciliation of profit Group RM 000 RM 000 Segment profit/(loss) 11,695 (6,929) Income tax expense (1,612) 2,154 Finance cost (4,617) (4,021) Loss for the year 5,466 (8,796) ====== ====== Reconciliation of assets Segment operating assets 425, ,756 Gain on disposal of land (8,418) (8,418) Utilisation on disposal of land 7,852 - Investment in subsidiaries (elimination) (79,027) (79,027) Intersegment balances (elimination) (79,140) (69,734) Others - 74 Goodwill Total assets 267, ,621 ====== ====== Reconciliation of liabilities Segment operating liabilities 209, ,320 Intersegment balances (elimination) (79,125) (69,734) Total liabilities 130, ,586 ====== ====== Reconciliation of capital expenditure Purchase of property, plant and equipment 5,068 3,199 ====== ====== 39. Authorisation of financial statements for issue The financial statements for the year ended 31 January 2016 were authorised for issue in accordance with a resolution of the directors on May 2016.

134 132 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Supplementary information - breakdown of retained profits into realised and unrealised The breakdown of the retained profits of the Group and of the Company as at 31 January 2016 into realised and unrealised profits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. Group Company RM 000 RM 000 RM 000 RM 000 Total retained profits of the Company and its subsidiaries - Unrealised 1,174 1, Realised 100, ,346 47,078 50, , ,663 47,078 50,683 Less: Consolidation adjustments (47,515) (55,486) - - Retained profits as per financial statements 53,761 48,177 47,078 50,683 ====== ====== ====== ======

135 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Analysis of Shareholdings As at 09 May 2016 Authorised Share Capital : RM100,000,000 Issued and Paid-up Share Capital : RM57,962,000 comprising 57,962,000 Ordinary Shares of RM1.00 each Class of Shares : Ordinary Shares of RM1.00 each 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, ,139, ,001 to 100, ,260, ,001 to less than 5% of issued shares ,317, % and above of issued shares ,363, , ,962, Substantial Shareholders as at 09 May 2016 According to the Register of substantial shareholders, the substantial shareholders of the Company as at 09 May 2016 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, The Estate of The Late Dato Tiang Ming Sing 5,700, ,309, List of Directors Interest According to the Register of Directors Shareholdings, the interest of Directors in the ordinary shares of the Company as at 09 May 2016 are as follows: Direct % Deemed interest % 1. Tiang Ching Kok 432, ,576, Henry Law Kah Kwong David Wong Siew Chow Ha Tiuen Kiong Pang Kim Soo

136 134 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Thirty Largest Shareholers As at 09 May 2016 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, RHB Capital Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Tiang Ming Sing 5,700, Affin Hwang Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Wangsa Bumimas Timber Sdn. Bhd. 2,805, 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, Cahaya Besi (Sarawak) Sdn. Bhd. 2,004, HLB Nominees (Tempatan) Sdn. Bhd. 9. 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 1,742, Kenanga Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Too Boon Siong 1,250, Maybank Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Wee Song Ching 1,091, Amsec Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Law Wee 636, Kenanga Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Tiang Chiin Ling 525, Affin Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Toh Pik Chai 490, Encorp Properties Sdn. Bhd. 448, Tiang Chiin Yew 432, Tiang Ching Kok 432, Amsec Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Chiaw Lik Chiat 420, Maybank Nominees (Tempatan) Sdn. Bhd. 264, Pledged securities account for Too Boon Siong 22. Datuk Hajjah Rodiah Binti Mahmud 260, Law Wee 254, Datuk Mazelan Bin Bugo 164, CIMSEC Nominees (Tempatan) Sdn. Bhd. 156, Pledged securities account for Abdul Aziz Bin Husain 26. CIMSEC Nominees (Tempatan) Sdn. Bhd. CIMB Bank for Bong Lee Min 150, Chieng Ngee Ong 136, Wong You Kee 130, Ngu Kee Tiong 115, Amsec Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Abd Rasyid Bin Abdullah 110, ,681,

137 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT List of Properties As at 31 January 2016 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 ,992,944 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 8 & 16 8,521,794 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 12 1,037,152 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 - 530,120 Land acquired in 1997 Tanjung Manis of approx Timber processing zone hectares Lot 368, Blk 53, Mukah Industrial land Office, Leasehold ,233 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 - 60,000 Land acquired Seniawan Sbrang, Bau approx hectares 2034 on No. 8, Level 10 1 unit Condominium Staff usage Leasehold 15 1 Building acquired Chonglin Plaza, of approx. 1,226 sq on Kuching feet 45,753,495

138 136 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Twentieth 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 Thursday, 30 June 2016 at a.m. for the following purposes :- ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the financial year ended 31 January 2016 together with the Reports of the Directors and Auditors thereon. 2. To re-elect Mr Ha Tiuen Kiong, 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. Resolution 1 3. To consider and, if thought fit, to pass the following resolution pursuant to Section 129(6) of the Companies Act 1965: THAT pursuant to Section 129(6) of the Companies Act 1965, Henry Law Kah Kwong, who is over the age of seventy (70) years, be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting. 4. To approve Directors fees of RM72, 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. Resolution 2 Resolution 3 Resolution 4 SPECIAL BUSINESS To consider and, if thought fit, to pass the following as ordinary resolutions: 6. Authority to issue Shares Pursuant to Section 132D of the Companies Act, 1965 That subject to Section 132D of the Companies Act, 1965 and approvals of the relevant governmental/regulatory authorities, the Directors be and are hereby empowered to issue and allot shares in the Company, at any time to such persons 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 issued pursuant to this Resolution does not exceed ten per centum (10%) of the issued and paid-up 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 commence immediately upon the passing of this resolution and continue to be in force until the conclusion of the next Annual General Meeting of the Company. Resolution 5

139 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT Notice of Annual General Meeting 7. Proposed Renewal of Shareholders Mandate For Recurrent Related Party Transaction Of A Revenue Or Trading Nature That subject to the Companies Act, 1965, the Memorandum and Articles of Association of the Company and 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 2016 with the related parties mentioned therein which are necessary for Quality Concrete Holdings Berhad Group s day-to-day operations subject to the following:- 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. Resolution 6 8. To transact any other business for which due notice shall have been given in accordance with the Companies Act, 1965 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 2016

140 138 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 2016 Notice of Annual General Meeting Explanatory Notes to Special Business a) Ordinary Resolution 6 Authority to allot shares pursuant to Section 132D of the Companies Act, The Ordinary Resolution proposed under Resolution 5 of the Agenda is a renewal of the General Mandate for the Directors to issue and allot shares pursuant to Section 132D of the Companies Act, This resolution will give authority to the Directors of the Company, from the date of the above Annual General Meeting, to issue and allot shares in the Company up to and not exceeding in total ten per cent (10%) of the issued and paid-up share capital of the Company for the time being, for such purpose as they consider would be in the interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of 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 Nineteenth Annual General Meeting held on 3 July 2015 and which will lapse at the conclusion of the Twentieth Annual General Meeting to be held on 30 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 Notes : 1. Only Depositors whose names appear in the General Meeting Record of Depositors as at 23 June 2016 be regarded as Members and shall be entitled to attend, speak and vote at the Annual General Meeting. 2. 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. 3. 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. 4. 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 pursuant to Section 147 of the Companies Act, 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. 6. 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 forty-eight (48) hours before the time for holding the meeting.

141 QUALITY CONCRETE HOLDINGS BERHAD ANNUAL REPORT 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 re-election at the Twentieth Annual General Meeting of the Company are as follows: Henry Law Kah Kwong Ha Tiuen Kiong 2. Details of attendance of Directors at Board Meetings Please refer to page 19 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, 30 June 2016 at a.m. 4. Further details of Directors seeking re-election at the Twentieth Annual General Meeting can be found in page 7 to 8 of the Annual Report.

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143 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 Thursday, 30 June 2016 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 Ha Tiuen Kiong, 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-appoint Henry Law Kah Kwong in accordance with Section 129(6) of the Companies Act To approve Directors fees of RM72,000 in respect of the financial year ended 31 January To re-appoint Messrs. Ernst & Young as Auditors and to authorise the Directors to fix their remuneration. 5. To authorise Directors to allot and issue Shares Pursuant to Section 132D of the Companies Act, Proposed renewal of shareholders mandate for recurrent related party transaction of a revenue or trading nature. Signed this day of, 2016 Signature / Common Seal of Shareholder NOTES: 1. Only Depositors whose names appear in the General Meeting Record of Depositors as at 23 June 2016 be regarded as Members and shall be entitled to attend, speak and vote at the Annual General Meeting. 2. 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. 3. 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. 4. 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 pursuant to Section 147 of the Companies Act, 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. 6. 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 forty-eight (48) hours before the time for holding the meeting.

144 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

145

146 QUALITY CONCRETE HOLDINGS BERHAD Incorporated in Malaysia (Company No D) Room 209, 2nd Floor, Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman, Kuching, Sarawak, Malaysia. Tel : Fax : info@qchb.com.my