TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
PART 1 – EXPLANATORY NOTES PURSUANT TO PARAGRAPH 16 OF MASB 26
1.
Basis of Preparation
The condensed financial statements should be read in conjunction with the Annual Financial Report for
the year ended 31 December 2003 and the Explanatory Notes for the period ended 31 December 2004.
The interim financial report for the financial quarter ended 31 December 2004 is unaudited and has been
prepared in accordance with MASB 26, Interim Financial Reporting.
The accounting policies and methods of computation adopted by the Group in this interim financial
report are consistent with those adopted in the financial statements for the year ended 31 December
2003.
2.
Auditors’ Report on Preceding Annual Financial Statements
The auditor’s report on the financial statements for the year ended 31 December 2003 was not subject to
any qualification.
3.
Comments about the Seasonality or Cyclical of Interim Operations
Except for the production of fresh fruit bunches (“FFB”) which is cyclical in nature; the Group’s
business operations are not subject to seasonality or cyclical factors.
4.
Unusual Nature and Amount of Items Affecting Assets, Liabilities, Equity, Net Income, or Cash
Flows
There were no unusual items affecting assets, liabilities, equity, net income or cash flows except for the
following exceptional items:

Allowance for diminution in value of unquoted
investments
Current Quarter
31.12.2004
RM’000
(Unaudited)
Year-to-date
31.12.2004
RM’000
(Unaudited)
13,142
13,322
The details of the above provisions and investments written off are set out in Part 2 Section B (d) below.
5.
Changes in Estimates
There was no change in estimate of amount reported in prior interim periods of the current financial year
or change in estimate of amount reported in prior financial years that will give a material effect in the
current interim period.
1
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
6.
Issuance, Cancellation, Repurchases, Resale and Repayments of Debt and Equity Securities
For the current financial year to-date:-
7.
(a)
There was no issuance or repayment of equity or debt securities by the Company other than the
issuance of 39,000 new ordinary shares of RM1.00 each at an issue price of RM1.00 per share
and 6,000 new ordinary shares of RM1.00 each at an issue price of RM1.08 per share pursuant
to the exercise of options under the Company’s employees’ share option scheme, and the
issuance of 30,239,433 new ordinary shares of RM1.00 each at an issue price of RM1.10 per
share pursuant to the acquisition of the entire equity interest in Asiaprise Biotech Sdn Bhd; and
(b)
The Company had not engaged in any share buyback scheme or implemented any share
cancellation. The Company does not have any share held as treasury shares.
Dividends Paid
The Company paid a final dividend of 3% less 28% income tax amounting to RM8,349,509 on 9 June
2004 in respect of the financial year ended 31 December 2003.
8.
Segmental Information
Segmental information is presented in respect of the Group’s business segments which are the Group’s
primary basis of segmental reporting.
(a)
Revenue
Plantation
Construction
Timber Extraction
Venture Capital
Information Technology
Healthcare
Investment Holding
Money Lending & Others
Total Revenue
2
Current Quarter
31.12.2004
RM’000
(Unaudited)
Year-to-date
31.12.2004
RM’000
(Unaudited)
48,294
47,805
91
0
976
1,186
489
177
99,018
159,017
134,969
649
34
1,500
3,324
1,955
641
302,089
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
(b)
Profit before Tax
Plantation
Construction
Timber Extraction
Venture Capital
Information Technology
Healthcare
Investment Holding
Money Lending & Others
Unallocated Expenses
Interest Income
Operating Profit
Finance Costs
Share of profit in an associate
Profit before tax
9.
Current Quarter
31.12.2004
RM’000
(Unaudited)
Year-to-date
31.12.2004
RM’000
(Unaudited)
18,803
534
(2,377)
(13,669)
(839)
(688)
(2,308)
136
(408)
(2)
292
(118)
(1,871)
(327)
(2,316)
68,264
9,924
(6,452)
(14,683)
(3,297)
(1,380)
(6,287)
566
46,655
(382)
1,179
47,452
(6,860)
(371)
40,221
Valuation of Property, Plant and Equipment
Valuation had been carried out on land and building during the year and the valuation approximate cost
value, therefore no adjustment is made in the financial statements.
10.
Material Subsequent Events
There was no material event subsequent to the end of the interim period to 21 February 2005, being 7
days prior to the date of this report that has not been reflected in the financial statements for the interim
period.
11.
Changes in the Composition of the Group
There was no change to the composition of the Group during the current interim period including
business combination, acquisition or disposal of subsidiaries and long term investments (except for
venture capital investments), restructuring and discontinuing of operations other than below:-
(a)
On 5 November 2004, TH Group Berhad (“ THG”) completed the internal restructuring and
reorganisation exercise (“ IRR’) involving the Company and several of its subsidiaries with the
objectives to enhance tax efficiency of dividend payments from certain subsidiaries to
shareholders of TH Group and to streamline the core businesses of the Group into distinct
divisions of plantation, construction and timber operations.
3
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
12.
Changes in Contingent Liabilities and Contingent Assets
There were no changes in the contingent liability or contingent asset of the Group since the last annual
balance sheet as at 31 December 2003 except for the following:
RM’000
Secured:Increase in bank guarantee utilised for performance bonds for the construction
division
Decrease in bank guarantees in favour of Government agencies
15,717
(235)
15,482
PART 2 – EXPLANATORY NOTES PURSUANT TO PART A OF APPENDIX 9B OF THE BURSA
MALAYSIA SECURITIES BERHAD (“BMSB”) LISTING REQUIREMENTS (AS REVISED)
A.
Explanatory Comments on Material Changes in the Profitability for the Quarter Reported On
Compared to the Immediate Preceding Quarter
Current Quarter
31.12.2004
RM’000
(Unaudited)
Previous
Quarter
30.09.2004
RM’000
(Unaudited)
Revenue
99,018
63,515
Profit / (Loss) before taxation
(2,316)
24,516
The performances of the individual business segments are further elaborated in Section B below.
B.
Review of Results
(a)
Plantation
For the current quarter, the revenue increased from RM44.9 million in the previous quarter to
RM48.3 million (+8%) while the segmental profit before tax decreased from RM23.7 million
in the previous quarter to RM18.8 million (-21%).
The increase in revenue was primarily due to higher CPO and PK quantities sold during the
current quarter while the decrease in profitability was due to lower CPO and PK prices realised
in the current quarter.
Sales of CPO was approximately 28,089 MT (+19%)compared to 23,702 MT in the previous
quarter, while sales of PK was approximately 6,467 MT (+17%)compared to 5,528 MT in the
previous quarter. The average prices realised for CPO and PK were RM1,465 per MT (-10%)
and RM 998 per MT (-3%)respectively compared to RM1,625 per MT and RM1,030 per MT in
the previous quarter.
4
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
During the period under review, the production of fresh fruit bunches (“FFB”) was lower from
103,424 MT in the previous quarter to 92,571 MT (-10%), the production of CPO decreased
from 30,105 MT to 28,299 MT (-6%) and the production of PK increased from 6,490 MT to
6,525 MT (+1%).
The palm oil mill recorded a higher average oil extraction rate of 22.26% compared to 21.94 %
in the previous quarter, while the kernel extraction rate was higher at 5.13% compared to
4.73% in the previous quarter.
(b)
Timber Extraction
For the current quarter, revenue decreased from RM0.3 million in the previous quarter to
RM0.09 million (-70%) and a higher segmental loss of RM2.4 million was registered (+500%)
compared to a segmental loss of RM0.4 million in the previous quarter.
The decrease in the revenue and the increase in segmental loss were due to the closure of the
land clearing activities in East Kalimantan, where expenses were incurred for the retrenchment
of Kalimantan work force.
(c)
Construction
Revenue for the current quarter increased by RM31.5 million (+193%) to RM 47.8 million
from RM16.3 million in the previous quarter, while the segmental profit before tax decreased
by RM5.0 million to RM 0.5 million (-91%) from RM 5.5 million in the previous quarter.
The current quarter revenue was higher mainly due to higher work in progress from its ongoing
projects during the quarter. The higher profitability registered during the previous quarter was
mainly due to gain in disposal of assets which was not recurred in the current quarter and the
completion of several higher margin construction projects in the previous quarters
The Group currently has a total order book of RM553 million, with RM263 million in
outstanding value as at 31 December 2004.
(d)
Venture Capital
The venture capital division made an allowance for diminution in value for the following
unquoted investment:-
AsiaDirect Capital Holdings Sdn Bhd
C-Solution,Inc
Ginosko Technology Investments Pte Ltd
Cinepix Inc.
Total
5
Allowance for
diminution in value
during the quarter
(RM’000)
Total allowance for
diminution /write off
in value YTD
(RM’000)
60
11,468
203
1,411
13,142
240
11,468
203
1,411
13,322
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
The additional provision for impairment of the above investments were due to actual operating
expenses incurred, inability to raise further funding to continue with operation and / or
depletion in shareholders’ fund by the investee companies.
The aggregate carrying value of investments at the end of the reporting period was
approximately RM43.8 million in eight companies, of which over 62% of the portfolio are
focused on Biotechnology.
The venture capital division will now focus on monitoring the portfolio investment rather than
making any further investment.
(e)
Information Technology
Revenue for the current quarter increased from RM481,000 in the previous quarter to
RM976,000 (+103%), while the segmental losses increased from RM0.7 million in the
previous quarter to RM0.8 million (+14%).
The increase in revenue in the current quarter was due to billings for plantation software
implementation at customers’ sites and progress billings for its e-procurement solution on
contracts secured by the IT division during the year.
(f)
Healthcare
Revenue for the current quarter increased from RM1.0 million in the previous quarter to
RM1.1 million (+10%), while the segmental losses increased from RM542,000 in the previous
quarter to RM688,000 (+27%).
The higher revenue was mainly due to higher number of patients treated for cancer in the
centre during the current quarter.
C.
Next Financial Year Prospects
The prospects for the next financial year are as follows:(a)
Plantation
Profit contribution from plantation would generally depend on the price performance of the
palm oil commodity, the level of production and sales and the ability of the Group to control its
costs of production.
(b)
Timber Extraction
The Group’s land clearing activities in East Kalimantan undertaken by PT THG Kontrak has
ceased operation while its logs handling and stevedoring services will depend on the level of
production of the principal. The division will continue to look for other feasible projects.
(c)
Construction
The Group is actively reviewing and negotiating business proposals to further strengthen its
order book. The performance of the construction division will depend on the ability to increase
its order book.
6
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
(d)
Venture Capital
The Group’s venture capital division currently has a total of eight investments at the end of the
reporting period focusing mainly on a joint biotechnology fund with a government agency and
private institutions, a bio generic company and a 3D animation company. These three projects
take up 95% of the total outstanding venture capital fund. The returns from the Group’s
investments in these companies are only expected to materialise in the mid term. The Group’s
future focus in this sector will be the close supervision and monitoring of the portfolio of
companies invested.
(e)
Information Technology
The Group’s IT division is actively marketing its plantation software, facilities management
software and e-business solutions both locally and in neighbouring countries. Its performance
will depend on its ability to increase its order book which stands at RM5.5 million as at 31
December 2004 with an outstanding value of RM3.9 million.
(f)
Healthcare
The Group’s healthcare division performance will depend on the number of cancer patients
seeking treatment from the Nilai Cancer Institute (NCI) and the securing of clinical trials
projects from international pharmaceutical companies. The setting up of a pharmaceutical
distribution arm is in process and an investment was made in a pharmaceutical manufacturing
and distribution company in India. The focus of the Healthcare division will be under 3
segments: NCI, pharmaceutical distribution and healthcare related investments.
Currently, NCI is embarking on Phase two (2) of its plan to expand its capacities, facilities and
services, which involves the building of an additional hospital wing, the establishment of
specialist clinics, the provision of healthcare screening services and the purchase of new
machineries for diagnostic and treatments.
D.
Profit Forecast
Not applicable.
E.
Taxation
Taxation comprised the following:Provision based on current period's profits
Under/(over) provision in previous years
Deferred taxation provided for / (written back)
7
Current Quarter
31.12.2004
RM’000
(Unaudited)
Year-to-date
31.12.2004
RM’000
(Unaudited)
3,875
(289)
381
3,967
23,089
(577)
(2,619)
19,893
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
The Group’s effective tax rate was higher than the prima facie tax rate as certain expenses including
amortisation on leasehold land and revaluation surplus of plantation development expenditure were not
allowed for tax purposes. Losses incurred by certain subsidiaries were also not available to set-off
against taxable profits in other companies within the Group.
Deferred tax arose mainly from excess of capital allowances over depreciation, unutilised capital and
agricultural allowances and unabsorbed tax losses. The deferred tax benefits would only be realised if
the relevant subsidiaries derive future assessable income of a nature and of amounts sufficient for the
tax benefits to be utilised.
F.
Profit on Sale of Unquoted Investments and/or Properties
There was no sale of unquoted investment or properties for the current financial period and financial
year to date.
G.
Purchase or Disposal of Quoted Securities (Other than Quoted Securities in Subsidiaries and
Associated Companies)
(a)
(b)
Other than the following, there was no other acquisition or disposal of any quoted security for
the current financial period and year-to-date
(i)
During the first quarter, the Group disposed an investment in a quoted unit trust in
Malaysia for RM1,096,000 with a gain of RM46,000.
(ii)
During the second quarter, the Group’s venture capital division subscribed for
additional shares in a quoted security outside Malaysia for GBP350,000
(approximately RM2,450,000) as a follow on investment in a company which the
venture capital division had earlier invested.
(iii)
During the third quarter, the Group invested RM14.0 million in a Malaysian-based
unit trust fund.
(iv)
During the current quarter, the Group made a net investment of RM7.7 million in a
Malaysian based unit trust fund and out of which RM368,363 was an investment gain
which was reinvested.
The investments in quoted securities as at 31 December 2004 were as follows:-
At cost
At carrying value/book value
At market value
Quoted unit trusts,
in Malaysia
(RM’000)
22,971
22,971
23,123
Quoted shares,
in Malaysia
(RM’000)
61
61
81
Quoted shares,
outside Malaysia
(RM’000) *
20,770
13,965
6,088
* Long term quoted investments are stated at cost. An allowance is made when the Directors
are of the view that there is a diminution in their value which is other than temporary.
The Directors are of the view that the diminution in value for this particular investment is
temporary due to the following considerations:-
8
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
(i)
The investee company is currently developing certain bio-generic drugs for global
markets in which there will be a gestation period before full commercialisation could
be achieved.
(ii)
Continuous achievement on the milestones planned for the company and the product
development progress, which included the completion of certain manufacturing plants,
distribution agreements entered into with established pharmaceutical companies, the
continued expansion plans, and the entering into trials for product(s) that is targeted to
commercialise in 2006 or early 2007.
(iii)
Subsequent to the Company’s financial year ended 31 December 2003, the investee
company announced a potential merger with a prominent pharmaceutical company
and the potential initial public offering in the US capital market Nasdaq which the
exercise is still in progress
(iv)
The Company had successfully completed a few fund raising rounds in 2004.
Based on the above, the Directors believe that there is potential growth in the investee
company and therefore the current market price does not reflect the fair value of the investee
company.
H.
Status of Corporate Proposals Announced but Not Completed
(a)
There was no corporate proposal announced but not completed as at 21 February 2005, being 7
days prior to the date of this report.
(b)
The Company had on 31 January 2002 issued RM150.0 million nominal amount of 3% secured
serial Al-Bai’ Bithaman Ajil Islamic Debt Securities (“BAIDS”). The status of the utilisation of
proceeds raised from the BAIDS exercise as at 31 December 2004 was as follows:Purpose
Amount as
approved

Proposed acquisition of an office complex in
Cyberjaya, Selangor
 Investment in biotechnology, internet and other
high technology related companies
 Repayment of Group’s existing bank
borrowings (Note 1)
 Working Capital (Note 1)
 Defraying incidental expenses of the proposal
Total
RM’000
Actual
Amount
Utilised
RM’000
18,288
18,188
10,000
10,000
83,500
77,287
35,712
2,500
150,000
41,925
2,048
149,448
Note 1
As stated in the circular to shareholders dated 15 November 2001, the excess of the approved
amount over the repayment of the Group’s existing bank borrowings will be utilised as
additional working capital. Total amount utilised for repayment of Group’s existing bank
borrowings was RM77,287,000 thus resulting in a surplus of RM6,213,000 to be drawn down
for working capital purposes.
9
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
I.
Group Borrowings and Debt Securities
All the Group’s bank borrowings and the BAIDS are secured and a breakdown between the short term
and long term borrowings is stated in the Condensed Consolidated Balance Sheets. The Group’s
borrowings are all denominated in Malaysian Ringgit.
J.
Off Balance Sheet Financial Instruments
During the current financial period and up to 21 February 2005, being 7 days prior to the date of this
report, the Group’s plantation division has entered into commodity future contracts to hedge the CPO
prices.
The associated credit risk is minimal as these contracts were entered into with registered brokers of
commodity exchanges. Gain or loss, arising from contracts entered as hedges of anticipated future
transactions, is deferred until the date of such transaction whereby the forward or cash transaction is
entered and simultaneously closed off the future contracts, which will be measured accordingly then. .
The gains or losses on contracts which are no longer designated as hedges are included in the Income
Statement. There is no commodity future contracts that was entered into and is still outstanding as at 21
February 2005, being 7 days prior to the date of this report.
K.
Changes in Material Litigations
There is no pending material litigation that is likely to give rise to any proceeding which may materially
and adversely affect the financial position and business of the Group between the last annual balance
sheet date and 21 February 2005, being 7 days prior to the date of this report.
L
Dividend
The Directors are recommending that a first and final dividend of 3% less tax amounting to
RM8,349,509 be paid in respect of the financial year ended 31 December 2004.
M
Provision of Financial Assistance
Pursuant to Practice Note No 11/2001, the provision of financial assistance under Paragraph 8.23 (1)(ii)
of the BMSB Listing Requirements during the current quarter ended 31 December 2004 by the Group
were as follows:RM’000
Provision of advances in the ordinary course of business by a subsidiary involved
in money lending to parties not related to directors and substantial shareholders of
the Company
10
7,105
TH Group Berhad (Company No 183467-X)
(Incorporated in Malaysia)
Interim Financial Report On Consolidated Results for the Financial Quarter Ended 31
December 2004
During the quarter, the principal amounts totalling RM 1,018,079 were repaid by borrowers.
The above provision of financial assistance does not affect the share capital and the shareholding
structure of the Company, and there is no material impact on the earnings and the net tangible assets of
the Group for the period ended 31 December 2004.
N.
Earnings Per Share
Basic earning per share of the Group is calculated by dividing the net profit for the period attributable to
shareholders by the weighted average number of ordinary shares in issue during the period of
378,980,232 shares.
Diluted earnings per share for the current period and year-to-date were not disclosed as the assumed
conversion of the Company’s outstanding ESOS options and warrants to ordinary shares was antidilutive.
By Order of the Board
Lim Yew Heang (MAICSA 7007653)
Chan Yee Kiaw (MAICSA 7012253)
Company Secretaries
28 February 2005
11