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Foremost 4 qtr result280208

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					                               FOREMOST HOLDINGS BERHAD
                                 (Company No: 463440 –X)
                                 (Incorporated in Malaysia)

               EXPLANATORY NOTES TO THE INTERIM FINANCIAL REPORT



PART A – Explanatory Notes pursuant to Paragraph 16 of Financial Reporting Standard 134
         on “Interim Financial Reporting”

A1. Accounting Policies and Method of Computation
    Basis of preparation
    The interim financial statements should be read in conjunction with the audited financial
    statements for the year ended 31 December 2006. These explanatory notes attached to the
    interim financial statements provide an explanation of events and transactions that are
    significant to an understanding of the changes in the financial position and performance of
    Foremost Holdings Berhad (“FHB”) and its subsidiaries namely, Foremost Audio Sdn. Bhd.
    (“FASB”), Fomak Marketing Sdn. Bhd. (“FMSB”), Star Host (M) Sdn. Bhd. (“SHMSB”),
    Vintage Consortium Sdn. Bhd. (“VCSB”), YKS Roofing Solutions (M) Sdn. Bhd. (“YKS”), and
    Foremost Electronic Sdn. Bhd. (“FESB”) (hereinafter referred to as the “Group”) since the
    financial year ended 31 December 2006.

     The same accounting policies and methods of computation are followed in the interim
     financial statements as compared with the financial statements for the financial year ended
     31 December 2006.


A2. Audit Report of the Preceding Annual Financial Statements
    The audit report of the Group‟s preceding year‟s annual financial statements included an
    emphasis of matter whereby it draws attention to the audit report of the financial statements
    of Vintage Consortium Sdn. Bhd. which had been qualified with an „except for‟ opinion on the
    non-allowance for doubtful debts amounting to RM4,907,888 as the directors of the
    Company are of the opinion that this amount is recoverable in full.

     As at the date of this quarterly report, the directors of Vintage Consortium Sdn. Bhd. are of
     the opinion that the amount is still recoverable in full.


A3. Seasonality or Cyclicality of Operations
    The business operations of the Group are affected by the cyclical factors in the speakers
    manufacturing industry whereby major part of the invoicing and deliveries typically takes
    place towards the second and third quarter of the financial year.


A4. Exceptional or Unusual Items
    There were no exceptional items reported in the financial statements during the quarter
    ended 31 December 2007.


A5. Changes in Estimation
    There were no changes in estimates of amounts reported in prior interim period of the current
    financial year or in prior financial years that have a material effect in the current financial
    quarter.




                                                                                                 1
A6. Changes in Debt and Equity Securities
    There were no issuance and repayment of debt and equity securities, share buy-backs,
    share cancellations, shares held as treasury shares and resale of treasury shares for the
    financial quarter ended 31 December 2007.


A7. Dividends
    There was no dividend paid or declared during the current financial quarter ended 31
    December 2007.


A8. Segmental Reporting
    Primary reporting format – Business Segment

     The Group‟s primary business is that of the manufacture and sales of speakers and related
     products and hence, no separate disclosure is made as the segment revenue and results are
     as disclosed in the condensed income statement.
.

A9. Valuation of Property, Plant and Equipment
    The valuation of property, plant and equipment has been brought forward, without
    amendment from the most recent annual financial statements.


A10. Material Events Subsequent to the End of the Current Interim Period
     There was no material event subsequent to the end of the quarter under review.


A11. Effect of Changes in Composition of the Group
     There were no significant change in the composition of the Group for the current financial
     quarter and financial year to-date including business combinations, acquisitions or disposals
     of subsidiaries and long-term investments, restructuring or discontinuing operations.


A12. Changes in Contingent Liabilities and Contingent Assets Since the Last Balance Sheet
     Date

     a. The Company, together with Kenn Kenn Auto Accessories & Services Sdn Bhd (“KKAA”)
        and two other defendants are contingently liable for an amount of RM765,142, being
        claims for breach of tenancy agreement, which was not provided for in the financial
        statements.

     b. The Company has issued corporate guarantees amounting to RM44.6 million (as at
        31.12.2006: RM44.6 million) to various financial institutions for banking facilities granted
        to subsidiaries of which approximately RM21.869 million (as at 31.12.2006: RM23.869
        million) has been utilised as at 31 December 2007. Of the amount utilised, RM16.904
        million was for Yaku Shin (Malaysia) Sdn. Bhd.‟s banking facilities of which the full
        provision has been made.

     There were no material contingent assets since the date of the last balance sheet date.


A13. Capital commitment
     There was no capital commitment for the quarter under review.




                                                                                                  2
Part B –   Additional Explanatory Notes pursuant to Part A, Appendix 9B of the Listing
           Requirements of Bursa Malaysia Securities Berhad

B1. Review of the Performance of the Company and its Principal Subsidiaries

                                      3 months ended                     12 months ended
                                 31/12/2007     31/12/2006          31/12/2007      31/12/2006
                                  RM‟000         RM‟000               RM‟000         RM‟000

      Revenue                         12,370            11,227             40,803          30,729

      Profit/ (Loss) before
      exceptional item                    750           (6,442)                1,265      (7,931)
      Exceptional item                -               (16,904)             -              (2,905)

      Profit/ (Loss) before
      tax                                 750          (23,346)                1,265      (10,836)

     The Group‟s recorded an increase in revenue for the current quarter by 10.18% as compared
     to the previous year‟s corresponding quarter. The increase in revenue was mainly due to
     increase in demand by its customers. The efforts of the management to streamline its
     operations by discontinuing low margin products had resulted in an operating profit of
     RM750,000 for the current quarter as compared to the loss in the previous year‟s
     corresponding quarter.

     For the financial year to date, the Group had turned around by achieving an operating profit
     of RM1,265,000 as compared to the previous year‟s corresponding period operating loss of
     RM7,931,000. The turn around was due to the increase in revenue by 32.78% to
     RM40,803,000 and the discontinuation of low margin products.



B2. Material Changes in Quarterly Results of the Current Quarter as compared to the
    Results of the Immediate Preceding Quarter

                                                                    3 months ended
                                                              31/12/2007      30/09/2007
                                                               RM‟000          RM‟000

     Profit before tax                                               750                 100


     The current quarter recorded an increase in revenue of 43.45% as compared to the
     immediate preceding quarter. The economy of scale resulted from increased production
     activities coupled with tight cost control had resulted in a higher profit before tax for the
     current quarter.


B3. Prospects for the Current Financial Year

     Barring any unforeseen circumstance, the Group expects to see further improvement in its
     performance for the financial year ending 31 December 2008.




                                                                                                3
B4. Variance of Actual Profit from Forecast Profit and Profit Guarantee
    Not applicable.


B5. Taxation
    Taxation comprises:
                                          3 months ended                 12 months ended
                                     31/12/2007    31/12/2006         31/12/2007  31/12/2006
                                      RM‟000         RM‟000             RM‟000       RM‟000
     Current tax expense:
        - Charge for the period            -               -                -              -


     There is no taxation charge in the current quarter as the Group has sufficient unabsorbed tax
     losses brought forward to set off against the adjusted income.


B6. Sale of Unquoted Investments and/or Properties
    There were no sale of unquoted investments and/or properties outside the ordinary course of
    the Group's business for the quarter ended 31 December 2007.


B7. Purchase or Disposal of Quoted Securities
    There were no purchases or disposal of quoted securities for the quarter ended 31
    December 2007.


B8. Status of Corporate Proposals

     Save as disclosed below, there are no other outstanding corporate exercise which have been
     announced but not yet completed as at 31 December 2007.

     1.   Affin Investment Bank Bhd (“Affin”) had on 20 April 2004, announced on behalf of FHB
          that the Company proposes to undertake a private placement of 8,770,000 new
          ordinary shares of RM1.00 each in the Company (“Placement Shares”), representing
          20% of the issued and paid-up share capital of FHB as at 31 March 2004 (“Private
          Placement”). The Placement Shares were listed on 16 September 2004, 29 September
          2004 and 6 October 2004. However, among the conditions imposed by the SC for the
          approval of the Private Placement was, FHB was to allocate at least 30% of the
          Placement Shares to Bumiputra investors, or increase its Bumiputra equity by 5.38% of
          the enlarged issued and paid-up share capital within two (2) years from the date of the
          Private Placement.

          As at 31 December 2007, FHB had only allocated 25% of the Placement Shares to
          Bumiputra investors.

     2.   Pertaining to the Company‟s position as an affected listed issuer pursuant to the
          amended Practice Note No. 17/2005 (“PN 17”) of the listing requirements of Bursa
          Malaysia Securities Berhad (“Bursa Securities”).

          The Company has on 9 March 2007, submitted a comprehensive regularisation plan to
          implement the following:-




                                                                                                4
      (i)     Proposed capital reduction wherein the issued and paid-up share capital of the
              Company of RM52,620,000 comprising 52,620,000 ordinary shares of RM1.00
              each shall be reduced to RM26,310,000 comprising 52,620,000 ordinary shares of
              RM0.50 each (“FHB Shares”) (“Proposed Par Value Reduction”);

      (ii)    Proposed set-off of the Company‟s share premium account standing at
              RM3,630,164 against the accumulated losses of the Company and expenses in
              connection with the Proposals (“Proposed Share Premium Reduction”);

      (iii)   Proposed amendment to the Memorandum and Articles of Association of the
              Company (“Proposed Amendment”);

      (iv)    Proposed renounceable rights issue of up to 13,155,000 new ordinary shares of
              RM0.50 each (“Rights Share”) on the basis of one (1) Rights Share for every four
              (4) FHB Shares held after the Proposed Par Value Reduction at an indicative issue
              price of RM0.50 per Rights Share, together with 39,465,000 free detachable
              warrants (“Warrants”) on the basis of three (3) Warrants for every one (1) Rights
              Share (“Proposed Rights Issue with Warrants”);

      (v)     Proposed exemption to Ooi Chieng Sim and person acting in concert with him from
              the obligation to extend a mandatory take-over offer for the remaining FHB Shares
              not already owned by Ooi Chieng Sim and person acting in concert with him upon
              the completion of the Proposed Rights Issue with Warrants pursuant to Practice
              Note 2.9.1 of The Malaysian Code on Take-overs and Mergers, 1998 (“Code”)
              (“Proposed Exemption”); and

      (vi)    Proposed settlement of the debt owing to a creditor (“Proposed Debt
              Settlement”).

      (collectively referred to as the “Proposals”)

     The Proposals were approved by the Securities Commission and the shareholders on 15
     June 2007 and 26 November 2007 respectively. The Company has filed an application to the
     Kuala Lumpur High Court vide Petition No. D1-26-3-2008 for the capital reduction and the
     case is being fixed for hearing on 27 March 2008.


B9. Borrowings and Debt Securities
    Total Group borrowings as at 31 December 2007 were as follows:
                                                                RM'000
    a. Short Term – Unsecured
           Bank overdrafts                                          490
           Bankers acceptance                                     4,475
                                                                  4,965


     There were no borrowings or debt securities denominated in foreign currencies.


B10. Off Balance Sheet Financial Instruments
     As at 31 December 2007, no forward exchange contracts were entered into by the Group.

                                                                                             5
B11. Material Litigation
     As at 31 December 2007, the latest practicable date which is not earlier than 7 days from the
     date of issue of this quarterly report, the Group is engaged in the following material
     litigations:-

           Plaintiff(s)   Defendant(s)          Court        Status as at 31 December 2007
                                             Reference
      1    Gan Seng       FHB, KKAA,       Kuala Lumpur      Gan Seng Biang has filed a claim
           Biang          Dato‟            High Court Suit   for a liquidated sum of RM665,142
                          Mohammed         No. D1-22-        plus interest 10% per annum in
                          Radzi @          1947-2002         respect of a corporate guarantee
                          Mohd Radzi                         issued by the Company over
                          bin Manan,                         specific performance of the
                          Siow You &                         tenancy agreement previously
                          IPO                                signed by Kenn Kenn Auto
                          Corporation                        Accessories & Services Sdn. Bhn.
                          Sdn Bhd                            (“KKAA”).

                                                             The case is fixed for mention on
                                                             23 April 2008.

      2   Scrin           Yaku Shin E-     Pulau Pinang      Scrin has filed a claim against
          Technology      Tech (M) Sdn     High Court Suit   Yaku Shin E-Tech (M) Sdn Bhd
          (M) Sdn Bhd     Bhd              No. 22-576-       for breach of contract.
                          (“YSET)          2003              YSET has filed a counter claim for
                                                             a sum of RM2,150,000 against
                                                             Scrin for breach of contract for
                                                             non-deliverance of product.

                                                             The case is fixed for hearing on 27
                                                             March 2008.

      3    Alliance       Foremost         Kuala Lumpur      Plaintiff has filed a legal suit
           Merchant       Holdings         High Court Suit   against FHB to recover the sum of
           Bank Berhad    Berhad           No. (5)-52-       RM64,000 plus interest due from
                          (“FHB”)          24564-05          FHB for services rendered.

                                                             The case is fixed for decision on
                                                             12 March 2008.

      4    Vintage        Fabina           Kuala Lumpur      VCSB filed a legal suit to recover
           Consortium     Properties       High Court Suit   RM5.5 million or alternatively
           Sdn. Bhd.      Sdn. Bhd.        No. D3-22-774-    RM4.0 million from Fabina being
           (“VCSB”)       (“Fabina”)       2006              the loan granted to Fabina by
                                                             VCSB. Fabina filed a defence and
                                                             outer claimed for declarations that
                                                             the loan granted is void and
                                                             unenforceable, and damages to
                                                             be assessed.

                                                             VCSB‟s application for injunction,

                                                                                                   6
          Plaintiff(s)     Defendant(s)         Court       Status as at 31 December 2007
                                              Reference
                                                            together with Fabina‟s application
                                                            to set aside the ex-parte injunction
                                                            obtained by VCSB and Fabina‟s
                                                            application for fortification of
                                                            VCSB‟s undertaking, have been
                                                            withdrawn and the issue of costs
                                                            resulting from such withdrawals is
                                                            fixed for mention on 17 March
                                                            2008.

                                                            VCSB‟s application for summary
                                                            judgment is now fixed for mention
                                                            on 2 April 2008 for written
                                                            submission to be filed.



B12. Earnings/ (Loss) Per Share
     Basic earnings/ (loss) per share is calculated by dividing profit/ (loss) for the period
     attributable to the equity holders of the Company by the weighted average number of
     ordinary shares in issue as at 31 December 2007 of 52,620,000 shares.

                                          3 months ended               12 months ended

                                      31/12/2007    31/12/2006   31/12/2007      31/12/2006
       Profit/ (Loss) for the                750     (23,346)           1,265         (10,994)
         period attributable to the
         equity holders of the
         Company (RM‟000)
       Weighted average
        number of shares in
        issue during the quarter           52,620     52,620          52,620            52,620
        / year to date („000)

       Basic earnings/ (loss) per            1.43     (44.37)             2.40         (20.89)
        share attributable to the
        equity holders of the
        Company (sen)

     The Company does not have any potential dilutive ordinary shares outstanding as at 31
     December 2007 and therefore diluted earnings per share has not been presented.


By Order of the Board




NG KIM WENG
MANAGING DIRECTOR

26th February 2008

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