Beruflich Dokumente
Kultur Dokumente
Corporate Information
3 Corporate Structure
4 Directors Profile
10 Financial Highlights
11 Management Discussion and Analysis
TABLE OF 17 Statement on Corporate Governance
CONTENTS 24 Statement of Risk Management and Internal Control
27 Audit Committee Report
31 Additional Disclosures
32 Financial Statements
128 List of Properties
129 Analysis of Shareholdings
134 Notice of Annual General Meeting
139 Statement Accompanying Notice of Annual General Meeting
Proxy Form
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
02
CORPORATE
INFORMATION
Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir Suite 705, Block A
Independent Non-Executive Director/Chairman Kelana Business Centre
97, Jalan SS 7/2
Lim Yong Hew 47301 Petaling Jaya
Group Managing Director Selangor Darul Ehsan
Tel: (03) 7492 1166
Lim Hai Guan Fax: (03) 7492 2299
Executive Director
http://www.solutionholdings.com.my
AUDIT COMMITTEE
PRINCIPAL BANKERS
Low Wei Ngee
Independent Non-Executive Director/Chairman Malayan Banking Berhad
Alliance Bank Malaysia Berhad
Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir
Independent Non-Executive Director
AUDITORS
Zainuddin Bin Muhamad
Independent Non-Executive Director
Folks DFK & Co.
Chartered Accountants
12th Floor, Wisma Tun Sambanthan
NOMINATION AND REMUNERATION COMMITTEE No.2, Jalan Sultan Sulaiman
50000 Kuala Lumpur
Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir
Independent Non-Executive Director/Chairman
SHARE REGISTRAR
Low Wei Ngee
Independent Non-Executive Director
Tricor Investor & Issuing House Services Sdn Bhd
Unit 32-01, Level 32, Tower A,
Zainuddin Bin Muhamad
Vertical Business Suite, Avenue 3, Bangsar South,
Independent Non-Executive Director
No. 8, Jalan Kerinchi, 59200 Kuala Lumpur
Tel. No.:(03) 2783 9299
aFax No.: (03) 2783 9222
COMPANY SECRETARIES
03
CORPORATE
STRUCTURE
30% 51%
04
DIRECTORS
PROFILE
05
directors profile
(contd)
Datuk Dr. Syed Muhamad, a Malaysian aged 70, is our Independent Non-Executive Chairman and he was
appointed to the Board on 28 May 2005. He graduated with a Bachelor of Arts (Hons.) from University of
Malaya in 1971. He obtained a Masters of Business Administration from the University of Massachusetts,
USA, in 1977 and proceeded to obtain a PhD (Business Management) from Virginia Polytechnic Institute and
State University, USA in 1986. In 2005, he obtained a Bachelor of Jurisprudence (Hons.) from the University of
Malaya. He obtained the Certificate in Legal Practice in 2008 from the Malaysian Professional Legal Board. He
was admitted as an Advocate and Solicitor of the High Court of Malaya in July 2009, and obtained the Master
of Law (Corporate Law) from Universiti Teknologi MARA in December 2009. In June 2011 he became a member
of The Chartered Institute of Arbitrators, United Kingdom and in May 2012 became the fellow of the Institute.
He started his career in 1973 as Senior Project Officer, School of Financial Management at the National
Institute of Public Administration (INTAN) and held various positions before his final appointment as Deputy
Director (Academic). In November 1988, he joined the Ministry of Education as Secretary of Higher Education
and there after assumed the post of Deputy Secretary (Foreign and Domestic Borrowing, Debt Management),
Finance Division of Federal Treasury. From 1993 to 1997, he joined the Board of Directors, Asian Development
Bank, Manila, Philippines, first as Alternate Director and later as Executive Director. Datuk Dr. Syed Muhamad
then joined the Ministry of Finance as Secretary (Tax Division) and subsequently became the Deputy Secretary
General (Operations) of Ministry of Finance. Prior to his retirement, Datuk Dr. Syed Muhamad was Secretary
General, Ministry of Human Resources.
During his career, he wrote and presented many papers relating to human resources development. His special
achievement was that his dissertation A Study on Board of Directors and Organizational Effectiveness was
published by Garland Publisher, Inc. of New York in 1991.
Datuk Dr. Syed Muhamad is also a Director of Euro Holdings Berhad, BSL Corporation Berhad, ACR ReTakaful
SEA Berhad and Malakoff Corporation Berhad. He is also a Chairman of CIMB Islamic Bank Berhad, CIMB-
Principal Islamic Asset Management Sdn Bhd, Sun Life Malaysia Takaful Berhad and Sun Life Malaysia Assurance
Berhad. In addition, he holds a directorship in a number of private companies.
He does not have any family relationships with any directors and/or major shareholders of the Company. He
has no conflict of interest with the Company and has no convictions for any offences within the past ten years.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
06
directors profile
(contd)
Lim Yong Hew, a Malaysian aged 57, is our founder and Group Managing Director of the Solution Group. He was
appointed to the Board on 28 May 2005. He graduated with a Bachelor of Engineering in Electrical Engineering
(Hons) majoring in Control and Instrumentation from Salford University in 1982. He started his career with
George Kent Malaysia as a Project Engineer. He then joined Foxboro Malaysia in 1985 as a Sales Engineer.
He left the company to establish Solution Engineering Sdn Bhd (SESB) in 1988 where he took on the position
of Managing Director. With his extensive business experience, Mr Lim has been the main driving force of the
Group. His responsibilities cover various aspects of the Groups overall business development and corporate
strategy.
He is the uncle of Mr. Lim Hai Guan and Ms. Lim Chiou Kim. He has no conflict of interest with the Company
and has no convictions for any offences within the past ten years.
Mohd Shahrin bin Saparin @ Abd Rahman, a Malaysian aged 54, is our Executive Director and he was appointed
to the Board on 28 May 2005. He graduated with a Bachelor of Science in Chemical Engineering from University
of Southern California (USA) in 1987. He started his career with Lasera Systems Sdn. Bhd as a Sales and
Project Engineer in Scientific Equipment Division where he was responsible for the marketing of laboratory
and scientific products to various local universities. He was subsequently appointed as a Project Engineer
responsible for the management of supply of locally fabricated engineering education equipment to local
universities. He joined SESB in 2000 as a R&D Manager responsible for equipment research and development.
He is now the Managing Director of Solution Bioforce Sdn Bhd.
He does not have any family relationships with any directors and/or major shareholders of the Company. He
has no conflict of interest with the Company and has no convictions for any offences within the past ten years.
ANNUAL REPORT 2016
07
directors profile
(contd)
Lim Chiou Kim, a Malaysian aged 45, is our Executive Director and she was appointed to the Board on 28 May
2005. She graduated from Tunku Abdul Rahman College with a Bachelor of Science in Information Systems from
Campbell University, USA in 1996. She started her career with SESB since 1996 as a System Analyst. She was
promoted to Software Engineering Manager in 2001. In 2010, she was appointed the Chief Operating Officer.
She is responsible for the Software Development Department and Human Resource Planning. She oversees the
general administration. She is also responsible for the overall Groups operation and support Group Managing
Director in formulating and implementing the policies and corporate development plans of the Group.
She is the niece of Mr. Lim Yong Hew and sister of Mr. Lim Hai Guan. She has no conflict of interest with the
Company and has no convictions for any offences within the past ten years.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
08
directors profile
(contd)
Zainuddin Bin Muhamad, a Malaysian aged 69, is our Independent Non-Executive Director and he was
appointed to the Board on 12 June 2014. He studied Electrical Engineering and later did Diploma in Business
Management. He started his career with Chemical Company Of Malaysia in 1968. He received detail training
in principles of process measurements and control instrumentation. He joined Foxboro Singapore in 1974 as
Instruments Engineer, supervising installation, hook-up and commissioning instrumentation of grass-root plants
in Malaysia and Indonesia. He returned to Malaysia and setup Foxboro Malaysia Sdn Bhd, he was the General
Manager for Foxboro Malaysia, managing the whole operation and responsible for setting up and supervising
Foxboro Representatives in East Malaysia and Brunei. He joined Protek Consultants Engineers in 1988 as an
Instruments Engineer, responsible for conceptual design of a large Compression Platform for SSB, He was then
Promoted to Senior Instrument Engineer and responsible for detailed designs and engineering of several drilling
platforms instrumentation, controls and shutdown systems. He joined Delcom Services Sdn Bhd in 1991 as
a Senior Manager responsible for Daniel Metering Systems. He was also an Operation Manager for Eckardt/
Delcom joint venture. He joined Wehaya Controls SdnBhd in 1996 as a Managing Director of the company
and responsible for sales and support of Valtek control valves and P+F products. He then joined Regeltec
Engineering (M) Sdn Bhd as a Managing Director of the company and responsible for the company operation.
In 2001, he Joined Trisystems Flow Products Sdn Bhd as a Executive Director, responsible for the company
operation, which mainly centered around securing and implementing Custody and Allocation metering projects
until present.
He does not have any family relationships with any directors and/or major shareholders of the Company. He
has no conflict of interest with the Company and has no convictions for any offences within the past ten years.
ANNUAL REPORT 2016
09
directors profile
(contd)
Low Wei Ngee, a Malaysian aged 45, is our Independent Non-Executive Director and he was appointed to the
Board on 28 May 2005. He graduated from Monash University, Australia in 1993 with a Bachelor of Business,
Accounting and received his Certificate in Asian Corporate Finance from INSEAD, France in 1999.
He started his career with an international public accountant firm in Kuala Lumpur. Thereafter, he joined the
commercial world where he spent the last 20 years in hospitality, science park management, retail, venture
capital, information technology and education sectors, both locally and overseas. Currently he is a private
investor managing personal portfolio of assets. He also sits on the board of several private companies in
Malaysia.
He does not have any family relationships with any directors and/or major shareholders of the Company. He
has no conflict of interest with the Company and has no convictions for any offences within the past ten years.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
10
FINANCIAL
HIGHLIGHTS
40,000 12,000
35,000 10,000
10,864
35,897
35,362
30,000 8,000
8,450
29,073
7,945
25,000 6,000
Profit/(Loss)
5,730
4,000
1,423
(2,212)
(2,212)
Profit/(Loss)
3,862
15,000 2,000
764
after tax
12,648
10,000 -
7,861
5,000 -2,000
0 -4,000
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
NET ASSETS VALUE PER SHARE (RM) EARNINGS PER SHARE (SEN)
0.180 3.00
0.160 2.50
2.53
0.16
0.140 2.00
1.96
1.83
0.14
0.120 1.50
0.12
0.13
0.12
0.100 1.00
0.42
0.080 0.50
-
0.060
(1.25)
0.040 (0.50)
0.020 (1.00)
- (1.50)
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
ANNUAL REPORT 2016
11
MANAGEMENT
DISCUSSION
AND ANALYSIS
The aim of Management Discussion and Analysis is to provide shareholders an overview of Solution Engineering Holdings
Berhads ( The Company or The Group) business operations, financial reviews for the financial year ended 31 December
2016 and future prospects.
Company Profile
1) Engineering Equipment; Design and development of equipment and software for engineering education, research
and technical and vocational training (TVET) in chemical, mechanical, electrical, civil and control engineering
under SOLTEQ brand;
2) Industrial Automation; Provision of industrial automation solutions, currently specialising in water works such as
remote monitoring system for dams, tidal control system for irrigation and automation system for flood mitigation
under SOLWEB brand; and
3) Industrial Lubricants; Production and distribution of industrial lubricants under SOLMAX and OEM brand; and
4) Biotechnology; Provision of industrial biotechnology solutions such as design and development of equipment
and processes for the manufacturing of products used in the biotechnology and pharmaceutical industries under
BIOFORS brand;
The Group is a leading company in manufacturing of equipment for engineering education, research and TVET. The equipment
that the Group supplies cover most of the engineering disciplines and are utilised in more than 59 public and private
universities, university colleges, polytechnics, skilled training centers, advanced technical institutions and colleges locally.
The Group also export equipment to overseas, countries like Middle East, Asia Pacific and Africa.
For the industrial automation, biotechnology and industrial lubricants the Group only supply to the domestic market.
The Group aims to become the most admired Malaysian technology company. Our mission is to maximize the stakeholder
value. To achieve the vision and mission, we are determined to meet the following objectives:
FINANCIAL REVIEW
The Groups revenue for the year ended 31 December 2016 registered at RM35.4million, an increase of 21.6% against
RM29.1 million in 2015. The growth in the Groups revenue was mainly contributed by its core business manufacturing of
engineering equipment. The revenue of this business segment increased from RM24.5 million in 2015 to RM32.3 million
in 2016.
The revenue from industrial automation projects registered at RM2.1 million against RM4.2million in 2015, the decrease
was due to lower value of jobs being completed during the financial year.
For the segment of production and supply of automotive lubricant, the revenue has increased to RM1.0 million as compared
to RM0.4 million in 2015 with increased demand for our industrial lubricants.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
12
management discussion
and analysis
(contd)
The Groups cost of sales for the financial year of RM17.5 million increased by RM3.4 million against RM14.1 million
in 2015, mainly due to the cost increment associated with the growth in educational engineering equipment business
segment. However, the increment of Cost of sales at 24.1% was slightly higher if to compare against the percentage of
increase in sales of 21.6%, which was mainly attributable to inflationary impact on the cost of materials consumed.
Other Income for the year ended 31 December 2016 of RM1.0 million declined by RM0.2 million against RM1.2 million
in 2015. This was mainly due to the lower foreign exchange gain as lesser foreign currencies exposure in comparison to
preceding financial year.
The Groups operating expenses for the financial year was RM7.9 million against RM7.6 million in 2015. The increase of the
operating expenses RM0.3 million was mainly attributable to professional fees for the corporate exercise of Bonus Issue
and disposal of property, and inclusion of overheads of newly-acquired subsidiary.
The Groups Profit before Tax at RM10.9 million was higher by RM2.4 million with the overall impact of higher gross profit
(RM2.9 million), lower other income (RM0.2 million) and higher operating expenses (RM0.3 million).
The Groups effective tax rate during the financial year was 26.9%, which was lower than the preceding years effective tax
rate of 32.2%, mainly attributable to reversal of over-provision of deferred taxation liability and reduction of statutory tax
rate.
As at 31 December 2016, the Groups total assets were registered at RM46.1 million, representing an increase of RM5.1
million. This was mainly attributable to the increased revenue collection and higher balance due from customer from
contract arising from the difference between value of job completed and amount billed.
The total liabilities as at 31 December 2016 was RM7.9 million, which was lower by RM0.7 million, mainly attributable to
lower trade payable outstanding as at year end and loan repayments made during the year.
The Groups net assets as at 31 December 2016 increased by RM5.9 million to RM38.2 million from RM32.3 million
recorded as at 31 December 2015.
The cash and cash equivalents as at 31 December 2016 stood at RM8.6 million in comparison to RM12.0 million as at 31
December 2015. The lower cash and cash equivalents was mainly due to more cash has been placed with unit trust fund
and RM3.0 million of dividend payment to shareholders.
The Groups other investment in unit trust fund increased by RM5.7 million, from RM4.3 million in FY2015 to RM10.0 million
in FY2016.
The RM8.6million cash and cash equivalents in FY2016, mainly comprised of short term deposits, highly-liquid deposits in
money market fund and, fixed deposits placed with financial institutions, of which RM3.6 million was pledged with the bank
trade facilities.
The RM0.6 million capital expenditure in FY2016 in respect of property, plant and equipment was mainly attributable to the
preliminary works for the construction of new production facilities. The nature and the amount of capital commitments of
the Group are mentioned in the notes to audited financial statements.
The Groups total borrowings as at 31 December 2016 was RM0.9 million which reduced by RM0.4million from RM1.3
million in previous financial year.
Gearing Ratio
The gearing ratio of the Group as at 31 December 2016 was 2.4% as compared with 3.9% as at 31 December 2015. This
ratio is calculated as total borrowings divided by total capital. Total borrowings were as above-mentioned while total capital
is calculated as the sum of total equity and total debt.
ANNUAL REPORT 2016
13
management discussion
and analysis
(contd)
BUSINESS REVIEW
During the financial year, the Group revenue was contributed mainly from three business segments:
Design and development of equipment and software for engineering education, research and TVET;
Provision of industrial automation solutions; and
Production and distribution of industrial lubricants
The Groups PBT (profit before tax) jumped 28% from RM8.5 million in 2015 to RM10.9 million in 2016. The increase was
on the back of contracts secured from TVET programs and the progress of completion of existing contracts.
The engineering equipment business segment remains the key contributor, which has contributed 91% of the Group total
revenue. The Group managed to attain a sales value of RM32.3 million in 2016 on the back of 231 units sold, compared
with a sales value of RM24.5 million or 174 units sold in 2015. The higher units sold during the financial year was mainly
attributed to the government initiatives and allocation in developing TVET as well as the purchases made by new universities
and new campuses of existing universities for their engineering laboratory facility.
The industrial automation segment has contributed 6% to the Group total revenue. The sales value has dropped to RM2.1
million in 2016 from RM4.2 million in year 2015; this was mainly attributed to the delay of civil works which caused the
slower progress of completion during the financial year.
For the industrial lubricants segment the sales value has increased from RM0.4 million in 2015 to RM1 million in 2016
which contributed 3% to the Group total revenue. The increase was attributed to better market penetration, increase of OEM
orders and wider market coverage in West Malaysia.
The Group is undertaking continuous product and services improvement and expansion efforts to provide good quality
products and enhanced value-added after sales services and supports to its customers. This includes the following:-
Undertaking continuous R&D activities to develop new products and product ranges; and
Continuous R&D activities for the improvement of its product features, functionalities and usage; and
Expanding the project management, maintenance and servicing services to customers by way of increasing the
staff size and improve the employees competencies and skills to provide comprehensive after- sales, repair and
maintenance services to customers. This also includes expanding its range of engineering services to include the
provision of contracted maintenance services.
During the financial year, the Group reinforced its leadership position by accelerating R&D developments to expand its range
of products and services offered for use by the education and TVET sector.
The Group is in the midst of developing several prototype models of renewable energy, electrical and electronic equipment,
which includes solar power, wind turbine, fuel cell, electrical machine trainer, power electronics trainer as well as digital and
analogue trainer. The development of these new models shall cater for the education industry, specifically to the TVET sector
as well as local and international institutions that provide courses related to renewable energy and electrical and electronic
engineering.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
14
management discussion
and analysis
(contd)
During the financial year, 97% of the Groups revenue was from the domestic market. The Group is making concerted
marketing efforts to expand its overseas market in the Southeast Asia, South Asia, Middle East, Africa and Australia. The
Group has participated in various international trade fairs, such as the Global Educational Supplies & Solutions (GESS)
in Indonesia & Asian Pacific Confederation of Chemical Engineering (APCCHE) in Australia, the Group will also participate
in Worlddidac GESS 2017 in Dubai and Eduweek 2017 in South Africa to promote its range of products and services to
potential customers in these markets. In addition, the Group has developed various new marketing literatures to promote
its range of products and services, and increase the frequency of sales visits to its overseas agents to provide sales and
technical support.
With the intention of reducing the cost of manufacturing, the Group has acquired a subsidiary to perform fabrication
and basic assembly works. The Group has invested in a new 20,000 sq feet fabrication workshop to reduce the cost of
production, improve the delivery lead time and overall product quality.
The Group is also specialises in providing automation solutions for remote and local supervisory control, monitoring, data
acquisition and collection. The automation system that we supply can be used to control, monitor, and to analyse an industrial
process in a broad range of modern industries, including water/waste water, energy, food and beverage, manufacturing, oil
and gas, power, recycling, transportation, etc. The Group has more than 25 years of experiences in system integration and
automation business, which has successfully implemented and commissioned numerous automation systems for private
sector and government-related projects.
The automation technology is changing fast and very often the customer requested for web-based automation application.
However, we are short of talent in this area, in order to fill in the gap and keep our design and development team abreast of
changes in technology. We sent our staff to attend workshop, seminar and training.
The Group completed the formulation of its mineral ,semi-synthetic and fully synthetic automotive lubricants in 2016. The
mineral , semi-synthetic and fully synthetic automotive lubricants are available in the size of 4L, 5L, 18L bottle and 200L
drum under the brand SOLMAX. The Group also provides OEM blending and packaging services to its customers. The Group
intends to expand its local and overseas market by working closely with distributors.
Expansion Plan
In order to support the Group growing business activities and operations, the Group has committed RM11mil to construct an
office and new assembly facility at Technology Park Malaysia. It will also have state of the art training facilities for both local
and overseas customers. The Construction is expected to be completed by 1H2018. This facility is expected to enhance our
corporate image and boost our local and international standing in the technical training industry.
During the year, the Group continued to explore merger and acquisition opportunities in companies in the same industry but
with different product ranges, in order to further strengthen its position in the market.
ANNUAL REPORT 2016
15
management discussion
and analysis
(contd)
The Group is well positioned to benefit from the major thrust of Technical Vocational Education and Training (TVET) in
Malaysia as it has wide product range in crucial TVET areas identified by the Malaysian government such as oil and gas,
marine and automotive industries. Under the Eleventh Malaysian Plan (RMK11), steps to better establishment TVET
presence and broadening of access to quality TVET were undertaken to address industry needs for skilled workers. TVET has
been identified as one of the game changers in the RMK11 to meet the demand of industry and contribute towards economic
growth in view of globalization, knowledge economy, technology advances and global labour mobility and has been given
higher impetus under the RMK11. The increase importance of TVET is reflected by the Malaysian government increased
allocation for its Skill Development Fund (Tabung Pembangunan Kemahiran) from RM500 million in Tenth Malaysian Plan
(RMK10) to RM1 billion in RMK11.
Whilst we see a decrease in public spending in education since 2015, we noted that the government has maintained the
allocation of RM4.6bil to strengthen the development of technical and vocational education and training (TVET) in the
Budget 2017. Following recent news from Borneo Post online, the government has declared Year 2017 as TVET year in an
effort to fill the void of skilled workers in Malaysia. This initiative is in line with the Eleventh Malaysia Plan (RMK11), an effort
to achieve a high-income developed nation by 2020. The report pointed out that current Malaysias skilled workforce is at
28% and the government aims to achieve 33% by 2015; and 50% by 2020.
Based on a study statistics carried out by Regional Association for Vocational Teacher Education and Training in Asia (RAVTE)
in 2010, enrolment in TVET programme in Malaysia was approximately 15% compared to the average of countries involved
in the Organisation of Economic co-operation and Development (OECD) was 44%. The low TVET enrolment rates point to
huge untapped potential for training which could increase the supply of skilled workers in Malaysia. In this respect, we think
greater provisions will continue to be made for further vocational education and skills-training pathways, these augurs well
for the Group performance.
The company delivered 5 automation system packages for the River Of Life (ROL) project. ROL has been identified as
an Entry Point Project in the Greater Kuala Lumpur/Klang Valley National Economic Area (NKEA) under the Economic
Transformation Programme (ETP). It aims to clean up and beautify the 10.7km Klang River, and develop into a vibrant a
bustling waterfront. Besides the ROL project, the company has also supplied automation system to state water operator
(Syarikat Air Negeri Sembilan Sdn Bhd: SAINS) and (Jabatan Pengairan Dan Saliran Malaysia: JPS). With this achievement
has strengthening the Group position as an automation solution provider, The Group will participate in second phase of River
Of Life (RoL) program with confident.
Moving forward, despite uncertain economic sentiments, the Group is cautiously exploring new opportunities in water supply
industries to enhance its portfolio in industrial automation businesses. The Group has participated in few upgrading projects
of pumping station and water treatment plant in Negeri Sembilan, Selangor, Terengganu and Johor states. With these track
records, the Group has been recognised as a quality and preferred automation system integrator, and has been invited by
main contractor to participate in the federal and state water authority tenders.
Other than expanding the domestic market coverage through our network of distributors , the Group also plans to export to
Asean countries. The Group will continue its R&D to develop more products such as gear oil and hydraulic oil to widen our
product range.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
16
management discussion
and analysis
(contd)
Biotechnology Segment
Biotechnological and life sciences equipment may represent new opportunity for the Group to expand its business operation.
Currently, there are more than 20 public and private universities and colleges offering courses in biotechnology and related
fields. Furthermore, the National Biotechnology Institute Malaysia with three institutes under its administration, will take
more active role in the Research and Development of plant based products for healthcare and food in the coming years
since its inception in 2011. Other relevant institutions are MARDI with its Biotechnology and Nanotechnology Institute,
National Institute Animal Biotechnology and Biotechnology Division under Forest Research Institute Malaysia. Our current
operation however, are very limited to only fermentation and few biotech related equipment. Many of the equipment at these
institutions are foreign made. Opportunities are a bound in the teaching and pilot facility for extractions, processing and
formulation of bioactive compound from herbs, flowers, micro algae, mushrooms and other biological sources.
Development of SMEs is part of the National Biotechnology Policy framework to invigorate the bio-based industry. A special
tax exemptions and incentives were provided to Bionexus companies to help the growth of the industry. One of the criteria
to qualify and maintain the Bionexus status is to provide a minimum of 3% of revenue as budget each year for Research
and Development. This will ensure sustainability and healthy growth of the company. This could be also a potential growth
area for the Solution Group, given the fact that the third phase of the policy is to ensure growth by increasing the exports
of Malaysian bio-based products.
The current economic outlook with less budget being allocated to public universities, may require the Group to refocus on
servicing the needs of private universities and companies. The prospect ofthe industrial R&D and small scale processing
of bio-based products are brighter as many more of the Malaysian based SMEs or Bionexus Companies expanding their
products and manufacturing operation. As part of the growth strategy, we may even explore our expertise and services in
bio-based technology can even be extended into other ASEAN countries.
DIVIDEND POLICY
Our Board is adopting a dividend payout policy of not less than 0.5 cent dividend shall be declared per financial
year, subject to yearly net profit after tax of not less than RM4.8 mil and the necessary approval from the
shareholders being obtained. This dividend policy shall be reviewed from time to time by the Board and the Audit
Committee. From FY2014 to FY2016, the Group has been rewarding its shareholders with a 1 cent declared
dividends.
ANNUAL REPORT 2016
17
Statement on
Corporate Governance
The Board of Directors (the Board) of Solution Engineering Holdings Berhad (the Company or Solution Engineering)
is committed in ensuring good corporate governance practices are adopted within the company and its subsidiaries (the
Group), as set out in the Malaysian Code on Corporate Governance 2012 (the Code) and Rule 15.25 of the ACE Market
Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Securities) in discharging its duties and responsibilities
to safeguard and enhance shareholders value and financial performance of the Group.
The Board and the management play an important role in formulating and charting its strategic direction, setting out short
and long terms plans and objectives, overseeing and reviewing the Group business operation and performance within a
systematic and controlled environment while ensuring that it complies with the principles of good corporate governance. In
discharging its fiduciary and leadership functions, the Board has assumed the following throughout the year;
Reviewing and adopting strategic corporate plans and programs for the Group
Reviewing the risk management framework
Approving acquisitions and disposals of new ventures and investments
Approving major capital investments and material agreements including the acquisition and disposals of properties
Identifying principal risk and to ensure implementation of appropriate internal control system and mitigation measures
to manage these risks
Overseeing and evaluating the conduct of the Groups businesses
Review the adequacy and integrity of the Groups internal control system and management information system
Any other matters which are required to be approved by the Board pursuant to the relevant rules, laws and regulations,
Further, the Executive Directors are responsible for leading and managing the daily operational matters of the company,
including the co-ordination and implementation of policies and strategic decisions for the expansion of the business, while
the role of the Independent Non-Executive Directors are particularly important in providing unbiased and independent views,
advice and judgments to ensure that the interests of minority shareholders and the general public are given due consideration
in the decision-making processes of the Board.
Access to and Supply of Information
All Directors have unrestricted access to information of the Group and on an on-going basis, the Directors interact with the
management team to seek further information, updates or explanation on any aspect of the Groups operations or businesses.
The Directors have access to the advice and services of the Company Secretary and may seek external independent
professional advice on any matter connected with the discharge of their responsibilities as they may deem necessary and
appropriate, at the Companys Expense, to assist them in their decision-making.
Prior to each Board meeting, all Board members are provided with the agenda and information necessary for deliberation
at the Board meeting, for them to review. The proceedings of all Board meetings are duly minuted and kept by the Company
Secretary at the registered office of the Company. The Company Secretary attends all Board meetings and ensures that the
Board procedures are followed and that applicable laws and regulations are complied with as well as highlighting all issues
which he feels ought to be brought to the Boards attention.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
18
statement on
corporate governance
(contd)
STRENGTHEN COMPOSITION
Board Composition
The Board of Directors of the Company comprises seven (7) members. The composition complies with the ACE Market Listing
Requirements of the Bursa Malaysia Securities Berhad which is as follows:
The Board has within it, professionals drawn from various backgrounds, including one lady director even though we do not
have a formal policy on gender diversity; bringing in-depth and diversity in experience, expertise and perspectives to the
Companys business operation. The Board is also comprised of individuals who are committed to business integrity and
professionalism in all its activities. A brief profile of each member is set out on pages 5 to 9.
The Nomination & Remuneration Committee consists of three members, all of whom are independent directors, has assumed
the following throughout the year;
To review the appropriate size and balance of the Board, including appropriateness of non-executive participation.
To review the required mix of skills, experience, knowledge and responsibilities of Board of Directors.
Assist the Board in establishing procedures towards an annual assessment of the effectiveness of the Board as a
whole and each Board Committee (including its size and composition), as well as the contribution of each individual
Director.
Review the remuneration package, terms of employment, reward structure and fringe benefits for Executive Directors
and key positions.
During the financial year ended 31 December 2016, there was one nomination & remuneration committee meeting held and
was fully attended by all the members.
The Remuneration Committee review, assess and recommend to the Board the remuneration packages of the Executive
Directors in all forms, with other independent professional advice or outside advice as necessary. None of the Executive
Directors participated in any way in determining their individual remuneration. The remuneration of Executive Directors is
structured to link rewards to corporate and individual performance.
The Remuneration Committee also review, assess and recommend to the Board the remuneration packages of the Non-
Executive Directors based on their contribution to the Group in terms of knowledge, responsibility and experience. The
remuneration of Non-Executive Directors is determined at levels, which will enable the Company to attract and retain such
directors with the relevant experience and expertise to contribute to the success of the Group.
ANNUAL REPORT 2016
19
statement on
corporate governance
(contd)
The details of the remuneration of Directors of the Company comprising remuneration received/receivable from the Company
and subsidiaries during the financial year ended 31 December 2016 are set out as follows:
Independent
Executive Non-Executive
Directors Directors Total
Type of remuneration RM RM RM
The number of directors of the Group whose total remuneration during the financial year fell within the following bands is
analysed below:
Number of Directors
Independent
Executive NonExecutive
Range of remuneration Directors Directors
Below RM50,000 2
RM50,001 to RM100,000 1
RM100,001 to RM150,000
RM150,001 to RM200,000
RM200,001 to RM250,000 1
RM250,001 to RM300,000 1
RM300,001 to RM350,000
RM350,001 to RM400,000 1
RM450,001 to RM500,000
RM500,001 to RM550,000 1
REINFORCE INDEPENDENCE
The Nomination and Remuneration Committee and the Board have upon their annual assessment, concluded that each of
the 3 Independent Non-Executive Directors continues to demonstrate conduct and behaviour that are essential indicators
of independence.
The Independent Non-Executive Directors are not employees and they do not participate in the day-to-day operation of the
Company. They are free from any business or other relationship which would materially interfere with the exercise of their
independent judgments. They bring an external perspective, constructively challenge and help develop proposals on strategy,
scrutinize the performance of Management in meeting approved goals and objectives, and monitor the risk profile of the
Companys business and the reporting of quarterly business performances.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
20
statement on
corporate governance
(contd)
Datuk Dr. Syed Muhamad and Low Wei Ngee who have served on the Board for 11 years by 27 May 2016 remain objective
and independent in expressing their views and in participating in deliberations and decision making of the Board and Board
Committee. The length of their services on the Board does not in any way interfere with their exercise of independent judgment
and ability to act in the best interests of the Group. Their re-elections to the Board are therefore to be sought for approval
of the re-election to the Board at the forthcoming 13th AGM.
FOSTER COMMITMENT
The Board is mindful on the importance of time commitment in attending to the matters of the Group in general, including
attendance at the meeting of the Board, Board Committees and other types of meetings.
The Board has at least five (5) regularly scheduled meetings annually to review the operations of the Company and to approve
the quarterly and annual financial statements, with additional meetings convened as and when necessary.
During the year, the Board of Directors have met six (6) times and details of the Directors attendance are set out as follows:
Directors Attendance
Datuk Dr. Syed Muhamad bin Syed Abdul Kadir (Chairman and Independent Non-Executive Director) 6/6
Lim Yong Hew (Group Managing Director) 6/6
Lim Hai Guan (Executive Director) 6/6
Lim Chiou Kim (Executive Director) 6/6
Mohd Shahrin Bin Saparin @ Abd Rahman (Executive Director) 5/6
Low Wei Ngee (Independent Non-Executive Director) 5/6
Zainuddin bin Muhamad (Independent Non-Executive Director) 5/6
In accordance with the Companys Articles of Association, at least one-third (1/3) of the directors shall retire from office, at
least once in three (3) years, but shall be eligible for re-election at the Annual General Meeting. The Board is satisfied that the
directors who required standing for re-election at the forthcoming AGM continue to demonstrate the necessary commitment
to be fully effective members of the Board.
ANNUAL REPORT 2016
21
statement on
corporate governance
(contd)
Directors Training
The Board recognizes the importance of the training needs for its members to further enhance their skills and knowledge
on relevant new laws and regulations to keep abreast with the latest developments. Those training programs enable them
discharge their duties effectively.
During the financial year, members of the Board had attended relevant training programmes to enhance their knowledge
which they had collectively or individually considered as benefit in discharging their stewardship responsibilities. Amongst
others the seminars and conference attended by one or more Directors during the year:
Focus Group Discussion in preparation for Dialogue with BNMs Senior Management
Bank Negara Malaysia Annual Report 2015 / Financial Stability and Payment Systems Report 2015 Briefing Session
Risk Appetite Workshop CIMB
Independent Directors Programme : The Essence of Independence
Panelist for the session Putting it All Together - MINDA Engagement on Enhancing Director and Board Effectiveness
- INSKEN Onboarding Directors Programme
Participated in the RFI Responsible Finance Summit
Breakfast Talk Session entitled Key Traits to Make or Break a CEO: Establishing the Measures
Training Session on ISO for EURO Board of Directors
Public Lecture at the University Sultan Zainal Abidin (UniSZA)
Focus Group Discussion on Islamic Finance for Board Programme
Future CEO Programme
Competition Law Talk for MMC Group Directors & Senior management
Khazanah Megatrends Forum
2016 National Conference organised by The Institute of Internal Auditors Malaysia
Speaking to students of BBA (Islamic Finance) who took subject on Shariah Aspects of Business and Finance
Sesi Refleksi CEO Faculty Programme bersama YB Menteri Pendidikan Tinggi
CIMB Groups Annual Management Summit (AMS)
Anti-corruption & Integrity - Foundation of Corporate Sustainability
The Directors will continue to undergo other relevant training programmes to further enhance their skills and knowledge
from time to time.
The Board strives to present true and fair, comprehensive, balanced and meaningful evaluation and assessment of the Groups
financial performance and prospects through the annual audited financial statements and quarterly interim financial reports
to its stakeholders, in particular, shareholders, investors and the regulatory authorities. In preparing the financial statements,
the Directors are required to select appropriate accounting policies, consistently applied and supported by reasonable and
prudent judgments and estimates. The Directors have responsibility for ensuring that the Company keeps proper accounting
records which disclose with accuracy at any time the financial position of the Company which enables them to ensure that
the financial statements comply with the Companies Act, 1965, the Malaysia Financial Reporting Standards (MFRS) and
the Listing Requirements. The Directors also have responsibility for taking such steps as are reasonable to safeguard the
assets of the Group for prevention and detection of fraud and other irregularities.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
22
statement on
corporate governance
(contd)
The Group has established a transparent and professional relationship with the Groups Auditors, Messrs Folks DFK & Co.
The Audit Committee has been explicitly accorded the power to communicate directly with them. The external auditors fill an
essential role for the shareholders by enhancing the reliability of the Groups financial statements and giving assurance of
that reliability to users of these financial statements.
In the course of audit of the Groups financial statements, they are invited to attend the Audit Committee meetings to present
audit plan and audit findings. The appointment of the external auditors is subject to the approval of the shareholders at the
Annual General Meeting.
The Board acknowledges their responsibility in maintaining an internal control system that provides reasonable assurance of
effective and efficient operations, and compliance with laws and regulations as well as internal procedures and guidelines.
The Board also responsible for assessing the integrity of financial information and adequacy of the Groups system of internal
control and risk management processes.
The Groups internal audit function currently assigned to Total Advisors Sdn Bhd whereby the annual Internal Audit Report
was presented to the Audit Committee directly.
Further details of the activities of the Internal Audit functions are set out in the Audit Committee Report.
The Group observes the Corporate Disclosure Guide and the Listing Requirements issued by Bursa Securities. The Group also
acknowledges the timely and equal dissemination of material information to the shareholders, investors and public at large.
The Group announces its quarterly and full year results within the stipulated time frame. The financial statements and other
information are circulated and publicly released through BURSALINK and FRESH by Securities Commission of Malaysia, on
a timely basis to ensure effective distribution of information concerning to the Group.
The Group has also established web site at http://solutionholdings.com.my for shareholders and the public to access Group
information, financial statements, news and recent developments on a timely basis and for feedback.
The Board recognizes the importance of transparency and accountability to its shareholders and the need for regular,
effective and comprehensive communications with the Companys shareholders and investors. The Company maintained
active communications with its shareholders and investors of the Groups business activities, financial performance, material
information and corporate developments. Such information is disseminated via annual reports, circulars to shareholders,
quarterly financial results and the various announcements made from time to time. All shareholders have an opportunity to
participate in discussions with the Board on matters relating to the Groups operation and performance at the Companys
Annual General Meeting (AGM).
The AGM is the principal forum for dialogue and interaction with all the shareholders to raise their concerns pertaining to the
issues in the Annual Report, resolutions being proposed and the financial performance and business operations in general.
Notice of AGM and annual reports will be sent to the shareholders with the period prescribed by the Companys Articles &
Associations.
ANNUAL REPORT 2016
23
statement on
corporate governance
(contd)
In line with the revised Listing Requirements of Bursa Securities, all resolutions put in the forthcoming annual general
meetings will be voted by poll.
The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which give a
true and fair view of the financial statements of the Company and Group at the end of the financial year and of their results
and cash flows of the Company and Group for the financial year then ended.
In preparing the financial statements for the financial year ended 31 December 2016, the Directors have:
- adopted relevant and appropriate accounting policies and applying them consistently
- made judgments and estimates that are prudent and reasonable
- ensured applicable accounting standards have been adopted
- prepared the financial statements on going concern basis
The Directors have responsibility of ensuring that the Company and Group keeps proper accounting records and that such
records are disclose with reasonable accuracy of the financial statements of the Company and Group and which enable them
to ensure that the financial statements comply with the Companies Act, 1965, the Malaysia Financial Reporting Standards
(MFRS) and the Listing Requirements
The Directors have overall responsibilities for taking such steps that are reasonably open to them to safeguard the assets
of the Group to prevent and detect fraud as well as other irregularities.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
24
Statement of Risk
Management and
Internal Control
INTRODUCTION
The Board of Directors of the Group is committed to maintain a sound risk management framework and effective internal
controls within the Group to safeguard its assets and shareholders investment as recommended under the Malaysian Code
on Corporate Governance 2012 (Code) and guided by Rule 15.26(b) of the ACE Market Listing Requirements of Bursa
Malaysia Securities Berhad (Bursa Securities), and the Statement of Risk Management and Internal Control: Guidelines
for Directors of Public Listed Companies. With the approval of the Board of Directors (the Board), Solution Engineering
Holdings Berhad (the Company) is pleased to provide the following statement on the state of internal control of the Company
BOARD RESPONSIBILITY
The Board acknowledges its overall responsibility in maintaining a sound risk management framework and system of internal
control in safeguarding the shareholders investments and the Groups assets, and for reviewing the adequacy and integrity of
the system which not only covers the financial controls but also the operational and compliance controls and risk management.
The Board confirms that there is an ongoing process for identifying, evaluating, and managing the significant risks faced by
the Group for the financial year under review and approval of the annual report and financial statements.
The system of internal control is designed to manage the risk of failure to achieve business objectives, and inherently it can
only provide reasonable and not absolute assurance against material misstatement or loss.
RISK MANAGEMENT
The Board recognises that the process of identification, evaluation and management of significant risks faced by the Group
is an ongoing one. The board has delegated the implementation of the policies on risk and control to the Management who
remains accountable to the Board, to ensure that the Groups risk management and internal control system is operating
adequately and effectively.
The Management is responsible for identifying and assessing the risks faced by the Group, and in the design and operation of
suitable internal controls to mitigate these risks identified. As part of carrying out this responsibility, and with the assistance
of the outsourced internal auditors who report directly to the Audit Committee, the Management has established a satisfactory
Internal Control System with Risk Management embedded in the internal controls.
The Management Team reviews the risk management process in an ongoing basis.
The Board through the Audit Committee, with the assistance of the outsourced Internal Auditors, will further review and
improves the existing internal control processes within the Group every year. The Group will continue to focus on the key risks
and corresponding controls to ensure that they are able to respond effectively to the changing business and competitive
environment.
ANNUAL REPORT 2016
25
statement of risk
management and
internal control
(contd)
Organisation structure that clearly defines the management functions, responsibilities and delegated authorities.
Documented organisation-wide standard operating policies, procedures and limits of approving authorities for key
business units are set out and communicated to all levels. These are periodically reviewed and updated in accordance
with changes in the operating environment.
Active involvement by the Executive Directors in the running of the business and operations of the Group and they
report to the Board on significant changes in the business and external environment.
The Groups computerized information systems are continuously being monitored and streamlined to ensure compliance
with hardware and software regulations and guidelines for system integrity, effectiveness and efficiency.
Timely financial reporting process in providing relevant financial information for management review. Announcement of
financial information is further subjected to Audit Committees review prior to Boards approval. In addition, statutory
auditors opinion is sought for as and when required.
Board meetings are scheduled regularly. Board papers are distributed to the members ahead of the meetings and
information is presented and deliberated which would ensure that the Board maintains full and effective control on
the direction of the Group.
Weekly production meetings are conducted to identify key production issues and to allocate responsibility for tracking
and monitoring of all on-going projects.
Management meetings are held regularly amongst key management staff for various planning and monitoring as well
as to address weaknesses and to improve efficiency and productivity.
Establishment of Management Review Meeting under the ISO 9001:2008 to review quality policy and quality objectives
for continual improvement of the effectiveness of Quality Management System. Scheduled audits are conducted
internally as well as by the external ISO auditors.
INTERNAL AUDIT
The Audit Committee was entrusted by the Board to ensure that an effective and adequate Risk Management and Internal
Control system is in place during the financial year. The Group had outsourced the internal audit function to an independent
consulting firm, Total Advisors Sdn Bhd (Total Advisors) who assists the Audit Committee in providing assurance on
effectiveness as well as the adequacy and integrity of the Groups systems of internal control.
The Board works in ensuring that an ongoing process for identifying, evaluating, monitoring and managing the significant
risks of the Group is in place. Such process is applied consistently throughout the Group and is constantly reviewed by the
Board with the assistance of the outsourced auditors. Total Advisors conducts audits on all principal areas of operations and
continuously offers assurances on the efficiency and adequacy of the system of internal control. The internal audit function is
independent of the activities it audits and audits are performed with impartiality, proficiency and with due professional care.
As part of the Internal Audit function, follow-up reviews to ensure that all weaknesses and non-compliances to the Internal
Control system have been rectified accordingly. The weaknesses and non-compliances that have been identified were not
deemed as significant and material in its impact to the Groups businesses, financial conditions and results of operation,
and hence have not been disclosed in this Statement. Total Advisors reports to the Audit Committee whose members are
all independent and non executive members of the Board.
Annually, the Audit Committee reviews the Internal Audit Plan to ensure the adequacy of the scope of work and resources to
perform such work. All reports by Total Advisors are presented to the Audit Committee who in turn ensures that all material
weaknesses identified are satisfactorily rectified and controls are put in place to monitor the risks identified.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
26
statement of risk
management and
internal control
(contd)
ADEQUACY AND EFFECTIVENESS OF THE GROUPS RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM
The Board has received assurance from the Managing Director and Executive Directors that the Groups risk management
and internal controls system is operating effectively, in all material aspects, based on the risk management and internal
control system of the Group.
The Groups risk management and internal controls system does not apply to the associated company as the Group does not
have controlling interest in the company. However, the Group oversees the investment in the associated company by monitoring
its performance through reviewing the financial reports, sales orders and other information submitted on a quarterly basis.
Nevertheless, the Board of Directors recognizes that the system must continuously evolve and improve to support the
Groups business activities.
In accordance to paragraph 15.23 of the ACE Market Listing Requirement of the Bursa Malaysia Securitites Berhad, the
external auditors have reviewed this Statement for inclusion in the Annual Report of the Group for the year ended 31 December
2016 and reported to the Board that nothing has come to their attention that caused them to believe that the Statement is
inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of
internal controls of Solution Engineering Holdings Berhad.
This Statement on Risk Management and Internal Control is made in accordance with the resolution approved by the Board
on 12 April 2017.
ANNUAL REPORT 2016
27
AUDIT
COMMITTEE REPORT
AUDIT COMMITTEE
The Audit Committee of the Company was established on 17 June 2005 to serve as a Committee to the Board of Directors
(Board).
Members of the Audit Committee during the financial year ended 31 December 2016 are as follows:
Members Designation
Low Wei Ngee Independent Non-Executive Director/Chairman
Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Independent Non-Executive Director
Zainuddin bin Muhamad Independent Non-Executive Director
TERMS OF REFERENCE
The Audit Committee shall be appointed by the Board from amongst the Board of Directors who are non-executive directors
and shall comprise at least three (3) members, a majority of whom shall be Independent Directors. No alternate director
shall be appointed as a member of the Audit Committee.
At least one (1) member of the Audit Committee must be a member of the Malaysian Institute of Accountants or if he is not
a member of the MIA, he must have at least 3 years working experience and;
(a) He/she must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or
(b) He/she must be a member of one of the associations of accountants as specified in Part II of the 1st Schedule of
the Accountants Act 1967; or
fulfils such other requirements as prescribed or approved by the Bursa Malaysia Securities Berhad.
The term of office and performance of the Committee and each of its members shall be reviewed by the Board at least once
every three (3) years. In the event of any vacancy with the result that the number of members is reduced to below three, the
vacancy must be filled within two (2) months, but in any case not later than three (3) months.
Chairman
The Chairman of the Audit Committee shall be appointed by the Board, or failing which, by the members of the Audit Committee
themselves. The Chairman shall be an Independent Director.
In the event of the Chairmans absence, the meeting shall be chaired by another Independent Director.
Secretary
The Company Secretary shall be the secretary of the Audit Committee and shall be responsible for drawing up agendas in
consultation with the Chairman and circulating to the committee members prior to each meeting.
The Company Secretary shall also be responsible for recording attendance, keeping minutes of meetings and circulating to
committee members and members of the Board.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
28
audit
committee report
(contd)
Frequency of Meetings
The quorum for a meeting shall be two (2) members, provided that the majority of the members present at the meeting shall
be Independent Directors.
The Committee shall meet at least four (4) times a year to coincide with the review of the quarterly and annual financial
statement prior to presentation to the Board for approval. However, additional meetings may be called as and when required
with reasonable notice as the Committee Members deem fit.
The Committee may invite the internal and external auditors, any other Board members and senior management of the Group
to be in attendance during meetings to assist in its deliberations.
have explicit authority to investigate any matter within its terms of reference;
have the resources which are required to perform its duties;
have full and unrestricted access to all information, documents and employees of the Group;
have direct communication channels with the internal and External Auditors;
be able to obtain independent legal or independent professional advice in the performance of its duties at the cost of
the Company;
have authorization to convene meetings with the internal and external auditors, excluding the attendance of other
directors and employees of the Company, whenever deemed necessary.
In fulfilling its primary objectives, the Committee shall undertake the following duties and responsibilities:
External Audit
To review the appointment of External Auditors, the audit, resignation or dismissal and to make recommendations to
the Board;
To review with the External Auditor before the audit commences, the audit plan, the nature and scope of audit;
To review the proposed audit fees for the external auditors in respect of their audit of the Group;
To review any management letters sent by the External Auditors to the Company and the managements response to
such letters;
To review the Companys policies and procedures with management and External Auditors to ensure the adequacy
accounting and financial reporting controls;
To review the audit findings raised by the External Auditors and ensure that issues are being managed and rectified
appropriately and timely manner;
To review the assistance given by the officers and employees of the Group to the External Auditors;
To have direct communication channels with the External Auditors and to meet with the External Auditors without the
presence of management, at least twice a year;
To discuss issues arising from the interim and a final audit and any matter the External Auditors may wish to discuss
(in the absence of management where necessary).
Internal Audit
29
audit
committee report
(contd)
Internal controls
To review the adequacy of risk management framework and to provide assurance to the Board of Directors on the
effectiveness of the Companys risk management processes;
To review and evaluate the quality and effectiveness of the internal control and management information systems;
Financial reporting
To review quarterly reports on consolidated results and annual financial statements prior to submission to the Board
of Directors focusing particularly on going concern assumption, compliance with accounting standards and regulatory
requirements, any changes in accounting policies and practices, significant issues arising from the audit and major
judgmental areas; and
To monitor related party transactions entered into by the Company or the Group and to determine if such transactions
are undertaken on an arms length basis and normal commercial terms and on terms not more favorable to the related
parties than those generally available to the public and to review conflicts of interest that may arise within the Company
or the Group including any transaction, procedures or course of conduct that raises questions of management integrity.
There were five (5) Audit Committee meetings held during the financial year ended 31 December 2016. The number of
meetings attended by the Committee Members is as follows:
Audit Committee
Name of Director
Meetings Attendance
Low Wei Ngee
4/5
(Chairman and Independent Non-Executive Director)
Datuk Dr. Syed Muhamad bin Syed Abdul Kadir
(Independent Non-Executive Director) 5/5
Reviewed the internal and external auditors scope of work and annual audit planning memorandum of the Group prior
to the commencement of the annual audit;
Reviewed the quarterly and annual reports of the Group to ensure compliance with the ACE Market Listing Requirements
of Bursa Malaysia Securities Berhad and the applicable approved accounting standards issued by the Malaysian
Financial Reporting Standards (MFRS) prior to submission to the Board of Directors for their approval;
Reviewed the Audit Committee Report, Statement on Corporate Governance and Statement on Internal Control and
recommend to the Board for approval prior to their inclusion in the Annual Report;
Reviewed and deliberated on internal audit reports, audit recommendations made and Managements response to
these recommendations;
Evaluated the effectiveness of the external auditor and made recommendations to the Board of Directors on their re-
appointment and remuneration; and
Reviewed the related party transactions entered into by the Group.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
30
audit
committee report
(contd)
The Company has outsourced its internal audit function to an independent internal audit firm in November 2008.
The Group Internal Audit assists the Audit Committee in discharging its duties and responsibilities. Its role is to undertake
regular and systematic reviews of internal controls and then provide the Audit Committee with independent and objective
reports on the adequacy of internal controls and procedures in the operating business entities within the Group as well as
the extent of compliance with the Groups policies and procedures, and are in compliance with applicable laws, regulation,
directives and other externally enforced compliance requirements.
The Audit Committee reviews and approves the internal audit plan, which was developed based on the key risk areas and
major operating units of the Group. The internal audit function carried out audits in accordance with approved internal audit
plan and reports independently to the Audit Committee. The findings and recommendations of the internal audit reviews
were presented to the Audit Committee.
In addition, the Internal Auditors also performed follow-up visits to ensure the corrective actions have been implemented
in a timely manner. Based on the internal audit reviews conducted for the year, some weaknesses in internal control were
identified but these are not deemed significant hence have not been included in this Annual Report.
The cost incurred for the internal audit function in respect of the financial year ended 31 December 2016 was RM14,800.
ANNUAL REPORT 2016
31
ADDITIONAL
DISCLOSURES
pursuant to the listing
requirements of bursa
malaysia securities
The Company had obtained its shareholders approval for the establishment of Employees Share Option Scheme (ESOS) of
up to 30% of the total issued and paid-up share capital for the eligible employees and directors and its subsidiaries at the
EGM dated 16 January 2014. On 6 February 2014, the Company had announced that the effective date of implementation
of the ESOS is on 30 January 2014.
During the financial year ended 31 December 2016, the Company had granted the third Employees Share Option Scheme
(ESOS) of 6,000,000 options to the eligible employees and Directors of the Group. The details of options granted are
disclosed in the Directors Report and Note 16 (a) and Note 17 (b) of the Audited Financial Statements for the financial year
ended 31 December 2016.
For the financial year ended 31 December 2016, the amount of audit fees paid or payable to the auditors was as below:
Company Group
RM RM
There were no non-audit fees payable to the auditors during the financial year.
There were no material contracts entered into by the Company and its subsidiaries, involving the directors and substantial
shareholders interests during the financial year.
During the financial year, the Group had made some contributions to the society in the form of sponsorship of events and
donations. Amongst the sponsorship and contribution are as follows:
1. Contribution towards Rotary Kasih Foundation Contribution which was made in February 2016.
2. Co-sponsoring the event of The Engineering, Science and Technology Conference (ESTCON 2016) organised by Universiti
Teknologi Petronas which was held in August 2016.
4. Sponsorship for the 29th Symposium of Malaysian Chemical Engineers (SOMChE 2016) held by Department of Chemical
Engineering of Curtin University of Technology Sarawak Campus in December 2016.
5. Diamond sponsorship for the upcoming 3rd International Conference on Global Sustainability of Chemical Engineering
organized by the Faculty of Chemical Engineering, Universiti Teknologi MARA (UiTM), held in February 2017.
33 Directors Report
41 Directors Statement
42 Statutory Declaration
43 Consolidated Statement of Financial Position
45 Consolidated Statement of Comprehensive Income
FINANCIAL 46 Consolidated Statement of Changes in Equity
STATEMENTS 48 Consolidated Statement of Cash Flows
50 Statement of Financial Position
51 Statement of Comprehensive Income
52 Statement of Changes in Equity
54 Statement of Cash Flows
55 Notes to the Financial Statements
124 Independent Auditors Report
ANNUAL REPORT 2016
33
DIRECTORS
REPORT
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 December 2016.
PRINCIPAL ACTIVITIES
The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are set out 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
Company
RM RM
Attributable to :-
- Owners of the Company 7,652,312 10,749,348
- Non-controlling interests 293,174
7,945,486 10,749,348
There were no material transfers made to or from reserves or provisions during the financial year other than those disclosed
in the financial statements.
DIVIDEND
Since the end of the previous financial year, an interim single-tier dividend of 1 sen per share amounting to RM3,043,059
in respect of financial year ended 31 December 2016 was declared on 22 November 2016 and paid on 23 December
2016.
The directors do not recommend the payment of any dividend in respect of financial year ended 31 December 2016.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
34
directors
report
(contd)
SHARE CAPITAL
During the financial year, the issued and paid-up share capital of the Company was increased from RM19,981,500 to
RM30,433,587 through the issue of 104,520,865 ordinary shares by way of :-
(a) bonus issue of 101,329,365 new ordinary shares of RM0.10 each at par by way of capitalising the entire share premium
account on the date of bonus issue on 5 July 2016 amounting to RM4,687,785 and retained profits amounting to
RM5,445,152 on the basis of one (1) new ordinary share for every two (2) existing ordinary shares held (Bonus
Issue).
(b) issues of 3,189,000 new ordinary shares of RM0.10 each for cash pursuant to the exercise of Employees Share
Option Scheme (ESOS) at exercise prices of ranging between RM0.135 and RM0.220 per ordinary share.
(c) issues of 2,500 new ordinary shares of RM0.10 each for cash pursuant to the exercise of the Warrants at an exercise
price of RM0.20 per ordinary share.
The movement in the issued and paid-up share capital of the Company arising from the new issue of shares are
disclosed in Note 16 to the financial statements.
All the new ordinary shares issued during the financial year are listed on the ACE Market of the Bursa Malaysia Securities
Berhad and rank pari passu in all respects with the existing ordinary shares of the Company.
Subsequent to the financial year, 1,877,500 new ordinary shares of RM0.10 each were issued pursuant to the exercise
of ESOS.
WARRANTS
On 5 July 2016, a total of 101,329,365 free detachable Warrants have been issued and allotted to the shareholders in
conjunction with the bonus issue on the basis of one (1) Warrant for every two (2) existing ordinary shares of RM0.10 each
held in the Company.
The Warrants are listed on the ACE Market of the Bursa Malaysia Securities Berhad on 11 July 2016 and confer the right to
holders thereof at any time, not later than maturity date of 4 July 2021, to subscribe for one new ordinary share of RM0.10
each in the Company for every warrant held at an exercise price, to be paid in cash, of RM0.20 per share or as adjusted in
certain circumstances as set out in the Deed constituting the warrants. Any warrants not exercised by the date of maturity
will thereafter lapse and cease to be valid for any purpose.
The movements of the Warrants during the financial year are as follows :-
Number of Warrants
As at As at
01.01.2016 Issued Exercised 31.12.2016
35
directors
report
(contd)
The Companys Employees Share Option Scheme (ESOS or the Scheme) is governed by the By-Laws which were approved
by the shareholders on 16 January 2014. This ESOS was implemented on 30 January 2014 and will expire on 29 January
2019 (the Option Period). The movements of options over unissued ordinary shares granted to eligible Directors and
employees of the Group during the financial year are as follows:-
(i) Scheme shall be in force for a period of five years from 30 January 2014 (effective date) expiring on 29 January 2019
and may be extended for a further period of up five years at the sole and absolute discretion of the Board of Directors
upon recommendation from the ESOS Committee, provided always that the ESOS shall not in aggregate exceed a
duration of ten years from the effective date.
(ii) Eligible persons are employees of the Group, who has attained 18 years of age, been confirmed and is employed full
time and is on the payroll of the Group. Employees serving under employment contract may be considered where the
contract is for a duration of at least 2 years. The eligibility for participation in ESOS shall be at the discretion of the
ESOS Committee appointed by the Board of Directors.
(iii) The total number of shares to be issued under ESOS shall not exceed 30% of the issued and paid-up share capital of
the Company, at any point of time throughout the duration of Scheme.
(iv) The price payable for the exercise of an ESOS Option (Exercise Price) shall be determined by the ESOS Committee
at its discretion based on the 5 days volume weighted average market price of the underlying Company shares as
quoted by Bursa Securities, immediately prior to the Date of Offer with a discount of not more than 10% (or such
lower or higher limit in accordance with any prevailing guidelines, rules or regulations issued by Bursa Securities or
any other relevant regulatory authorities), if deemed appropriate, or the par value of the Company shares, whichever
is the higher.
The exercise price as determined by the ESOS Committee shall be conclusive and binding on the Grantee.
(v) The offer to participate in the ESOS shall be valid for acceptance for a period of 14 days from the date of offer or such
longer period as may be determined by the ESOS Committee on a case to case basis at its discretion.
(vi) All new ordinary shares issued upon exercise of the option under ESOS will rank pari-passu in all respects with the
existing ordinary shares of the Company except that the shares so issued will not be entitled to any dividends, rights
allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the new ordinary
shares.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
36
directors
report
(contd)
SUBSIDIARIES
The details of the subsidiaries of the Group are disclosed in Note 6 to the financial statements.
DIRECTORS
The names of the directors during the financial year and during the period from the end of the financial year to the date of
this report are :-
DIRECTORS INTERESTS
According to the Register of Directors Shareholdings, particulars of interests of directors at the end of the financial year
in shares, warrants and options over ordinary shares of the Company and its subsidiaries during the financial year were as
follows :-
The Company
37
directors
report
(contd)
The Company
Indirect 1 Deemed interested by virtue of his immediate familys interest and his substantial shareholdings in Solvest
Sdn. Bhd.
Indirect 2 Deemed interested by virtue of their substantial shareholdings in Solvest Sdn. Bhd.
Indirect 1 Deemed interested by virtue of his immediate familys interest and his substantial shareholdings in Solvest
Sdn. Bhd.
Indirect 2 Deemed interested by virtue of their substantial shareholdings in Solvest Sdn. Bhd.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
38
directors
report
(contd)
By virtue of their substantial shareholdings in the Company, Messrs Lim Yong Hew, Lim Hai Guan and Lim Chiou Kim are
also deemed interested in shares in its subsidiaries to the extent of interests held by the Company.
Other than as disclosed above, no other directors in office at the end of the financial year held any interests, direct or indirect,
in shares, warrants and options of the Company and its subsidiaries.
DIRECTORS REMUNERATION
The particulars of remuneration provided to the directors and past directors of the Company are disclosed in Note 25 to the
financial statements.
No indemnity was given to nor was there any insurance effected for the directors, officers or auditors of the Company during
the financial year.
DIRECTORS BENEFITS
Since the end of the previous financial year, no Director has received or become entitled to receive any benefits (other than
those disclosed as directors remuneration in Note 25 to the financial statements) by reason of a contract made by the
Company or a related corporation with the Director or with a firm of which he is a member or with a company in which he
has a substantial financial interest other than by virtue of transactions entered into in the ordinary course of business as
disclosed in Note 30 to the financial statements.
As at the end of the financial year and during the year, there did not subsist any arrangement to which the Company was a
party, whereby the Directors or their nominees might acquire benefits by means of acquisition of shares in, or debentures
of, the Company or any other body corporate other than any benefits which may be derived from the share options granted
under the Companys ESOS and warrants issued as disclosed in Directors Interest section of this report.
ANNUAL REPORT 2016
39
directors
report
(contd)
AUDITORS REMUNERATION
The details of remuneration paid or payable to the auditors of the Company are disclosed in Note 25 to the financial
statements.
(a) Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps :-
(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of
allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and adequate
allowance had been made for doubtful debts; and
(ii) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including
the value of current assets as shown in the accounting records of the Group and of the Company had been
written down to an amount which the current assets might be expected so to realise.
(b) As at the date of this report, the Directors are not aware of any circumstances :-
(i) which would render the amount written off for bad debts and the amount of allowance made for doubtful debts
in the financial statements of the Group and of the Company inadequate to any substantial extent;
(ii) which would render the values of current assets in the financial statements of the Group and of the Company
misleading;
(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group
and of the Company misleading or inappropriate; and
(iv) not otherwise dealt with in this report or the financial statements of the Group and of the Company which would
render any amount stated in the financial statements misleading.
(i) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year
which secures the liabilities of any other person; and
(ii) any contingent liability in respect of the Group and of the Company which has arisen since the end of the financial
year.
(i) no contingent or other liability has become enforceable, or is likely to become enforceable, within the period
of twelve months after the end of the financial year which will or may affect the ability of the Group and of the
Company to meet their obligations when they fall due;
(ii) the results of the Groups and of the Companys operations during the financial year were not substantially
affected by any item, transaction or event of a material and unusual nature; and
(iii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the
financial year and the date of this report which is likely to affect substantially the results of operations of the
Group and of the Company for the financial year in which this report is made.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
40
directors
report
(contd)
AUDITORS
The auditors, Messrs. Folks DFK & Co., have expressed their willingness to continue in office.
This report is made pursuant to the directors resolution passed on 25 April 2017
41
STATEMENT BY
DIRECTORS
We, Lim Yong Hew and Lim Chiou Kim, being two of the Directors of SOLUTION ENGINEERING HOLDINGS BERHAD, do
hereby state that in the opinion of the Directors, the accompanying financial statements are drawn up in accordance with
Malaysian Financial Reporting Standards, International Financial Reporting Standards and the provisions of the Companies
Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31
December 2016 and of the financial performance and cash flows of the Group and of the Company for the financial year
ended on that date.
The information set out in Note 38 to the financial statements on page 123 have been prepared in accordance with 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.
42
STATUTORY
DECLARATION
I, Lim Yong Hew, being the Director primarily responsible for the financial management of SOLUTION ENGINEERING HOLDINGS
BERHAD, do solemnly and sincerely declare that to the best of my knowledge and belief, the accompanying financial statements
are 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.
Before me,
43
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
as at 31 December 2016
Group
Restated Restated
31.12.2016 31.12.2015 01.01.2015
Note RM RM RM
ASSETS
Non-Current Assets
Property, plant and equipment 4 2,024,557 4,005,381 4,124,568
Intangible assets 5 113,776 141,154 176,442
Investment in an associate 7 1,220,920 1,206,042 1,180,092
Current Assets
Inventories 8 1,261,268 1,124,698 1,037,409
Amount due from contract customers 9 8,861,160 5,224,906 6,456,829
Trade and other receivables 10 6,828,247 8,756,221 7,310,345
Amount due from an associate 11 5,230,509 4,208,949 6,102,809
Tax recoverable 51,368
Short term investments 13 10,043,674 4,261,011 6,620,594
Deposits, cash and bank balance 14 8,603,870 11,996,020 9,792,074
Non-current asset held for sale 15 1,890,415
44
consolidated
statement of
financial position
(contd)
Group
Restated Restated
31.12.2016 31.12.2015 01.01.2015
Note RM RM RM
Non-Current Liabilities
Hire purchase payables 18 328,034 516,763 376,978
Term loan (secured) 19 432,343 597,512
Deferred tax liabilities 20 148,660 189,763
Current Liabilities
Amount due to contract customers 9 143,372
Trade and other payables 21 5,409,073 6,512,376 13,681,934
Amount due to directors 22 216,000
Hire purchase payables 18 188,620 210,774 133,412
Term loan (secured) 19 430,493 135,022 119,326
Taxation 1,030,181 583,877 624,177
45
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the year ended
31 December 2016
Group
Restated
2016 2015
Note RM RM
Profit for the year and total comprehensive income 7,945,486 5,730,406
7,945,486 5,730,406
RM RM RM RM RM RM RM RM
STATEMENT OF
CONSOLIDATED
Group
for the year ended
31 December 2016
At 1 January 2016
CHANGES IN EQUITY
SOLUTION ENGINEERING HOLDINGS BERHAD
- As previously stated 19,981,500 4,105,865 342,540 (1,880,483) 9,082,529 31,631,951 711,513 32,343,464
- Prior year adjustment (Note 36 (iii)) 1,880,483 (1,880,483)
Total comprehensive income for the year 7,652,312 7,652,312 293,174 7,945,486
Issuance of ordinary shares pursuant to:-
- Exercise of ESOS 318,900 282,640 601,540 601,540
- Bonus issue 10,132,937 (4,687,785) (5,445,152)
- Exercise of warrant 250 250 500 500
ESOS granted 360,000 360,000 360,000
ESOS forfeited (1,860) 1,860
Transferred to share premium upon
exercise of ESOS 361,380 (361,380)
Effect of acquisition of additional equity
interest in subsidiaries (7,600) (7,600) 245,000 237,400
Dividend paid (Note 28) (3,043,059) (3,043,059) (210,000) (3,253,059)
Balance at 31 December 2016 30,433,587 62,350 339,300 6,360,407 37,195,644 1,039,687 38,235,331
Group
At 1 January 2015
- As previously stated 19,637,400 3,430,710 18,960 (1,880,483) 5,664,521 26,871,108 396,715 27,267,823
- Prior year adjustment (Note 36 (iii)) 1,880,483 (1,880,483)
Total comprehensive income for the year 5,415,608 5,415,608 314,798 5,730,406
Issuance of ordinary shares pursuant to :-
- Exercise of ESOS 344,100 278,735 622,835 622,835
ESOS granted 720,000 720,000 720,000
Transferred to share premium upon
exercise of ESOS 396,420 (396,420)
Dividend paid (Note 28) (1,997,600) (1,997,600) (1,997,600)
Balance at 31 December 2015 19,981,500 4,105,865 342,540 7,202,046 31,631,951 711,513 32,343,464
(contd)
changes in equity
statement of
consolidated
47
ANNUAL REPORT 2016
48
CONSOLIDATED
STATEMENT OF
CASH FLOWS
for the year ended
31 December 2016
Group
Restated
2016 2015
RM RM
Adjustments for :-
Amortisation of intangible assets 35,288 35,288
Bad debts written off 108,127
Deposits written off 9,000
Depreciation of property, plant and equipment 651,798 735,524
Dividend income from short term investments (323,620) (141,214)
ESOS expense 360,000 720,000
Gain on disposal of short term investments (65,726) (106,109)
Loss on disposal of property, plant and equipment 1,229
Loss on derecognition of subsidiary 78,160
Net loss on fair value change on financial asset held for trading 168,222 58,641
Interest income (183,114) (179,069)
Interest expense 44,388 38,139
Share of profit in an associated company (14,878) (25,950)
Unrealised gain on foreign exchange (316,604)
Property, plant and equipment written off 79,784
49
consolidated
statement of
cash flows
for the year ended
31 december 2016
(contd)
Group
Restated
2016 2015
RM RM
Cash and cash equivalents at end of year (Note 14) 8,603,870 11,996,020
50
STATEMENT OF
FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Company
Restated Restated
31.12.2016 31.12.2015 01.01.2015
Note RM RM RM
ASSETS
Non-Current Assets
Investment in subsidiaries 6 30,383,583 30,049,083 28,648,163
Current Assets
Other receivables 10 104,000 1,008,791
Amount due from subsidiaries 12 10,021,749 5,158,944 4,286,381
Tax recoverable 35
Short term investments 13 7,038,996 3,566,981 6,545,557
Deposits, cash and bank balances 14 1,224,180 333,523 753,452
Current Liabilities
Other payables 21 92,615 121,563 85,040
Amount due to subsidiaries 12 15,840 27,323
51
STATEMENT OF PROFIT
OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the year ended
31 December 2016
Company
Restated
2016 2015
Note RM RM
Profit for the year and total comprehensive income 10,749,348 529,334
10,749,348 529,334
Company
STATEMENT OF
At 1 January 2016
31 December 2016
CHANGES IN EQUITY
Company
At 1 January 2015
54
STATEMENT OF
CASH FLOWS
for the year ended
31 December 2016
Company
Restated
2016 2015
RM RM
Adjustments for :-
Dividend income from short term investments (236,208) (127,658)
Dividend income from subsidiaries (11,100,000) (1,000,000)
Net loss on fair value change on financial asset held for trading 116,433 58,118
Gain on disposal of short term investments (52,991) (100,091)
Interest income (1,228) (1,570)
Share option expenses 25,500 319,080
Cash and cash equivalents at end of year (Note 14) 1,224,180 333,523
55
NOTES TO THE
FINANCIAL STATEMENTS
at 31 December 2016
1. GENERAL INFORMATION
Solution Engineering Holdings Berhad is a public company limited by shares, incorporated and domiciled in Malaysia,
and is listed on the ACE Market of Bursa Malaysia Securities Berhad.
Its registered office is located at Suite 705, Block A, Kelana Business Centre, 97, Jalan SS 7/2, 47301 Petaling Jaya,
Selangor Darul Ehsan and principal place of business is located at No. 6, Jalan BK 1/15, Bandar Kinrara, 47180
Puchong, Selangor Darul Ehsan.
The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are set
out in Note 6 to the financial statements.
The financial statements of the Group and of the Company were authorised for issue by the Board of Directors in
accordance with a resolution of directors on 25 April 2017.
The financial statements of the Group and of the Company have been prepared in accordance with Malaysian
Financial Reporting Standards (MFRSs), International Financial Reporting Standards and the provisions of the
Companies Act, 1965 in Malaysia.
The financial statements of the Group and of the Company are prepared under the historical cost convention
unless otherwise indicated in the summary of significant accounting policies.
The accounting policies applied by the Group and the Company are consistent with those applied in the previous
financial year other than the application of the amendments to MFRSs as disclosed in Note 2.2.
During the financial year, the Group and the Company have applied the following amendments to MFRSs issued
by the Malaysian Accounting Standards Board (MASB) which are effective from the beginning of the current
financial year:-
Amendments to MFRS 10, MFRS 12 and MFRS 128 - Investment Entities : Applying the
Consolidation Exception
Amendments to MFRS 11 - Accounting for Acquisition of Interest 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 127 - Equity Method in Separate Financial Statements
Amendments to MFRSs Classified as Annual Improvements to MFRSs 2012 - 2014 Cycle
The application of the Amendments has no impact on the Groups and the Companys financial statements.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
56
notes to the
financial statements
(contd)
2.3 New MFRSs and IC Interpretation and Amendments to MFRSs That Are In Issue But Not Yet Effective
The Group and the Company have not early adopted the following new MFRSs and IC Interpretation and
amendments to MFRSs that have been issued by the MASB but are not yet effective :-
The Group and the Company will apply the above new MFRSs and IC Interpretation and amendments to MFRSs
that are applicable once they become effective. Their main features are summarised below.
The Amendments to MFRS 107 Statement of Cash Flows require an entity to provide disclosures
that enable users of financial statements to evaluate changes in liabilities arising from financing
activities, including changes from cash flows and non-cash changes.
(b) Amendments to MFRS 112 - Recognition of Deferred Tax Assets for Unrealised Losses
(i) decreases in value of a debt instruments measured at fair value for which the tax base
remains at its original cost give rise to a deductible temporary difference. The estimate of
probable future taxable profits may include recovery of some of an entitys assets for more
than their carrying amounts if sufficient evidence exists that it is probable the entity will
achieve this.
ANNUAL REPORT 2016
57
notes to the
financial statements
(contd)
2.3 New MFRSs and IC Interpretation and Amendments to MFRSs That Are In Issue But Not Yet Effective (Contd)
2.3.1 Effective for annual periods beginning on or after 1 January 2017 (Contd)
(b) Amendments to MFRS 112 - Recognition of Deferred Tax Assets for Unrealised Losses (Contd)
(ii) deductible temporary differences should be compared with the entitys future taxable profits
excluding tax deductions resulting from the reversal of those deductible temporary differences
when an entity evaluates whether it has sufficient future taxable profits. In addition, when an
entity assesses whether taxable profits will be available, it should consider tax law restrictions
with regards to the utilisation of the deduction.
(c) Amendments to MFRSs Classified as Annual Improvements to MFRS Standards 2014 - 2016
Cycle : - Amendments to MFRS 12, Disclosure of Interests in Other Entities
The Amendments clarify the scope of the Standard by specifying that the disclosure requirements
in the Standards apply to an entitys interests in subsidiaries, joint arrangements, associates and
unconsolidated structured entities that are classified as held for distribution or as discontinued
operations in accordance with MFRS 5.
The Amendments also clarify that an entity is not required to disclose summarised financial
information when its subsidiary, joint venture and associates is classified as held for sale in
accordance with MFRS 5.
The initial application of the above Amendments is not expected to have any significant impact on the
financial statements of the Group and of the Company.
The Standard replaces earlier versions of MFRS 9 and introduces a package of improvements
which includes a classification and measurement model, a single forward-looking expected loss
impairment model and a substantially-reformed approach to hedge accounting.
Under MFRS 9, all recognised financial assets are required to be subsequently measured at
either amortised cost, fair value through other comprehensive income (FVTOCI) or fair value
through profit or loss (FVTPL) on the basis of both an entitys business model for managing
the financial assets and the contractual cash flow characteristics of the financial assets.
These requirements improve and simplify the approach for classification and measurement
of financial assets as the numerous categories of financial assets under MFRS 139 had
been replaced.
Most of the requirements in MFRS 139 for classification and measurement of financial
liabilities were carried forward unchanged to MFRS 9, except for the measurement of financial
liabilities designated as at FVTPL. Under MFRS 139, the entire amount of the change in the
fair value of the financial liability designated as FVTPL is presented in profit or loss. However,
MFRS 9 requires that the amount of change in the fair value of the financial liability that is
attributable to changes in the credit risk of that liability is presented in other comprehensive
income, unless the recognition of the effects of changes in the liabilitys own credit risk in
other comprehensive income would create or enlarge an accounting mismatch in profit or
loss. Changes in fair value attributable to a financial liabilitys credit risk are not subsequently
reclassified to profit or loss.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
58
notes to the
financial statements
(contd)
2.3 New MFRSs and IC Interpretation and Amendments to MFRSs That Are In Issue But Not Yet Effective (Contd)
2.3.2 Effective for annual periods beginning on or after 1 January 2018 (Contd)
In relation to the impairment of financial assets, MFRS 9 requires an expected credit loss
model, as opposed to an incurred credit loss model under MFRS 139. Under MFRS 9, it is
no longer necessary for a credit event to have occurred before credit losses are recognised.
Instead, an entity always accounts for expected credit losses and changes in those expected
credit losses at each reporting date to reflect changes in credit risk since initial recognition.
The new general hedge accounting requirements retain the three types of hedge accounting
mechanisms currently available in MFRS 139 i.e. fair value hedges, cash flow hedges
and hedges of a net investment in a foreign operation. MFRS 9 incorporates a new hedge
accounting model that aligns the hedge accounting more closely with an entitys risk
management activities. The new hedge accounting model has also expanded the scope of
eligibility of hedge items and hedging instruments respectively.
MFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers. MFRS 15 will supersede the current revenue recognition
guidance including MFRS 111, MFRS 118 and the related IC Interpretations when it becomes
effective.
The core principle of MFRS 15 is that an entity recognises revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. An entity recognises revenue in
accordance with that core principle by applying the following steps :-
Step 4 Allocate the transaction price to the performance obligations in the contract
Step 5 Recognise revenue when (or as) the entity satisfies a performance obligation
Under MFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied
i.e. when control of the goods or services underlying the particular performance obligation is
transferred to the customer. MFRS 15 also requires more extensive disclosures.
(iii) assessing whether revenue from a licence of intellectual property is recognised over time
or at a point in time.
ANNUAL REPORT 2016
59
notes to the
financial statements
(contd)
2.3 New MFRSs and IC Interpretation and Amendments to MFRSs That Are In Issue But Not Yet Effective (Contd)
2.3.2 Effective for annual periods beginning on or after 1 January 2018 (Contd)
(i) the effects of vesting and non-vesting conditions on the measurement of cash -settled share-
based payments;
(ii) share-based payment transactions with a net settlement feature for withholding tax
obligations; and
(iii) a modification to the terms and conditions of a share-based payment that changes the
classification of the transaction from cash-settled to equity-settled.
The Amendments to MFRS 140 Investment Property clarify that an entity shall transfer a property
to, or from, investment property when, and only when, there is evidence of a change in use. A
change of use occurs if property meets, or ceases to meet, the definition of investment property. A
change in managements intentions for the use of a property by itself does not constitute evidence
of a change in use.
(f) Amendments to MFRSs Classified as Annual Improvements to MFRS Standards 2014 - 2016
Cycle
The Annual Improvements to MFRS Standards 2014 - 2016 Cycle include amendments to the
following MFRSs :-
(i) The Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards
have removed certain provisions that have served their intended purposes and are no longer
required.
(ii) The Amendments to MFRS 128 Investments in Associates and Joint Ventures clarify that the
election to measure at fair value through profit or loss an investment in an associate or a
joint venture that is held by an entity that is a venture capital organisation, or other qualifying
entity, is available for each investment in an associate or joint venture on an investment-by-
investment basis, upon initial recognition.
The IC Interpretation addresses which exchange rate to use in reporting foreign currency transactions
that involve advance consideration paid or received.
The initial application of MFRS 9 and MFRS 15 may have an impact on the financial statements of the
Company. However, it is not practicable to provide a reasonable estimate of the effect until a detailed review
has been completed. The initial application of other new MFRSs an IC Interpretation and amendments to
MFRSs for reporting periods beginning on or after 1 January 2018 is not expected to have any significant
impact on the financial statements of the Group and of the Company.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
60
notes to the
financial statements
(contd)
2.3 New MFRSs and IC Interpretation and Amendments to MFRSs That Are In Issue But Not Yet Effective (Contd)
MFRS 16 will supersede the existing MFRS 117 Leases, IC Interpretation 4 Determining whether an
Arrangement contains a Lease, IC Interpretation 115 Operating Leases - Incentives and IC Interpretation
127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease and it sets out the
principles for the recognition, measurement, presentation and disclosures of leases.
Under the existing MFRS 117, lessees and lessors are required to classify their leases as either finance
leases or operating leases and account for those two types of leases differently. It requires a lessee to
recognise assets and liabilities arising from finance leases but not from operating leases.
The new MFRS 16 introduces a single accounting model and requires a lessee to recognise assets
and liabilities for the rights and obligations arising from all leases and hence eliminates the distinction
between finance leases and operating leases. As a consequence, a lessee recognises right-of-use assets
and lease liabilities arising from operating leases. The right-of-use asset is depreciated in accordance
with the principle in MFRS 116 Property, Plant and Equipment and the lease liability is accreted over
time with interest expense recognised in the profit or loss.
The financial effects arising from the application of this Standard are still being assessed by the
management.
The consolidated financial statements include the financial statements of the Company and its subsidiaries.
The financial statements of the subsidiaries are prepared for the same reporting date as the Company. The
consolidated financial statements are prepared using uniform accounting policies for like transactions and other
events in similar circumstances.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls
an entity when the Group :-
is exposed, or has rights, to variable returns from its involvement with the entity; and
has the ability to affect those returns through its power over the entity.
The Group reassesses whether it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of controls listed above.
Consolidation of a subsidiary begins from the date the Group obtains control over the subsidiary and ceases
when the Group loses control of the subsidiary.
In preparing consolidated financial statements, intra-group balances and transactions and the resulting unrealised
profits are eliminated on consolidation. Unrealised losses are eliminated on consolidation and the relevant assets
are assessed for impairment. The consolidated financial statements reflect external transactions and balances
only. When necessary, adjustments are made to the financial statements of subsidiaries to ensure conformity
with the Groups accounting policies. The total comprehensive income of a subsidiary is attributed to the Group
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
ANNUAL REPORT 2016
61
notes to the
financial statements
(contd)
Changes in the Groups ownership interest in a subsidiary that do not result in a loss of control are accounted
for as equity transactions. The carrying amounts of the controlling and non-controlling interests are adjusted to
reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the consideration paid or received by the Group is
recognised directly in equity and attributed to owners of the Company. If the Group loses control of a subsidiary, the
assets (including any goodwill) and liabilities of the subsidiary and non-controlling interests will be derecognised
at their carrying amounts at the date when control is lost. Any investment retained in the former subsidiary
is recognised at its fair value at the date when control is lost. The resulting difference between the amounts
derecognised and the aggregate of the fair value of consideration received and investment retained is recognised
as gain or loss in profit or loss attributable to the Group.
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred
for the acquisition of an acquiree is measured at fair value which is calculated as the sum of the
acquisition-date fair values of assets transferred, liabilities incurred, equity interests issued and contingent
consideration given. Acquisition-related costs are recognised as an expense in the periods in which the
costs are incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are measured initially at their acquisition-date fair values, except for non-current assets (or disposal group)
that are classified as held for sale which shall be measured at fair value less costs to sell.
Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of any
non-controlling interests and the acquisition-date fair value of any previously held equity interest over the
net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed. The excess
of the Groups interest in the net amounts of the identifiable assets, liabilities and contingent liabilities
over the aggregate of the consideration transferred, the amount of any non-controlling interests and the
acquisition-date fair value of any previously held equity interest is recognised immediately in profit or loss.
Subsidiaries arising from common control combinations are consolidated using the principles of merger
accounting. The common control combinations are business combinations in which all the combining
entities have common ultimate controlling parties prior to and immediately after such combinations. Under
the principles of merger accounting, the assets and liabilities of the combining entities are consolidated
using the existing book values from the controlling parties perspective and the results of each of the
combining entity are presented as if the combination had been effected throughout the current and previous
comparative periods presented. On consolidation, the cost of investment is matched against the nominal
value of ordinary shares acquired and any resulting credit difference (merger reserve) is classified under
equity as a non distributable reserve and any resulting debit difference (merger deficit) is adjusted against
suitable consolidated reserves.
Non-controlling interests represent that portion of profit or loss and net assets of a subsidiary not
attributable, directly or indirectly, to the Group. For each business combination, non-controlling interests are
measured either at their fair value at the acquisition date or at the non-controlling interests proportionate
share of the subsidiarys identifiable net assets. Non-controlling interests in the net assets of consolidated
subsidiaries comprised the amount of non-controlling interests at the date of original combination and
their share of changes in equity since the date of combination.
In a business combination achieved in stages, any previously held equity interest is remeasured at its
acquisition-date fair value and the resulting gain or loss is recognised in profit or loss.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
62
notes to the
financial statements
(contd)
2.5 Goodwill
Goodwill arising on the acquisitions of subsidiaries is recognised as an asset and carried at cost as established
at the acquisition date less any accumulated impairment losses. Goodwill is tested for impairment annually or
more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the
purpose of impairment testing, goodwill from acquisition date is allocated to each of the Groups cash-generating
unit (CGU) or groups of CGUs that are expected to benefit from the synergies of the combination in which the
goodwill arose. The test for impairment of goodwill on consolidation is in accordance with the Groups accounting
policy for impairment of non-financial assets. An impairment loss recognised for goodwill is not reversed in a
subsequent period.
Where goodwill forms part of a CGU or groups of CGUs and part of the operation within that unit is disposed
of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation
when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is
measured based on the relative values of the operation and the portion of the CGU retained.
2.6 Associates
An associate is an entity, including an unincorporated entity, over which the Group has significant influence.
Significant influence is the power to participate in the financial and operating policy decisions of the investee
but is not control or joint control of those policies.
Investments in associates are accounted for in the consolidated financial statements using the equity method.
Under the equity method, the investments in associates are initially recognised at cost and adjusted thereafter
for the Groups share of the profit or loss and changes in the associates other comprehensive income after
the date of acquisition. Equity accounting is discontinued when the Groups share of losses of an associate
equals or exceeds its interest in the associate. Once the Groups interest in such associate is reduced to zero,
additional losses are provided for and a liability recognised, only to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports
profits, the Group resumes recognising its share of those profits only after its share of the profits equals the
share of losses not recognised.
Unrealised gain on transactions between the Group and the associate are eliminated to the extent of the Groups
interest in the associate. Unrealised losses are eliminated and the relevant assets are assessed for impairment.
On acquisition of an investment in an associate, any excess between the cost of the investment and the Groups
share of net fair value of the associates identifiable asset and liabilities is accounted for as goodwill and is
included in the carrying amount of the investment and is not amortised. Any excess of the Groups share of the
net fair value of the associates identifiable assets and liabilities over the cost of the investment is included
as income in the determination of the Groups share of the associates profit or loss in the period in which the
investment is acquired.
After the application of the equity method, the Group determines whether it is necessary to recognise any
additional impairment loss with respect to the Groups net investment in the associate. The Group determines
at the end of each reporting date whether there is any objective evidence that the investments in associates are
impaired. If such evidence exists, the Group determines the amount of impairment by comparing the investments
recoverable amount with its carrying amount (including goodwill) and the impairment loss is recognised to profit
or loss as part of the Groups share of results of associates.
In applying the equity method of accounting, the latest audited financial statements of the associate are used.
Where the reporting dates of the Group and the associate are not coterminous, equity accounting is applied on
the management accounts made to the financial year end of the Group. Uniform accounting policies are adopted
for like transactions and events in similar circumstances.
ANNUAL REPORT 2016
63
notes to the
financial statements
(contd)
When the Group reduces its equity interest in an associate but continues to apply the equity method, the
Group reclassifies to profit or loss the proportion of gain or loss that had previously been recognised in other
comprehensive income.
The Group discontinues the use of equity method from the date when its investment ceases to be an associate.
If the Group retains interest in the former associate and the retained interest is a financial asset, the Group
measures the retained interest at fair value at that date. The Group recognises in profit or loss the difference
between (i) the fair value of any retained interest and any proceeds from disposing of a part interest in the
associate; and (ii) the carrying amount of the investment at the date the equity method was discontinued.
In the Companys separate financial statements, investments in subsidiaries and associates are accounted for at
cost less any accumulated impairment losses. The investments are reviewed for impairment in accordance with
the Groups accounting policy for impairment of non-financial assets as disclosed in Note 2.11. On disposal of
such investments, the difference between the net disposal proceeds and the net carrying value of the investments
is recognised as a gain or loss on disposal in the Companys profit or loss.
All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant
and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can be measured reliably.
Subsequent to recognition, property, plant and equipment except for capital work-in-progress are stated at cost
less accumulated depreciation and any accumulated impairment losses. When significant parts or property, plant
and equipment are required to be replaced in intervals, the Group recognised such parts as individual assets
with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost
is recognised in the carrying amount of the property, plant and equipment as a replacement if the recognition
criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.
Capital work-in-progress is not depreciated as these assets are not yet available for use. Leasehold land is
amortised over the period of of its lease of 90 years. Depreciation of other property, plant and equipment is
calculated on a straight-line basis to write off their costs to their residual values over the estimated useful lives
of the assets concerned. The estimated useful lives of the Groups property, plant and equipment are :-
Buildings 50 years
Office equipment and furniture and fittings 3 to 10 years
Tools 10 years
Motor vehicle 10 years
Plant and machinery 5 years
Signboard 10 years
Renovation 10 years
The residual values and useful lives of assets are reviewed at each financial year end and adjusted prospectively,
if appropriate, where expectations differ from previous estimates. Property, plant and equipment are reviewed for
impairment in accordance with the Groups accounting policy for impairment of non-financial assets as disclosed
in Note 2.11.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net
carrying value is recognised in the profit or loss in the year the asset is derecognised.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
64
notes to the
financial statements
(contd)
All research expenditure are recognised in the statement of comprehensive income as incurred.
Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group
can demonstrate the technical feasibility of completing the intangible asset so that it will be available for
use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate
future economic benefits, the availability of resources to complete the project and the ability to measure
reliably the expenditure during the development. Product development expenditures which do not meet
these criterias are expensed when incurred.
Development costs, considered to have finite useful lives, are stated at cost less any impairment losses
and are amortised using the straight-line basis over the commercial lives of the underlying products
not exceeding five years. Impairment is assessed whenever there is indication of impairment and the
amortisation period and method are also reviewed at least at each statement of financial position date.
2.10 Non-current Assets (or Disposal Groups) Classified as Held for Sale
Non-current assets (or disposal groups) are classified as assets held for sale if their carrying amounts will be
recovered principally through a sale transaction rather than through continuing use. This condition is regarded
as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale
in its present condition subject only to terms that are usual and customary.
On initial classification as held for sale, non-current assets or disposal groups (other than deferred tax assets,
financial assets and inventories) are measured at the lower of their carrying amount and fair value less costs
to sell. Any differences are included in profit or loss.
The carrying amounts of non-financial assets (other than inventories, assets arising from construction contracts,
deferred tax assets, assets arising from employee benefits and non-current assets or disposal groups held for
sale) are reviewed for impairment at the end of each reporting period to determine whether there is any indication
of impairment. If any such indication exists, the assets recoverable amount is estimated to determine the amount
of impairment loss. For goodwill recognised in a business combination and that has an indefinite useful life
and intangible assets that are not yet available for use, the recoverable amount is estimated annually or more
frequently when indicators of impairment are identified.
An impairment loss is recognised if the carrying amount of an asset or a cash generating unit (CGU) exceeds
its recoverable amount. A CGU is the smallest identifiable group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or group of assets. Impairment losses recognised in
respect of CGUs (or groups of CGUs) are allocated first to reduce the carrying amount of any goodwill arising
from a business combination allocated to the units (or groups of units) and then to reduce the carrying amount
of the other assets in the units (or groups of units) on a pro rata basis.
The recoverable amount of an asset or CGU is the higher of its fair value less costs of disposal and its value in
use. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset.
ANNUAL REPORT 2016
65
notes to the
financial statements
(contd)
Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than
goodwill is reversed if, and only if, there has been a change in the estimates used to determine the assets
recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other
than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the
carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss
been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is
recognised in profit or loss.
The Group recognises all financial assets in its statement of financial position when, and only when, the Group
becomes a party to the contractual provisions of the instruments. All regular way purchases or sales of financial
assets are recognised and derecognised using trade date accounting. A regular way purchase or sale is a
purchase or sale of a financial asset that requires delivery of asset within the time frame established generally
by regulation or convention in the marketplace concerned. Trade date accounting refers to :-
the recognition of an asset to be received and the liability to pay for it on the trade date i.e. the date
the Group commits itself to purchase or sell an asset; and
derecognition of an asset that is sold, the recognition of any gain or loss on disposal and the recognition
of a receivable from the buyer for payment on the trade date.
Financial assets are initially measured at fair value plus, in the case of financial assets not at fair value
through profit or loss, directly attributable transaction costs.
Financial assets are classified into the following specified categories depending on the nature and
purpose of the financial assets and are determined at the time of initial recognition.
Financial assets are classified at fair value through profit or loss when the financial assets are
either held for trading or designated as such upon initial recognition.
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition, it is part of a portfolio of identified financial instruments that the Group
manages together and has a recent actual pattern of short-term profit-taking; or
After initial recognition, financial assets at fair value through profit or loss are measured at fair
value with any gains or losses arising from changes in fair values recognised in profit or loss.
The net gains or losses do not include any exchange differences, dividend or interest earned on
the financial asset. Exchange differences, dividend and interest earned on financial assets at fair
value through profit or loss are recognised separately in profit or loss as part of other income or
other expenses.
Derivatives that are linked to and must be settled by delivery of unquoted equity instruments
whose fair value cannot be reliably measured are measured at cost less any impairment losses.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
66
notes to the
financial statements
(contd)
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturity that the Group has the positive intention and ability to hold to maturity.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. Trade receivables, loans and other receivables are classified
as loans and receivables.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the
effective interest method less any impairment losses. Gains and losses are recognised in profit
or loss when loans and receivables are derecognised or impaired, and through the amortisation
process.
Available-for-sale financial assets are non-derivative financial assets that are designated as available
for sale or are not classified as loans and receivables, held-to-maturity investments or at fair value
through profit or loss. Available-for-sale financial assets comprise quoted and unquoted equity and
debt instruments that are not held for trading.
Subsequent to initial recognition, quoted equity and debt instruments are measured at fair value and
investments in equity instruments that do not have a quoted market price in an active market and
whose fair value cannot be reliably measured are measured at cost. A gain or loss from changes
in fair value is recognised in other comprehensive income, except that impairment losses, foreign
exchange gains or losses on monetary instruments and interest calculated using the effective
interest method are recognised in profit or loss. The cumulative gain or loss previously recognised
in other comprehensive income is reclassified from equity to profit or loss as a reclassification
adjustment when the financial asset is derecognised. Dividends on an equity instrument are
recognised in profit or loss when the Groups right to receive payment is established.
The Group assesses at the end of each reporting period whether there is any objective evidence that a
financial asset, other than financial assets at fair value through profit or loss, is impaired. Financial assets
are considered to be impaired when objective evidence indicates that a loss event has occurred after
the initial recognition of the assets and that the loss event had a negative effect on the estimated future
cash flows of that asset that can be reliably estimated. Losses expected as a result of future events, no
matter how likely, are not recognised. For quoted equity instrument, a significant or prolonged decline in
the fair value of the investment below its cost is considered to be objective evidence of impairment.
ANNUAL REPORT 2016
67
notes to the
financial statements
(contd)
An amount of impairment loss in respect of financial assets measured at amortised cost is measured
as the difference between the assets carrying amount and the present value of estimated future cash
flows discounted at the financial assets original effective interest rate i.e. the effective rate computed
at initial recognition. The carrying amount of the asset is reduced through an allowance account. The
amount of loss is recognised in profit or loss.
If in a subsequent period the amount of the impairment loss on financial assets measured at amortised
cost decreases and the decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account
to the extent that the carrying amount of the financial asset does not exceed its amortised cost had
the impairment not been recognised at the date the impairment is reversed. The amount of reversal is
recognised in profit or loss.
When an available-for-sale financial asset is impaired, the cumulative loss in relation to decline in fair
value previously recognised in other comprehensive income is reclassified from equity and recognised in
profit or loss as a reclassification adjustment even though the financial asset has not been derecognised.
The amount of cumulative loss that is reclassified is the difference between the acquisition cost (less any
principal repayment and amortisation) and current fair value, less any impairment loss on that financial
asset previously recognised in profit or loss.
Impairment losses recognised in profit or loss for an investment in an equity instrument classified as
available-for-sale is not reversed through profit or loss. Increase in fair value, if any, subsequent to the
impairment loss, is recognised in other comprehensive income.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and
the increase can be objectively related to an event occurring after the impairment loss was recognised
in profit or loss, the impairment loss is reversed with the amount of the reversal recognised in profit or
loss.
An amount of impairment loss in respect of financial assets carried at cost is measured as the difference
between the carrying amount of the financial asset and the present value of estimated future cash flows
discounted at the current market rate of return for a similar financial asset. Such impairment losses are
not reversed in subsequent periods.
The Group derecognises a financial asset when, and only when, the contractual rights to the cash flows
from the financial asset expires or it transfers the financial asset without retaining control or transfers
substantially all the risks and rewards of ownership of the financial asset to another party.
On derecognition of a financial asset in its entirety, the difference between the carrying amount and the
sum of the consideration received and any cumulative gain or loss that had been recognised in other
comprehensive income is recognised in profit or loss.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
68
notes to the
financial statements
(contd)
2.13 Inventories
Inventories are measured at the lower of cost and net realisable value.
Cost is determined on the weighted average cost basis. Cost of raw materials, consumable and crane components
comprise all costs of purchase plus incidentals in bringing these inventories to their present location and condition.
Net realisable value represents the estimated selling price in the ordinary course of business less the estimated
cost of completion and selling expenses.
Where the outcome of a construction contract can be estimated reliably, contract revenue and contract
costs are recognised as revenue and expenses respectively by reference to the stage of completion of
the contract activity at the statement of financial position date. The stage of completion is measured by
reference to the proportion of contract costs incurred for work performed bear to date to the estimated
total contract costs.
Where the outcome of construction contract cannot be estimated reliably, contract revenue is recognised to
the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised
as expenses in the period in which they are incurred.
When it is estimated that total contract costs will exceed total contract revenue, the expected loss is
recognised as an expense immediately.
Amount due from/(to) customers for contract work is the net amount of cost incurred for contract work
plus profit recognised to date less foreseeable losses, if any, and progress billings. Contract costs incurred
to-date include costs directly related to the contract or attributable to contract activities in general and
costs specifically chargeable to the customers under the terms of the contract.
Cash and cash equivalents consist of cash at banks and on hand, fixed deposits, and short term, highly liquid
investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of
change in value used by the Group in the management of its short term funding requirements, reduced by bank
overdrafts. The statements of cash flows are prepared using the indirect method. Cash and cash equivalents
(other than bank overdrafts) are categorised and measured as loans and receivables in accordance with policy
set out in Note 2.12.1 (c).
ANNUAL REPORT 2016
69
notes to the
financial statements
(contd)
The Group recognises all financial liabilities in its statement of financial position when, and only when, the Group
becomes a party to the contractual provisions of the instruments.
Financial liabilities are initially measured at fair value plus, in the case of other financial liabilities, directly
attributable transaction costs.
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other
financial liabilities.
Financial liabilities are classified as at fair value through profit or loss when the financial liability
is either held for trading or it is designated as at fair value through profit or loss upon initial
recognition.
it has been incurred principally for the purpose of repurchasing it in the near term; or
on initial recognition, it is part of a portfolio of identified financial instruments that the Group
manages together and has a recent actual pattern of short-term profit-taking; or
After initial recognition, financial liabilities at fair value through profit or loss are measured at fair
value with any gains or losses arising from changes in fair value recognised in profit or loss. The
net gains or losses recognised in profit or loss do not include any exchange differences or interest
paid on the financial liability. Exchange differences and interest expense on financial liabilities at
fair value through profit or loss are recognised separately in profit or loss as part of other income
or other expenses.
Derivative liability that is linked to and must be settled by delivery of an unquoted equity instrument
whose fair value cannot be reliably measured is measured at cost.
All financial liabilities, other than those categorised as fair value through profit or loss are
subsequently measured at amortised cost using the effective interest method. Other financial
liabilities of the Group include trade and other payables, loans and borrowings.
A gain or loss on other financial liabilities is recognised in profit or loss when the liabilities are
derecognised and through the amortisation process.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
70
notes to the
financial statements
(contd)
A financial liability is derecognised when, and only when, the obligation specified in the contract is
extinguished. When an existing financial liability is exchanged with the same lender on substantially
different terms or the terms of an existing liability are substantially modified, they are accounted for as an
extinguishment of the original financial liability and a new financial liability is recognised. The difference
between the carrying amount of a financial liability extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
profit or loss.
Financial assets and financial liabilities are offset when the Group has a legally enforceable right to offset
and intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with
the original or modified terms of a debt instrument.
Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent
to initial recognition, financial guarantee contracts are amortised in profit or loss using the straight-line method
over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon
discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate
of the obligation is made in accordance with MFRS 137, Provisions, Contingent Liabilities and Contingent Assets.
If the carrying amount of the financial guarantee is lower than the obligation estimated, the carrying value is
adjusted to the obligation amount and accounted for as a provision.
2.18 Hire Purchase and Finance Lease Arrangements and Operating Leases
A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards
incidental to ownership of the leased assets. All other leases are classified as operating leases.
Assets acquired under hire purchase arrangements are recognised and measured in a similar manner as finance
leases.
2.18.1 Assets acquired under hire purchase and finance lease arrangements
Assets acquired under hire purchase and finance lease arrangements are stated at the amounts equal at
the inception of the arrangement to the lower of the fair values and the present values of the minimum
hire purchase or lease payments.
ANNUAL REPORT 2016
71
notes to the
financial statements
(contd)
2.18 Hire Purchase and Finance Lease Arrangements and Operating Leases (Contd)
2.18.1 Assets acquired under hire purchase and finance lease arrangements (Contd)
The corresponding obligations are taken up as hire purchase or finance lease liabilities. Hire purchase
or lease payments are apportioned between the outstanding liabilities and finance charges which are
recognised in profit or loss over the period of the hire purchase/lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liabilities for each period.
The depreciation policy of property, plant and equipment acquired under hire purchase and finance lease
arrangements are consistent with the Groups depreciation policy as set out in Note 2.8 above.
Operating lease payments are recognised as expenses in profit or loss on a straight-line basis over the
period of the relevant leases.
Ordinary shares are classified as equity. Distributions to holders of ordinary shares are debited directly to equity
and dividends declared on or before the end of the reporting period are recognised as liabilities. Costs directly
attributable to equity transactions are accounted for as a deduction, net of tax, from equity.
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly
attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares that are
not subsequently cancelled are classified as treasury shares in statement of changes in equity.
Where treasury shares are distributed as share dividends, the cost of the treasury shares is applied in the
reduction of the share premium account or distributable reserves, or both.
When treasury shares are sold or reissued subsequently, the difference between the sales consideration and
the carrying amount are shown as movement in equity.
Tax expense is the aggregate amount of current and deferred taxes. Current and deferred taxes are recognised
as income or expense in profit or loss except to the extent that the taxes relate to items recognised outside
profit or loss, either in other comprehensive income or directly in equity or a business combination.
Current tax assets and liabilities is the expected tax payable on the taxable profit for the year or tax recoverable
from the taxation authorities and is calculated using tax rates enacted or substantially enacted at the end of
the reporting period.
Deferred tax is recognised, using the liability method, on temporary differences at end of the reporting period
between the carrying amounts of assets and liabilities in the financial statements and the amounts attributed
to those assets and liabilities for taxation purposes.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised
for all deductible temporary differences and unabsorbed tax losses and unused tax credits to the extent that it
is probable that future taxable profit will be available against which the assets can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and is reduced to
the extent that it is no longer probable that the related tax benefits will be realised.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
72
notes to the
financial statements
(contd)
Tax rates enacted or substantively enacted at the end of the reporting period are used to determine deferred
tax.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
Revenue is measured at the fair value of the consideration received or receivable net of discounts and rebates.
Revenue is recognised to the extent that is probable that the economic benefits associated with the transaction
will flow to the Group, and the amount of revenue and the cost incurred or to be incurred in respect of the
transaction can be reliably measured. The following specific recognition criteria must also be met for each of
the Groups activities before revenue is recognise :-
Revenue from sales of goods subject to installation and inspection is recognised upon acceptance by
customers of the individual contracts.
Revenue from rendering of services is recognised by reference to the stage of completion of the services
at the end of the reporting period.
Interest income is recognised on a time proportion basis, taking into account the principal outstanding
and the effective interest rate applicable.
Wages, salaries, social security contribution, paid annual leave and sick leave, bonuses and non-monetary
benefits are recognised as an expense in the period in which the associated services are rendered by
employees of the Group.
ANNUAL REPORT 2016
73
notes to the
financial statements
(contd)
The Group provides post-employment benefits by way of contribution to defined contribution plans operated
by the relevant authorities at the prescribed rates.
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions
into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions
if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the
current and prior periods.
The Groups contributions to defined contribution plans are recognised as an expense in the period to
which they relate.
The Company operates an equity-settled share-based compensation plan for eligible employees of the
Group. The fair value of the employee services received in exchange for the grant of the share options
is recognised as an expense in profit or loss over the vesting period of the grant with a corresponding
increase in equity.
The total amount to be expensed over the vesting period is determined by reference to the fair value of the
share options granted. The fair value of the share options is measured at grant date, taking into account,
if any, the market vesting conditions upon which the options were granted but excluding the impact of
any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable on vesting date.
At each reporting date, the Group revises its estimates of the number of options that are expected to
vest. It recognises the impact of the revision to the original estimates, if any, in profit or loss, and a
corresponding adjustment to equity. The equity amount is recognised in the share option reserve until the
option is exercised, upon which it will be transferred to share premium, or until the option expires, upon
which it will be transferred directly to retained profits.
The proceeds received net of any directly attributable transaction costs are credited to equity when the
options are exercised.
The grant by the Company of the share options to employees of subsidiaries in the Group is treated as
a capital contribution. The fair value of employee services received, measured by reference to the grant
date fair value is recognised over the vesting period as an increase to investments in subsidiaries with a
corresponding credit to equity in the Companys financial statements.
The individual financial statements of each entity in the Group are measured using the currency of the
primary economic environment in which the entity operates [the functional currency]. The consolidated
financial statements are presented in Ringgit Malaysia [RM], which is also the Companys functional
currency.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
74
notes to the
financial statements
(contd)
In preparing the financial statements of the individual entities, transactions in foreign currencies are
measured in the respective functional currencies at the exchange rates approximating those ruling at the
transaction dates. At each year end, monetary assets and liabilities denominated in foreign currencies
are translated at the rates of exchange ruling at the year end. Non-monetary items denominated in foreign
currencies that are measured at historical cost are translated using the exchange rates as at the dates
of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value
are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items, or on translating monetary items at
the year end are recognised in profit or loss except for exchange differences arising on monetary items
that form part of the Groups net investment in foreign operations, which are recognised initially in other
comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign
currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the
foreign operation.
Exchange differences arising on the translation of non-monetary items carried at fair value are included in
profit or loss for the period except for the differences arising on the translation of non-monetary items in
respect of which gains and losses are recognised in other comprehensive income. Exchange differences
arising from such non-monetary items are recognised to other comprehensive income.
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the
acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the
activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing
costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended
use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs
consist of interest and other costs that the Group incurred in connection with the borrowing of funds.
The Group presents basic and diluted (where applicable) earnings per share [EPS] data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by
the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by
adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares. No adjustment is made for anti-dilutive
potential ordinary shares.
An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the
Groups other components. All operating segments operating results are reviewed regularly by the chief operating
decision maker, which in this case is the Board of Directors that makes strategic decisions, to make decisions
about resources to be allocated to the segment and to assess its performance, and for which discrete financial
information is available.
ANNUAL REPORT 2016
75
notes to the
financial statements
(contd)
2.27 Contingencies
A contingent liability or asset is a possible obligation or benefit that arises from past events and whose existence
will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within control
of the Group.
Contingent liabilities and assets are not recognised in the statement of financial position of the Group and of
the Company.
The fair value of an asset or a liability, except for lease transactions, is determined as 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 measurement assumes that the transaction to sell the asset or transfer the liability
takes place either in the principal market or in absence of a principal market, in the most advantageous market.
For non-financial asset, the fair value measurements takes into account a market participants 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.
When measuring fair value, the Group maximises the use of relevant observable inputs and minimises the use
of unobservable inputs. Fair value measurements are categorised into different levels in a fair value hierarchy
based on the input used in the valuation technique as follows:-
Level 1 : Quoted prices (unadjusted) in active market for identical assets or liabilities;
Level 2 : Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 : Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Transfer between levels of the fair value hierarchy are deemed to have occurred on the date of the event or
change in circumstances that caused the transfer.
2.29 Provisions
Provisions are recognised when the Group has a present legal and constructive obligation as a result of past
events and it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation. Where the effect of time value
of money is material, the amount of provision is measured at the present value of the expenditure expected to
be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. Where discounting is used, the increase in the amount of
a provision due to passage of time is recognised as finance cost.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
76
notes to the
financial statements
(contd)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
(a) Significant judgements in applying the Groups accounting policies
In the process of applying the Groups accounting policies, which are described in Note 2, the management are
of the opinion that any instances of application of judgement are not expected to have a significant effect on
the amounts recognised in the financial statements, apart from those involving estimations which are dealt with
below.
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are discussed below.
The Group recognised contract profits based on the stage of completion method. The stage of completion
of a contract is measured by the value of work certified as a proportion of total contract where the outcome
of the contract can be foreseen with reasonable certainty. When it is probable that the estimated total
contract costs of a contract will exceed the total contract revenue of the contract, the expected loss on
the contract is recognised as an expense immediately.
Significant judgement is required in determining the extent of the contract costs incurred, the estimation
of total contract revenue and contract costs, as well as the recoverability of the contracts. Total contract
revenue also includes an estimation of the recoverable variation works that are recoverable from the
customers. Where the actual total contract costs is different from the estimated total contract costs,
such difference will impact the contract profits or losses recognised. In making the judgement, the Group
evaluate based on past experience.
ANNUAL REPORT 2016
77
notes to the
financial statements
(contd)
The Group makes an allowance for impairment losses based on an assessment of the recoverability of
receivables. Allowances are applied to receivables where events or changes in circumstances indicate
that the carrying amounts may not be recoverable. In assessing the extent of irrecoverable debts, the
management has given due consideration to all pertinent information relating to the ability of the debtors
to settle debts. Where the expectation is different from the original estimate, such difference will impact
the carrying value of the receivables. The carrying amounts of receivables and the cumulative allowances
for impairment losses are disclosed in Note 10.
Review are made periodically by management on damaged, obsolete and slow-moving inventories. These
reviews require judgement and estimates. Possible changes in these estimates could result in revisions
to the valuations of inventories.
(iv) Depreciation
Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives.
The management estimates the useful lives of property, plant and equipment to be between 3 to 10 years.
These are common life expectancies applied in the industry. The carrying amounts of the Groups and the
Companys property, plant and equipment as at 31 December 2016 are stated in Note 4 to the financial
statements. Changes in the expected level of usage and technological developments could impact the
economic useful lives and residual values of these assets, therefore future depreciation charges could
be revised.
The fair value of the share options granted was measured by using the Black Scholes Option Pricing
Model. The valuation model uses inputs which are required to be estimated such as expected volatility,
expected life of the options, risk-free rate and expected dividend yield. Any changes in these estimates
and assumptions will impact the profit or loss of the Group and of the Company. Details of the inputs used
on the valuation model are disclosed in Note 17(b).
4. PROPERTY, PLANT AND EQUIPMENT
78
Group Long term Office
leasehold equipment Capital (contd)
Plant and land and furniture Motor workin
(Company No. 654575-P)
notes to the
machinery buildings and fittings Tools vehicle Signboard Renovation progress Total
2016 RM RM RM RM RM RM RM RM RM
Cost
financial statements
Balance at 1 January 2016 1,645,550 2,300,000 856,015 659,630 2,212,821 4,400 541,310 8,219,726
Acquisition of subsidiary 9,480 20,094 4,500 34,074
SOLUTION ENGINEERING HOLDINGS BERHAD
Balance at 31 December 2016 1,645,550 896,678 220,147 2,212,821 9,900 533,605 552,906 6,071,607
Accumulated depreciation
Balance at 1 January 2016 1,316,438 389,525 738,536 510,729 794,671 4,399 460,047 4,214,345
Acquisition of subsidiary 337 214 56 607
Charge for the year 329,108 20,060 58,151 9,805 212,034 492 22,148 651,798
Written off (3,723) (406,392) (410,115)
Reclassification to non-current
asset held for sale (Note 15) (409,585) (409,585)
Balance at 31 December 2016 1,645,546 793,301 114,356 1,006,705 4,947 482,195 4,047,050
Balance at 31 December 2015 1,645,550 2,300,000 856,015 659,630 2,212,821 4,400 541,310 8,219,726
Accumulated depreciation
Balance at 1 January 2015 987,328 355,137 680,905 445,884 573,389 4,399 431,779 3,478,821
Charge for the year 329,110 34,388 57,631 64,845 221,282 28,268 735,524
Balance at 31 December 2015 1,316,438 389,525 738,536 510,729 794,671 4,399 460,047 4,214,345
80
notes to the
financial statements
(contd)
(a) Net book value of property, plant and equipment held under hire-purchase are as follows:-
Group
2016 2015
RM RM
(b) The Groups leasehold land and buildings have been charged to a licensed bank in consideration for banking
facilities granted to the Group.
5. INTANGIBLE ASSETS
Development
Goodwill expenditure Total
Group
Cost
At 1 January 2016 176,442 176,442
Additions 7,910 7,910
Accumulated amortisation
At 1 January 2016 35,288 35,288
Charged during the year 35,288 35,288
(i) The above goodwill has been allocated to a newly acquired subsidiary during the year.
(ii) Development expenditure are incurred in respect of process, plant design and commissioning of a new additive-
added lubricants and amortised over the estimated finite useful lives of not exceeding 5 years to administrative
and distribution expenses. The amortisation period and amortisation method are reviewed annually, and changes,
if any, are treated as changes in estimates.
Company
Restated
2016 2015
RM RM
30,383,583
30,049,083
ANNUAL REPORT 2016
81
notes to the
financial statements
(contd)
Principal place
of business Effective interest
Name of Principal and country of 2016 2015
company activities incorporation % %
Solution Bioforce Sdn. Bhd. Undertakes all types Malaysia 100 100
and kinds of
biotechnology
business
All subsidiaries are audited by FOLKS DFK & Co except Bioforce Co. Ltd.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
82
notes to the
financial statements
(contd)
On 6 May 2016, Solution Engineering Sdn. Bhd. (SESB), a wholly-owned subsidiary of the Company acquired
fifty one percent (51%) stake in Solution LCE Manufacturing Sdn. Bhd. (LCE) for a total cash consideration of
RM255,000.
The acquisition had the following effects on the financial results of the Group during the financial year :-
Revenue 3,937,924
Cost of sales (3,031,684)
Operating profit 327,658
Finance costs
If the acquisition had occurred at the beginning of the financial year, the Groups revenue and profit for the year
would have increased and decreased by RM536,604 and RM15,510 respectively.
The assets acquired and liabilities recognised as at the date of acquisition are as follows :-
The fair value of trade and other receivables acquired is equivalent to their gross contractual amount.
ANNUAL REPORT 2016
83
notes to the
financial statements
(contd)
In the previous financial year on 8 April 2015, the Company had acquired the entire equity interest in One Green
Solution Sdn Bhd (OGSSB) for total cash consideration of RM100.
The acquisition had the following effects on the financial results of the Group during the financial year :-
Other income
Administrative and distribution expenses (24,394)
Operating profit (24,394)
Finance costs
The assets acquired and liabilities recognised as at the date of acquisition were as follows :-
In the current financial year, the Group derecognised the assets and liabilities of Bioforce Co. Ltd. upon cessation
of control by the Group over this subsidiary. The loss to the Group arising from the derecognition of the net
assets amounted to RM78,160 which has been included under administrative and distribution expenses in the
consolidated statement of profit or loss and other comprehensive income.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
84
notes to the
financial statements
(contd)
The summarised financial information for each subsidiary that has material non-controlling interests (NCI) are
set out below. The amounts in the summarised financial information are before inter-company eliminations.
2016
SA&C (1) SE&E (2) LCE (3)
RM RM RM
Non-current liabilities (48,640) (68) (8,700)
Current liabilities (1,117,219) (50,395) (844,178)
2015
SA&C (1) SE&E (2)
RM RM
2,985,590 248,278
Non-current liabilities (86,699)
Current liabilities (471,812) (303,646)
(558,511) (303,646)
(1)
Solution A & C Technology Sdn Bhd
(2)
Solution E&E Technology Sdn Bhd
(3)
Solution LCE Manufacturing Sdn Bhd
ANNUAL REPORT 2016
85
notes to the
financial statements
(contd)
2016
SA&C (1) SE&E (2) LCE (3)
RM RM RM
Revenue 2,451,086 4,474,528
2015
SA&C (1) SE&E (2)
RM RM
Revenue 4,195,847
2016
SA&C (1) SE&E (2) LCE (3)
RM RM RM
Net cash inflow/(outflow) from operating activities 514,482 (14,005) (122,762)
Net cash inflow/(outflow) from investing activities (270,981) (80,040)
Net cash (outflow)/inflow from financing activities (66,681) 500,000
(1)
S olution A & C Technology Sdn Bhd
(2)
Solution E&E Technology Sdn Bhd
(3)
Solution LCE Manufacturing Sdn Bhd
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
86
notes to the
financial statements
(contd)
2015
SA&C (1) SE&E (2)
RM RM
(1)
Solution A & C Technology Sdn Bhd
(2)
Solution E&E Technology Sdn Bhd
(3)
Solution LCE Manufacturing Sdn Bhd
7. INVESTMENT IN AN ASSOCIATE
GROUP
2016 2015
RM RM
1,220,920 1,206,042
Principal place
of business Effective interest
Name of Principal and country of 2016 2015
company activities incorporation % %
Held by Solution
Engineering Sdn. Bhd.
Summarised financial information in respect of Global Plus Solution Sdn Bhd is set out below. The summarised financial
information presented below represents the financial statements of the associates and not the Groups share of those
amounts.
ANNUAL REPORT 2016
87
notes to the
financial statements
(contd)
2016 2015
RM RM
Assets and liabilities
Non-current liabilities
- Non-current financial liabilities (excluding trade and other payables) 87,446 104,674
- Other non-current liabilities 4,600 4,600
Current liabilities
- Current financial liabilities (excluding trade and other payables) 17,228 16,274
- Other current liabilities 3,929,892 3,564,290
Results
2016 2015
RM RM
574,835 559,957
Goodwill on acquisition of associate included in cost of investment 646,085 646,085
88
notes to the
financial statements
(contd)
8. INVENTORIES
Group
2016 2015
RM RM
At cost:
Raw matenals 487,215 625,541
Finished goods 170,482 106,616
Engineering equipment components 603,571 392,541
1,261,268 1,124,698
Group
2016 2015
RM RM
66,267,960 21,123,061
Less : Progress billings (57,550,172) (15,898,155)
8,717,788 5,224,906
Analyse as:-
Amount due from customers on contracts 8,861,160 5,224,906
Amount due to customers on contracts (143,372)
8,717,788 5,224,906
Group Company
2016 2015 2016 2015
RM RM RM RM
6,387,563 6,717,988
Deposits 244,637 98,902 104,000
Other receivables 170,631 1,932,438 1,008,791
Prepayment 25,416 6,893
Trade receivables are non-interest bearing. The Groups normal credit term ranges from 30 days to 90 days (2015: 30
to 90 days) from the date of invoice. They are recognised at their original invoice amounts which represent their fair
values on initial recognition.
ANNUAL REPORT 2016
89
notes to the
financial statements
(contd)
Group
2016 2015
RM RM
6,086,800 6,530,300
Past due and impaired 43,444 45,528
6,431,007 6,763,516
Less: Individual Impairment (43,444) (45,528)
6,387,563 6,717,988
Trade receivables that are individually determined to be impaired comprised those customers who have defaulted on
their payments and are considered to have financial difficulties in repaying their debts.
Trade receivables that are not impaired are considered to be creditworthy and are able to settle their
debts.
The Group does not hold any collateral as security for the trade receivables as at the end of the reporting period.
During the financial year, the Group did not renegotiate the terms of any trade receivables.
Movements in allowance for impairment losses on trade receivables during the year:-
Group
2016 2015
RM RM
90
notes to the
financial statements
(contd)
Movements in allowance for impairment losses on other receivables during the year:-
Group
2016 2015
RM RM
The amount due from an associate is interest free, unsecured and repayable on demand.
The amount due from subsidiaries is interest free, unsecured and is repayable on demand.
Group Company
Restated Restated
2016 2015 2016 2015
RM RM RM RM
Group Company
Restated Restated
2016 2015 2016 2015
RM RM RM RM
As at 31.12.2016, fixed deposits with licensed banks amounting to RM 3,564,989 (2015: RM3,900,667) are placed
under lien to secure credit facilities granted to the Group as disclosed in Note 19.
ANNUAL REPORT 2016
91
notes to the
financial statements
(contd)
The non-current asset held for sale comprise the Groups long term leasehold land and building and its carrying amount
as at 31 December 2016 is as follows:-
Group
2016
RM
1,890,415
The Group had on 11 October 2016 entered into a Sales and Purchase Agreement with a third party to dispose the
abovementioned property for a total consideration of RM7.7 million. The disposal transaction is not completed as at
end of financial year pending full payment of the consideration sum from the purchaser.
Authorised:-
Ordinary shares of RM0.10 each:-
At 1 January/31 December 500,000,000 500,000,000 50,000,000 50,000,000
During the financial year, the issued and paid-up share capital of the Company was increased from RM19,981,500 to
RM30,433,587 through the issue of 104,520,865 new ordinary shares by way of:-
(i) bonus issue of 101,329,365 new ordinary shares of RM0.10 each at par by way of capitalising the entire share
premium on the date of bonus issue on 5 July 2016 was allotted whilst the remaining via capitalisation from
retained earnings on the basis of one (1) new ordinary share for every two (2) existing ordinary share held;
(ii) issues of 3,189,000 new ordinary shares of RM0.10 each for cash pursuant to the exercise of Employees Share
Option Scheme (ESOS) at exercise prices of ranging between RM0.135 and RM0.22 per ordinary share; and
(iii) issues of 2,500 new ordinary shares of RM0.10 each for cash pursuant to the exercise of the Warrants at an
exercise price of RM0.20 per ordinary share.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
92
notes to the
financial statements
(contd)
All the new ordinary shares issued during the financial year rank pari passu in all respects with the existing ordinary
shares of the Company.
Subsequent to the financial year, 1,877,500 new ordinary shares of RM0.10 each were issued pursuant to the exercise
of ESOS.
The Companys Employees Share Option Scheme (ESOS or the Scheme) is governed by the By-Laws which
were approved by the shareholders on 16 January 2014. This ESOS was implemented on 30 January 2014 and
will expire on 29 January 2019 (the Option Period).
The salient features of the ESOS as contained in the By-Laws are as follows:-
(i) Scheme shall be in force for a period of five years from 30 January 2014 (effective date) expiring on 29
January 2019 and may be extended for a further period of up five years at the sole and absolute discretion
of the Board of Directors upon recommendation from the ESOS Committee, provided always that the ESOS
shall not in aggregate exceed a duration of ten years from the effective date.
(ii) Eligible persons are employees of the Group, who has attained 18 years of age, been confirmed and is
employed full time by and is on the payroll of the Group. Employees serving under employment contract
may be considered where the contract is for a duration of at least 2 years. The eligibility for participation
in ESOS shall be at the discretion of the ESOS Committee appointed by the Board of Directors.
(iii) The total number of shares to be issued under ESOS shall not exceed 30% of the issued and paid-up
share capital of the Company, at any point of time throughout the duration of Scheme.
(iv) The price payable for the exercise of an ESOS Option (Exercise Price) shall be determined by the ESOS
Committee at its discretion based on the 5 days volume weighted average market price of the underlying
Company shares as quoted by Bursa Securities, immediately prior to the Date of Offer with a discount
of not more than 10% (or such lower or higher limit in accordance with any prevailing guidelines, rules or
regulations issued by Bursa Securities or any other relevant regulatory authorities), if deemed appropriate,
or the par value of the Company shares, whichever is the higher. The exercise price as determined by the
ESOS Committee shall be conclusive binding on the Grantee.
(v) The offer to participate in the ESOS shall be valid for acceptance for a period of 14 days from the date of
offer or such longer period as may be determined by the ESOS Committee on a case to case basis at its
discretion.
(vi) All new ordinary shares issued upon exercise of the option under ESOS will rank pari-passu in all respects
with the existing ordinary shares of the Company except that the shares so issued will not be entitled to
any dividends, rights allotments and/or other distributions, the entitlement date of which is prior to the
date of allotment of the new ordinary shares.
ANNUAL REPORT 2016
93
notes to the
financial statements
(contd)
2016
Option over number of ordinary shares of RM0.10 each
Grant Exercise As at As at
date price 1.1.2016 Granted Exercised Forfeited 31.12.2016
2015
Option over number of ordinary shares of RM0.10 each
Grant Exercise As at As at
date price 1.1.2015 Granted Exercised Forfeited 31.12.2015
During the financial year, the exercise of share options has resulted in the issuance of 3,189,000 (2015:
3,441,000) new ordinary shares of RM0.10 each at weighted average exercise price per share of RM0.19 (2015:
RM0.18). The weighted average share price at the dates of exercise was RM0.29 (2015 : RM0.22).
(b) Warrants
As at 1 January
Issued during the year 101,329,365
Exercised (2,500)
As at 31 December 101,326,865
The Company had on 5 July 2016 issued a total of 101,329,365 free detachable Warrants in conjuction with a
bonus issue of shares to entitled shareholders on the basis of one (1) Warrant for every two (2) existing ordinary
shares of RM0.10 each held in the Company.
The warrants are listed on the ACE Market of the Bursa Malaysia Securities Berhad on 11 July 2016 and confer
the right to holders thereof at any time, not later than maturity date of 4 July 2021, to subscribe for one new
ordinary share of RM0.10 each in the Company for every warrant held at an exercise price, to be paid in cash,
of RM0.20 per share or as adjusted in certain circumstances as set out in the Deed constituting the warrants.
Any warrants not exercised by the date of maturity will thereafter lapse and cease to be valid for any purpose.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
94
notes to the
financial statements
(contd)
17. RESERVES
Group Company
Restated Restated
2016 2015 2016 2015
RM RM RM RM
This represents premium arising from issues of shares, net of related expenses. The movements in share
premium during the year are as follows:-
Group/Company
2016 2015
RM RM
Group/Company
2016 2015
RM RM
95
notes to the
financial statements
(contd)
The fair value of the share options granted was measured using the Black Scholes Option Pricing model. The
weighted average fair value of share options granted measured at the grant date and the inputs to that model
used to measure the fair value are as follows:-
2016 2015
The expected volatility is a historical volatility calculated using daily closing market prices. The expected volatility
reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be
the actual outcome. No other features of the options granted were incorporated in the measurement of the fair
value.
The acquisition of Solution Engineering Sdn. Bhd. was accounted for using the merger method pursuant to a
group restructuring exercise for the purpose of an initial public offering.
Group
2016 2015
RM RM
557,708 799,516
Future finance charge on hire purchase (41,054) (71,979)
96
notes to the
financial statements
(contd)
Group
2016 2015
RM RM
432,343
430,493 567,365
The term loan and credit facilities obtained from licensed banks are secured as follows:-
ii. existing first party legal charge over the Groups leasehold land and building;
iv. certain fixed deposits of a subsidiary company as disclosed in Note 14; and
v. existing corporate Guarantee Corporation under the New Principal Guarantee Scheme.
The entire term loan amount as at 31 December 2016 has been classified under current liabilities as the amount
is expected to be fully paid within the next twelve months with proceeds from the disposal of land and building as
disposal of land and building as disclosed in Note 15.
Group
2016 2015
RM RM
97
notes to the
financial statements
(contd)
The components and movements of deferred tax assets and liabilities prior to offsetting are as follows:-
As at Recognised As at
01.01.2016 profit or loss 31.12.2016
RM RM RM
2016
As at Recognised As at
01.01.2015 profit or loss 31.12.2015
RM RM RM
2015
189,763 189,763
Deferred tax assets have not been recognised in respect of the following items:-
2016 2015
RM RM
Group
Unutilised capital allowances 288,000 435,000
Unabsorbed tax losses 833,000 354,000
1,121,000 789,000
Deferred tax assets have not been recognised in respect of unused tax losses and unutilised capital allowances arising
in certain subsidiaries as they do not expect to achieve significant profits sufficient to offset these items in the long
term.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
98
notes to the
financial statements
(contd)
Group Company
2016 2015 2016 2015
RM RM RM RM
Other payables :-
The credit terms of the Groups trade payables range from 30 to 90 days (2015: 30 to 90 days).
The amount due to directors is interest free, unsecured and is repayable on demand.
23. REVENUE
Group Company
2016 2015 2016 2015
RM RM RM RM
Group
2016 2015
RM RM
17,537,196 14,120,369
ANNUAL REPORT 2016
99
notes to the
financial statements
(contd)
Group Company
Restated Restated
2016 2015 2016 2015
RM RM RM RM
100
notes to the
financial statements
(contd)
Group Company
Restated Restated
2016 2015 2016 2015
RM RM RM RM
and crediting:-
Dividend income:-
- other short term investments (323,620) (141,214) (236,208) (127,658)
- subsidiaries (11,100,000) (1,000,000)
Interest income (183,114) (179,069) (1,228) (1,570)
Gain on foreign exchange:-
- Realised (518,344) (21,287)
- Unrealised (316,604) (10)
Income from money market fund (23,276) (282)
Write back of impairment loss
on trade receivables (330)
Gain on disposal of short term
investments (65,726) (106,109) (52,991) (100,091)
26.
TAXATION
Group Company
2016 2015 2016 2015
RM RM RM RM
2,960,113 2,909,451
(41,103) (189,763)
Malaysian income tax is calculated at the statutory rate of 24% (2015: 25%) on the estimated taxable profit for the
year.
ANNUAL REPORT 2016
101
notes to the
financial statements
(contd)
The numerical reconciliation between the tax expenses recognised in profit or loss and the income tax expense applicable
to profit/(loss) before taxation at the statutory income tax rates of the Group and of the Company is as follows:-
Group Company
2016 2015 2016 2015
RM RM RM RM
As at 31 December 2016, the Group has estimated unabsorbed tax losses and unutilised capital allowances amounting
to RM833,000 (2015: RM354,000) and RM350,000 (2015: RM435,000) representing by which subject to the approval
of the tax authorithies, can be used to offset against future taxable profits.
(a) Basic
The basic earnings per share is calculated based on the Groups profit for the financial year attributable to owners
of the Company of RM7,652,312 (2015: RM5,415,608) and on weighted average number of shares in issue
during the financial year of 302,728,429 (2015 (Restated): 295,434,294).
(b) Diluted
For purpose of calculation diluted earnings per share, the profit for the financial year attributable to owners of
the Company and the weighted average number of ordinary shares in issue during the financial year have been
adjusted for the dilutive effects of all potential ordinary shares arising from the assumed exercise of the share
options under the Employees Share Option Scheme and exercise of warrants.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
102
notes to the
financial statements
(contd)
Group
2016 2015
RM RM
28. DIVIDENDS
Group Company
2016 2015 2016 2015
RM RM RM RM
3,055,036 2,173,589
The number of employees of the Group at end of the financial year was 81 (2015: 53). Employees include executive
directors of the Group and of the Company.
ANNUAL REPORT 2016
103
notes to the
financial statements
(contd)
For the purpose of these financial statements, parties are considered to be related if one party has the ability,
directly or indirectly, to control the party or exercise significant influence over the party in making financial and
operating decisions, or vice versa, or when both parties subject to common control or common significant
influence of another party. Related parties way be individuals or other entities.
(b) The Group and the Company had the following transactions with related parties during the year :-
Group Company
2016 2015 2016 2015
RM RM RM RM
Income
Expenses
514,790 -
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
104
notes to the
financial statements
(contd)
Group Company
2016 2015 2016 2015
RM RM RM RM
Receivables
Payables
The indebtedness with related parties are unsecured, interest free and are repayable on demand and settlement
are expected to be in cash.
No expense has been recognised during the financial year in respect of bad or doubtful debts due by the related
parties.
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the Group either directly or indirectly. The key management personnel of the Group
are the Directors of the Company and executive directors of subsidiaries and their remuneration for the financial
year are disclosed in Note 25.
Group Company
2016 2015 2016 2015
RM RM RM RM
11,258,000 9,266,000
ANNUAL REPORT 2016
105
notes to the
financial statements
(contd)
Corporate guarantee
Group Company
2016 2015 2016 2015
RM RM RM RM
Litigation
A subsidiary of the Company had initiated a legal claim in the Kuala Lumpur High Court against two (2) parties
(defendants) for the recovery of costs/expenses amounting to RM246,528 advanced by the subsidiary in prior years.
The defendants had in turn counter claimed the subsidiary for loss or profit amounting to RM1,944,000. During the
year, the Kuala Lumpur High Court has given judgement in favour of the subsidiarys claim against the first defendant
but dismissed the claim against the second defendant. In addition, the defendants counter claim againts the subsidiary
was dismissed by the court. The first defendant had since filed an appeal to the Court of Appeal and which hearing is
pending as at date of this report. The Directors are of opinion that, based on the advice by their legal counsels, the
appeal has no merits.
The Group has three reportable segments as described below which comprised the Groups major business segments.
These business segments are involved in different activities and are based on the Groups management and internal
reporting structure. The reportable segments are as follows:-
i. Engineering education Designing and development of equipment for engineering education and research
and research and provision of training and curriculum content development
iii. Others Provision of industrial automation services and production and supply of industrial
bio-lubricants
The performance of each business segment is evaluated based on the segments profit or loss which is measured on
a basis not significantly different from the profit or loss inclu ed in the consolidated financial statements.
Segment revenue, results, assets and liabilities include items directly attributable to a segment and those where a
reasonable basis of allocation exist.
Segment assets are measured based on all assets (including goodwill) of a segment, as included in the internal
management reports that are reviewed by the Groups Managing Director. Segment assets are used to measure the
return on assets of each segment.
Segment liabilities are measured based on all liabilities of a segment, as included in the internal management reports
that are reviewed by the Groups Managing Director.
The comparative figures of the Groups business segments have been amended to conform with current years
presentation.
33. SEGMENTAL INFORMATION (contd)
106
notes to the
Continuing Operations
Engineering
education
financial statements
Revenue
Revenue from
external parties 32,263,947 3,097,667 35,361,614
Inter-segment
revenue 3,940,174 11,100,000 385,062 (15,425,236)
Results
Segment result 10,964,299 10,749,349 455,090 (11,274,732) 10,894,006
The main business segments of the Group comprise the following :- (Contd)
Continuing Operations
Engineering
education
and research Investment Others Elimination Total
2016 RM RM RM RM RM
Assets
Segment assets 34,250,099 48,772,543 5,928,205 (42,821,083) 46,129,764
Liabilities
Segment liabilities (17,636,694) (108,455) (2,338,330) 12,189,046 (7,894,433)
Other information
Interest income 181,886 1,228 183,114
Interest expense (37,864) (6,524) (44,388)
Depreciation (282,820) (368,978) (651,798)
Amortisation of
intangible assets (35,288) (35,288)
Bad debt written off (1,494) (106,633) (108,127)
(contd)
financial statements
notes to the
107
ANNUAL REPORT 2016
33. SEGMENTAL INFORMATION (contd)
108
notes to the
Continuing Operations
Engineering
education
financial statements
Revenue
Revenue from external parties 24,527,400 4,545,892 29,073,292
Inter-segment revenue 1,000,000 (1,000,000)
Results
Segment result 8,192,923 529,334 740,026 (1,000,000) 8,462,283
The main business segments of the Group comprise the following :- (Contd)
Continuing Operations
Engineering
education
and research Investment Others Elimination Total
2015 RM RM RM RM RM
Assets
Segment assets 30,540,157 40,117,322 6,027,633 (35,760,730) 40,924,382
Liabilities
Segment liabilities (12,354,062) (121,563) (2,127,508) 6,022,215 (8,580,918)
Other information
Interest income 177,499 1,570 179,069
Interest expense (29,432) (8,707) (38,139)
Depreciation (365,754) (369,770) (735,524)
Amortisation of
intangible assets (35,288) (35,288)
(contd)
financial statements
notes to the
109
ANNUAL REPORT 2016
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
110
notes to the
financial statements
(contd)
In determining geographical segments of the Group, revenue is based on the geographical location of customers.
Malaysian Overseas
Customers Customers Consolidated
RM RM RM
Revenue
- 2016 34,228,824 1,132,790 35,361,614
- 2015 25,938,343 3,134,949 29,073,292
Revenue from transactions with major customers who individually accounted for 10 percent or more of Groups
revenue are summarised below:-
Revenue Segment
2016 2015
RM RM
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability
or equity instrument of another enterprise.
Financial assets of the Group include fixed deposits, cash and bank balances, trade and other receivables and short
term investments.
Financial liabilities of the Group include trade and other payables, hire purchase payables and term loans.
In respect of the Company, financial assets and financial liabilities also include amount due from/to subsidiaries.
ANNUAL REPORT 2016
111
notes to the
financial statements
(contd)
The Groups and the Companys financial instruments are categorised as follows:-
Fair value
Carrying Loans and through
amount receivables profit or loss
RM RM RM
2016
Group
Trade and other receivables 6,828,247 6,828,247
Amount due from an associate 5,230,509 5,230,509
Short term investments 10,043,674 10,043,674
Fixed deposits, cash and bank balances 8,603,870 8,603,870
Company
Other receivables 104,000 104,000
Amount due from subsidiaries 10,021,749 10,021,749
Short term investments 7,038,996 7,038,996
Fixed deposits, cash and bank balances 1,224,180 1,224,180
Fair value
Carrying Loans and through
amount receivables profit or loss
RM RM RM
2015 - Restated
Group
Trade and other receivables 8,756,221 8,756,221
Amount due from an associate 4,208,949 4,208,949
Short term investments 4,261,011 4,261,011
Fixed deposits, cash and bank balances 11,996,020 11,996,020
Company
Other receivables 1,008,791 1,008,791
Amount due from subsidiaries 5,158,944 5,158,944
Short term investments 3,566,981 3,566,981
Fixed deposits, cash and bank balances 333,523 333,523
112
notes to the
financial statements
(contd)
Other
financial
liabilities
measured at
Carrying amortised
amount cost
RM RM
2016
Group
Trade and other payables 5,409,073 5,409,073
Amount due to directors 216,000 216,000
Hire purchase payables 516,654 516,654
Term loan (secured) 430,493 430,493
6,572,220 6,572,220
Company
Other payables 92,615 92,615
Amount due to subsidiaries 15,840 15,840
108,455 108,455
2015 - Restated
Group
Trade and other payables 6,512,376 6,512,376
Hire purchase payables 727,537 727,537
Term loan (secured) 567,365 567,365
7,807,278 7,807,278
Company
Other payables 121,563 121,563
ANNUAL REPORT 2016
113
notes to the
financial statements
(contd)
The Groups and the Companys financial risk management policies seek to ensure that adequate financial
resources are available for the development of the Groups and of the Companys businesses whilst managing
their interest rate, liquidity, credit and foreign exchange risks. The Group and the Company operate within clearly
defined guidelines that are approved by the directors and the Groups and the Companys policies are not to
engage in speculative transactions. There has been no change to the Groups and the Companys exposure to
these financial risks or the manner in which it manages and measures the risks. The policies in respect of the
major areas of treasury activity are set out as follows:-
Interest rate exposure arises from the Groups and the Companys deposits and borrowings, and is managed
through the use of fixed and floating rate debts.
The following table set out the carrying amounts, the weighted average effective interest rates [WAEIR]
of the Groups and the Companys financial instruments as at the reporting date and the periods in which
they reprice or mature, whichever is earlier:-
More than 1
Within year but less
Note WAEIR 1 year than 5 years Total
Group (%) RM RM RM
2016
Financial assets
Fixed rate
Fixed deposits with licensed bank 14 1.85% - 3.10% 4,067,758 4,067,758
Financial liabilities
Fixed rate
Hire purchase payables 18 4.51% - 6.01% 188,620 328,034 516,654
Floating rate
Term loan (secured) 19 5.85% 430,493 430,493
2015
Financial assets
Fixed rate
Fixed deposits with licensed bank 14 2.95% - 3.30% 3,900,667 3,900,667
Financial liabilities
Fixed rate
Hire purchase payables 18 4.51% - 6.01% 210,774 516,763 727,537
Floating rate
Term loan (secured) 19 5.85% 135,022 432,343 567,365
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
114
notes to the
financial statements
(contd)
At the reporting date, if interest rates on the floating rate financial assets and financial liabilities had
been 50 basis points lower/higher, with all other variables held constant, the impact is immaterial to the
Groups and the Companys profit net of tax.
The assumed movement in basis points for interest rate sensitivity analysis is based on prudent estimate
of the current market environment.
Liquidity or cash flow risks is the risk of the inability to meet commitments associated with financial
instruments while cash flow risk is the risk of uncertainty of future cash flow amount associated with a
monetary financial instrument.
The Group actively manages its operating cash flows and the availability of funding so as to ensure that
all repayment and funding needs are met. As part of its overall prudent liquidity management, the Group
maintains sufficient levels of cash and cash equivalents to meet its working capital requirements and
prudently balances its portfolio of short term and long term funding requirements.
The summary of the maturity profile of the Groups and of the Companys financial liabilities as at the
reporting date based on contractual undiscounted repayments obligations is as follows:-
More than
1 year but
Within 1 less than
year 5 years Total
Group Note RM RM RM
2016
2015
Company
2016
2015
115
notes to the
financial statements
(contd)
Credit risk is the risk of financial loss attributable to default on obligations by parties contracting with
the Group. The Groups main exposure to credit risk is in respect of its trade receivables, shor t term
investments, deposits with financial institutions and cash and bank balances. The Companys exposure
to credit risk arises principally from amount due from subsidiaries, short term investments, deposits and
cash and bank balances and financial guarantee given to banks for credit facilities of subsidiaries as
disclosed in Note 32.
Credit risk is addressed by the application of credit approvals, limits and monitoring procedures.
The credit risk on liquid funds is limited because the counterparties are licensed banks and financial
institutions.
The Groups maximum exposure to credit risk as at 31 December 2016 is represented by the carrying
amount of each class of financial assets recognised in the statement of financial position.
As at the end of the reporting period, the Group has significant concentration of credit risk arising from
the exposure to the amounts due by 2 major customers representing approximately 50% (2015: 1 major
customer representing approximately 34%) of the total trade receivables. The amounts due and repayments
from these customers are closely monitored by the management to ensure that the credit limits and terms
agreed with the customers are complied with.
Information on the ageing and impairment of trade receivables is disclosed in Note 10.
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. The Group has transactional currency exposures
arising from sales or purchases that are denominated in a currency other than the functional currency of
the Group. The Groups trade receivables and trade payables balances at the reporting date have similar
exposures. The foreign currencies in which these transactions are denominated are mainly United States
Dollar [USD], Singapore Dollar [SGD], Great Britain Pounds [GBP] and Euro Dollar [EURO].
The Group holds cash and cash equivalents denominated in foreign currency for working capital purposes.
Group
2016 2015
RM RM
116
notes to the
financial statements
(contd)
Group
2016 2015
RM RM
The following table demonstrated the sensitivity of the Groups profit net of tax to a reasonably possible
change in USD, SGD and AUD exchange rates against the functional currency of the Group, with all other
variables held constant. The Groups profit net of tax would increase/decrease, as applicable, by the
amounts stated below if the individual foreign currency had strengthened/weakened by the following
percentage:
Change in Group
currency rate 2016 2015
% RM RM
34.3 Fair value of financial instruments that are carried at fair value
(i) The carrying amount of hire purchase payables approximates its fair value.
(ii) The fair value of term loan approximates its carrying amount.
(iii) The carrying amounts of deposits, cash and bank balances, receivables and payables approximate their
fair values due to the relatively short term nature of these financial instruments.
ANNUAL REPORT 2016
117
notes to the
financial statements
(contd)
34.3 Fair value of financial instruments that are carried at fair value (Contd)
The fair value measurement hierarchies used to measure financial assets and liabilities carried at fair value in
the statements of financial position as at 31 December 2016 are as follows :-
(i) Level 1 : Quoted prices (unadjusted) in active markets for identical assets or liabilities.
(ii) Level 2 : Input other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
(iii) Level 3 : Inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
The fair value of an asset to be transferred between levels is determined as of the date of the event or change
in circumstances that caused the transfer.
There were no transfers between Level 1, Level 2 and Level 3 during the current year.
The Group and the Company do not have any financial liabilities carried at fair value as at 31 December 2016.
The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy:-
2016
Financial assets
Short term investments 13 10,043,674 10,043,674
2015
Financial assets
Short term investments 13 4,261,011 4,261,011
2016
Financial assets
Short term investments 13 7,036,996 7,038,996
2015
Financial assets
Short term investments 13 3,566,981 3,566,981
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
118
notes to the
financial statements
(contd)
The Groups objectives when managing capital are to safeguard the Groups ability to continue as a going concern, so
as to maintain investor, creditor and market confidence and to sustain future development of the business. In order to
maintain the optimal capital structure, the Group may, from time to time, adjust the dividend payout to shareholders,
return capital to shareholders, issue new shares, redeem debts or sell assets to reduce debts, where necessary.
In the management of capital risk, management takes into consideration the net debt equity ratio as well as the Groups
working capital requirement. As at end of the reporting period, the Group has excess cash and cash equivalents over
its debts.
There was no change in the Groups approach to capital management during the financial year.
(i) Equity contribution to subsidiaries in respect of share options granted to employees of the subsidiaries
The prior year adjustment was in respect of recognition of equity contribution to subsidiaries in respect of share
options granted to employees of the subsidiaries pursuant to the Companys Employees Share Option Scheme
in accordance with MFRS 2, Share-based Payments in prior years.
The effects of adjustment for the recognition of equity contribution to subsidiaries are as follows:-
2015
As previously
reported Adjustments Restated
RM RM RM
Company
2014
As previously
reported Adjustments Restated
RM RM RM
Company
119
notes to the
financial statements
(contd)
(i) Equity contribution to subsidiaries in respect of share options granted to employees of the subsidiaries (Contd)
Company
2016 2015
RM RM
Company
2015 2014
RM RM
The Group had reclassified certain amounts of deposits placed in money market funds and trust funds which
were previously included in deposits, cash and bank balances to short term investments. The affected deposits
were held for investment purpose rather than for purpose of meeting short term cash commitments.
2015
As previously
reported Adjustments Restated
RM RM RM
Group
Company
120
notes to the
financial statements
(contd)
2014
As previously
reported Adjustments Restated
RM RM RM
Group
Company
There is no effect on the profit for the year of the Group and Company. Certain items of profit or loss have however
been restated as follows:
2015
As previously
reported Adjustments Restated
RM RM RM
Group
Company
The amount of other component of equity which was previously presented as a separate item under reserves
has been included in Retained Profits.
ANNUAL REPORT 2016
121
notes to the
financial statements
(contd)
37. Comparatives
Certain comparative figures have been reclassified to conform with current years presentation.
2015
As previously
reported Reclassification Restated
RM RM RM
Group
Current assets
Amount due from contract customers 5,224,906 5,224,906
Trade and other receivables 17,786,954 (9,030,733) 8,756,221
Amount due from an associate 468,720 3,740,229 4,208,949
Current liabilites
Trade and other payables 6,577,974 (65,598) 6,512,376
2014
As previously
reported Reclassification Restated
RM RM RM
Group
Current assets
Amount due from contract customers 6,456,829 6,456,829
Trade and other receivables 19,399,807 (12,089,462) 7,310,345
Amount due from an associate 470,176 5,632,633 6,102,809
2014
As previously
reported Reclassification Restated
RM RM RM
Company
Current assets
Investment in subsidiaries 28,335,263 312,900 28,648,163
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
122
notes to the
financial statements
(contd)
2015
As previously
reported Reclassification Restated
RM RM RM
Group
2015
As previously
reported Reclassification Restated
RM RM RM
Company
2015
As previously
reported Reclassification Restated
RM RM RM
Group
2015
As previously
reported Reclassification Restated
RM RM RM
Company
123
notes to the
financial statements
(contd)
The breakdown of retained profits of the Group and of the Company as at 31 December 2016, into realised and
unrealised profits or losses, pursuant to the directive issued by Bursa Malaysia Securities Berhad dated 25 March
2010, is as follows :-
Group Company
2016 2015 2016 2015
RM RM RM RM
The determination of realised and unrealised profits or losses is based on the Guidance of 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.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
124
INDEPENDENT
AUDITORS report
to the members of Solution
Engineering Holdings Berhad
(Incorporated in Malaysia)
We have audited the financial statements of SOLUTION ENGINEERING HOLDINGS BERHAD, which comprise the statements
of financial position as at 31 December 2016 of the Group and of the Company, and the statements of profit or loss and other
comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company
for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and
other explanatory information, as set out on pages 43 to 123.
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 December 2016, and of their financial performance and their cash flows for the year then ended in
accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements
of the Companies Act, 1965 in Malaysia.
Basis of 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
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.
We are independent 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 Boards 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 IESBA Code.
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 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 matters How our audit addressed the key audit matters
1. Recognition of contract revenue Our procedures include the following :-
Contract revenue recognised by the Group during the We obtained management estimates of the costs
year amounted to RM 30.0 million. The disclosures to complete for individually significant contracts
on recognition of contract revenue are set out in Note in progress as at end of the reporting period and
3(b)(i) and Note 23 to the financial statements. compared these estimates to purchases contracts,
suppliers quotations or invoices where applicable to
Contract revenue is measured by reference to the determine their reasonableness.
stages of completion for each contract at the end of
the reporting period. The stage of completion of a We tested the calculations of stages of completion
contract is determined by the proportion of contract used by management to ascertain the accuracy of
costs incurred to date bear to the estimated total contract revenue recognised during the reporting
contract costs. The process to determine the stages period.
of completion involves significant management
judgement and use of management estimates. Any We performed substantive test procedures over
error in the application of judgement or estimates contract costs and contract revenue by checking
could result in a material misstatement in the amount against the underlying supporting documents including
of revenue recognised. contracts for sales and purchases.
ANNUAL REPORT 2016
125
independent
auditors report
(contd)
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 information
contained 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 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. We have nothing to report in this regard.
The directors of the Company are responsible for the preparation of 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, 1965 in Malaysia. The directors are also responsible for such internal
control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the
Company that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the
Groups and Companys 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 and the Company
or to cease operations, or have no realistic alternative but to do so.
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. Misstatement 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
these 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 :-
Identifying 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.
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 Groups and of the
Companys internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
126
independent
auditors report
(contd)
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 :- (Contd)
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 Groups or the Companys 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 the 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 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 financial statements of the Group and of the Company,
including the disclosures, and whether the financial statements 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.
We communicated 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
an 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 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.
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following :-
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and
its subsidiaries which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
(b) We are satisfied that the financial statements of all the subsidiaries that have been consolidated with the Companys
financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial
statements of the Group and we have received satisfactory information and explanations required by us for those
purposes.
(c) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse
comment made under Section 174(3) of the Act.
ANNUAL REPORT 2016
127
independent
auditors report
(contd)
T he supplementary information set out in Note 38 on page 123 is disclosed to meet the requirement of Bursa Malaysia
Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the
supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised
Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued
by the Malaysian Institute of Accountants (MIA Guidance) and the directive of Bursa Malaysia Securities Berhad. In our
opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the
directive of Bursa Malaysia Securities Berhad.
Other Matters
1. The financial statements of the Group and Company for the year ended 31 December 2015 were audited by another
firm of auditors who expressed an unmodified opinion on those statements on 30 March 2016.
2. This report is made solely to the member 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.
Kuala Lumpur
128
List OF
PROPERTIES
Description /Address A double storey detached factory situated on a piece of leasehold land held
under H.S.(M) 23157, P.T. No. 24403, Mukim Petaling Daerah Petaling, Negeri
Selangor Darul Ehsan, with a postal address of No. 3, Jalan TPK 2/4, Taman
Perindustrian Kinrara, 47100 Puchong, Selangor Darul Ehsan
Existing Use Currently used by SESB as its Equipment Demonstration and Training
Centre. The factory also houses Solutions Equipment R&D Department,
Design & Engineering Department, Sales &, Marketing Department, Finance
& Administration Department and the Customer Support and Services
Department.
Audited Net Book Value The property was classified as non-current asset held for sale with a carrying
amount of RM1,890,415.
Status of Certificate of Fitness or The property is in compliance with building regulations with the Certificate of
Occupational Certificate Fitness for Occupation, dated 29 January 1996.
Restrictions-in-interest of the property There is a restriction of interest on the property requiring the State Authoritys
consent to any transfer or charge of the property.
Encumbrances The property is presently charged to Alliance Islamic Bank Berhad under
Presentation No. 2052/2009 for loan facilities granted to SESB.
ANNUAL REPORT 2016
129
Analysis of
Shareholdings
as at 28 March 2017
Distribution of Shareholdings
No. of No. of
Range of Holdings Holders % Shares %
1 - 99 192 5.29 12,169 0.00
100 to 1000 186 5.13 86,777 0.03
1,001 to 10,000 1,132 31.21 7,415,217 2.42
10,001 to 100,000 1,785 49.21 65,606,183 21.43
100,001 to 15,308,292 * 331 9.13 153,085,970 50.00
15,308,293 and above ** 1 0.03 79,959,549 26.12
Total 3,627 100.00 306,165,865 100.00
Remarks :
* Less than 5% of issued shares
** 5% and above of issued shares
No. of
No. Name Shares Held %
1. Lim Yong Hew 59,959,550 19.58
2. Lim Yong Hew 19,999,999 6.53
3. HSBC Nominees (Tempatan) Sdn. Bhd. HSBC (M) Trustee Bhd. for RHB Small Cap 10,735,000 3.51
Opportunity Unit Trust
4. Tan Han Wooi 8,500,000 2.78
5. Lim Hai Guan 7,188,315 2.35
6. Lim Chiou Kim 6,647,259 2.17
7. RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Fong 5,540,000 1.81
Siling (CEB)
8. Mohd Shahrin Bin Saparin @ Abd Rahman 2,993,100 0.98
9. Solvest Sdn. Bhd. 2,991,903 0.98
10. Zamri Bin Mohamad 2,917,300 0.95
11. Syed Muhamad Bin Syed Abdul Kadir 2,845,422 0.93
12. Shing Mun Yin 2,530,000 0.83
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
130
analysis of
shareholdings
(contd)
No. of
No. Name Shares Held %
13. HSBC Nominees (Tempatan) Sdn Bhd, HSBC (M) Trustee Bhd for RHB Emerging 2,100,000 0.68
Opportunity Unit Trust
14 Zainuddin Bin Muhamad 2,046,921 0.67
15. Lim Chiou Kim 2,019,999 0.66
16. Chan Yee Wah 2,010,345 0.66
17. See Kong Lam 1,600,000 0.52
18. Fong Jong Yan 1,427,250 0.47
19. Alliance Group Nominees (Tempatan) Sdn Bhd, Pledged Securities Account for
Tan Oiy Pow 1,400,000 0.46
20. Chan Thong Wing 1,393,899 0.45
21. Maybank Nominees (Tempatan) Sdn Bhd, Yeo Kim Hock 1,272,000 0.42
22. Tan Lee Soon Holdings Sdn Bhd 1,200,000 0.39
23. Alliance Group Nominees (Tempatan) Sdn Bhd, Pledged Securities Account for 1,151,750 0.38
Low Wee Yien
24. Lim Boon Seng 1,150,000 0.37
25. Tay Boon Chin 1,046,700 0.34
26. HLIB Nominees (Tempatan) Sdn Bhd, Hong Leong Bank Bhd for Ramesh A/L 1,022,000 0.33
Palaniyandy
27. Tan Eng Hock 1,010,000 0.33
28. Chia Nam Cheun 1,000,000 0.33
29. Public Nominees (Tempatan) Sdn Bhd, Pledged Securities Account for Lock Wut Ling 908,000 0.29
30. Lim See An 850,000 0.28
Total 157,456,712 51.43
(1)
Deemed interested by virtue of his immediate family members interest and shareholding in Solvest Sdn.Bhd.
ANNUAL REPORT 2016
131
analysis of
shareholdings
(contd)
No. of No. of
Range of Holdings Holders % Warrants %
1 to 99 284 17.44% 10,931 0.01
100 to 1000 168 10.32% 97,008 0.10
1,001 to 10,000 584 35.87% 3,331,297 3.29
10,001 to 100,000 490 30.10% 18,681,027 18.44
100,001 - 5,066,342 * 100 6.14% 40,920,086 40.38
5,066,343 and above ** 2 0.12% 38,286,516 37.79
Total 1,628 100.00 101,326,865 100.00
Remarks :
* Less than 5% of issued warrants
** 5% and above of issued warrants
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
132
analysis of
shareholdings
(contd)
No. of
No. Name Warrants Held %
1 Lim Yong Hew 19,619,850 19.36
2 RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account for 12,000,000 11.84
Fong Siling (CEB)
3 Lim Yong Hew 6,666,666 6.58
4 Lim Hai Guan 3,000,105 2.96
5 Lim Chiou Kim 2,215,753 2.19
6 Shing Mun Yin 1,129,700 1.11
7 Zamri bin Mohamad 1,129,500 1.11
8 Alliance Group Nominees (Tempatan) Sdn Bhd Pledged Securities Account for 1,123,000 1.11
Tan Oiy Pow
9 Ong Kim Leng 1,100,000 1.09
10 Yew Chin Theng 1,050,000 1.04
11 Mohd Shahrin bin Saparin @ Abd Rahman 997,700 0.98
12 Solvest Sdn. Bhd. 997,301 0.98
13 Public Invest Nominees (Asing) Sdn Bhd Exempt An for Phillip Securities Pte 966,200 0.95
Ltd (clients)
14 Syed Muhamad bin Syed Abdul Kadir 948,474 0.94
15 Fong Jong Yan 835,750 0.82
16 Chia Siew Hoon 817,300 0.81
17 Ng Soon Kiat 804,100 0.79
18 Ong Kim Leng 702,600 0.69
19 Lim Boon Seng 700,000 0.69
20 Lim Chiou Kim 673,333 0.66
21 Chan Yee Wah 670,115 0.66
22 Zainuddin bin Muhamad 667,307 0.66
23 Cheong Boon Long 650,000 0.64
24 Lew Wong Keong 650,000 0.64
25 Public Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Choo 612,000 0.60
Gee Chang
26 Teo Pui Meng 600,000 0.59
27 Shin Chang Fun 590,800 0.58
28 Maybank Nominees (Tempatan) Sdn Bhd Ong Kheng Hong 500,000 0.49
29 Ng Soon Hao 500,000 0.49
30 Public Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Yap 500,000 0.49
Cheah Suan
Total 63,417,554 62.59
ANNUAL REPORT 2016
133
analysis of
shareholdings
(contd)
(1)
Deemed interested by virtue of his immediate family members interest and shareholding in Solvest Sdn.Bhd.
134
NOTICE OF
ANNUAL GENERAL
MEETING
NOTICE IS HEREBY GIVEN that the Thirteenth Annual General Meeting of Solution Engineering Holdings Berhad (SEHB)
will be held at Kinrara 1 Room, Kinrara Golf Club, Jalan Kinrara 6, Bandar Kinrara, 47100 Puchong, Selangor on Thursday,
22 June 2017 at 10.00 a.m. to transact the following businesses :
AGENDA
1. To receive the Audited Financial Statements for the financial year ended 31 December Please refer to
2016 and the Reports of the Directors and Auditors thereon Explanatory
Note on Agenda 1
2. To re-elect the following Directors of the Company who are retiring pursuant to Article
83 of the Constitution of the Company
(a) Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir Ordinary Resolution 1
3. To approve the payment of Directors fees of RM 159,840 for the financial year ended Ordinary Resolution 3
31 December 2016
4. To approve the payable Directors fees of RM300,600 with effect from 1 January 2017 Ordinary Resolution 4
until the next Annual General Meeting of the Company
5. To re-appoint Messrs. Folks DFK & Co. as Auditors of the Company and to authorise Ordinary Resolution 5
the Directors to determine their remuneration.
6. Special Businesses :
To consider and if thought fit, pass with or without modifications, the following
resolutions:
(ii) THAT authority be and is hereby given to Mr. Low Wei Ngee to continue
to act as an Independent Non-Executive Director of the Company until the
conclusion of the Next Annual General Meeting in accordance with the
Malaysian Code of Corporate Governance 2012
That pursuant to Sections 75 and 76 of the Companies Act 2016 and subject
always to the approval from the relevant authorities, where such approval is
necessary, the Board of Directors be authorised to issue and allot shares in
the Company at any time and upon such terms and conditions and for such
purposes as the Directors may, in their absolute discretion deem fit, PROVIDED
ALWAYS THAT the aggregate number of ordinary shares to be issued pursuant
to this resolution does not exceed ten percent (10%) of the issued capital of the
Company for the time being and that the Directors be and are also empowered
to obtain the approval for the listing of and quotation for the additional shares so
issued on the ACE Market of Bursa Malaysia Securities Berhad and that such
authority shall continue to be in force until the conclusion of the next Annual
General Meeting (AGM) of the Company or the expiration of the period within
which the next AGM which is required by law to be held or revoked / varied by
a resolution passed by the shareholders in general meeting whichever is the
earlier.
ANNUAL REPORT 2016
135
notice of
annual general
meeting
(contd)
(c) Proposed renewal of authority for the Company to purchase its own shares Ordinary Resolution 9
(Proposed renewal of Share Buy-Back Mandate)
THAT subject to the provisions under the Act, the Constitution of the Company,
the Listing Requirements and any other applicable laws, rules, regulations and
guidelines for the time being in force, the Company be and is hereby authorised
to purchase such number of ordinary shares in the Company (Shares) as
may be determined by the Directors from time to time through Bursa Securities
upon such terms and conditions as the Directors may deem fit and expedient
in the interest of the Company provided that the aggregate number of shares
purchased pursuant to this resolution shall not exceed 10% of the total issued
and paid-up share capital of the Company.
THAT the maximum amount of funds to be allocated for the purpose of purchasing
the Shares shall not exceed the retained profits of the Company.
THAT authority be and is hereby given to the Directors to decide at their discretion,
as may be permitted and prescribed by the Act and/or any prevailing laws,
rules, regulations, orders, guidelines and requirements issued by the relevant
authorities for the time being in force to deal with any of the Shares so purchased
by the Company in the following manner:
THAT the authority conferred by this resolution will be effective immediately from
the passing of this ordinary resolution and shall continue to be in force until:
(i) the conclusion of the next AGM of the Company, at which time the said
authority would lapse unless by an ordinary resolution passed at that
meeting, the authority is renewed, either unconditionally or subject to
conditions; or
(ii) the expiration of the period within which the next AGM is required by law
to be held; or
136
notice of
annual general
meeting
(contd)
AND THAT the Directors be and are hereby authorised to take such steps as Ordinary Resolution 10
are necessary or expedient to implement or to effect the purchase(s) of the
Shares with full power to assent to any conditions, modifications, variations
and/or amendments as may be imposed by the relevant authorities and to take
such steps as they may deem necessary or expedient in order to implement,
finalise and give full effect in relation thereto.
THAT subject to the provisions under the Act, the Constitution of the Company,
the Listing Requirements and any other applicable laws, rules, regulations and
guidelines for the time being in force, approval be and is hereby given to the
Company and/or its subsidiaries to enter into recurrent related party transactions
of a revenue or trading nature which are necessary for day-to-day operations
involving the interests of Directors, Major Shareholders or persons connected
to the Directors and/or Major Shareholders of the Company and its subsidiaries
(Related Parties), as detailed in Section 3 of the Circular to Shareholders of
the Company subject to the following:
(a) the transactions are carried out in the ordinary course of business on
normal commercial terms which are not more favourable to the Related
Parties than those generally available to the public and are not to the
detriment of the minority shareholders of the Company; and
THAT the authority conferred by this resolution will be effective immediately from
the passing of this ordinary resolution and shall continue to be in force until:
(i) the conclusion of the next AGM of the Company, at which time the said
authority would lapse unless by an ordinary resolution passed at that
meeting, the authority is renewed, either unconditionally or subject to
conditions;
(ii) the expiration of the period within which the next AGM is required by law
to be held; or
137
notice of
annual general
meeting
(contd)
AND THAT the Directors be and are hereby authorised to take such steps as are
necessary or expedient to implement or to effect the Proposed Shareholders
Mandate.
7. To transact any other business for which due notice shall have been given under
the Companies Act, 2016
_______________________________________
ONG WHEE TIONG (MAICSA No. : 0739672)
Company Secretary
Kuala Lumpur
NOTES :
1. Depositors whose names appear in the Record of Depositors as at 15 June 2017 shall be regarded as members of
the Company entitled to attend, speak and vote at the 13th Annual General Meeting
2. A member entitled to attend and vote at the meeting is entitled to appoint one or more [but not more than three (3)]
proxies, each representing a minimum of 100 shares held by the member to vote on his behalf. A proxy may but need
not be a member of the Company. Where a member appoints two (2) or more proxies to attend and vote at the meeting,
the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each
proxy.
3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories)
Act, 1991, (SICDA) it may appoint at least one (1) proxy in respect of each securities account is holds with ordinary
shares of the Company standing to the credit of the said securities account.
4. Where a member of the Company is an exempt authorised nominee as defined under the SICDA which is exempted from
compliance with the provisions of Subsection 25(A)(1) of the SICDA, of which holds ordinary shares in the Company for
multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies
which the exempt authorised nominee may appoint in respect of each omnibus account it holds.
5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised
in writing or if the appointer is a corporation, either under its common seal or under the hand of an attorney duly
authorised.
6. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or
notarially certified copy thereof, shall be deposited at the Registered Office of the Company at Suite 705, Block A,
Kelana Business Centre, 97 Jalan SS 7/2, 47301 Petaling Jaya, Selangor Darul Ehsan not less than forty-eight (48)
hours before the time set for holding the Thirteenth Annual General Meeting or any adjournment thereof.
SOLUTION ENGINEERING HOLDINGS BERHAD
(Company No. 654575-P)
138
notice of
annual general
meeting
(contd)
This Agenda is meant for discussion only as the provisions of Section 340(1)(a) of the Companies Act, 2016 does
not require a formal approval of shareholders for the Audited Financial Statements and hence, Agenda 1 is not put
forward for voting.
Pursuant to Malaysian Code of Corporate Governance 2012, the tenure of an Independent Director should not
exceed a cumulative term of nine years unless an approval is sought from the Companys shareholders at the
Annual General Meeting to retain the said director as an independent director. Both, Datuk Dr. Syed Muhamad
Bin Syed Abdul Kadir and Mr. Low Wei Ngee were appointed as Non-Executive Directors of the Company on 28
May 2005 and have therefore served for more than nine years.
The Board has recommended that both Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir and Mr. Low Wei Ngee
continue to act as Independent Non-Executive Directors of the Company based on the following reasons:-
i. They fulfil the criteria under the definition on Independent Directors in the Ace Market Listing Requirements
of Bursa Malaysia Securities Berhad;
ii. They are able to bring independent and objective judgment to the Board;
iii. Their wide range of business experience relevant to the Group enables them to provide the Board with a
diverse set of corporate expertise, skills and competence;
iv. They have been with the Company for more than nine years and therefore understands the Companys
business operations which enables them to participate actively and contribute positively during deliberations
or discussions at Board Meetings;
v. They have contributed sufficient time and effort and attended the Committee and Board meetings for an
informed and balanced decision making; and
vi. They have exercised due care during their tenure as Independent Non-Executive Directors of the Company
and carried out their professional duties in the interest of the Company and shareholders.
The Company had during its Twelfth Annual General Meeting held on 1 June 2016 obtained from its shareholders,
a general mandate pursuant to Section 132D of the Companies Act, 1965 to issue and allot shares in the
Company up to an amount not exceeding 10% of the issued share capital of the Company and this mandate
had not being exercised by the Company.
The Ordinary Resolution No. 8 proposed under item 6(b) of the Agenda is a renewal mandate of the general
mandate for the issuance of shares by the Company under Sections 75 and 76 of the Companies Act 2016.
The mandate, if passed, will give the Directors of the Company, the authority to issue and allot shares in the
Company up to an amount not exceeding 10% of the issued share capital of the Company for the time being for
such purposes as the Directors would consider to be in the best interest of the Company. This authority, unless
revoked or varied by the Company in a general meeting will expire at the conclusion of the next Annual General
Meeting of the Company.
This mandate would provide the Company the flexibility to raise fund including but not limited to placing of shares
to finance future projects, working capital and / or acquisitions without having to convene a general meeting.
ANNUAL REPORT 2016
139
notice of
annual general
meeting
(contd)
c) Ordinary Resolution No. 9 Proposed Renewal of Authority for the Company to purchase its own shares
The proposed Ordinary Resolution No. 9, if passed, will give the Directors of the Company the authority to take
all such steps as are necessary or expedient to implement, finalise, complete and/or effect the purchase(s) of
Shares by the Company as the Directors may deem fit and expedient in the best interest of the Company. This
authority will, unless renewed or revoked or varied by the Company at a general meeting, continue to be in force
until the conclusion of the next AGM of the Company or the expiry of the period within which the next AGM of
the Company following the Thirteenth AGM is required by the law to be held. Please refer to the Share-Buy-Back
Statement dated 28 Apr 2017 which is despatched together with this Annual Report for more information.
d) Ordinary Resolution No. 10 Proposed Shareholders Mandate for Recurrent Related Party Transactions of
a revenue or trading nature
The proposed Ordinary Resolution No. 10, if passed, will authorise the Company and / or its subsidiaries to
enter into recurrent related party transactions of a revenue of trading nature which are necessary for day-to-
day operations, provided that such transactions are carried out in the ordinary course of business on normal
commercial terms which are not more favourable to the Related Parties than those generally available to the public
and are not to the detriment of the minority shareholders of the Company and shall lapse at the conclusion of
the next AGM unless authority for its renewal is obtained from shareholders of the Company at the next general
meeting.
During the financial year ended 31 December 2016, six (6) Board Meetings were held and the details of the attendance
of the Directors are as follows :
Number of Meeting
Executive Directors Attended
Number of Meeting
Non Executive Directors Attended
Date, Time and Venue of the Thirteenth Annual General Meeting of the Company
Venue : Kinrara 1 Room, Kinrara Golf Club, Jalan Kinrara 6, Bandar Kinrara, 47100 Puchong, Selangor
3. Profile of Directors seeking for re-election are set out under the Directors Profile appearing on page 5 and 9.
(This page has been intentionally left blank)
PROXY FORM
of________________________________________________________________________________________________________________
(FULL ADDRESS
)
being a member of SOLUTION ENGINEERING HOLDINGS BERHAD hereby appoint___________________________________________
_________________________________________________________________________________________________________________
(FULL NAME AND NRIC/PASSPORT NO.)
of________________________________________________________________________________________________________________
(FULL ADDRESS)
_________________________________________________________________________________________________________________
or failing him,______________________________________________________________________________________________________
(FULL NAME AND NRIC/PASSPORT NO.)
of________________________________________________________________________________________________________________
(FULL ADDRESS)
or failing either of them, the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf at the Thirteenth Annual
General Meeting of the Company to be held at Kinrara 1 Room, Kinrara Golf Club, Jalan Kinrara 6, Bandar Kinrara, 47100 Puchong,
Selangor on Thursday, 22 June 2017 at 10.00 a.m. and at any adjournment thereof, in the manner indicated below :-
NO ORDINARY RESOLUTIONS FOR AGAINST
1 To elect Y Bhg. Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir as a Director
2 To elect Mr. Low Wei Ngee as a Director
3 To approve the payment of Directors fees of RM 159,840 for the financial year ended 31
December 2016
4 To approve the payable Directors fees of RM300,600 with effect from 1 January 2017 until
the next Annual General Meeting of the Company
5 To re-appoint Messrs. Folks DFK & Co. as the Auditors and to authorise the Directors to fix
their remuneration
6 To retain Datuk Dr. Syed Muhamad Bin Syed Abdul Kadir as an Independent Non-Executive
Director
7 To retain Mr. Low Wei Ngee as an Independent Non-Executive Director
8 To approve the Authority to Directors to issue shares
9 To propose renewal of mandate for share buy-back by the Company
10 To propose Shareholders Mandate for Recurrent Related Party Transactions of a revenue or
trading nature
Please indicate with an x in the spaces provided above on how you wish to cast your vote. In the absence of specific directions,
your proxy will vote or abstain as he thinks fit.
Date: __________________________
Signature of Member / Common Seal
NOTES :-
1. Depositors whose names appear in the Record of Depositors as at 15 June 2017 shall be regarded as members of the Company entitled to
attend, speak and vote at the 13th Annual General Meeting.
2. A member entitled to attend and vote at the meeting is entitled to appoint one or more [but not more than three (3)] proxies, each representing
a minimum of 100 shares held by the member to vote on his behalf. A proxy may but need not a member of the Company. Where a member
appoints two (2) or more proxies to attend and vote at the meeting, the appointment shall be invalid unless he specifies the proportion of his
shareholdings to be represented by each proxy.
3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (SICDA),
it may appoint at least one (1) proxy in respect of each securities account is holds with ordinary shares of the Company standing to the credit of
the said securities account.
4. Where a member of the Company is an exempt authorised nominee as defined under the SICDA which is exempted from compliance with the
provisions of Subsection 25(A)(1) of the SICDA, of which holds ordinary shares in the Company for multiple beneficial owners in one securities
account (omnibus account), there is no limit to the number of proxies which the exempt authorized nominee may appoint in respect of each
omnibus account it holds.
5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if the appointer
is a corporation, either under its common seal or under the hand of an attorney duly authorised.
6. The instrument appointing a proxy and the power of attorney or other attorney (if any), under which it is signed or notarially certified copy thereof,
shall be deposited at the Registered Office of the Company at Suite 705, Block A, Kelana Business Centre, 97, Jalan SS 7/2, 47301 Petaling
Jaya, Selangor Darul Ehsan not less than forty-eight (48) hours before the time set for holding the Thirteenth Annual General Meeting or any
adjournment thereof.
Fold this flap for sealing
Affix
Stamp