TH GROUP - NOTES _3Q2003_ by nuhman10

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									TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003


PART 1 – EXPLANATORY NOTES PURSUANT TO PARAGRAPH 16 OF MASB 26

1.    Basis of Preparation

      The interim financial report is unaudited and has been prepared in compliance with MASB 26, Interim
      Financial Reporting.

      The interim financial report should be read in conjunction with the audited financial statements of the
      Group for the year ended 31 December 2002.

      The accounting policies and methods of computation adopted by the Group in this interim
      financial report are consistent with those adopted in the financial statements for the year ended
      31 December 2002.

2.    Comments about the Seasonality or Cyclical of Interim Operations

      Except for the following, the Group’s business operations are not subject to seasonality or cyclical
      factors :

      (a)      The production of fresh fruit bunches (“FFB”) is cyclical in nature; and

      (b)      The plantation, construction and timber extraction operations could be affected to a certain
               extent by the prevailing weather conditions.

3.    Unusual Nature and Amount of Items Affecting Assets, Liabilities, Equity, Net Income, or Cash
      Flows

      There were no unusual items affecting assets, liabilities, equity, net income or cash flows except for the
      following exceptional items:


                                                                         Current Quarter          Year-to-date
                                                                             30.09.2003            30.09.2003
                                                                                RM’000               RM’000
                                                                            (Unaudited)           (Unaudited)

           Allowance for diminution in value of unquoted                            120                 1,120
            investments
           Unquoted investments written off                                              0             14,220


      The details of the above provisions and investments written off are set out in Part 2 Section B (d) below.

4.    Changes in Estimates

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




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TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003


5.    Issuance, Cancellation, Repurchases, Resale and Repayments of Debt and Equity Securities

      For the current financial year to-date:-

      (i)      There were no issuance or repayment of equity or debt securities by the Company other than
               the issuance of 19,000 new ordinary shares of RM1.00 each at an issue price of RM1.00 per
               share pursuant to the exercise of options under the Company’s employees’ share option
               scheme; and

      (ii)     The Company had not engaged in any share buyback scheme and implemented any share
               cancellations. The Company does not have any shares held as treasury shares.

6.    Dividends Paid

      Since the end of the previous financial year, the Company paid a final dividend of 2% less 28% income
      tax amounting to RM5,128,646 on 7 August 2003 in respect of the financial year ended 31 December
      2002.

7.    Segmental Information

      Segmental information is presented in respect of the Group’s business segments which are the Group’s
      primary basis of segmental reporting.

      (a)      Revenue

                                                         Current Quarter          Year-to-date
                                                             30.09.2003            30.09.2003
                                                                RM’000               RM’000
                                                            (Unaudited)           (Unaudited)

      Plantation                                                  33,157               96,900
      Construction                                                42,162              102,891
      Timber Extraction                                              519                  982
      Venture Capital                                                  -                    -
      Information Technology                                          12                   63
      Investment Holding                                             488                1,513
      Money Lending & Others                                         122                  321
      Total Revenue                                               76,460              202,670

      (b)      Profit before Tax

                                                         Current Quarter          Year-to-date
                                                             30.09.2003            30.09.2003
                                                                RM’000               RM’000
                                                            (Unaudited)           (Unaudited)

      Plantation                                                   13,395               41,516
      Construction                                                  2,078                4,210
      Timber Extraction                                           (1,210)              (3,454)
      Venture Capital                                               (373)             (16,069)
      Information Technology                                        (723)              (2,083)
      Investment Holding                                            (940)              (3,314)
      Money Lending & Others                                          110                  305

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TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003

                                                          Current Quarter           Year-to-date
                                                              30.09.2003             30.09.2003
                                                                 RM’000                RM’000
                                                             (Unaudited)            (Unaudited)
                                                                   12,337                 21,111
      Unallocated Expenses                                              -                   (93)
      Interest Income                                                 469                  1,404
      Operating Profit                                             12,806                 22,422
      Finance Costs                                               (1,718)                (4,370)
      Share of profit in an associate                                  54                    244
      Profit before tax                                            11,142                 18,296



8.    Valuation of Property, Plant and Equipment

      The valuations of property, plant and equipment have been brought forward without amendment from
      the financial statements for the year ended 31 December 2002.

9.    Material Subsequent Events

      There were no material events subsequent to the end of the interim period to 6 November 2003, being 7
      days prior to the date of this report, that have not been reflected in the financial statements for the
      interim period other than those announced to the KLSE as follows:-.

      (a) On 7 October 2003, the Company announced that it proposed to implement a new employee share
          option scheme (“ESOS”) for eligible employees and executive directors of TH Group and its
          subsidiaries, save for those subsidiaries that are dormant, upon expiry of its existing ESOS. The
          existing ESOS will expire on 3 March 2004. The details and salient terms and conditions of the
          proposed new ESOS are set out in the announcement.

10.   Changes in the Composition of the Group

      There were no changes to the composition of the Group during the current interim period including
      business combination, acquisition or disposal of subsidiaries and long term investments (except for
      venture capital investments), restructuring and discontinuing of operations other than Progress Land
      Sdn Bhd which had ceased to be a wholly owned subsidiary on 12 August 2003 pursuant to a members’
      voluntary winding up.

11.   Changes in Contingent Liabilities and Contingent Assets

      There were no changes in the contingent liabilities or contingent assets of the Group since the last
      annual balance sheet as at 31 December 2002, except for the followings:

                                                                                              RM’000
       Secured:-

       Increase in bank guarantee utilised for performance bonds                                   11,272

       Increase in bank guarantees in favour of Government agencies                                   68

                                                                                                11,340




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TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003


12.   Auditors’ Report on Preceding Annual Financial Statements

      The auditor’s report on the financial statements for the year ended 31 December 2002 was not subject to
      any qualification.




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TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003


PART 2 – EXPLANATORY NOTES PURSUANT TO PART A OF APPENDIX 9B OF THE KLSE
LISTING REQUIREMENTS (AS REVISED)

A.    Explanatory Comments on Material Changes in the Profitability for the Quarter Reported On
      Compared to the Immediate Preceding Quarter


                                                                           Current              Previous
                                                                           Quarter               Quarter
                                                                        30.09.2003            30.06.2003
                                                                          RM’000                RM’000
                                                                       (Unaudited)           (Unaudited)

       Revenue                                                              76,460                80,782

       Profit / (Loss) before taxation                                      11,142                      (42)

      The performances of the individual business segments are further elaborated in Section B below.

B.    Review of Results

      (a)     Plantation

               For the current quarter, the revenue decreased from RM37.6 million to RM33.2 million (or
               about 12%) and the segmental profit before tax decreased from RM17.9 million to RM13.4
               million (or about 25%).

               The decreases in revenue and profitability were primarily due to lower quantity of palm
               products sold and lower crude palm oil (“CPO”) and palm kernel (“PK”) prices realised during
               the current quarter.

               Sales of CPO was approximately 20,900 MT compared to 22,900 MT whereas sales of PK was
               approximately 4,900 MT compared to 5,000 MT in the preceding quarter. The average prices
               realised for CPO and PK were RM1,407 per MT and RM588 per MT respectively compared to
               RM1,450 per MT and RM630 per MT in the preceding quarter.

               During the period under review, the production of fresh fruit bunches (“FFB”) was marginally
               lower by 2% from 82,100 MT to 80,700 MT. However, production of CPO was higher by 2%
               from 21,600 MT to 22,000 MT, arising from higher quantity of FFB processed, while
               production of PK decreased by 2% from 5,000 MT to 4,900 MT, mainly due to the drop in the
               kernel extraction rate.

               The palm oil mill recorded a lower average oil extraction rate of 21.38% compared to 21.71%,
               while the kernel extraction rate was lower at 4.76% compared to 5.05% in the last quarter.

      (b)     Timber Extraction

               For the current quarter, revenue increased from RM0.3 million to RM0.5 million (or by 67%),
               and the segmental loss decreased from RM1.6 million to RM1.2 million (or by 25%).




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TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003

               The increase in the revenue was due to higher log handling and stevedoring services and the
               commencement of timber extraction activities in East Kalimantan, Indonesia. As a result of the
               higher revenue, the segmental loss decreased.

      (c)      Construction

               For the current and preceding quarters, revenue was approximately RM42 million while the
               segmental profit before tax increased from RM1.8 million to RM2.1 million (or by 17%). The
               higher profitability achieved was mainly due to higher work progress achieved for higher
               margin projects.

      (d)      Venture Capital

               The venture capital division made an allowance for diminution in value for the following
               unquoted investment:-

                                                            Allowance for              Total
                                                            diminution in          allowance for
                                                           value during the        diminution in
                                                               quarter              value YTD
                                                              (RM’000)               (RM’000)

                AsiaDirect Capital Holdings Sdn Bhd               120                  1,120

               The additional allowance for diminution in value was based on the cash “burnt” or expended
               by the investee company during the period.

               The aggregate carrying value of investments at the end of the reporting period was
               approximately RM54.4 million in seven companies.

               During the current quarter, the venture capital division via THG Capital Sdn Bhd (“THG
               Capital”) made two additional investments as follows:-

               i)   On 29 July 2003, THG Capital subscribed for 3,003,003 ordinary shares of GBP0.01 each
                    in GeneMedix plc at GBP0.1665 per share, amounting to GBP500,000 (equivalent to
                    approximately RM3.1 million).

               ii) On 21 August 2003, THG Capital subscribed for 821 ordinary shares of RM1.00 each and
                    679 redeemable convertible preference shares of RM1.00 each in Amdon Malaysia Sdn
                    Bhd at an issue price of RM133.34 per share, amounting to RM200,010. Upon the
                    subscription of the ordinary shares, THG Capital’s equity interest in the company
                    increased to approximately 19%.

C.    Current Financial Year Prospects

      The prospects for the remaining period to the end of the current financial year are as follows:-

      (a)      Plantation

               Profit contribution from plantation would generally depend on the price performance of the
               palm oil commodity, the level of production and sales and the ability of the Group to maintain
               its costs of production at the current levels.




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TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003


      (b)      Timber Extraction

               The Group’s timber extraction activities in East Kalimantan undertaken by PT THG Kontrak
               had commenced generating revenue in the current quarter. The performance for the remaining
               financial year will depend on the level of production and the market for timber.

      (c)      Construction

               The performance of the construction division will depend on the progress of completion of the
               existing projects in hand.

      (d)      Venture Capital

              The Group’s venture capital division currently has a total of seven investments at the end of the
              reporting period focused mainly on a joint fund with governmental bodies and private
              institutions in Biotechnology and ICT, animation and innovative manufacturing. The returns
              from the Group’s investments in these companies are only expected to materialise in the longer
              term. The Group’s future focus in this sector will be the close supervision and monitoring of
              the seven investee companies.

      (e)      Information Technology

               The Group’s IT division is actively marketing its plantation software and e-business solutions,
               and during the quarter it secured two new projects for implementing its proprietary plantation
               software worth RM1.1 million. The performance of the IT division will depend on the progress
               of implementing these projects for its clients.

D.    Profit Forecast

      Not applicable.

E.    Taxation

                                                                          Current Quarter         Year-to-date
                                                                              30.09.2003           30.09.2003
                                                                                 RM’000              RM’000
                                                                             (Unaudited)          (Unaudited)
       Taxation comprised the following:-
       Provision based on current period's profits                                  3,695              10,248
       Under-provision in previous years                                                2                 693
       Deferred taxation                                                              788               1,610
                                                                                    4,485              12,551

      The Group’s effective tax rate was higher than the prima facie tax rate as certain expenses including
      amortisation on leasehold land and revaluation surplus of plantation development expenditure were not
      allowable for tax purposes. Losses incurred by certain subsidiaries were also not available for set-off
      against taxable profits of other companies within the Group as group relief was not available.

      Deferred tax provided for arose mainly from excess of capital allowances over depreciation, unutilised
      capital and agricultural allowances and unabsorbed tax losses. The deferred tax benefits would only be
      realised if the relevant subsidiaries derive future assessable income of a nature and of amounts sufficient
      for the tax benefits to be utilised.


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TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003


F.    Profit on Sale of Unquoted Investments and/or Properties

      There was no sale of unquoted investment or properties for the current financial period and financial
      year to date.

G.    Purchase or Disposal of Quoted Securities (Other than Quoted Securities in Subsidiaries and
      Associated Companies)

      (a)     Other than the quoted securities invested by the venture capital division as mentioned under
              Part 2 Section B (d)(i) above during the current quarter, there were no other acquisitions or
              disposals of any quoted securities for the current financial period and year-to-date

      (b)     The investments in quoted securities as at 30 September 2003 were as follows:-

                                                                  Quoted unit trusts,      Quoted shares,
                                                                    in Malaysia           outside Malaysia
                                                                     (RM’000)               (RM’000) *
               At cost                                                 2,317                   18,408
               At carrying value/book value                            2,317                   11,603
               At market value                                         2,512                    4,255

              * Long term quoted investments are stated at cost. An allowance is made when the Directors
                are of the view that there is a diminution in their value which is other than temporary.

                The Directors are of the view that the diminution in value for this particular investment is
                temporary due to the following considerations:-

                (i)     The investee company is currently developing certain bio-generic drugs for global
                        markets in which there will be a gestation period before full commercialisation could
                        be achieved.

                (ii)    The significant milestones and product development progress, which included the
                        completion of certain manufacturing plants, initial sales of a product in China,
                        distribution agreements entered into with established pharmaceutical companies,
                        setting up an insulin plant in Malaysia for the global supply of human insulin and the
                        continued expansion plans, as per plan, had been successfully achieved to date.

                (iii)   Therefore, the current market price does not reflect the fair value of the investee
                        company given the nature of the investee company’s business and its
                        progress/developments achieved to-date.

H.    Status of Corporate Proposals Announced but Not Completed

      (a)     The Company had on 24 July 2003 and 7 August 2003 announced that it had entered into sale
              and purchase agreements with various parties to acquire the entire equity interests in Asiaprise
              Biotech Sdn Bhd (formerly known as Asiaprise Sdn Bhd) for a total purchase consideration of
              RM43.0 million to be satisfied by RM9,736,624 in cash and the issuance of 30,239,433 new
              ordinary shares of RM1.00 each by TH Group at an issue price of RM1.10 per share.




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TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003


      (b)     The Company had on 7 October 2003, announced that the Company proposes to implement a
              new employee share option scheme (“ESOS”) for eligible employees and executive directors of
              TH Group and its subsidiaries, save for those subsidiaries that are dormant, upon expiry of its
              existing ESOS. Its existing ESOS will expire on 3 March 2004.

      The above proposals were submitted to the Securities Commission on 23 October 2003.

      Other than the above, there were no corporate proposals announced but not completed as at 6 November
      2003, being 7 days prior to the date of this report.

      (c)     The Company had on 31 January 2002 issued RM150.0 million nominal amount of 3% secured
              serial Al-Bai’ Bithaman Ajil Islamic Debt Securities (“BAIDS”). The status of the utilisation of
              proceeds raised from the BAIDS exercise as at 30 September 2003 was as follows:-

                Purpose                                                     Amount as                Actual
                                                                             approved               Amount
                                                                                                    Utilised
                                                                               RM’000               RM’000

                   Proposed acquisition of an office complex in                18,288               18,188
                    Cyberjaya, Selangor
                 Investment in biotechnology, internet and other               10,000                7,600
                    high technology related companies
                 Repayment of Group’s existing bank                            83,500               77,287
                    borrowings (Note 1)
                 Working Capital (Note 1)                                      35,712               40,018
                 Defraying incidental expenses of the proposal                  2,500                1,972
                Total                                                          150,000              145,065

              Note 1

              As stated in the circular to shareholders dated 15 November 2001, the excess of the approved
              amount over the repayment of the Group’s existing bank borrowings will be utilised as
              additional working capital. Total amount utilised for repayment of Group’s existing bank
              borrowings was RM77,287,000 thus resulting in a surplus of RM6,213,000 to be drawn down
              for working capital purposes.

I.    Group Borrowings and Debt Securities

      All the Group’s bank borrowings and the BAIDS were secured and a breakdown between the short term
      and long term borrowings are stated in the Condensed Consolidated Balance Sheets. The Group’s
      borrowings were all denominated in Malaysian Ringgit.


J.    Off Balance Sheet Financial Instruments

      During the current financial period and up to [6 November] 2003, being 7 days prior to the date of this
      report, the Group’s plantation division had entered into commodity future contracts to hedge the CPO
      prices.




                                                    9
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003

      The associated credit risk is minimal as these contracts were entered into with registered brokers of
      commodity exchanges. Gains or losses arising from contracts entered as hedges of anticipated future
      transactions are deferred until the date of such transactions whereby the forward or cash transactions are
      entered into and simultaneously closing off the future contracts, at which time they are included in the
      measurement of such transactions.

      The gains or losses on contracts which are no longer designated as hedges are included in the Income
      Statement.

      The commodity future contracts entered into and still outstanding as at 6 November 2003, being 7 days
      prior to the date of this report, were as follows:


                   Description                   Value in RM           Maturity Period
                                                  equivalent
                                                                           Contracts
       Sell contracts                              2,586,400         maturing in November
                                                                      and December 2003

      Other than the above, the Group did not have any other material outstanding financial instruments with
      off balance sheet risks.

K.    Changes in Material Litigations

      The changes in the material litigations of the Group between the last annual balance sheet date and 6
      November 2003, being 7 days prior to the date of this report, were as follows:-

      (a) Civil Suit No D2-22-1579-2002 - Company & Another (as plaintiffs) vs Stephen Ong Chee Hung &
          2 Others (as defendants).

          The hearing of the Company’s Summons in Chambers on 19 June 2003 was adjourned to a
          date to be fixed later.

      (b) Suit No.K22- 124 of 2001 - Monmin Glass & Aluminium Sdn Bhd (as plaintiffs) vs THG
          Construction Sdn Bhd (as defendants)

          On 8 July 2003, the Company announced that it has received notification from its solicitors that the
          suit filed by the plaintiffs for a total claim of RM1,115,441 has been discontinued.

          The above discontinuance of the suit by the plaintiffs was pursuant to a settlement agreed between
          the plaintiffs and the defendants based on an agreed settlement sum of RM115,263 paid by the
          defendants to the plaintiffs. The said settlement sum paid was final and binding on the parties and
          thereafter, neither party shall have any claims against the other in respect of the above suit and any
          other matters in respect of the Sub-Contract Agreement dated 7 February 2001 between the parties.

      Other than the above, there are no pending material litigations that are likely to give rise to any
      proceedings which may materially and adversely affect the financial position and business of the Group.




                                                     10
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)

Interim Financial Report On Consolidated Results for the Financial Quarter Ended 30
September 2003

L.    Provision of Financial Assistance

      Pursuant to Practice Note No 11/2001, the provision of financial assistance under Paragraph 8.23 (1)(ii)
      of the KLSE Listing Requirements during the third quarter ended 30 September 2003 by the Group were
      as follows:-

                                                                                                    RM’000

       Provision of advances in the ordinary course of business by a subsidiary involved             2,253
       in money lending to parties not related to directors and substantial shareholders of
       the Company


      During the quarter, principal amounts totalling RM100,000 were repaid by borrowers.

      The above provision of financial assistance does not affect the share capital and the shareholding
      structure of the Company, and there is no material impact on the earnings and the net tangible assets of
      the Group for the period ended 30 September 2003.

M.    Earnings Per Share

      Basic earning per share of the Group is calculated by dividing the net profit for the period attributable to
      shareholders by the weighted average number of ordinary shares in issue during the period of
      356,160,657 shares.


      Diluted earnings per share for the current period and year-to-date were not disclosed as the assumed
      conversion of the Company’s outstanding ESOS options and warrants to ordinary shares was anti-
      dilutive.



By Order of the Board
Lim Yew Heang (MAICSA 7007653)
Chan Yee Kiaw (MAICSA 7012253)
Company Secretaries
12 November 2003




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