PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) REPORTS AND FINANCIAL STATEMENTS 31 JULY 2017 CONTENTS PAGE CORPORATE INFORMATION 2-4 DIRECTORS REPORT 5-11 DIRECTORS STATEMENT 12 STATUTORY DECLARATION 12 INDEPENDENT AUDITORS REPORT TO THE MEMBERS 13-20 STATEMENTS OF FINANCIAL POSITION 21 STATEMENTS OF COMPREHENSIVE INCOME 22-23 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 24-25 STATEMENT OF CHANGES IN EQUITY 26-27 STATEMENTS OF CASH FLOWS 28-29 NOTES TO THE FINANCIAL STATEMENTS 30-96 SUPPLEMENTARY INFORMATION 97 1
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) CORPORATE INFORMATION Directors Ahmad Mustapha Ghazali (Executive Chairman) Lau Mong Ying (Managing Director) Lau Mong Fah (Non-Independent Non-Executive Director) Khadmudin Bin Mohamed Rafik (Independent Non-Executive Director) Chin Chew Mun (Independent Non-Executive Director) Lin, Cheng-Lang (Independent Non-Executive Director) Boo Chin Liong (Independent Non-Executive Director) Company Secretaries Lee Peng Loon (MACS 01258) P ng Chiew Keem (MAICSA 7026443) Audit Committee Chin Chew Mun (Chairman, Independent Non-Executive Director) Lin, Cheng-Lang (Independent Non-Executive Director) Lau Mong Fah (Non-Independent Non-Executive Director) Boo Chin Liong (Independent Non-Executive Director) Nominating Committee Khadmudin Bin Mohamed Rafik (Chairman, Independent Non-Executive Director) Lin, Cheng-Lang (Independent Non-Executive Director) Chin Chew Mun (Independent Non-Executive Director) 2
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) CORP78 ORATE INFORMATION (Incorporate Remuneration Committee Lau Mong Ying (Chairman, Managing Director) Lau Mong Fah (Non-Independent Non-Executive Director) Chin Chew Mun (Independent Non-Executive Director) Registered Office 51-21-A Menara BHL Bank Jalan Sultan Ahmad Shah 10050 Penang Tel: 04-2108833 Fax: 04-2108831 Business Address 531 Batu 2 ½ Jalan Kluang 83000 Batu Pahat Johor Darul Takzim Tel: 07-4318388 Fax: 07-4310133 E-Mail: enquiries@prolexus.com.my Website: www.prolexus.com.my Share Registrar Bina Management (M) Sdn. Bhd. Lot 10 The Highway Centre Jalan 51/205 46050 Petaling Jaya Selangor Darul Ehsan Tel: 03-77843922 Fax: 03-77841988 3
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) CORPORATE INFORMATION Auditors Grant Thornton Chartered Accountants Principal Bankers Citibank Berhad Hong Leong Bank Berhad HSBC Bank Malaysia Berhad Public Bank Berhad RHB Bank Berhad Standard Chartered Bank Malaysia Berhad Bank of China Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad Stock name: PRLEXUS Stock code: 8966 4
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) DIRECTORS REPORT FOR THE FINANCIAL YEAR ENDED 31 JULY 2017 The directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 July 2017. PRINCIPAL ACTIVITIES The principal activities of the Company consist of investment holding and provision of management services. The principal activities of the subsidiaries are disclosed in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. RESULTS GROUP RM 000 COMPANY RM 000 Profit for the financial year 27,227 1,879 Attributable to: Owners of the Company 22,610 1,879 Non-controlling interests 4,617-27,227 1,879 RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the notes to the financial statements. DIVIDENDS Since the end of the previous financial year, the Company has declared the following dividends: (i) Final single tier dividend of 1.75 sen per share amounting to RM3,014,212 in respect of the financial year ended 31 July 2016 paid on 16 January 2017; and (ii) Single tier interim dividend of 1.25 sen per share amounting to RM2,171,644 in respect of the financial year ended 31 July 2017 paid on 15 August 2017. 5
At the forthcoming Annual General Meeting, a final single tier dividend of 1 sen per share amounting to RM1,737,802 in respect of the financial year ended 31 July 2017 will be proposed for shareholders approval. The financial statements for the current financial year do not reflect the proposed dividends. Such dividends, if approved by the shareholders will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 July 2018. SHARE CAPITAL AND DEBENTURE During the financial year, the Company increased its issued and paid-up share capital from RM88,388,620 to RM122,837,799 by way of: (i) Issuance of 2,273,980 new ordinary shares pursuant to the exercise of 2,273,980 Warrants at an exercise price of RM1.20 per ordinary share; (ii) Issuance of 945,750 new ordinary shares for cash arising from the exercise of employees share options at a weighted average exercise price of RM0.71 per ordinary share; and (iii) Reclassification of share premium pursuant to Section 618(2) of the Companies Act 2016 amounting to RM32,040,054 to become part of the Company s share capital. The new ordinary shares issued during the year ranked pari passu in all respects with the existing ordinary shares of the Company. Other than the foregoing, the Company did not issue any other share or debenture. WARRANTS The salient features of the Warrants are disclosed in Note 18.1 to the financial statements. Details of Warrants issued to directors are disclosed in the section on directors interests in this report. TREASURY SHARES During the financial year, the Company did not repurchase any of its issued ordinary shares from the open market. As at 31 July 2017, the Company held a total of 6,265,400 treasury shares out of its 179,996,970 issued ordinary shares. Further relevant details are disclosed in Note 17 to the financial statements. 6
EMPLOYEES SHARE OPTION SCHEME ( ESOS ) The Company s ESOS is governed by the By-Laws approved by the shareholders at the Extraordinary General Meeting held on 3 September 2013, and the ESOS will be in force for a duration of five years expiring on 8 September 2018. The details of options over unissued ordinary shares granted to eligible employees and directors of the Group during the financial year are as follows: Grant date Exercise price RM ----------------Number of options over ordinary shares--------------- Balance Granted Balance at and at 1.8.16 accepted Exercised Lapsed 31.7.17 12.9.13 0.500 3,776,250 - (288,900) (97,300) 3,390,050 7.5.14 0.722 642,475 - (228,250) (2,100) 412,125 5.9.14 0.775 1,271,575 - (355,000) - 916,575 23.12.14 0.804 560,000 - - - 560,000 8.9.16 1.234-1,491,000 (73,600) (28,000) 1,389,400 The salient features of the ESOS are disclosed in Note 36 to the financial statements. During the financial year, the Company has been granted exemption by the Companies Commission of Malaysia from having to disclose in this report the names of the options holders, other than directors, who have been granted options to subscribe for less than 25,000 ordinary shares. The names of option holders granted to subscribe for 25,000 or more ordinary shares during the financial year are as follows: Name -------- Number of options over ordinary shares -------- Granted Balance and at accepted Exercised Lapsed 31.7.17 Choong Chee Mun 90,000 - - 90,000 Chua Yew Huat 50,000 - - 50,000 Chiu Hui Fang 40,000 - - 40,000 Kevin Chin Mun Yew 35,000 - - 35,000 Tan Tai Sung 30,000 - - 30,000 Koh Lee Chin 25,000 - - 25,000 Goh Ming Choo 25,000 - - 25,000 Koo Yeok Lee 25,000 - - 25,000 Ter Bee Tin 25,000 - - 25,000 Oset Anak Awel 25,000 - - 25,000 So Ah Sai 25,000 - - 25,000 Mohd Nazaruddin Bin Ithnin 25,000 (4,800) - 20,200 Lim Yeow Kwang 25,000 - - 25,000 Details of options granted to directors are disclosed in the section on directors interest in this report. 7
DIRECTORS The directors who served since the date of the last report are as follows: Directors of the Company: Ahmad Mustapha Ghazali Lau Mong Ying Lau Mong Fah Khadmudin Bin Mohamed Rafik Chin Chew Mun Lin, Cheng-Lang Boo Chin Liong Directors of the subsidiaries: Lau Boon Hwa Choong Chee Mun Goh Ming Choo Lee Eng Sia Cheah Chin Teong Chen, Cheng-Chun Liao Yun Mu DIRECTORS INTERESTS IN SHARES According to the Register of Directors Shareholdings, the interests of the directors in office at the end of the financial year in shares, warrants and options in the Company during the financial year are as follows: -------------- Number of ordinary shares ------------- Balance at 1.8.16 Bought Sold 8 Balance at 31.7.17 The Company Direct Interest: Ahmad Mustapha Ghazali 4,423,505 8,000-4,431,505 Lau Mong Ying 12,690,740 398,500-13,089,240 Lau Mong Fah 905,500 60,000-965,500 Khadmudin Bin Mohamad Rafik 1,222,200 - - 1,222,200 Chin Chew Mun 420,000 - - 420,000 Lin, Cheng-Lang 1,652,170 - - 1,652,170 Boo Chin Liong 298,500 - - 298,500 Deemed Interest: Ahmad Mustapha Ghazali 16,682,400 10,000-16,692,400 Lau Mong Ying 17,480,700 - - 17,480,700 Lau Mong Fah 17,480,700 - - 17,480,700
---------------- Number of Warrants --------------- Balance at 1.8.16 Bought Sold Balance at 31.7.17 The Company Direct Interest: Ahmad Mustapha Ghazali 1,518,545 - - 1,518,545 Lau Mong Ying 4,317,926 - - 4,317,926 Lau Mong Fah 306,300 - - 306,300 Khadmudin Bin Mohamad Rafik 407,400 - - 407,400 Chin Chew Mun 140,000 - - 140,000 Lin, Cheng-Lang 550,723 - - 550,723 Boo Chin Liong 102,500 - - 102,500 Deemed Interest: Ahmad Mustapha Ghazali 5,717,740 - - 5,717,740 Lau Mong Ying 6,000,210 - - 6,000,210 Lau Mong Fah 6,000,210 - - 6,000,210 --- Number of options over ordinary shares --- Balance at 1.8.16 Exercised Lapsed Balance at 31.7.17 The Company Direct Interest: Lau Mong Ying 3,200,000 (200,000) - 3,000,000 Lau Mong Fah 210,000 (60,000) - 150,000 Boo Chin Liong 105,000 - - 105,000 DIRECTORS REMUNERATIONS AND BENEFITS During the financial year, the remunerations and other benefits received and receivable by the directors of the Group and of the Company are as follows: GROUP RM 000 COMPANY RM 000 Salary, allowance and bonus 3,629 1,290 Defined contribution plan 473 241 Equity settled share-based payment 91 25 Fees 2,795 1,475 Benefits-in-kind 68 31 7,056 3,062 9
Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the directors shown in the financial statements) by reason of a contract made by the Company or a related corporation with a director or with a firm of which the director is a member or with a company in which the director has a substantial financial interest, other than those related party transactions disclosed in the notes to the financial statements. During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. INDEMNITY AND INSURANCE COSTS The total amount of premium paid for the Directors and Officers Liability Insurance by the Group and by the Company is RM15,000. OTHER STATUTORY INFORMATION Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps: (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts, and to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances: (i) (ii) (iii) (iv) that would render the amount written off for bad debts or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent, and that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, and that would render any amount stated in the financial statements of the Group and of the Company misleading, and which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. At the date of this report, there does not exist: (i) any charge on the assets of the Group and of the Company that has arisen since the end of the financial year which secures the liabilities of any other person other than those disclosed in the notes to the financial statements, and 10
(ii) any contingent liability in respect of the Group and of the Company that has arisen since the end of the financial year. In the opinion of directors: (i) (ii) (iii) no contingent liability or other liability of the Group and of the Company has become enforceable, or is likely to become enforceable, within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due, the results of 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, and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the current financial year in which this report is made. AUDITORS The total amount of fees receivable by the auditors, Grant Thornton, as remuneration for their services as auditors of the Group and of the Company for the financial year ended 31 July 2017 are RM188,000 and RM42,000 respectively. There was no indemnity given to or insurance effected for the auditors of the Company. The auditors, Grant Thornton, have expressed their willingness to continue in office. Signed in accordance with a resolution of the directors:...... Ahmad Mustapha Ghazali Executive Chairman...... Lau Mong Ying Managing Director Date: 2 October 2017 11
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) DIRECTORS STATEMENT In the opinion of the directors, the financial statements set out on pages 21 to 96 are properly drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 July 2017 and of their financial performance and cash flows for the financial year then ended. In the opinion of the directors, the supplementary information set out on page 97 has been compiled in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad. Signed in accordance with a resolution of the directors:...... Ahmad Mustapha Ghazali...... Lau Mong Ying Date: 2 October 2017 STATUTORY DECLARATION I, Choong Chee Mun, the officer primarily responsible for the financial management of Prolexus Berhad do solemnly and sincerely declare that the financial statements set out on pages 21 to 96 and the supplementary information set out on page 97 are to the best of my knowledge and belief, 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, 1960. Subscribed and solemnly declared by ) the abovenamed at Puchong, Selangor ) this 2nd day of October 2017. ) Before me,... Choong Chee Mun... Commissioner for Oaths Ng Say Jin (B195) 12
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) Report on the Audit of Financial Statements Opinion We have audited the financial statements of Prolexus Berhad, which comprise the statements of financial position as at 31 July 2017 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 financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 21 to 96. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 July 2017 and of their financial performance and of their cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Group and of the Company in accordance with the By- Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. 13
Independent Auditors Report To The Members Of Prolexus Berhad (cont d) Company No. 250857-T (Incorporated in Malaysia) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter Valuation net of inventories (Note 9 to the financial statements) The Group holds significant inventories as at 31 July 2017 which exposed the Group to a risk that the inventories may become slow moving or obsolete and eventually non-saleable or selling below their carrying value. We focused on this area as it involves estimation uncertainty by the directors in determining the accuracy of provision for inventory obsolescence and in assessing the net realisable value of the inventories. How our audit addressed the Key Audit Matter Our audit procedures included the following: Obtaining an understanding of: - the Group s inventory management process; - how the Group identifies and assesses inventory write downs; and - how the Group makes the accounting estimates for inventory write downs. Reviewing the consistency of the application of management s methodology in determining and estimating the provision from year to year. Reviewing and testing the reliability of the aging report of inventories provided by the management. Reviewing and testing the net realisable value of inventories on sampling basis. 14
Independent Auditors Report To The Members Of Prolexus Berhad (cont d) Company No. 250857-T (Incorporated in Malaysia) Key Audit Matters (cont d) Key Audit Matter Assessment on impairment of trade receivables (Note 10 to the financial statements) The Group has significant trade receivables as at 31 July 2017 and it is subject to credit risk exposure. We focused on this area as the determination of impairment for the past due receivables requires management s judgement in assessing the collectability of the debts after considering their ageing and historical loss experience for receivables with similar characteristics. How our audit addressed the Key Audit Matter Our audit procedures in relation to management s impairment assessment included the following: Obtaining an understanding of: - the Group s control over the customers collection process; - how the Group identifies and assesses the impairment of receivables; and - how the Group makes the accounting estimates for impairment. Reviewing the consistency of the application of management s methodology for calculating the impairment from year to year. Reviewing the ageing analysis of trade receivables and testing the reliability thereof. Reviewing subsequent collections for major customers and overdue amounts. Assessing recoverability of trade receivables that are past due but not impaired by reviewing their historical loss experience and past historical repayment trends. Examining other evidence including customer correspondences. There are no key audit matters in relation to the financial statements of the Company. 15
Independent Auditors Report To The Members Of Prolexus Berhad (cont d) Company No. 250857-T (Incorporated in Malaysia) Information Other than the Financial Statements and Auditors Report Thereon The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. As at the date of our report, except for the Directors Report, the remaining other information has not been made available to us for our reading and accordingly we are unable to report in this regard. However, if after reading the other information when available and we conclude there is a material misstatement therein, we will communicate same to the directors of the Company. Responsibilities of the Directors for the Financial Statements The directors of the Company are responsible for the preparation of the financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. 16
Independent Auditors Report To The Members Of Prolexus Berhad (cont d) Company No. 250857-T (Incorporated in Malaysia) In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the Group s and the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 17
Independent Auditors Report To The Members Of Prolexus Berhad (cont d) Company No. 250857-T (Incorporated in Malaysia) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s and of the Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s and the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in these financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the Group s and of the Company s financial statements, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 18
Independent Auditors Report To The Members Of Prolexus Berhad (cont d) Company No. 250857-T (Incorporated in Malaysia) We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current financial year and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Other Reporting Responsibilities The supplementary information set out on page 97 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. 19
Independent Auditors Report To The Members Of Prolexus Berhad (cont d) Company No. 250857-T (Incorporated in Malaysia) Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Grant Thornton No. AF: 0042 Chartered Accountants Tan Chee Beng No. 2664/02/19 (J) Chartered Accountant Date: 2 October 2017 Penang 20
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) STATEMENTS OF FINANCIAL POSITION AS AT 31 JULY 2017 GROUP COMPANY 2017 2016 2017 2016 NOTE RM'000 RM'000 RM'000 RM'000 ASSETS Non-current assets Property, plant and equipment 4 106,970 83,080 433 161 Land use rights 5 12,058 11,847 - - Investment in subsidiaries 6 - - 72,329 37,063 Other investments 7 527 502 527 502 Goodwill on consolidation 8 2,712 2,712 - - 122,267 98,141 73,289 37,726 Current assets Inventories 9 11,292 20,767 - - Trade receivables 10 61,471 67,450 - - Other receivables, deposits and prepayments 11 9,244 9,075 46 170 Amount due from subsidiaries 12 - - 42,005 45,030 Current tax assets 222 162 147 152 Derivative financial instruments 13-243 - - Deposits with financial institutions 14 42,247 58,973 17,606 56,630 Cash and bank balances 15 62,607 49,010 6,920 960 187,083 205,680 66,724 102,942 TOTAL ASSETS 309,350 303,821 140,013 140,668 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 16 122,838 88,389 122,838 88,389 Share premium 16-30,845-30,845 Treasury shares 17 (1,490) (1,490) (1,490) (1,490) Reserves 18 5,812 3,357 1,262 718 Retained profits 19 92,426 75,304 3,684 6,985 219,586 196,405 126,294 125,447 Non-controlling interests 24,167 15,566 - - Total equity 243,753 211,971 126,294 125,447 Non-current liabilities Borrowings 20 6,080 8,063 2,429 3,320 Deferred tax liabilities 21 2,061 2,161 - - 8,141 10,224 2,429 3,320 Current liabilities Trade payables 22 4,393 27,138 - - Other payables and accruals 23 42,724 38,211 4,261 2,872 Borrowings 20 8,131 13,710 7,029 9,029 Current tax liabilities 2,208 2,567 - - 57,456 81,626 11,290 11,901 Total liabilities 65,597 91,850 13,719 15,221 TOTAL EQUITY AND LIABILITIES 309,350 303,821 140,013 140,668 The notes set out on pages 30 to 96 form an integral part of these financial statements. 21
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 JULY 2017 GROUP COMPANY 2017 2016 2017 2016 NOTE RM'000 RM'000 RM'000 RM'000 Revenue 24 348,510 402,737 8,089 13,767 Cost of sales (276,387) (321,494) - - Gross profit 72,123 81,243 8,089 13,767 Other income 9,034 4,978 1,233 343 Administrative expenses (33,708) (33,098) (6,599) (6,273) Selling and distribution expenses (8,763) (10,570) - - Other expenses (958) (744) - - Operating profit 37,728 41,809 2,723 7,837 Finance costs (1,358) (1,123) (614) (617) Profit before tax 25 36,370 40,686 2,109 7,220 Tax expense 26 (9,143) (7,439) (230) (49) Profit for the financial year 27,227 33,247 1,879 7,171 Other comprehensive income/(loss), net of tax: Items that will be reclassified subsequently to profit or loss: Fair value gain on available-for-sale financial assets 10-10 - Foreign currency translation differences for foreign operations 2,292 (668) - - Other comprehensive income/(loss) for the financial year 2,302 (668) 10 - Total comprehensive income for the financial year 29,529 32,579 1,889 7,171 The notes set out on pages 30 to 96 form an integral part of these financial statements. 22
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 JULY 2017 GROUP COMPANY 2017 2016 2017 2016 NOTE RM'000 RM'000 RM'000 RM'000 Profit attributable to: Owners of the Company 22,610 28,349 1,879 7,171 Non-controlling interests 4,617 4,898 - - Total comprehensive income attributable to: 27,227 33,247 1,879 7,171 Owners of the Company 24,262 27,802 1,889 7,171 Non-controlling interests 5,267 4,777 - - Earnings per share attributable to owners of the Company (sen) - Basic 27 13 19 - Diluted 27 12 17 29,529 32,579 1,889 7,171 The notes set out on pages 30 to 96 form an integral part of these financial statements. 23
2017 PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 JULY 2017 --------------------------------------------- Attributable to Owners of the Company ------------------------------------------- ------------------------------------------------- Non-distributable --------------------------------------------------- Distributable Exchange Fair Non- Share Treasury Share Warrants Discount Translation Value ESOS Statutory Retained Controlling Total Capital Shares Premium Reserve On Shares Reserve Reserve Reserve Reserve Profits Total Interests Equity NOTE RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Balance at beginning 88,389 (1,490) 30,845 18,477 (18,477) 2,169-582 606 75,304 196,405 15,566 211,971 Transfer to statutory reserve - - - - - - - - 279 (438) (159) 159 - Foreign currency translation differences for foreign operations - - - - - 1,642 - - - - 1,642 650 2,292 Fair value gain on available-for-sale financial assets - - - - - - 10 - - - 10-10 Profit for the financial year - - - - - - - - - 22,610 22,610 4,617 27,227 Total comprehensive income for the financial year - - - - - 1,642 10 - - 22,610 24,262 5,267 29,529 Transactions with owners: Issuance of shares pursuant to: - Share options exercised 711-164 - - - - (200) - - 675-675 - Warrants exercised 1,698-1,031 (887) 887 - - - - - 2,729-2,729 Share-based payment - - - - - - - 724-16 740-740 Effects arising from dilution of equity interest in a subsidiary - - - - - - - - - 120 120 4,280 4,400 Non-controlling interest arising from incorporation of a subsidiary - - - - - - - - - - - 182 182 Deconsolidation of subsidiaries - - - - - - - - - - - 68 68 Dividends 28 - - - - - - - - - (5,186) (5,186) - (5,186) Dividends paid to non-controlling interests - - - - - - - - - - - (1,355) (1,355) Total transactions with owners 2,409-1,195 (887) 887 - - 524 - (5,050) (922) 3,175 2,253 Transition to no-par value regime on 31 January 2017 32,040 - (32,040) - - - - - - - - - - Balance at end 122,838 (1,490) - 17,590 (17,590) 3,811 10 1,106 885 92,426 219,586 24,167 243,753 The notes set out on pages 30 to 96 form an integral part of these financial statements. 24
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 JULY 2017 -------------------------------------- Attributable to Owners of the Company ------------------------------------. ------------------------------------------- Non-distributable ------------------------------------------ Distributable Exchange Non- Share Treasury Share Warrants Discount Translation ESOS Statutory Retained Controlling Total Capital Shares Premium Reserve On Shares Reserve Reserve Reserve Profits Total Interests Equity NOTE RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 2016 Balance at beginning 57,931 (1,490) 2,502 - - 2,716 505 501 51,790 114,455 11,674 126,129 Transfer to statutory reserve - - - - - - - 105 (165) (60) 60 - Foreign currency translation differences for foreign operations - - - - - (547) - - - (547) (121) (668) Profit for the financial year - - - - - - - - 28,349 28,349 4,898 33,247 Total comprehensive income for the financial year - - - - - (547) - - 28,349 27,802 4,777 32,579 Transactions with owners: Issuance of shares pursuant to Rights Issue 28,417-28,416 18,477 (18,477) - - - - 56,833-56,833 Rights Issue expenses - - (1,505) - - - - - - (1,505) - (1,505) Share-based payment - - - - - - 738-44 782-782 Share options exercised 2,041-1,432 - - - (661) - - 2,812-2,812 Non-controlling interest arising from incorporation of a subsidiary - - - - - - - - - - 182 182 Dividends 28 - - - - - - - - (4,714) (4,714) - (4,714) Dividends paid to non-controlling interests - - - - - - - - - - (1,127) (1,127) Total transactions with owners 30,458-28,343 18,477 (18,477) - 77 - (4,670) 54,208 (945) 53,263 Balance at end 88,389 (1,490) 30,845 18,477 (18,477) 2,169 582 606 75,304 196,405 15,566 211,971 25
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 JULY 2017 ----------------------------------- Non-distributable ------------------------------------- Distributable Share Treasury Share Warrants Discount on Fair Value ESOS Retained Total Capital Shares Premium Reserve Shares Reserve Reserve Profits Equity NOTE RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 2017 Balance at beginning 88,389 (1,490) 30,845 18,477 (18,477) - 718 6,985 125,447 Fair value changes on availablefor-sale financial assets - - - - - 10 - - 10 Profit for the financial year - - - - - - - 1,879 1,879 Total comprehensive income for the financial year - - - - - 10-1,879 1,889 Transactions with owners: Issuance of shares pursuant to: - Share options exercised 711-164 - - - (200) - 675 - Warrants exercised 1,698-1,031 (887) 887 - - - 2,729 Share-based payment - - - - - - 734 6 740 Dividends 28 - - - - - - - (5,186) (5,186) Total transactions with owners 2,409-1,195 (887) 887-534 (5,180) (1,042) Transition to no-par value regime on 31 January 2017 32,040 - (32,040) - - - - - - Balance at end 122,838 (1,490) - 17,590 (17,590) 10 1,252 3,684 126,294 The notes set out on pages 30 to 96 form an integral part of these financial statements. 26
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 JULY 2017 ---------------------------- Non-distributable ----------------------------- Distributable Share Treasury Share Warrants Discount on ESOS Retained Total Capital Shares Premium Reserve Shares Reserve Profits Equity NOTE RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 2016 Balance at beginning 57,931 (1,490) 2,502 - - 596 4,531 64,070 Net profit, representing total comprehensive income for the financial year - - - - - - 7,171 7,171 Transactions with owners: Issuance of shares pursuant to Rights Issue 28,417-28,416 18,477 (18,477) - - 56,833 Rights Issue expenses - - (1,505) - - - - (1,505) Share-based payment - - - - - 783 (3) 780 Share options exercised 2,041-1,432 - - (661) - 2,812 Dividends 28 - - - - - - (4,714) (4,714) Total transactions with owners 30,458-28,343 18,477 (18,477) 122 (4,717) 54,206 Balance at end 88,389 (1,490) 30,845 18,477 (18,477) 718 6,985 125,447 The notes set out on pages 30 to 96 form an integral part of these financial statements. 27
CASH FLOWS FROM OPERATING ACTIVITIES GROUP COMPANY 2017 2016 2017 2016 RM'000 RM'000 RM'000 RM'000 Profit before tax 36,370 40,686 2,109 7,220 Adjustments for: Amortisation of land use rights 280 52 - - Deemed loss on deconsolidation of subsidiaries 4,176 - - - Depreciation 5,782 4,836 103 70 Equity-settled share based payment 740 782 123 304 Fair value loss/(gain) on derivative financial instruments 243 (321) - - Gain on disposal of plant and equipment (238) (191) (41) (20) Gross dividends from subsidiaries - - (1,246) (8,210) Income distribution from unit trusts (14) (20) (14) (20) Impairment loss on other investment - 8-8 Interest expense 1,358 1,123 614 617 Interest income (1,763) (469) (1,178) (302) Plant and equipment written off 895 81 - - Unrealised loss/(gain) on foreign exchange 734 1,178 366 (1) Operating profit/(loss) before working capital changes 48,563 47,745 836 (334) Decrease in inventories 9,900 2,507 - - Decrease/(increase) in receivables 8,298 (13,626) 124 228 (Decrease)/increase in payables (27,431) 16,091 (782) 461 Cash generated from operations 39,330 52,717 178 355 Income tax paid (9,727) (8,212) (225) (249) Income tax refunded 22 - - - Interest paid (1,358) (1,123) (614) (617) Net cash from/(used in) operating activities 28,267 43,382 (661) (511) CASH FLOWS FROM INVESTING ACTIVITIES PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 JULY 2017 (i) Cash flows on deconsolidation of subsidiaries (25) - - - Interest received 1,745 469 1,120 302 Gross dividends received from subsidiaries - - 1,246 8,210 Payment for land use rights - (11,580) - - Proceeds from disposal of property, plant and equipment 1,666 387 120 20 Proceeds from non-controlling interest arising from investment in a subsidiary 4,400 - - - Purchase of investment in subsidiaries - - (26,899) (12,929) (ii) Purchase of property, plant and equipment (30,957) (21,046) (224) (32) Withdrawal of fixed deposits 1,744 1,042 - - Net cash used in investing activities (21,427) (30,728) (24,637) (4,429) Balance carried forward 6,840 12,654 (25,298) (4,940) The notes set out on pages 30 to 96 form an integral part of these financial statements. 28
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 JULY 2017 GROUP COMPANY 2017 2016 2017 2016 NOTE RM'000 RM'000 RM'000 RM'000 Balance brought forward 6,840 12,654 (25,298) (4,940) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (3,014) (4,714) (3,014) (4,714) Dividends paid to non-controlling interests (1,355) (1,127) - - Repayment of foreign currency trade loan - (295) - - Drawdown of term loans - 7,720-5,000 Repayment of trust receipts (3,786) (2,536) - - Drawdown of revolving credit - 8,000-8,000 Net change in subsidiaries' balances - - (4,816) (5,653) Payment of finance lease liabilities (120) (28) (120) (28) Payment of Rights Issue expenses - (1,505) - (1,505) Repayment of revolving credit (2,000) - (2,000) - Repayment of term loans (2,045) (1,682) (1,000) (750) Proceeds from issuance of shares pursuant to ESOS 675 2,812 675 2,812 Proceeds from issuance of shares pursuant to Warrants exercised 2,729-2,729 - Proceeds from Rights Issue - 56,833-56,833 Net cash (used in)/from financing activities (8,916) 63,478 (7,546) 59,995 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (2,076) 76,132 (32,844) 55,055 Effects of foreign exchange rate changes on cash and cash equivalents 673 (79) (220) 1 CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 105,647 29,594 57,590 2,534 CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 104,244 105,647 24,526 57,590 Cash and cash equivalents comprise: Deposits with financial institutions 14 42,247 58,973 17,606 56,630 Cash and bank balances 15 62,607 49,010 6,920 960 104,854 107,983 24,526 57,590 Less: Deposits with maturity more than 3 months - (1,744) - - Less: Deposits pledged (610) (592) - - Cash and cash equivalents 104,244 105,647 24,526 57,590 (i) Cash flows on deconsolidation of subsidiaries Other receivables 4,518 - - - Bank balances 25 - - - Other payables (434) - - - Net assets deconsolidated 4,109 - - - Deemed loss on deconsolidation (4,176) - - - Non-controlling interests 67 - - - Less: Cash and bank balances (25) - - - Cash flows from deconsolidation of subsidiaries (25) - - - (ii) Purchase of property, plant and equipment Total acquisition cost 31,187 21,046 454 32 Acquired under finance lease (230) - (230) - Total cash acquisition 30,957 21,046 224 32 The notes set out on pages 30 to 96 form an integral part of these financial statements. 29
PROLEXUS BERHAD Company No. 250857-T (Incorporated in Malaysia) NOTES TO THE FINANCIAL STATEMENTS - 31 JULY 2017 1. CORPORATE INFORMATION General 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 51-21-A Menara BHL Bank, Jalan Sultan Ahmad Shah, 10050 Penang. The principal place of business of the Company is located at 531 Batu 2 ½ Jalan Kluang, 83000 Batu Pahat, Johor Darul Takzim. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 2 October 2017. Principal Activities The principal activities of the Company consist of investment holding and provision of management services. The principal activities of the subsidiaries are disclosed in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. 2. BASIS OF PREPARATION 2.1 Statement of Compliance The financial statements of the Group and of the Company have been prepared in accordance with applicable Malaysian Financial Reporting Standards ( MFRS ), International Financial Reporting Standards ( IFRS ) and the requirements of the Companies Act 2016 in Malaysia. 30
2.2 Basis of Measurement The financial statements of the Group and of the Company are prepared under the historical cost convention unless otherwise indicated in the summary of accounting policies as set out in Note 3. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. 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 liability 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 best economic interest. A fair value measurement of a non-financial market 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 Group and the Company use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is 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 their fair value measurement as a whole: Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities. Level 2: Valuation techniques for which the lowest level input that is significant to their fair value measurement is directly or indirectly observable. Level 3: Valuation techniques for which the lowest level input that is significant to their fair value measurement is unobservable. 2.3 Functional and Presentation Currency The financial statements are presented in Ringgit Malaysia ( RM ) which is also the Company s functional currency. 31
2.4 Adoption of Amendments/Improvements to MFRS The accounting policies adopted by the Group and by the Company are consistent with those of the previous financial period except for the adoption of the following standards that are mandatory for the current financial year: Effective for annual periods beginning on or after 1 January 2016 MFRS 14 Regulatory Deferral Accounts Amendments to MFRS 10, MFRS 12 and MFRS 128 Investment Entities: Applying the Consolidation Exception Amendments to MFRS 11 Accounting for Acquisitions of Interests in Joint Operations Amendments to MFRS 101 Disclosure Initiative Amendments to MFRS 116 and MFRS 138 Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to MFRS 116 and MFRS 141 Agriculture: Bearer Plants Amendments to MFRS 127 Equity Method in Separate Financial Statements Annual Improvements to MFRS 2012-2014 Cycle Initial application of the above standards did not have any material impact to the financial statements of the Group and of the Company. 2.5 Standards Issued But Not Yet Effective The Group and the Company have not applied the following standards that have been issued by the Malaysian Accounting Standards Board ( MASB ) but are not yet effective for the Group and for the Company: Effective for annual periods beginning on or after 1 January 2017 Amendments to MFRS 12 Disclosure of Interest in Other Entities (under Annual Improvements to MFRS 2014-2016 Cycle) Amendments to MFRS 107 Statement of Cash Flows: Disclosure Initiatives Amendments to MFRS 112 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses Effective for annual periods beginning on or after 1 January 2018 MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014) MFRS 15 Revenue from Contracts with Customers Amendments to MFRS 2 Classification and Measurement of Share-based Payment Transactions Amendments to MFRS 4 Insurance Contracts: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts Amendments to MFRS 7 Mandatory Date of MFRS 9 and Transition Disclosures Amendments to MFRS 140 Investment Property: Transfers of Investment Property Annual Improvements to MFRS 2014-2016 Cycle (except for Amendments to MFRS 12 Disclosure of Interests in Other Entities) IC Interpretation 22 Foreign Currency Transactions and Advance Consideration 32