Annual Report2009 - MalaysiaStock.Biz...2010/04/28 · Financial Highlights 2 Vision, Mission &...
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HOCK SENG LEE BERHAD 045556-X Annual Report 2009
Transcript of Annual Report2009 - MalaysiaStock.Biz...2010/04/28 · Financial Highlights 2 Vision, Mission &...
HOCK SENG LEE BERHAD045556-X
AnnualReport2009
OvER COvER | Ocean inspired colours remain the hallmark of HSL’s Annual Reports and reflect the Group’s affinity with water-related engineering works. The elliptical lines represent the reach of HSL’s operations across the state of Sarawak as well as our integrated, all-encompassing construction services from initial reclamation or site preparation works, through civil works to the final infrastructure or building construction.
The photograph shows a crawler crane driving sheet piling with a vibro-hammer. This deep shaft construction scene is repeated across Kuching for Package 1 of the Centralised Waste Water Management System for Kuching, HSL’s largest ongoing project. The shafts are used to commission and retrieve Tunnel Boring Machines which allow the “trenchless” laying of sewage pipes with minimal surface disruption.
www.hsl.com.my
Contents Performance Highlights 2009 1
Financial Highlights 2
Vision, Mission & Strategy 4
Corporate Information 5
From The Chairman 6
From The Managing Director 8
Corporate Social Responsibility 11
Directors’ Profiles 12
HSL Happenings 14
Statement on Corporate Governance 15
Audit Committee Report 19
Statement on Internal Control 22
Financial Statements 23
Top 10 Properties 56
Other Information 57
Shareholding Analysis 58
Notice of AGM 60
Proxy Form 63
Performance Highlights for 2009
Revenue at a record high of RM375.0 million - up 21%
Earnings at a record high of RM75.6 million - up 34%
Earnings per share up 36%
Total dividend for 2009 to be 12%
Return on Equity 21%
HOCK SENG LEE GROUP
The case to invest:
Why we’re building your future today• Consistentlystrongfinancialresults
• Impressiveearningshistorywithgrowtheachofthelast10years
• Superiormargins(onPBT)averaging19%overthelastfiveyears
• Healthybalancesheetwithzerogearingandsubstantialcashreserves
• Strongtrackrecordofprojectdeliveryoverthirtyyears
• SizeableorderbookofRM1.8billionwithRM1.1billionoutstanding
• BeneficiaryofacceleratedinfrastructuredevelopmentinSarawak(eg.SCORE)
• Nichemarketplayerspecializinginmarineengineering
• ConsistentlyawardedforShareholderValue
2009 2008 2007 2006 2005 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue 375,021 309,069 248,168 260,555 290,347 Profit ProfitBeforeTax 75,569 56,458 53,173 48,173 44,788 ProfitAfterTax 56,323 41,839 38,940 33,481 32,197 Earnings Per Share (sen) 10.25 7.56 6.99 5.93 5.63 Return on Equity (%) 21.1% 18.2% 19.0% 18.1% 19.2% Property, Plant and Equipment 70,111 48,289 34,917 33,035 35,736 Other Non-current Assets 67,741 73,199 72,637 64,021 18,758 Net Current Assets 164,676 127,684 115,403 102,538 129,061 302,528 249,172 222,957 199,594 183,555 Financed by Share Capital 116,535 116,535 116,535 116,535 116,535 Capital Redemption Reserve 2,165 2,165 2,165 2,165 2,165 Treasury Shares (20,706 (20,296 (17,107 (14,276 (9,054 Retained Earnings 193,967 144,237 115,501 88,743 66,646 Minority Interest 199 - - - - Non-current Liabilities 10,368 6,531 5,863 6,427 7,263 302,528 249,172 222,957 199,594 183,555 Net Assets per share RM0.53 RM0.44 RM0.39 RM0.35 RM0.31
a adjustedtoreflectthesubdivisionofshareson21January2008 b restatedtoreflecttheadoptionofFRS117Leases
a
b b
b
aa a
b
a a
Financial Highlights
176,292
193,167
217,094
242,641
292,160
290,347
260,555
248,168
309,069
375,021
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
Net assets(RM’000)
Revenue(RM’000)
44,788
48,173
53,173
56,458
75,569
32,197
33,481
38,940
41,839
56,323
Profit before tax(RM’000)
Profit after tax(RM’000)
) ) ) ) )
Gross Dividend2005 2006 2007 2008 2009
18
16
14
12
10
8
6
4
2
0
7%
13%
%
14%
16%
11%12%
7%
8%
3%
5%
2%
6% 7%8% 8%
5%Interim
Special
Final
Equity and Liabilities 2009
Cashandbankbalances,16.0%
Trade and other receivables, 47.5% Inventories, 2.3%
Property development costs, 5.3%
Prepaid lease payments, 0.2%
Property, plant and equipment, 14.7%
Land held for property development, 14.0%Total:
RM477,755,569
Assets 2009
Current tax liabilities, 1.0%
Share capital, 24.4%
Reserves, 36.7%
Total:RM477,755,569
Minority interests, 0.0%
Deferred tax liabilities, 2.2%Trade and other payables, 35.7%
www.hsl.com.my
Our visionTo be a leading, integrated, professional construction company
contributing positively to the development of modern
environments in the region.
Our MissionTo deliver high quality marine engineering, civil engineering,
constructionandpropertydevelopmentprojectsontimeandon
budget to our client’s total satisfaction.
Our StrategyTo maintain a high performance organisation with dedicated,
competentstaffwhoworktogethertoprovidedependableproject
delivery and superior business results.
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HOCK SENG LEE BERHAD045556-X
Corporate Information
HOCK SENG LEE BERHAD is a marine engineering, civil engineering and construction company based in Sarawak,Malaysia. It undertakes dredging, land reclamation and earthworks, road and bridge construction,coastalprotectionworks,drainage,waterreticulationandspecialisedtunnellingaswellasotherinfrastructureandbuildingworks.
Its wholly owned subsidiary Hock Seng Lee Construction Sendirian Berhad is involved in property development and building construction.
LEGAL FORM AND DOMICILEPublic Limited Liability Company, Incorporated and domiciled in Malaysia
BOARD OF DIRECTORSYBSenatorDato’IdrisBinBuang(Chairman, Independent, Non-executive Director)Dato Yu Chee Hoe (Managing Director) Yii Chi Hau (Executive Director)Yu Chee Lieng (Executive Director)Lau Kiing Kang (Executive Director)Yii Chee Sing (Executive Director)Lau Kiing Yiing (Non-executive Director)Dato’Mohd.NadzirBinMahmud(Non-executive Director)Dr Chou Chii Ming (Independent, Non-executive Director)TuanHjAbangKashimBinAbangMorshidi(Independent, Non-executive Director)
COMPANY SECRETARIESYuCheeHung(MIANo.3926)AugustineLawSekHian(MIANo.10087)
REGISTERED OFFICELot1004JalanKwongLeeBank93450Kuching,Sarawak,MalaysiaTel: 6-082-332755Fax: 6-082-484653Email: [email protected]: www.hsl.com.my
AUDITORSKPMG
REGISTRARTricorInvestorServicesSdnBhd(118401-V)Level 17, The Gardens North TowerMidValleyCity,LingkaranSyedPutra59200 Kuala Lumpur
PRINCIPAL BANKERSAmBankBerhadHSBCBankMalaysiaBerhadMalayanBankingBerhadRHBBankBerhadPublicBankBerhad
LEGAL ADvISORSAlvin Chong and PartnersTang & Partners
LISTINGBursaMalaysia(MainBoard,ConstructionCounter) on 10 June 1996StockCode:6238StockName:HSLBloombergTicker:HSLMKShare Capital: 582.7m ordinary shares of RM0.20 each
From the Chairman
OnbehalfoftheBoardofDirectorsofHOCK SENG LEE BERHAD (HSL), I am pleased to present ourAnnual Report and the Audited Financial Statements for the year ended 31 December 2009.
Itakeparticularprideintheresultsfortheyearunderreviewas we have again proven our ability to manage a record number of orders and maintain consistently strong earnings growth. This is a remarkable achievement considering theuncertainties resulting from the economic downturn. Indeed, as our financial results show, we have emerged against the odds to perform better than ever.
Financial ResultsAnalystsdampened theirenthusiasm forconstructionstocksduringtheyear,withtheindustryseenasthemostlikelytobeaffected by the flow-on effects of the global financial crisis. However, HSL has shown resilience by going against the trend and surpassing expectations during 2009.
As with our previous reports, HSL Group is able to report commendablegrowth.Largerprojectsinourfieldsofexpertiseandenhancedefficiencyinprojectdelivery,costcontrolsandtechnical prowess have all contributed to impressive results. Revenue for the Group for the year ended 31 December 2009 stoodatRM375.02millionup21%fromRM309.07millionfor the 2008 financial year. Net profit before tax for HSL Group also reached an all-time high of RM75.57 million, a significant 34%increasefrom2008’sfigureofRM56.46million.
DividendFortheyear2009,theBoardhasrecommendedafinalordinarydividendof5%lesstaxat25%plusaspecialdividend,inlightoftheexcellentresults,of2%lesstaxat25%.Addedtothegrossinterimdividendof5%persharepaidinOctober2009,thetotaldividendfor2009willbe12%.Thefinaldividendshall be payable on 15 June 2010 pending approval at the Annual General Meeting on 25 May 2010.
HSL’s dividend policy retains its focus on maximising returns to shareholderswhileensuringsufficientcashreservesforprojectstart-up phases and the purchase of plant and equipment.
The Group made several planned purchases of specialised equipment during the year primarily in relation to its centralisedsewageprojectinKuching.WeacquiredadvancedTunnelBoringMachines(TBMs)toenabletheinstallationofan underground sewage pipe system for the city.
In August 2009, HSL was once again recognised in the Construction and Property Group category at the KPMG/ The Edge Shareholder Value Creation Awards – making it fivestraight years it has received this prestigious accolade.
Corporate GovernanceThe Malaysian Code of Corporate Governance forms an essential foundation for our management processes. The way we do business is as important as what business is done. HSL Board is resolute in ensuring full transparency in decisionmakingandisawarethatthehigheststandardsofcorporategovernance are necessary for a sustainable business.
The Audit Committee, Management Committee, Remuneration Committee and Nomination Committee remain the active sub-committeeswhichadvisethefullBoardintheirspecificareasandensureBoardresponsibilitiesareeffectivelymet.
Thevast andvariedexperienceofBoardmembersbringsabreadthofknowledgeandexpertisetothetaskofapprovingHSL’sAnnualBusinessPlanandmonitoringitonaquarterlybasis. We are acutely aware of safeguarding Group assets throughvigilantriskmanagement,stringentinternalcontrolsandconscientiousmonitoringofmarket indicators, industryclimate and financial management issues.
Our team of ten Board members includes five executivedirectors and five non-executive directors, three of whom are independent directors. Mindful of the benefits of good corporategovernance,thebalanceofpoweroftheBoardis
Hydraulic cutter suction dredger Steelarchbridge,Mukah Portconstruction,TanjungManis
We ’ r e b u i l d i n g y o u r f u t u r e t o d a y
enhanced through the separation of the role of the Chairman and the Managing Director.
AGM / Investor relationsOur Annual General Meeting provides an opportunity for engagement with our valued stakeholders, while in thisAnnual Report we examine the Group’s performance for the year under review as well as our prospects going forward.
At the Annual General Meeting held on 19 May 2009, shareholders supported a renewal of the proposed share buy-back of up to ten percent of the issued and paid-up sharecapital. They also approved the proposed recurrent related party transactions of a revenue or trading nature.
Of late, HSL has garnered considerable attention from fund managers and research analysts who view the Group as a proxyfortheintensiveinfrastructuredevelopmenttakingplaceinSarawak.Ourrecordordersandimpressivefinancialshavefurther attracted the interest of the investment community.
Numerous investor and analyst briefings were held during the yearand“Buy”callshavebeenthedominantoutcomeasHSLisrecognisedforitsexcellenttrackrecord,stronggrowthandniche in marine engineering.
AppreciationIt is testimony to the acuity of our visionary national and state leadership that Malaysia has weathered the world-wide economic slowdownwith such resilience. Sarawak is on aclear path of sustained and sustainable development. We are honoured to be able to contribute to the government’s goal to bring a higher standard of living to the rakyat.
Our success relies on the interaction between a myriad of support players forwhose assistancewe aremost thankful.These include our loyal specialist suppliers, skilled sub-contractors,professionalconsultantsandassociates,bankersand advisors. We also appreciate the valuable guidance and service we receive from the various government departments, councils and agencies; all of which deserve our deepest gratitude.
Ultimately, responsibility for the rise and fall of any company lieswithitsBoardandImustthusacknowledgemyfellowBoardmembers who have together steered HSL on an impressive upward and onward journey. Our leading position in theindustry has been hard won through the business acumen, strongwork ethic and hands-on approach of the executive
directors. I admire and commend the strong management team of HSL and congratulate them on an outstanding year.
Finally,toourloyalshareholdersmayIexpresssincerethanksfor your confidence in us and ongoing support. We are honoured to have you share in our success.
ProspectsInfrastructure development in East Malaysia is a priority of nation building. The Economic Report released in Kuala Lumpur in October 2009 said the people, particularly those in the rural and interior areas of East Malaysia, would have better access to clean water, electricity, education and health facilities in linewith theNational Key Result Area (NKRA)targets.
The ambitious targets include clean water supply for 90 per cent and electricity coverage for 95 per cent of Sabah and Sarawakby2012,whileinfrastructureintheruralareaswouldbe improved with the construction of 2,250 kilometres ofroads in the two states.
In the Sarawak Corridor of Renewable Energy (SCORE), asum of RM1.5 billionwas allocated for projects, includingconstructionofaccessroadstotheMurumandBaramdamsin Kapit and Miri respectively. Added to the substantial federal governmentstimuluspackagesflowingdowntoSarawak,andweforeseeapathofprogressforruralSarawakwhichisverymuch in keepingwith the people-oriented approachof the1Malaysia policy.
HSLGrouphasalongandillustriouslogbookofcompletedprojectsinitscorefieldsofmarineengineering,civilengineeringand construction. Unsurpassed marine equipment and heavy machineryresources,technicalprowessandfinancialbackingall stand HSL in good stead to be competitive in infrastructure project bids and there is every indication there are manyopportunitiestocome.Dostaywithusandenjoyourongoinggrowth.
YB Senator Dato’ Hj Idris BuangChairman
“ We have again proven our ability to manage a record number of orders and maintain consistently strong earnings growth.”
TunnelBoringMachineloweredintoashaft Roadconstruction,LubokAntu ‘The Leaf‘ show home
From the Managing Director
OnbehalfoftheBoardofDirectors,itismypleasuretoreviewHSLGroupoperationsfortheyearjustpastand offer insights into the direction the Group will takeasweforgeaheadin2010andbeyond.
Withseverallargeprojectsonhand,2009hasbeenanotheryear of record revenue and earnings for the Group. Our remarkableprogress is foundedon the sound fundamentalsof specialisation in a niche market, efficient projectimplementation and prudent financial control.
We completed eight projects worth some RM200 millionduring2009.AmongthesewereroadworksinTelagaAirandPaloh,floodmitigationworksinMiri,awastewatertreatmentplant in Tanjung Manis, earthworks in Kuching and theinfrastructureandbuildingworksforAlamSanctuary,astaffhousingprojectforagovernmentagency.
Wehavecontinuedtoreplenishourlargeorderbookduring2009 with 10 additional projects coming in worth someRM350 million. Notable new projects are flood mitigationworks in Sibu and an affordablehousingproject inBintuluwith roadworks and earthworks among the other projectssecured.
ThevalueofourprojectsinhandnowstandsatRM1.8billionof which RM1.1 billion is outstanding.
Keeping us well-occupied are a number of other ongoing projectsincludinglargereclamationandinfrastructureworkscontracts for industrial estates; roadworks, buildingprojectsandourownpropertydevelopmentprojects.
FeaturedinourcurrentorderbookisPackage1ofKuching’scentralisedwastewatermanagementproject.Constructionforthe sewage treatment plant at a site near to the Tun Salahuddin toll-bridge is well underway and the setting out of the first piping routes has been completed. Kuching’s inner city is now dotted with shafts that will accommodate the lowering and retrievalof the laser-guidedTunnelBoringMachines.Usingan advanced trenchless pipe-laying technology means these giant computer-directed drills bore underground to create a tunnel for the new sewer pipes without disturbing the surface above.
Property DevelopmentIn 2009Hock Seng LeeConstruction SdnBhd (HSLC), ourwholly-ownedsubsidiaryandpropertyarm,tookitsfirststepintothehigh-endhousingmarketwiththeNovemberlaunchof a boutique guarded and gated development called the Leaf. While established as a developer of quality, affordable homes, we are now venturing into specialised upscale dwellings that offer something extra – in this case, lush landscaping, aninnovative park and comprehensive security including thefirstelectricperimeterfencinginSarawak.
Our landbank standsat some600acreswithanestimatedGDV of RM1.7 billion. Among the larger plots acquired is the vast site off the new Kuching-Samarahan Expressway for HSL’s La Promenade, an integrated mixed development which includes a high-end guarded and gated community of some 1000 homes, 200 shops lots, offices and a mall at a prime site. The first show homes for the development are now being planned.
AsidefromLaPromenade,newphasesofHighfieldsatBatuKawaandEdenParkat11thmileKuching-SerianRoadarealso expected to launch during 2010.
HSL’spopularSamariangAman(642units)andthelaunchedphases of Lavender Hills (64 units) estates are nearinghandover, while Vista Parade in Sibu is almost sold-out and the 68-unit Vista Aman at Samarahan is selling well following a show home launch in January 2010.
TanjungManisDeepseaFishingPort Waste water treatment plantInfrastructureworks.ShipBuildingIndustrialZone,TanjungManis Affordable housing, Kuching
Corporate Social Responsibility (CSR)Our CSR programme has expanded and made further inroads into becoming an integrated part of the way we do business. In the confines of this statement it is hard to cover all the aspects of our programme, but a perusal of our pictorial CSR pagemaybringthesubjecttolife.
It is most gratifying to witness the centralised wastewater management system for Kuching being implemented as pollutionofthemagnificentSarawakRiverthatrunsthroughthe city’s golden triangle and the abysmal state of some other urban waterways serve to remind us all of the urgency of theseworksforthefuturepreservationoftheenvironmentandhealth of the city.
Similarly, our shore protection works, revetment walls,maintenance dredging, flood mitigation, drainage and water managementprojectsallhaveacentralobjectiveofenhancingor preserving the environment.
We also remain committed to our tree rescue and re-planting system and the year in review has seen several more mature raintrees saved from roadwork sites and successfully re-located to our residential estates.
Ourannual‘GreenWeek’eventwasagainheldinNovemberwith collected items expanded to include a large range of household items, newspapers and old clothes for recycling. These were donated to a local charity. We continue to enforce stringent procedures for paper and plastic recycling in the office to maximise the use of the mini council recycling centre we established at our headquarters.
HSL’s traditional Chinese New Year donation programme saw grants to 14 local charitable organisations, while throughout the year we also supported numerous community, sporting and cultural events in Sarawak. Notable among these wasourparticipationintheSarawakHeartFoundation’sWalk-a-Mile event on 4 October 2009 which saw HSL’s Executive Directors and a large contingent of staffwalk to help raiseawareness of heart disease as well as encourage a healthier, more active lifestyle for office-based personnel.
ISO CertificationFollowing the achievement of ISO Certification 9001:2000 underLloydsRegisterQualityAssurance(UK)andStandardsMalaysia in December 2008, we went on to achieve ISO Certification 9001:2008 in June 2009. Inculcating a work
culture whereby every individual strives for excellence within a systematic framework of procedures requires an alertnessand persistence on behalf of the management. Our progress in this regard is commendable and ongoing, and over time will be reflected in our further enhanced efficiency and control in projectadministration.
Information technology (IT)Accurateandspeedycommunicationiskeytoeverysuccessfulorganisation. With the rapid growth of the HSL Group and the dispersalofouroperationsacrossSarawak state,expeditingcommunications between the site and management is needed. This year, we have moved beyond email and intranet to introduce a new web-based Information Management System that stores, disseminates and solicits comments/ hosts forums.
In 2009 we also redesigned our website for a cleaner, more userfriendlylookandarecurrentlyintheprocessofexpandingit as a more comprehensive resource for investors. It already serves at a popular destination for property customers and for accessing our latest news, announcements and reports.
StaffingWith our orders continuing to rise, we have recruited additional staff, notably engineers. As at 31 December 2009, HSL Group had a total of 684 permanent staff members of whom some 167 are office-based and the remainder is site-based.
Management is ever-mindful that the advancement of the Group depends on the inherent talents and performance of the staff. We have an unwaveringly capable and devoted team of managers who are charged with motivating their teams and do so admirably. HSL Annual Dinner for 2009 saw 19 recipients of the award for ten years long service and three for twenty years long service. Staff member’s children who excelled in government examinations were also given incentive awards on this occasion.
With a quarterly newsletter, annual dinner, continually improving communications technology and other activities forthestaffwestrivetofosteracaring,family-likeatmospherethat nurtures career development and balances our high expectations for productivity with respect and understanding for each individual.
“ ... 2009 has been another year of record revenue and earnings for the Group.”
Floating and submerged dredger pipeline ‘The Leaf’residents’park ‘Vista Aman’ show home
Looking aheadThe cautionary tone of my message last year was rooted in the advent of global economic conditions and the challenges we faced in dealing with material and fuel price fluctuations, tightening liquidity and concerns on public sector spending priorities. I am proud that we have been able to manage these circumstances so successfully.
Wenowlookaheadwithconsiderableoptimism.ThechurnthroughrateonourlargeorderbookiscontinualandcontractsareflowingfromthegovernmentstimuluspackagesandfromSCORE (SarawakCorridor forRenewableEnergy) initiatives.Our leadersaresettingadeterminedpace tobringSarawakinto line with the socio-economic and industrialisation levels enjoyedinmuchoftherestofthecountry.AsidefromSCOREandtheseriesofeconomicstimuluspackages,theupcomingTenth Malaysia Plan is also expected to generate a new era of state-wide development.
To bring electricity and treated water to rural areas, to providelinkagestothehydro-damprojectsbothplannedandunderway and to open up the remote interiors with new access roads – all these plans will generate infrastructure projectsthatarepotentialprojectsforHSL.AsumofRM4billionhasbeen allocated for rural road construction in Sarawak andSabah. Airports are set to be upgraded and a Halal Food HubhasbeenlaunchedinTanjungManis,alocationwherewe are already mobilised for reclamation and civil works.Again, these engender more opportunities for HSL. Similarly, having established our expertise in waste water technology implementation and invested in the specialist tunnelling machinery required, we are well-positioned to be highly competitiveforfuturesewageworkspackages.
It is important to emphasise that HSL is not a typical construction counter player. Our forte in marine engineering and infrastructure works positions us in a niche marketscenario. Reclamation, earthworks, piping, roads, bridgesand the many other forms of construction requiring geo-technical or water-related engineering expertise are strongly indemandinSarawakandyetlocalskillsinthesefieldsarerare commodities. For this reason and in view of our technical expertiseandtrackrecord,weforeseeHSL’sgrowthstorytobe an ongoing one into 2010 and beyond.
We’re building your future today.
Dato Paul Yu Chee Hoe Managing Director
|1| ‘The Leaf’ show home |2| Sewerage Inlet Pumping Station|3|Massreclamationworks,Kuching |4| Hydraulic cutter suction dredger
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“Our forte in marine engineering and infrastructure works positions us in a niche market scenario.”
Corporate Social Responsibility
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LongserviceawardrecipientsposewithBoardmembers
SarawakHeartFoundationevent
“Greenweek”,HSL’scyclingandcharity collection drive
Supporting the local council’s Chinese New Year Open House
Community event, HSL’s Samariang Aman residential estate
Implementation of a centralised sewage system for Kuching will alleviate serious river pollution
in the city
Directors’ Profiles
1. YB Senator Dato’ Haji Idris Bin Buang, aged 55, Malaysian, appointed 23 March 1996
YB Senator Dato’ Haji Idris is the Group Chairman and anindependent, Non-executive Director. A practising advocate andsolicitor,heholdsaLLB(Hons),UniversityofBuckingham,United Kingdom (1982) and was admitted as Barrister of theLincoln’s Inn and as Advocate and Solicitor to the High Court of Sabah and Sarawak in 1983. YB Senator Dato’ Haji Idrisis a Senator of the Dewan Negara appointed by the SarawakState Legislative Assembly. The proprietor of Idris-Buang andAssociates,alegal firminKuching,YBSenatorDato’Haji Idrisisalsoanindependentnon-executivedirectorofSarawakEnergyBerhad,acompanylistedontheMainMarketofBursaMalaysia.HebringstotheBoardextensiveexperienceonBoardprocedures,corporate governance regulations and legal perspectives. He is also a director of several private limited companies.
YB Senator Dato’ Haji Idris is the Chairman of the AuditCommittee and the Remuneration Committee. He attended all fiveBoardmeetingsheldduring2009.Hehasnoconvictionsforoffences within the past 10 years.
2. Dato Yu Chee Hoe, aged 55, Malaysian, appointed 17 December 1978 Dato Yu has been the Managing Director since 1980 and is the
driving force of HSL. He leads the Company in strategic planning and business development; has a respected profile in the industry andkeenbusinessacumen.Hepossessesanin-depthknowledgeof the construction and engineering fields with extensive experienceincivilandinfrastructureworks.Heisalsoadirectorof several private limited companies.
Dato Yu is Chairman of the Management Committee and Member of the Remuneration Committee. He attended all five Boardmeetings held during 2009. He has no convictions for offences within the past 10 years.
3. Yii Chi Hau, aged 60, Malaysian, appointed 10 January 1980
Mr Yii is an Executive Director and a co-founder of the Company. Mr Yii oversees the dredging operations and maintenance of the marine fleet. Qualified as an engine driver, he has over thirty years experience in construction, heavy machinery mechanics and shipbuilding and maintenance. He is also a director of several private limited companies.
Mr Yii is a Member of the Management Committee and attended allfiveBoardmeetingsheldduring2009.Hehasnoconvictionsfor offences within the past 10 years.
4. Yu Chee Lieng, age 57, Malaysian, appointed 10 January 1980
Mr Yu is an Executive Director and co-founder of the Company. He is involved in strategic planning, co-ordinates and monitors all site operations including machinery and labour deployment, logistics and quality control. Qualified as a Coastal Shipping Master, he has vast experience in the construction industry from heavy machinery operation to heavy machinery mechanics and marine engineering. He is also a director of several private limited companies.
Mr Yu is a Member of the Management Committee and attended all five of the Board meetings held during 2009. He has noconvictions for offences within the past 10 years.
5. Lau Kiing Kang, aged 45, Malaysian, appointed 27 April 1998
Mr Lau is an Executive Director. He holds a Bachelor ofEngineering (Civil), University of New South Wales, Australia(1987) and is the Director of projects with responsibility fortechnicalexcellence. MrLauco-ordinatesprofessionalprojectstaff, project management and execution. He has particularexperience in road and infrastructure projects. Mr Lau hasbeentheChairmanoftheSarawakQuarryAssociationsinceitsinauguration in 2002. He is also a director of several private limited companies.
Mr Lau is a Member of the Management Committee and he attendedfourofthefiveBoardmeetingsheldduring2009.Hehas no convictions for offences within the past 10 years.
6. Yii Chee Sing, aged 41, Malaysian, appointed 2 January 1993
MrYiiisanExecutiveDirector.HeholdsaBachelorofBuilding,UniversityofNewSouthWales,Australia(1993)andisamemberof theAustralian InstituteofQuantitySurveyors (1994). MrYiiisinvolvedinprojectprocurement,projectviabilitystudiesandproperty development projects of HSL Group as well as theelectronic office environment. He is also a director of several private limited companies.
Mr Yii is a Member of the Management Committee and he attendedfourofthefiveBoardmeetingsheldduring2009.Hehas no convictions for offences within the past 10 years.
7. Lau Kiing Yiing, aged 54, Malaysian, appointed 23 March 1996
Mr Lau is a Non-executive Director. He holds a Bachelor ofCommerce,UniversityofCanterbury,NewZealand (1980)andhas been a Chartered Accountant of the Institute of Chartered Accountants of New Zealand since 1985 as well as a Chartered Accountant with the Malaysian Institute of Accountants since 1987. He is a fellow member of the Malaysian Institute of
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Taxation and is a partner in the accounting firm Hii and Lee. Mr Lau is well-versed in corporate reporting, auditing, taxation and statutory matters. He contributes his in-depth corporate accounting knowledge to the Board. He is also a director ofseveral private limited companies.
Mr Lau is a Member of the Audit Committee and Nomination Committee. He attended four of the five Boardmeetings heldduring 2009. He has no convictions for offences within the past 10 years.
8. Dato’ Mohd. Nadzir Bin Mahmud, aged 68, Malaysian, appointed 20 November 2000
Dato’Mohd.NadzirBinMahmudisaNon-executiveDirector.ABarrister-at-LawfromInnerTemple,London;hewascalledtotheEnglishBarin1973andadmittedandenrolledasanAdvocateand Solicitor to theHighCourtMalaya in 1974.Dato’Nadzircompletedhispost-graduatestudiesinBusinessAdministrationatHarvardUniversityGraduateSchoolofBusinessAdministrationUSA (1981). He had previously served in various seniormanagement positions as Executive Director in both local and international companies. As well as offering legal perspectives, Dato’ Nadzir is a highly experienced corporate director,familiar with corporate governance regulations, audit and riskmanagement assessment and company secretarial matters.
Dato’ Mohd. Nadzir Bin Mahmud is a Member of theRemunerationCommitteeandattendedall fiveBoardmeetingsheld during 2009. He has no convictions for offences within the past 10 years.
9. Dr Chou Chii Ming, aged 71, Malaysian, appointed 29 November 2001
Dr Chou is an independent, Non-executive Director. He holds aDoctorof Letters from the Irish InternationalUniversity (EU),CertifiedDoctorofBusinessAdministration(CDBA)oftheOxfordAssociation of Management United Kingdom, is an associate member of the Association of International Accountants, London and a Fellow of the Institute of Professional Financial Managers, London. He began his public service career in the field of education in 1958, then with Kuching Port Authority from 1966, rising to the post ofGeneralManager (1994-1999). Currentlyhe is active in communitywork holding numerous prestigiousposts.Healsobrings to theBoardhisextensivebackground inmanagement, administration, accounting and company image issues. As a community leader, he is in touch with local issues and keepsabreastofrelevantgovernmentpoliciesandprocedures.
Dr Chou is the Chairman of the Nomination Committee and a MemberoftheAuditCommittee.TheBoardhasnominatedhimas the Senior Independent Non-executive Director to whom concernsmaybeconveyed.DrChouattendedallthefiveBoardmeetings during 2009. He has no convictions for offences within the past 10 years.
10. Tuan Hj Abang Kashim Bin Abang Morshidi, aged 61, Malaysian, appointed 3 January 2008
TuanHjAbangKashimBinAbangMorshidiisaprofessionalforestergraduated from theUniversity ofAberdeenwith aBachelor ofScience in Forestry in 1972, and a Master of Philosophy in Natural Resources Management from Edinburgh University in 1979. He hasservedtheGovernmentofSarawakfor32yearsindifferentcapacities namely Deputy Director –Department of Forestry,General Manager – Sarawak Timber Industry DevelopmentCorporation,PermanentSecretary–MinistryofTourismandtheChiefExecutiveOfficer–SarawakTourismBoard.Heattendedthe Senior Fellows Management Course at John F. Kennedy School of Government, Harvard University in 1995. He is also a member of the Malaysian Institute of Management and Institute of RimbawanMalaysia.TuanHjAbangKashimbringstotheBoardextensive understanding of public sector administration and management, as well as policies and procedures. His professional qualifications allow him to contribute on environmental issues and he is also well-versed on corporate governance regulations.
TuanHjAbangKashimBinAbangMorshidiisaMemberoftheAudit Committee and Nomination Committee and attended all fiveBoardmeetingsheldduring2009.Hehasnoconvictionsforoffences within the past 10 years.
Family relationshipDato Yu Chee Hoe, Mr Yii Chi Hau, Mr Yu Chee Lieng and Mr Yii Chee Sing are brothers. Mr Lau Kiing Yiing and Mr Lau Kiing Kang, who are brothers, are their brothers-in-law. Yii Chi Hau, Yu Chee Lieng, Dato Yu Chee Hoe and Yii Chee Sing are substantial shareholders of HSLbyvirtueoftheirsubstantialinterestinHockSengLeeEnterpriseSdnBhd.
Other than the above, none of the other directors have any family relationship with any of the directors and/or substantial shareholders of the Company.
Conflict of interestDato Yu Chee Hoe, Yii Chi Hau, Yu Chee Lieng, Lau Kiing Kang, Yii Chee Sing and Lau Kiing Yiing, each have interests in certain private companies which are involved in property development and construction, but these are not in direct conflict with the business of HSL.YBSenatorDato’IdrisBuang,Dato’MohdNadzirMahmud,DrChouChiiMingandTuanHjAbangKashimBinAbangMorshidihaveno conflict of interest with HSL.
Except for recurrent related party transactions of a revenue nature which are necessary for day to day operations of the HSL Group and for which Dato Yu Chee Hoe, Yii Chi Hau, Yu Chee Lieng, Lau Kiing Kang, Yii Chee Sing and Lau Kiing Yiing are deemed to have interests as disclosed on pages 57 of the Annual Report, there are no other business arrangements with the Group in which the directors have interests.
6 7 8 9 10
HSL Annual Dinner featured “The Colours of HSL”theme
Career Expo
HSL’s boutique guarded & gated development, The Leaf, received accolades & featured at various property exhibitions
Happenings 2009
2009
Sarawak’sChiefMinisterattendedbriefingsandofficiatedatthelaunchoftheKuchingWasteWaterManagementSystemproject
HSL has been awarded for shareholder value for the past five consecutive years in the Edge/KPMG Shareholder Value Awards, in the construction and property sector
Statement on Corporate Governance
TheBoardofDirectors(“theBoard”)ofHockSengLeeBerhad(“HSL”)isfirmlycommittedtogoodcorporategovernanceandrecognises that accountability and transparency at every level of the organisation is essential in safeguarding assets, enhancing shareholder value and maintaining strong financial performance.
This statement outlines the manner in which HSL Group has applied the principals of the Malaysian Code on Corporate Governance(“theCode”)andtheextentofcompliancewiththeBestPracticesinCorporateGovernanceoftheCode.
BOARD OF DIRECTORS
Principal Responsibilities: The Board assumes full responsibility for the success of the Group by taking stewardshipresponsibilities to lead the Group, focusing on strategic plan, overall management and business performance, management of principalrisksandcontrols,thesuccessionplan,investorrelationsandcorporatecommunications.
•Strategic Plan:TheBoardestablishes thevision for theGroupandsetsoverall strategiesandobjectives. It reviewsandapproves the annual business plan which covers the scope of business activities; government initiatives and policies; industry overviewandpotentialopportunities; riskmanagement;businessmodeland revenuegenerators;humanresourcesplan;capital expenditure; finance plan; critical success factors; profit estimates and targets for the year. TheBoard evaluatesbusiness performance and target achievement quarterly.
•Overall Management:Tofacilitateeffectivemanagement,certainfunctionshavebeendelegatedtovariousBoardCommittees
in accordance with their respective terms of reference, namely the Management Committee, the Audit Committee, the RemunerationCommitteeandtheNominationCommittee.TheminutesoftheBoardCommitteemeetingsarepresentedtotheBoardforinformationandthechairmanoftherelevantBoardCommitteeswillreportonthekeyissuesdeliberatedanddecidedateachBoardmeeting.ThekeymattersreservedspecificallyforthedecisionoftheBoardincludetheapprovalofthe business plans and annual estimates and target, substantial transactions that are not of a revenue nature in the ordinary courseofbusiness,expenditureandcontractsaboveacertainlimit,majorinvestmentandfinancialdecisionsincludingkeypoliciesandproceduresandchartofauthoritylimitfortransactions,allbankingfacilitiesandchequesignatories,quarterlyreports and the annual financial statement. The chart of authority limit is reviewed when required.
The Managing Director, Dato Yu Chee Hoe is the chairman of the Management Committee which comprises all Executive Directors. The Management Committee is primarily responsible for developing the Group’s strategy and business plan including annual estimates for the approval of the Board; overseeing the implementation of the approved strategy andbusinessplan;developingariskmanagementframeworkandundertakinganongoingprocessforidentifying,reviewingandmanagingthesignificantfinancialrisksfacedbytheGroup;andmanagingtheoperationalactivitiesandroutinebusinessmatters and entering into transactions up to an approved limit.
Eachquarter,DatoYuCheeHoe,aschairmanoftheManagementCommittee,providestheAuditCommitteeandtheBoardwith the quarterly reports and financial statements as well as the financial performance evaluation for review and approval.
•Risks Management and Internal Control System: TheManagingDirector,withthesupportoftheriskmanagerswhoarevariousdepartmentheads,reviewstherisksandexposuresandtheinternalcontrolsthatareinplacestomitigatesuchrisksatleastannually.Inthecurrenteconomicclimate,conscientiousmonitoringofmarketindicators,theindustryclimateandfinancialmanagementissuesisvital.FurtherdetailsonrisksmanagementaresetoutintheStatementofInternalControlonpage 22 of this Annual Report.
•Succession Planning and Human Resources Management: The Nomination Committee comprises three Non-executive Directors of whom two are independent. It is lead by Dr Chou Chii Ming. The Nomination Committee is responsible, among others,forrecommendingnewdirectornomineestotheBoardandBoardCommitteesandforassessingtheperformanceof thedirectorsonanon-goingbasis.TheNominationCommittee reviews the requiredskillsandcorecompetenciesofNon-executiveDirectorsannually.AnynewnominationsreceivedwillbereviewedandputtotheBoard,whichmakesalldecisions on such appointments.
TheRemunerationCommitteecomprisesthreedirectorsofwhomtwoareNon-executiveDirectors.ItisleadbyYBSenatorDato’ Idris Bin Buang. TheRemunerationCommittee reviews the remuneration of theDirectors and advises the Boardaccordingly. Thedeterminationof the remunerationpackages of directors is approvedby the full Board and individualDirectors are required to abstain from deliberating and voting on their own remuneration. The fees for Non-executive DirectorsarerecommendedbytheBoardandapprovedbytheshareholdersoftheCompanyatitsAGM.
The Managing Director together with the Executive Directors ensures management of the highest standard in appointing, training,assessingandprovidingforsuccession.TheGroupmaintainsastrongorganizationstructurewithadynamicseniormanagement team. The Group values its employees and strives to foster a caring atmosphere that nurtures career development and balances high expectations for productivity with respect and understanding for each individual. The Group adopts a standard set of policies and procedures in human resources management. The responsibilities and duties of each individual and the reporting structure are clearly set out. Performance appraisals are carried out and form the basis for staff promotion, salaryadjustment,bonuspaymentandidentifyingtrainingneeds.
•Shareholder/Investor Relations and Corporate Communication: TheBoardplaces great importance in ensuring thehighest standards of transparency and accountability in the disclosure of information to shareholders, potential investors andthepublic.TheBoardendeavourstoprovideshareholdersandthepublicwithabalancedassessmentoftheGroup’sperformance, position and prospects on a quarterly basis via the quarterly reports and press releases and to provide timely andadequatedisclosureofinformationonmattersofmaterialimpacttothepublic.TheBoardvaluestheopportunitytoprovide an annual report to shareholders and to meet them annually.
The senior management of the Company frequently meets with investors, analysts and institutional shareholders to discuss theGroup’sstrategies,performance,generalmarketconditionsrelevanttothebusinessoftheGroupandnewdevelopmentsaswellasexplainingtheGroup’sbusinessandfinancialobjectives.TheGroupalsoparticipatedinroadshowsandinvestorconferences during the year.
TheBoardrecognizesthattheAGMprovidesanimportantopportunitytomeetshareholdersanditwelcomesshareholderstoaskquestionsandshareadialogueontheperformanceoftheGroup.In2009,allDirectorsattendedtheAGMandtheexternal auditors were invited to present their audit report.
The Group has a web-site where shareholders and the general public can access the latest corporate information of the Groupincludingannualreports,quarterlyreportsandothercorporateannouncementsmadetoBursaMalaysia.
Board Balance:TheBoardcurrentlyhastenmembers,fiveExecutiveDirectorsandfiveNon-executiveDirectorsofwhomthree ie. one-third, are Independent Directors. The profile of each Director is presented on pages 12 to 13.
TheChairman,YBSenatorDato’IdrisBuangwholeadstheBoard,isresponsiblefortheefficientfunctioningoftheBoard.TheManaging Director, Dato Yu Chee Hoe, holds the executive responsibilities for the Group’s business and manages the Group inaccordancewiththestrategiesandpoliciesapprovedbytheBoard.TheseparationoftheroleoftheChairmanandtheManaging Director ensures a balance of power and authority.
Dato Yu Chee Hoe, who has extensive experience in the construction industry and renowned business acumen, leads the Executive Directors in taking on the primary responsibility to manage the Group’s business and resources, making andimplementing operational business decisions. The Executive Directors are experienced and hands-on and have intimate knowledgeofthebusinessoftheGroup.
TheNon-executiveDirectorshave takenonvarious roles in theBoardCommitteesandcontribute significantly,especiallyin the enhancement of the corporate governance and controls of the Group. They are individuals of high calibre, sound reputationandstandingandbringindependentjudgmenttotheBoard’sdecisionmaking.Aswellasbeingwellqualifiedintheirrespectivefields,theybringextensivecorporateandprofessionalworkexperiencetotheBoard.Togetherwiththehands-on,in-depthindustryknowledgeandvastexperienceoftheexecutivedirectors,thereisavaluablecollaborationofexpertiseandexperience, iebusiness, technical, legaland financial.This rangeof inputsandviewsenables theBoard todeliberateonissuesfromvariedperspectivesandsohelpstoensurecarefullyconsidered,prudentdecision-makingatthehelmoftheGroup. The Board is proportionally represented in amanner that fairly reflects the investment in the Company. There are threeIndependentDirectorsandthentherearerepresentativesofthesignificantshareholder,HockSengLeeEnterpriseSdnBhd,whileDato’Mohd.NadzirMahmudrepresentstheothersubstantialshareholder,SkimAmanahSahamBumiputra.
TheBoardhasidentifiedDrChouChiiMingastheSeniorIndependentNon-executiveDirectortowhomanyconcernsrelatingto the Group may be conveyed.
The Nomination Committee reviews the performance of the directors annually and is of the view that the present board is effectiveandbalancedwithsufficientmembersandhavetherightmixofskillsandexperienceappropriateforinformedandefficientdecisionmaking.
Meetings:TheattendancedetailsofthedirectorsatBoardandBoardCommitteemeetingsareasfollows:
Boardof Management Audit Remuneration Nomination Directors Committee Committee Committee CommitteeNo. of meetings held 5 15 4 1 1
AttendanceatBoardandBoardCommitteeMeetings
Executive Directors Dato Yu Chee Hoe 5/5 15/15* n/a 1/1 n/aYu Chee Lieng 5/5 15/15 n/a n/a n/aYii Chi Hau 5/5 13/15 n/a n/a n/aLau Kiing Kang 4/5 15/15 n/a n/a n/aYii Chee Sing 4/5 15/15 n/a n/a n/a
Non-Executive Directors
Dato’Mohd.NadzirBinMahmud 5/5 n/a n/a 1/1 n/aLau Kiing Yiing 4/5 n/a 4/4 n/a 1/1
Independent Directors
YBSenatorDato’IdrisBinBuang 5/5* n/a 4/4* 1/1* n/aDr Chou Chii Ming 5/5 n/a 4/4 n/a 1/1*TuanHjAbgKashimBinAbgMorshidi 5/5 n/a 4/4 n/a 1/1
*chairmanoftherespectiveBoardandBoardcommittees
Supply of Information: The Directors have access to all information within the Group, whether in the capacity of a full Board,BoardCommitteeorintheirindividualcapacity,toenablethemtodischargetheirduties.Alldirectorsareprovidedwithtimelynoticeswithagendaandappropriateinformationpriortoeachmeeting.ThisincludesappropriateBoardpapersthatidentifyandfairlyaddresstheaffairsoftheGroupandthekeyissuesoftherespectivemeeting.MinutesondeliberationsandconclusionsonissuesbroughtuparetakenforallmeetingsoftheBoardanditscommitteesandtheyarecirculatedtoalldirectors.
TheBoardand itsBoardCommitteeshaveaccess to the seniormanagementand to theCompanySecretarieswhoattendallBoardandBoardCommitteemeetings.Thecompanysecretariesensure thatallBoardprocedures,applicablerulesandregulationsarecompliedwith.Whennecessary, theBoardobtains independentprofessionaladvice todischarge itsdutieseffectively.
Training and Development: All Directors have completed the mandatory accreditation programme and they are encouraged tokeepabreastoftrendsthroughgeneraleconomic,regulatory,industryandtechnicaldevelopmentseminars.
Duringtheyear,theDirectorshaveattendedvarioustrainingprogrammestoenhancetheirknowledgeandexpertiseandtheyare briefed by the management on their respective areas and updates on new regulations, changes in laws and accounting standards. Conferences, seminars and training programmes attended by the Directors are as follows:
Directors Conferences/Seminars/ Training Programme attended
YBSenatorDato’Haji - NewframeworkforlistingandequityfundraisingandkeyChangestotheListingRequirements IdrisBinBuang
DatoYuCheeHoe - NewframeworkforlistingandequityfundraisingandkeyChangestotheListingRequirements - KPMG ACI roundtable discussion
YuCheeLieng - NewframeworkforlistingandequityfundraisingandkeyChangestotheListingRequirements
YiiChiHau - CorporateGovernanceGuide:TowardsBoardroomExcellence
LauKiingKang - PWDDesign&Build(Revision)4User’sManual - NewframeworkforlistingandequityfundraisingandkeyChangestotheListingRequirements - Contract administration in a day - Doyouhavewhatittakestosurviveonthebattlefieldofconstructiondisputes? - Drillingfluids–savingtimeandmoneyforyourpipejackingjob
YiiCheeSing - DialoguesessiononTTSEBursaMalaysiaKLCI–SarawakRegion - CorporateGovernanceGuide:TowardsBoardroomExcellence
Lau Kiing Yiing - Understanding new public ruling & tax implication for rental income and IHC - Fundamental approach to accounting for financial institution - National tax conference - Implementingqualitycontrol–incorporatingISQC1&practicereviewfindings - 2010 budget seminar - New public rulings in 2009
DrChouChiiMing - NewframeworkforlistingandequityfundraisingandkeyChangestotheListingRequirements
Dato’ Mohd. Nadzir -Dato’NadzirhadattendedmanyconferencesapprovedbytheBursaMalaysiapriorto2009.BinMahmud Dato’Nadzirhadnotattendedanystructuredtrainingin2009butDato’haskepthimself updated in new developments in financial and legal issues through reading and research.
TuanHjAbangKashim -CorporateGovernanceGuide:TowardsBoardroomExcellenceBinAbangMorshidi
Re-election and Reappointment of Directors:Adirector(includingtheManagingDirector)appointedbytheBoardmustsubmit himself or herself for re-election at the next AGM following his or her appointment and at least every three years thereafter in accordance with the Company’s Articles of Association. At least one-third of the Directors are required to retire byrotationeachyear.Anydirectoroverseventy(70)yearsofageisrequiredtosubmithimselfforre-appointmentannuallyinaccordance with section 129 of the Company Act, 1965.
AttheforthcomingAGM,threedirectors,namelyMrYuCheeLieng,Dato’Mohd.NadzirBinMahmudandTuanHajiAbangKassimBinAbangMorshidiwillretirebyrotationandareseekingre-election.DrChouChiMingwillretirepursuanttosection129oftheCompanyAct1965andisseekingre-appointmenttotheBoard.
DIRECTORS’ REMUNERATION
The Level and Make up of Remuneration: TheremunerationpackageofeachindividualExecutiveDirectorisstructuredtoreflecthisorherexperience,performanceandscopeofresponsibilities.ThebonusesforExecutiveDirectorsarelinkedtotheirperformances, achievements on group financial targets and the net earnings growth of the Group. The Executive Directors are not paid any directors’ fees.
At the last AGM, the shareholders approved the payment of Directors’ fees of up to RM160,000.00 for the year 2009 and the fees were distributed to Non-Executive Directors at RM48,000 for the Chairman and RM28,000 for each of the other Non-executive Directors. Disclosure: The details of remuneration of the Directors for the financial year ended 31 December 2009 are as follows:-
Fees Salaries Bonuses Others Total Remuneration RM’000 RM’000 RM’000 RM’000 RM’000
Executive Directors - 2,191 1,095 690 3,976Non-executive Directors 160 - - - 160
Total 160 2,191 1,095 690 4,136
The number of Directors whose total remuneration falls within the following bands is as follows:-
Executive Directors Non-Executive Directors
BelowRM50,000 - 5RM450,001 to RM500,000 2 -RM750,001 to RM800,000 1 -RM900,001 to RM950,000 1 -RM1,300,001 to RM1,350,000 1 -
The Board has considered the disclosure of the details of the remuneration of eachDirector and is of the view that thetransparency and accountability aspects of corporate governance in relation to Directors’ remuneration are appropriately servedbytheabovedisclosureofanalysisbyapplicablebandsofRM50,000,adisclosurerequiredundertheMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhad.
ACCOUNTABILITY AND AUDIT
Financial Reporting: Inpresentingtheannualauditedfinancialstatementsandthequarterlyreportstoshareholders,theBoardaims to present a balanced and understandable assessment of the Group’s financial position and prospects and ensures that the financialresultsarereleasedtoBursaMalaysiaSecuritiesBerhadwithintherequiredtimeframe.
Statement on Directors’ Responsibility for Preparing the Annual Audited Financial Statement: The directors are responsible for ensuing that the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at the end of the accounting period and of the results of their operations and of their cash flows for the year ending on that date.
TheDirectorsare responsible for taking reasonable steps toensure themaintenanceofproperaccountingandother recordsand internal controls, the application of appropriate accounting policies and the safeguarding of the assets of the Group. The Directors are of the opinion that in preparing the financial statements for the year ended 31 December 2009, the Company has adopted appropriate accounting policies in accordance with applicable financial reporting standard in Malaysia and the provision oftheCompaniesAct1965andthattheseareappliedconsistentlyandaresupportedbyreasonableandprudentjudgmentsandestimates.
Audit Committee: TheAuditCommitteeassiststheBoardintheeffectivedischargeofitsresponsibilitiesrelatingtofinancialreporting,corporategovernanceandcorporatecontrol.ThecompositionoftheAuditCommitteemeetstheMainMarketListingRequirementswherebyallmembersoftheAuditCommitteeareNon-executiveDirectors,themajorityofwhomareIndependentDirectors and one member is a qualified accountant. The report of the Audit Committee is set out on pages 19 to 21.
External Auditors: TheAuditCommitteerecommendstotheBoardtheappointmentoftheexternalauditorsandtheirremuneration.TheBoardhasmaintainedatransparent,objectiveandprofessionalrelationshipwiththeexternalauditors.
The Audit Committee reviews with the external auditors, their audit plan and the results of the audit including any recommendations arising. The report of the external auditors to members is set out on page 55.
ThisstatementismadeinaccordancewitharesolutionoftheBoardofDirectorson25February2010.
The Audit Committee carried out its duties and responsibilities in accordance with its terms of reference during the year with the mainobjectiveofassistingtheBoardofDirectorsintheeffectivedischargeofitsresponsibilitiesrelatingtofinancialreporting,corporate governance and corporate control.
COMPOSITION TheAuditCommitteeshallcompriseno fewer than threeNon-executiveDirectors,majorityof themmustbe IndependentDirectors with at least one member who is a member of the Malaysian Institute of Accountants or a member who fulfils the requirementsoftheMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhad.AllfourmembersoftheAuditCommittee are Non-executive Directors, of whom three are Independent Non-executive Directors. Mr Lau Kiing Yiing is a memberoftheMalaysianInstituteofAccountants.ThechairmanoftheAuditCommittee,YBSenatorDato’HajiIdrisBinBuangis an independent director elected by the members of the Audit Committee. The members of the Audit Committee and the chairmanoftheAuditCommitteearere-appointedannuallybytheBoardofDirectorsandthemembersoftheAuditCommitteerespectively. The present members of the Audit Committee are:-
Chairman YBSenatorDato’HajiIdrisBinBuang Independent,Non-executiveDirectorMember LauKiingYiing(MIA3709) Non-executiveDirectorMember Dr Chou Chii Ming Independent, Non-executive DirectorMember TuanHjAbangKashimBinAbangMorshidi Independent,Non-executiveDirector
AUTHORITYThe Audit Committee shall, wherever necessary and reasonable for the performance of its duties and in accordance with a proceduretobedeterminedbytheBoardofDirectors:-i have authority to investigate any matter within its terms of reference;ii have the resources which are required to perform its duties;iii have full and unrestricted access to any information pertaining to the Company and the Group;iv have direct communication channels with both the internal and external auditors;v be able to obtain independent professional or other advice; andvi be able to convene meetings with the external auditors, internal auditors or both, excluding the attendance of other
directors and employees of the Company, whenever deemed necessary.
DUTIES AND RESPONSIBILITIESThe duties and responsibilities of the Audit Committee shall be:
Financial Reportingi Toreviewthequarterlyresultsandtheannualauditedfinancialstatements,priortotheapprovalbytheBoardofDirectors,
focusing particularly on:- • anychangesinorimplementationofmajoraccountingpoliciesandpractices; • significantadjustmentsarisingfromtheaudit; • significantandunusualevents; • thegoingconcernassumption;and • compliancewithaccountingstandardsandotherlegalrequirements.
Internal Control and Risk Managementii ToreviewtheadequacyandeffectivenessofriskmanagementandinternalcontrolsystemsoftheGroup;
Internal and External Auditiii To review the adequacy of the scope, functions, competency and resources of the internal audit function and that it has the
necessaryauthoritytocarryoutitswork;iv To review the effectiveness and quality of the control environment, the management information and the internal control
systems of the Company and the Group including the scope of the internal audit plan, processes and performance, the resultsoftheinternalaudit,processesorinvestigationsundertakenandwhetherornotappropriateactionistakenontherecommendations of the internal audit;
v To review any appraisal or assessment of the performance of members of the internal audit function and the appointment or termination of senior staff member;
vi To review with the external auditor, their audit plan including the nature and scope of audit, their evaluation of the system ofinternalcontrolsincludingtheirauditfindings/externalauditor’smanagementlettersandactionstakenbymanagementto rectify any matter noted and the audit reports;
vii To ensure that the assistance and cooperation given by the employees of the Company and the Group to the internal and externalauditorsisatalevelwhichenablesthemtocompletetheirworkeconomically,efficientlyandeffectively;
viii TorecommendtotheBoardofDirectorstheappointmentandremunerationoftheexternalauditorsandanyquestionsofresignation or dismissal of the external auditors;
Audit Committee Report
Related Party Transactionsix To review any related party transactions that may arise within the Company and the Group;
Other Functionsx toperformanyotherfunctionsasmaybeagreedbytheBoardofDirectors.
MEETINGS AND REPORTINGThe Audit Committee met four times during the year 2009. The attendance details of the members at these meetings are as follows:-
No. of meetings attended
Chairman YBSenatorDato’HajiIdrisBinBuang 4/4Member LauKiingYiing(MIA3709) 4/4Member Dr Chou Chii Ming 4/4Member TuanHjAbangKashimBinAbangMorshidi 4/4
The head of Internal Audit attended all four of the meetings and presented the internal audit reports. Other directors and relevant members of senior management were invited to attend the Audit Committee meetings where appropriate to discuss the financial performance, the audit findings and other financial reporting issues. The Audit Committee had also met with the external auditors twice in 2009 without the presence of any executive board members and management to discuss the state of affairs of the system ofinternalcontrolsandcontrolenvironmentoftheGroupandtomakeenquiriesinrelationtomanagement’scooperationintheaudit process and financial reporting.
ThequorumforeachmeetingistwomembersandthemajorityofthememberspresentmustbeIndependentDirectorsandtheCompany Secretaries act as the secretaries of the Audit Committee. Minutes of all Audit Committee meetings were circulated to allmembersoftheBoardofDirectorsandthechairmanoftheAuditCommitteereportsonkeyissuesdeliberatedanddecidedateachmeetingtotheBoardofDirectors.
SUMMARY OF ACTIvITIES Duringtheyear,themainactivitiesundertakenbytheAuditCommitteewereasfollows:-i review the Quarterly Reports and year end Financial Statements to ensure compliance with generally accepted accounting
principlesandFinancialReportingStandards,beforerecommendingthesameforBoard’sapproval;ii reviewtheeffectivenessoftheinternalauditprocessandtheinternalauditreportsincorporatingtheriskassessment,internal
controls review and audit procedures, findings, internal audit recommendation and the response from the management;iii meeting with the external auditors to review the audit plan well as their audit findings and audit report and to discuss the
state of affairs of the system of internal controls and control environment of the Group;iv review the recurrent related party transactions of a revenue or trading nature which are necessary for the day to day
operations of the Group on a quarterly basis to ensure that all transactions are covered under the shareholders’ mandate and are on normal commercial terms that are not more favourable to the related parties than those generally available to the public;
v review the Circular to Shareholders in relation to the Shareholders’ Mandate for recurring related party transactions before recommendingitforBoardofDirectors’approval;and
vi reviewthesharebuy-backactivitiesoftheCompanyandreportthesametotheBoardofDirectors.
The Audit Committee has recommended the re-appointment of KPMG as the external auditors for the ensuing year.
TRAININGDuring the year, the chairman and members of the Audit Committee have attended the following conferences and seminars:-
Members Conferences/Seminars attended
YBSenatorDato’Haji - NewframeworkforlistingandequityfundraisingandkeyChangestotheListingRequirementsIdrisBinBuang Lau Kiing Yiing - Understanding new public ruling & tax implication for rental income and IHC - Fundamental approach to accounting for financial institution - National tax conference - Implementingqualitycontrol–incorporatingISQC1&practicereviewfindings - 2010 budget seminar - New public rulings in 2009DrChouChiiMing -NewframeworkforlistingandequityfundraisingandkeyChangestotheListingRequirementsTuanHjAbangKashim -CorporateGovernanceGuide:TowardsBoardroomExcellenceBinAbangMorshidi
INTERNAL AUDIT FUNCTIONTheInternalAuditfunctionoftheGroupisperformedinhouse,headedbytheRiskAssuranceManager,acharteredaccountantwho reports to the Audit Committee. Cost amounting to RM98,000 were incurred in relation to the Internal Audit function for year 2009.
TheAudit Committee obtains adequate assurance that the systemof internal controls and riskmanagement practices areappropriate to the Group’s operation, through the review and audit conducted by the Internal Audit. The Internal Audit adopts ariskbaseapproachwhenestablishingitsauditplanandstrategy. ItprovidestheAuditCommitteewithindependentandobjectivereportsonthestateofinternalcontrolsandriskmanagement,theextentofcompliancewithpoliciesandproceduresand its recommendation thereof.
Duringtheyear,theinternalauditcontinuedwiththeongoingreviewonthesystemofinternalcontrolandriskmanagementtoconstantlystrengthenthestateofinternalcontroloftheGroup.Themajorassignmentscarriedoutduringtheyearincludedthe audit on property development management, purchases, property plant and equipment management and overall corporate processandcontrolsoftheGroup.Inundertakingeachauditassignment,theinternalauditorreviewedtheriskmanagementprocedureswithemphasisonmajorriskareas,performedrelevantcomplianceandsubstantiveauditproceduresandreportedhis findings, recommendations and the response from the management to the Audit Committee. The internal auditor has, where necessary followed up on the implementation and satisfactory dispositions of all audit findings and recommendations on all previous audits.
Statement on Internal Control
RESPONSIBILITYTheBoardofDirectorsofHockSengLeeBerhadrecognisestheimportanceofsoundinternalcontrolsandriskmanagementpractices togoodcorporategovernance.TheBoardaffirms itsoverall responsibility tomaintainasoundsystemof internalcontrolsandriskmanagementincludingthereviewforadequacyandintegrityofthesesystemssoastosafeguardshareholdersinvestment. Inconsidering the system, theBoardnoted that such systemof internalcontrols isdesigned tomanage ratherthaneliminatetheriskof failuretoachievebusinessobjectives.Accordingly, theinternalcontrolsystemscanonlyprovidereasonable but not absolute assurance against material misstatement or loss.
RISK MANAGEMENT TheRiskManagement Framework of theGroup,which is embedded in theCompany’smanagement systems, provides astructuredapproach in identifying, assessingandmanaging thekey risks facedby theGroup.During theyear, theGrouphas reviewedandupdated the riskassessmenton theGroup’soperations. It involved reviewingandupdating thekey riskexposuresoftheGroupandre-assessingtherisksidentified,thestrengthofinternalcontrolsand/oractionplansthatmitigateandmanagetheprimaryrisksandtheresidualrisks.Thisinteractiveprocessenablescontinualimprovementindecisionmakingandminimiseslossesandmaximisesopportunities.Theriskassessmentissubjectedtoperiodicreviewandupdates.
KEY PROCESS OF INTERNAL CONTROLS ThekeyprocessesofinternalcontrolsoftheGroupcanbesummarisedasfollows:-
Strategic Business Planning and Budgeting Process:TheBoardapprovestheGroup’sAnnualBusinessPlanwhichincludesanassessmentoftheoverallbusinessenvironmentaffectingtheGroup’soperations,majorrisksandopportunitiesaswellasfinancial estimates for the year, against which the Group’s performance is monitored on an ongoing basis.
Financial Reporting: The Audit Committee reviews and approves the Quarterly reports and annual financial statements before recommendingtotheBoardforapproval.PerformanceevaluationincludingthecomparisonofactualresultsagainstestimatesispresentedtotheBoard.TheBoardapprovesthequarterlyreportsandtheannualfinancialstatementsbeforeannouncementtoBursaMalaysiaSecuritiesBerhad.
Authorisation Procedures: The Group has established an organisational structure with defined lines of accountability and delegated authority. All transactions are approved in accordance with delegated authorities in the Chart of Financial Authority LimitapprovedbytheBoard.
Operational Risks:Therisksinherentintheconstructionactivitiesaremainlyrelatedto:marketcondition;escalating/volatilematerialcosts;tendering;executionofconstructionworkandcompletionofprojectwithinthecontractperiod.Theobjectiveof theGroup is to identify, evaluate, control andminimise the risks. The executive directors and senior professional staffapplyingtheirexperienceandknowledgetoallaspectsofcontracttendering,proposals,contractingandprojectexecution.Constructionschedules,costsofprojectsandqualityofworksarecontrolledthroughmonthlyprogressreportstotheseniormanagement.Selectiveandcarefulprojectprocurementensuresthattherelevantknow-howincludinganyspecializedplantand machinery and suitably trained personnel are available within the Group for the procurement and the eventual performance oftheprojects.TheExecutiveDirectorsvisitthesitesofon-goingprojectsregularly.Wherenecessary,professionalconsultantsmaybeengagedtoadviseonspecialisedfields.Forpropertydevelopment,projectfeasibilitystudiesarecarriedoutbeforetheGroupembarksonanyproject.
Internal Review and Audit: TheGroupmonitorscompliancewithitsinternalcontrolsthroughinternalcheckingandapprovalprocedures and management review. The system of internal controls is continually reviewed and updated to reflect changing risksorchangesintheoperatingenvironment.ApartfrominternalreviewontheGroup’spoliciesandprocedures,theinternalauditor conducts periodic internal audits to monitor and ensure compliance with procedures and evaluates the effectiveness of the system of internal controls within the Group. The results of such reviews are reported to the Audit Committee on a quarterly basis, which provides reasonable independent assurance on the effectiveness of the Group’s system of internal controls. The AuditCommitteeconsidersthereportsfromtheinternalauditandmanagementandpresentstheirconclusionstotheBoard.TherewerenomajorinternalcontrolweaknessthatrequiresdisclosureintheAnnualReportandcorrectiveactionshavebeentakenoncontrolexceptionsnoted.
BOARD’S CONCLUSIONTheBoardofDirectorsisoftheviewthatthesystemofinternalcontrolsandriskmanagementpracticesareeffectivetoensurethatthelevelofrisktowhichtheGroupisexposedtohasbeenmanagedappropriately.TheBoardwillcontinuetheon-goingprocessinidentifying,evaluatingandmanagingthesignificantrisksfacedbytheGroup.
ThisstatementismadeinaccordancewitharesolutionoftheBoardofDirectorsdated25February2010.
Directors’ report for the year ended 31 December 2009
The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the year ended 31 December 2009.
Principal activitiesThe principal activity of the Company is to carry on business as a marine engineering, civil engineering and construction contractor while the principal activities of the subsidiaries are as stated in Note 5 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.
Results Group Company RM RMProfit attributable to: - equity holders of the Company 56,323,850 51,237,352 -minorityinterests (859 - 56,322,991 51,237,352
Reserves and provisions There were no material transfers to or from reserves and provisions during the year under review.
Dividends Since the end of the previous financial year, the Company paid:
(i) afinalordinarydividendof3.00%perordinaryshareofRM0.20eachlesstaxat25%totallingRM2,473,060(equivalentto2.25%netperordinaryshareofRM0.20)inrespectoftheyearended31December2008on9June2009;and
(ii) aninterimordinarydividendof5.00%perordinaryshareofRM0.20eachlesstaxat25%totallingRM4,121,227(equivalentto3.75%netperordinaryshareofRM0.20)inrespectoftheyearended31December2009on8October2009.
The Directors are proposing the following dividends in respect of the year ended 31 December 2009, to be paid once approved by shareholders at the forthcoming annual general meeting:
(a) finalordinarydividendof5%perordinaryshareofRM0.20eachlesstaxat25%totallingRM4,121,000;and
(b) specialdividendof2%perordinaryshareofRM0.20eachlesstaxat25%totallingRM1,648,000.
Directors of the CompanyDirectors who served since the date of the last report are:
YBSenatorDato’HajiIdrisBinHajiBuangDato Yu Chee HoeYii Chi HauYu Chee LiengLau Kiing KangYii Chee SingLau Kiing YiingDato’MohdNadzirBinMahmudDr Chew Kheng Min @ Chou Chii MingTuanHajiAbangKashimBinAbangMorshidi
Directors’ interestsTheinterestanddeemedinterestsoftheDirectorsinthesharesoftheCompanyandofitsrelatedcorporations(otherthanwholly-ownedsubsidiaries)asrecordedintheRegisterofDirectors’Shareholdingsareasfollows:
Number of ordinary shares of RM1.00 each At At 1.1.2009 Bought Sold 31.12.2009Holding company
Direct interestYii Chi Hau 2,774,117 - - 2,774,117Yu Chee Lieng 2,774,117 - - 2,774,117Yu Chee Hoe 2,774,117 - - 2,774,117Yii Chee Sing 2,774,117 - - 2,774,117
Financial Statements
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Number of ordinary shares of RM0.20 each At At 1.1.2009 Bought Sold 31.12.2009Company
Yii Chi Hau: Direct interest 8,784,000 - - 8,784,000 Deemed interest 308,792,010 - - 308,792,010
Yu Chee Lieng: Direct interest 2,640,000 3,449,200 - 6,089,200 Deemed interest 308,792,010 - - 308,792,010
Yu Chee Hoe: Direct interest 4,533,600 - - 4,533,600 Deemed interest 308,792,010 - - 308,792,010
Yii Chee Sing: Direct interest 3,136,000 271,000 - 3,407,000 Deemed interest 308,792,010 - - 308,792,010
Lau Kiing Kang: Direct interest 1,175,000 - - 1,175,000 Deemed interest 384,000 - - 384,000
Lau Kiing Yiing: Direct interest 276,000 - - 276,000 Deemed interest 400,000 - - 400,000
Chew Kheng Min @ Chou Chii Ming: Direct interest 120,000 - - 120,000
^ 5,244,000 shares held through Public Nominees (Tempatan) Sdn. Bhd.
# 1,151,000 shares held through TA Nominees (Tempatan) Sdn. Bhd.
Save as disclosed, none of the Directors holding office at 31 December 2009 had any interest in the shares of the Company and of its related corporations during and at the end of the financial year.
Directors’ benefitsSince the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit(otherthanabenefitincludedintheaggregateamountofemolumentsreceivedordueandreceivablebyDirectorsasshowninthefinancialstatements)byreasonofacontractmadebytheCompanyorarelatedcorporationwiththeDirectoror with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, other than certain Directors who have significant financial interests in certain companies which traded with the Group in the ordinary course of business.
TherewerenoarrangementsduringandattheendofthefinancialyearwhichhadtheobjectofenablingDirectorsoftheCompany to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
Issue of sharesThere were no changes in the authorised, issued and paid-up capital of the Company during the financial year.
Options granted over unissued shares NooptionsweregrantedtoanypersontotakeupunissuedsharesoftheCompanyduringtheyear.
^
#
Other statutory informationBefore the balance sheets and income statements of theGroup and of theCompanyweremade out, theDirectors tookreasonable steps to ascertain that:
i) allknownbaddebtshavebeenwrittenoffandadequateprovisionmadefordoubtfuldebts,and
ii) allcurrentassetshavebeenstatedatthelowerofcostandnetrealisablevalue.
At the date of this report, the Directors are not aware of any circumstances:
i) thatwouldrendertheamountwrittenoffforbaddebts,ortheamountoftheprovisionfordoubtfuldebts,intheGroupand in the Company inadequate to any substantial extent, or
ii) thatwouldrenderthevalueattributedtothecurrentassetsinthefinancialstatementsoftheGroupandoftheCompanymisleading, or
iii) whichhavearisenwhichrenderadherencetotheexistingmethodofvaluationofassetsorliabilitiesoftheGroupandofthe Company misleading or inappropriate, or
iv) nototherwisedealtwithinthisreportorthefinancialstatements,thatwouldrenderanyamountstatedinthefinancialstatements of the Group and of the Company misleading.
At the date of this report, there does not exist:
i) anychargeontheassetsoftheGrouporoftheCompanythathasarisensincetheendofthefinancialyearandwhichsecures the liabilities of any other person, or
ii) anycontingentliabilityinrespectoftheGrouporoftheCompanythathasarisensincetheendofthefinancialyear.
No contingent liability or other liability of any company in theGroup has become enforceable, or is likely to becomeenforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.
In the opinion of the Directors, the results of the operations of the Group and of the Company for the financial year ended 31 December 2009 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.
Auditors
The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.
SignedonbehalfoftheBoardofDirectorsinaccordancewitharesolutionoftheDirectors:
…………………………….Dato Yu Chee Hoe
…………………………….Lau Kiing Kang
Kuching,
Date: 25 February 2010
Balance sheets at 31 December 2009
Group Company 2009 2008 2009 2008 Note RM RM RM RM
Assets
Property, plant and equipment 3 70,111,478 48,289,446 69,868,289 48,022,397 Prepaid lease payments 4 1,020,307 1,045,777 1,020,307 1,045,777 Investment in subsidiaries 5 - - 62,799,999 1,000,100 Land held for property development 6 66,720,520 72,152,842 - - Amount due from subsidiaries 7 - - - 69,253,996 Total non-current assets 137,852,305 121,488,065 133,688,595 119,322,270
Property development costs 8 25,626,039 20,834,421 - - Inventories 9 10,981,994 6,035,698 10,081,047 4,607,587 Trade and other receivables 10 226,935,228 196,308,416 209,535,166 173,606,238 Cashandbankbalances 11 76,360,003 56,941,779 74,340,685 55,777,551
Total current assets 339,903,264 280,120,314 293,956,898 233,991,376
Total assets 477,755,569 401,608,379 427,645,493 353,313,646
Equity
Share capital 12 116,535,200 116,535,200 116,535,200 116,535,200 Capital redemption reserve 12 2,165,500 2,165,500 2,165,500 2,165,500 Treasuryshares 12 (20,705,974 (20,296,305 (20,705,974 (20,296,305 Retained earnings 12 193,966,678 144,237,115 148,803,214 104,160,149
Total equity attributable to equity holders of the Company 291,961,404 242,641,510 246,797,940 202,564,544
Minority interests 2(a)(iii) 199,141 - - -
Total equity 292,160,545 242,641,510 246,797,940 202,564,544
Liabilities
Deferred tax liabilities 13 10,367,500 6,530,900 10,420,000 6,588,000
Total non-current liabilities 10,367,500 6,530,900 10,420,000 6,588,000
Trade and other payables 14 170,609,382 148,864,011 166,190,553 140,881,434 Current tax liabilities 4,618,142 3,571,958 4,237,000 3,279,668
Total current liabilities 175,227,524 152,435,969 170,427,553 144,161,102
Total liabilities 185,595,024 158,966,869 180,847,553 150,749,102
Total equity and liabilities 477,755,569 401,608,379 427,645,493 353,313,646
The notes on pages 30 to 53 are an integral part of these financial statements.
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Income statements for the year ended 31 December 2009
Group Company 2009 2008 2009 2008 Note RM RM RM RM
Revenue 15 375,021,001 309,068,736 345,641,708 277,081,670Costofsales 15 (287,575,749 (241,199,955 (265,925,951 (218,680,816
Gross profit 87,445,252 67,868,781 79,715,757 58,400,854
Other operating income 822,731 624,391 805,119 316,019Administrativeexpenses (14,187,275 (12,773,698 (13,200,469 (11,375,543
Results from operating activities 74,080,708 55,719,474 67,320,407 47,341,330
Interest income 1,487,847 738,385 1,454,851 715,843
Profit before taxation 16 75,568,555 56,457,859 68,775,258 48,057,173
Taxexpense 18 (19,245,564 (14,618,731 (17,537,906 (12,443,326
Profit for the year 56,322,991 41,839,128 51,237,352 35,613,847
Profit attributable to:
Equity holders of the Company 56,323,850 41,839,128 51,237,352 35,613,847Minorityinterests (859 - - -
56,322,991 41,839,128 51,237,352 35,613,847
Basic/dilutedearningsperordinaryshare(sen) 19 10.25 7.56
Dividends per ordinaryshare(sen)-gross 20 2.40 2.20
The notes on pages 30 to 53 are an integral part of these financial statements.
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Statement of changes in equity for the year ended 31 December 2009
_________ Non-distributable _________ Capital Distributable Share redemption Treasury Retained Minority
capital reserve shares earnings Total interests Total Note RM RM RM RM RM RM RM
Group
At 1 January 2008 116,535,200 2,165,500 (17,107,004 115,500,602 217,094,298 - 217,094,298
Profit for the year - - - 41,839,128 41,839,128 - 41,839,128Treasury shares purchased -atcost 12 - - (3,189,301 - (3,189,301 - (3,189,301Dividendstoshareholders 20 - - - (13,102,615 (13,102,615 - (13,102,615
At 31 December 2008/ 1 January 2009 116,535,200 2,165,500 (20,296,305 144,237,115 242,641,510 - 242,641,510
Profitfortheyear - - - 56,323,850 56,323,850 (859 56,322,991Treasury shares purchased -atcost 12 - - (409,669 - (409,669 - (409,669Dividendstoshareholders 20 - - - (6,594,287 (6,594,287 - (6,594,287Shares issued by a new subsidiary - - - - - 200,000 200,000 At 31 December 2009 116,535,200 2,165,500 (20,705,974 193,966,678 291,961,404 199,141 292,160,545
(Note12 (Note12 (Note12
___________ Non-distributable ___________ Capital Distributable Share redemption Treasury Retained
capital reserve shares earnings Total Note RM RM RM RM RM
Company
At 1 January 2008 116,535,200 2,165,500 (17,107,004 81,648,917 183,242,613
Profit for the year - - - 35,613,847 35,613,847Treasurysharespurchased-atcost 12 - - (3,189,301 - (3,189,301Dividendstoshareholders 20 - - - (13,102,615 (13,102,615
At 31 December 2008/ 1 January 2009 116,535,200 2,165,500 (20,296,305 104,160,149 202,564,544
Profit for the year - - - 51,237,352 51,237,352Treasurysharespurchased-atcost 12 - - (409,669 - (409,669Dividendstoshareholders 20 - - - (6,594,287 (6,594,287
At 31 December 2009 116,535,200 2,165,500 (20,705,974 148,803,214 246,797,940
(Note12 (Note12 (Note12 (Note12
The notes on pages 30 to 53 are an integral part of these financial statements.
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Cash flow statements for the year ended 31 December 2009
Group Company 2009 2008 2009 2008 Note RM RM RM RM Cash flows from operating activities
Profit before taxation 75,568,555 56,457,859 68,775,258 48,057,173 Adjustments for: Amortisation of prepaid lease payments 4 25,470 25,470 25,470 25,470 Depreciation on property, plant and equipment 3 5,404,262 4,373,926 5,356,172 4,332,830 Gainondisposalofproperty,plantandequipment 16 (547,160 (64,987 (547,160 (64,987 Property, plant and equipment written off 16 124,310 105,678 124,153 104,729 Interestincome (1,487,277 (738,385 (1,454,851 (715,843 Operating profit before changes in working capital 79,088,160 60,159,561 72,279,042 51,739,372 Changes in working capital Inventories (4,718,244 (3,051,590 (5,473,460 (4,607,587 Propertydevelopmentcosts(netofinterestexpense) 1,417,921 (175,102 - - Tradeandotherreceivables (31,767,848 (58,183,043 (35,932,988 (53,636,061 Trade and other payables 22,882,348 64,851,078 25,399,305 65,684,695 Amount due from subsidiaries - - 9,163,810 519,588 Cash generated from operations 66,902,337 63,600,904 65,435,709 59,700,007
Overdraftinterestpaid (349 (32,163 - - Taxespaid (14,362,780 (13,716,904 (12,748,574 (10,961,756 Net cash from operating activities 52,539,208 49,851,837 52,687,135 48,738,251
Cash flows from investing activities Subscriptionofsharesinanewlyincorporatedsubsidiary - - (800,000 - Increaseininvestmentinanexistingsubsidiary - - (999,900 - Acquisitionofproperty,plantandequipment 3 (29,118,579 (18,213,300 (29,094,190 (18,115,748 Proceeds from shares issued to minority interests 200,000 - - - Proceeds from disposal of property, plant and equipment 2,315,134 426,180 2,315,134 426,180 Landheldforpropertydevelopment (1,004,921 (587,289 - - Interest received 1,491,338 655,229 1,458,911 632,687
Net cash used in investing activities (26,117,028 (17,719,180 (27,120,045 (17,056,881
Cash flows from financing activities Dividendspaid 20 (6,594,287 (13,102,615 (6,594,287 (13,102,615 Repurchaseoftreasuryshares 12 (409,669 (3,189,301 (409,669 (3,189,301 Net cash used in financing activities (7,003,956 (16,291,916 (7,003,956 (16,291,916 Net increase in cash and cash equivalents 19,418,224 15,840,741 18,563,134 15,389,454Cashandcashequivalentsatbeginningofyear (i) 56,491,779 40,651,038 55,327,551 39,938,097
Cash and cash equivalents at end of year (i) 75,910,003 56,491,779 73,890,685 55,327,551
Note: (i) Cash and cash equivalents
Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts:
Cashandbankbalances 11 18,664,452 5,991,779 17,635,134 4,827,551 Depositswithlicensedbanks 11 57,695,551 50,950,000 56,705,551 50,950,000
76,360,003 56,941,779 74,340,685 55,777,551 Depositspledged 11 (450,000 (450,000 (450,000 (450,000
75,910,003 56,491,779 73,890,685 55,327,551
The notes on pages 30 to 53 are an integral part of these financial statements.
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Notes to the financial statements
HockSengLeeBerhadisapubliclimitedliabilitycompany,incorporatedanddomiciledinMalaysiaandlistedontheMainBoardofBursaMalaysiaSecuritiesBerhad.TheaddressofitsregisteredofficeisLot1004,JalanKwongLeeBank,93450Kuching,Sarawak.
The consolidated financial statements of the Company as at and for the year ended 31 December 2009 comprise the Company and its subsidiaries(togetherreferredtoastheGroup).
The principal activity of the Company is to carry on business as a marine engineering, civil engineering and construction contractor while the principal activities of the subsidiaries are as stated in Note 5 to the financial statements.
Theimmediate/ultimateholdingcompanyduringthefinancialyearisHockSengLeeEnterpriseSendirianBerhad,acompanyincorporatedin Malaysia.
ThefinancialstatementswereapprovedbytheBoardofDirectorson25February2010.
1. Basis of preparation
(a) Statement of compliance The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting
Standards, generally accepted accounting principles and the Companies Act, 1965 in Malaysia. These financial statements also complywiththeapplicabledisclosureprovisionsoftheListingRequirementsoftheBursaMalaysiaSecuritiesBerhad.
The Group and the Company have not applied the following accounting standards, amendments and interpretations that have beenissuedbytheMalaysianAccountingStandardsBoardbutareonlyeffectiveforannualperiodsbeginningonoraftertherespective dates indicated herein:
Standard / Amendment / Interpretation Effective date
FRS 8, Operating Segments 1 July 2009Amendments to FRS 1, First-time Adoption of Financial Reporting Standards and FRS 127, Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate 1 January 2010Amendments to FRS 2, Share-based Payment: Vesting Conditions and Cancellations 1 January 2010FRS 4, Insurance Contracts 1 January 2010FRS 7, Financial Instruments: Disclosures 1 January 2010Amendments to FRS 101, Presentation of FinancialStatements 1 January 2010FRS123(revised),Borrowing Costs 1 January 2010FRS 139 and Amendments to FRS 139, Financial Instruments: Recognition and Measurement 1 January 2010Amendments to FRS 139, Financial Instruments: Recognition and Measurement, FRS 7, Financial Instruments: Disclosures and IC Interpretation 9, Reassessment of Embedded Derivatives 1 January 2010ImprovementstoFRSs(2009) 1January2010IC Interpretation 9, Reassessment of Embedded Derivatives 1 January 2010IC Interpretation 10, Interim Financial Reporting and Impairment 1 January 2010IC Interpretation 11, FRS 2 - Group and Treasury Share Transactions 1 January 2010IC Interpretation 13, Customer Loyalty Programmes 1 January 2010ICInterpretation14,FRS119–The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction 1 January 2010FRS 1, First-time Adoption of Financial Reporting Standards(revised) 1July2010FRS 3, Business Combinations(revised) 1July2010FRS 127, Consolidated and Separate Financial Statements(revised) 1July2010Amendments to FRS 2, Share-based Payment 1 July 2010Amendments to FRS 5, Non-current Assets Held for Sale and Discontinued Operations 1 July 2010Amendments to FRS 138, Intangible Assets 1 July 2010Amendments to IC Interpretation 9, Reassessment of Embedded Derivatives 1 July 2010IC Interpretation 12, Service Concession Agreements 1 July 2010IC Interpretation 15, Agreements for the Construction of Real Estate 1 July 2010IC Interpretation 16, Hedges of a Net Investment in a Foreign Operation 1 July 2010IC Interpretation 17, Distribution of Non-cash Assets to Owners 1 July 2010
1. Basis of preparation (continued)
(a) Statement of compliance (continued)The Group and the Company plan to apply:
• fromtheannualperiodbeginningon1January2010thosestandards,amendmentsandinterpretationsaslistedabove that are effective for annual periods beginning on or before 1 January 2010, except for Amendments to FRS1andFRS127,AmendmentstoFRS2,FRS4,andICInterpretations(ICI)9,ICI11,ICI13andICI14whichare not applicable to them; and
• from the annual period beginning on 1 January 2011 those standards, amendments and interpretations aslistedabovethatareeffectiveforannualperiodsbeginningonorafter1July2010,exceptforFRS1(revised),Amendments to FRS 2, Amendments to FRS 5, Amendments to FRS 138, Amendments to ICI 9, ICI 12, ICI 16 and ICI 17 which are not applicable to them.
The initial application of a standard, an amendment or an interpretation, which is to be applied prospectively, is not expected to have any financial impacts to the financial statements for the current and prior periods upon their first adoption.
The impact of applying FRS 7 and FRS 139 on the financial statements upon first adoption as required by paragraph 30(b)ofFRS108,Accounting Policies, Changes in Accounting Estimates and Errors, is not disclosed by virtue of the exemption given in the respective FRSs.
FRS 8, which replaces FRS 114, Segment Reporting, requires the identification and reporting of operating segments basedoninternalreportsthatareregularlyreviewedbytheentity’schiefoperatingdecisionmakerinordertoallocateresources to the segment and to assess its performance. As the Group’s operating segments, namely Construction and Property Development, are the same as the business segments on which the Group currently presents segment information(seeNote22),theadoptionofFRS8isnotexpectedtohaveamaterialimpactontheGroup.
FRS 101 aims to improve user’s ability to analyse and compare the information given in financial statements. It requires information in financial statements to be aggregated on the basis of shared characteristics to enable readers to analyse transactions between the Company and shareholders separately from transactions with external parties. FRS 101 also changes the titles of the financial statements to reflect their functions more clearly, for example, balance sheet is renamed as statement of financial position, amongst others.
FRS123(revised)requiresanentitytocapitaliseborrowingcostsdirectlyattributabletotheacquisition,constructionor production of a qualifying asset as part of the cost of that asset and removes the option of immediately recognising the borrowing costs as an expense. As the Company’s current capitalisation policy for borrowing costs is consistent withFRS123(revised),theadoptionthereofisnotexpectedtohaveamaterialimpactontheCompany.
IC Interpretation 10 prohibits the reversal of an impairment loss recognised in an interim period during the financial year in respect of goodwill, an investment in an equity instrument or a financial asset carried at cost. IC interpretation 10 applies prospectively from the date the measurement criteria of FRS 136, Impairment of Assets and FRS 139 respectivelywerefirstapplied.Asthesubsidiaries(seeNote5)wereallincorporatedbytheCompany,ratherthanacquired from third parties, the adoption of IC Interpretation 10 will not have a material impact to the financial statements.
FRS3(revised),whichistobeappliedprospectively,incorporatesthefollowingchangestotheexistingFRS3:
• Thedefinitionofabusinesshasbeenbroadened,whichislikelytoresultinmoreacquisitionsbeingtreatedasbusinesscombinations.
• Contingentconsiderationwillbemeasuredatfairvalue,withsubsequentchangesthereinrecognisedinprofitorloss.• Transactioncosts,otherthanshareanddebtsissuecosts,willbeexpensedasincurred.• Anypre-existinginterestintheacquireewillbemeasuredatfairvaluewiththegainorlossrecognisedinprofitorloss.• Anyminority(willbeknownasnon-controlling)interestwillbemeasuredateitherfairvalue,oratitsproportionate
interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis.
The amendments to FRS 127 require changes in group composition to be accounted for as equity transactions betweenthegroupanditsminority(willbeknownasnon-controlling)interestholders.Currently,changesingroupcompositionareaccountedforinaccordancewiththeaccountingpoliciesasdescribedinNote2(a)(ii).
The amendments to FRS 127 further require all losses attributable to minority interest to be absorbed by minority interest i.e., the excess and any further losses exceeding the minority interest in the equity of a subsidiary are no longer charged against the Group’s interest. Currently, such losses are accounted for in accordance with the accounting policiesasdescribedinNote2(a)(iii).
1. Basis of preparation (continued)
(a) Statement of compliance (continued)The above changes in FRS 127 are not expected to have material impacts to the Group.
Improvements to FRSs (2009) contain various amendments that result in accounting changes for presentation,recognition or measurement and disclosure purposes. These amendments are not expected to have a material impact to the Group.
ICI 15 replaces the existing FRS 201 , Property Development Activities and provides guidance on how to account for revenue from construction of real estate. The adoption of IC Interpretation 15 by the Group for the year ending 31 December 2011, which is to be applied retrospectively, will result in a change in accounting policy in that the recognition of revenue from the property development activities will change from the percentage of completion method to the completed method.
The potential impacts on the financial statements for the year ended 31 December 2009 on initial application of ICI 15 are summarised as follows: Effects on As currently adoption of IC If stated Interpretation 15 restated DR/(CR) DR/(CR) DR/(CR) RM RM RMBalance sheetProperty development costs 25,626,039 19,481,719 45,107,758Inventories 10,981,994 2,094,673 13,076,667Accrualbillings 6,137,122 (6,108,605 28,517Tradereceivables 180,740,397 (5,906,705 174,833,692Progressbillings (20,448 20,448 -Advancefromcustomers - (16,880,802 (16,880,802Deferredtaxation (10,367,500 1,824,818 (8,542,682Retainedearnings (193,966,678 5,474,454 (188,492,224
Effects on As currently adoption of IC If stated Interpretation 15 restated RM RM RMIncome statementRevenue 375,021,001 (8,743,169 366,277,832Costofsales 287,575,749 (6,438,462 281,137,287Profitbeforetax 75,568,555 (2,304,707 73,263,848Taxexpense 19,245,564 (576,177 18,669,387Profitfortheyear 56,322,991 (1,728,530 54,594,461
Earningspershare(sen) 10.25 (0.31 9.94
Financial Reporting Standards will be fully converged with International Financial Reporting Standards by 1 January 2012. The financial impact and effects on disclosures and measurement consequent on such convergence are dependent on the issuance of such new or revised standards, amendments and interpretations by Malaysian AccountingStandardsBoardasarenecessarytoeffectuatethefullconvergence.
(b) Basis of measurement The financial statements have been prepared on the historical cost basis.
(c) Functional and presentation currency ThesefinancialstatementsarepresentedinRinggitMalaysia(RM),whichistheCompany’sfunctionalcurrency.
(d) Use of estimates and judgements Thepreparationoffinancialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsthat
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
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1. Basis of preparation (continued)
(d) Use of estimates and judgements (continued) 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 and in any future periods affected.
Therearenosignificantareasofestimationuncertaintyandcriticaljudgementsinapplyingaccountingpoliciesthathave significant effect on the amounts recognised in the financial statement other than those described below:
(i) Profit from Construction Contracts The Group and the Company recognise revenue from construction contracts based on the percentage of
completionmethod,measuredby reference to theproportion that contract costs incurred for contractworkperformedtodatebeartothetotalestimatedcontractcosts.Significantjudgementisrequiredindeterminingthestage of completion of contracts/transactions, accruing for costs incurred for which claims/billings have yet to be received, estimating total contract revenue and contract costs as well as the recoverability of the carrying amount ofthecontractwork-in-progress.Thetotalcontractrevenuealsoincludesanestimationofthevariationsthatarerecoverable from the contract customers. The Group and the Company rely, inter alia, on the assessment of their experiencedprojectmanagersandquantitysurveyorswhenmakingthejudgement.
(ii) Profit from Property Contracts The Group recognised revenue from property development based on the stage of completion of properties sold,
measuredbyreferencetotheproportionthatpropertydevelopmentcostsincurredforworkperformedtodatebear to theestimated totalpropertydevelopmentcosts.Significant judgement is required indetermining theestimatedtotaldevelopmentcostswhichincludesvariationworks,ifany.Whenestimatingthetotaldevelopmentcosts, the Group, inter alia,takescognizanceofcontractworksawardedtothirdparties,ifany,andreliesontheassessmentofitsexperiencedprojectmanagersandquantitysurveyors.
2. Significant accounting policiesThe following are the significant accounting policies of the Group which have been applied consistently to the periods presented in these financial statements, unless otherwise stated.
(a) Basis of consolidation
(i) Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the ability to exercise its
power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessingcontrol,potentialvotingrightsthatpresentlyareexercisablearetakenintoaccount.Subsidiariesareconsolidated using the purchase method of accounting.
Under the purchase method of accounting, the financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Investments in subsidiaries are stated in the Company’s balance sheet at cost less impairment losses, unless the investmentisclassifiedasheldforsale(orincludedinadisposalgroupthatisclassifiedasheldforsale).
(ii) Changes in Group composition Where a subsidiary issues new equity shares to minority interest for cash consideration and the issue price
has been established at fair value, the reduction in the Group’s interests in the subsidiary is accounted for as a disposal of equity interest with the corresponding gain or loss recognised in the income statement.
When a group purchases a subsidiary’s equity shares from minority interest for cash consideration and the purchase price has been established at fair value, the accretion of the Group’s interests in the subsidiary is accounted for as a purchase of equity interest for which the acquisition method of accounting is applied.
The Group treats all other changes in group composition as equity transactions between the Group and its
minority shareholders. Any difference between the Group’s share of net assets before and after the change, and anyconsiderationreceivedorpaid,isadjustedtooragainstGroupreserves.
2. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
(iii) Minority interest Minority interests at the balance sheet date, being the portion of the net identifiable assets of subsidiaries
attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheet and statement of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interests and the equity shareholders of the Company.
Where losses applicable to the minority exceed the minority’s interests in the equity of a subsidiary, the excess,
and any further losses applicable to the minority, are charged against the Group’s interest except to the extent thattheminorityhasabindingobligationto,andisableto,makeadditionalinvestmenttocoverthelosses.Ifthesubsidiary subsequently reports profits, the Group’s interest is allocated with all such profits until the minority’s share of losses previously absorbed by the Group has been recovered.
(iv) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
Unrealised loss on intra-group transactions are eliminated in the same manner as unrealised gains, unless there is evidence of impairment to the underlying assets.
(b) Foreign currency transactionsTransactions in foreign currencies are translated to Ringgit Malaysia at exchange rate ruling at the transaction dates.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to Ringgit Malaysia at the exchange rates at that date. Foreign currency differences arising on retranslation are recognised in the income statements.
(c) Property, plant and equipment
(i) Recognition and measurement Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any.
Cost includes expenditure that is directly attributable to the acquisition of the assets and any other costs directly attributabletobringingtheassetstoworkingconditionfortheirintendeduse,andthecostsofdismantlingandremoving the assets and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour and, for qualifying assets, borrowing costs are capitalised in accordance with the Group’s accounting policy. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When significant parts of an item of property, plant and equipment have different useful lives, they are accounted forasseparateitems(majorcomponents)ofproperty,plantandequipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “otherincome”or“otheroperatingexpenses”respectivelyintheincomestatements.
(ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of
the item if it is probable that the future economic benefits embodied within the part will flow to the Group and to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statements as incurred.
(iii) Depreciation Depreciation is recognised in the income statements on a straight-line basis over the estimated useful life of each
part of an item of property, plant and equipment.
2. Significant accounting policies (continued) (c) Property, plant and equipment (continued)
(iii) Depreciation (continued)
The estimated useful lives for the current and comparative periods are as follows:
Buildings 50yearsFurniture and fittings 5, 13 yearsMotor vehicles 10 yearsPlant, machinery and equipment 5, 10,13 yearsVessels and wharf 10, 15, 20 years
Depreciation methods, useful lives and residual values are reassessed at the balance sheet date.
(d) Leased assets
Operating lease LeasesforwhichtheGroupdoesnotassumesubstantiallyalltherisksandrewardsofownershipareclassifiedas
operating leases and the lease assets, other than prepaid lease payments, are not recognised on the balance sheets.
Leasehold land that normally has an indefinite economic life and the title of which is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payments made on acquiring a leasehold interest on land are accounted for as prepaid lease payments.
Payments made under operating leases are recognised in the income statements on a straight-line basis over the term of the lease.
(e) Land held for property development Land held for property development consists of land or such portions thereof on which no development activities
have been carried out or where development activities are not expected to be completed within the Group’s normal operating cycle of 2 to 3 years. Such land is classified as a non-current asset and is stated at cost less accumulated impairment losses.
Land held for property development is reclassified as property development costs at the point when development activities have commenced and where it can be demonstrated that the development activities can be completed within the Group’s normal operating cycle of 2 to 3 years.
Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, commissions, conversion fees and other direct development expenditure and related overheads.
(f) Property development costs Property development costs comprise costs associated with the acquisition of land and all costs that are directly
attributable to development activities or that can be allocated on a reasonable basis to such activities.
Property development costs not recognised as an expense is recognised as an asset and is stated at the lower of cost and net realisable value.
The excess of revenue recognised in the income statement over billings to purchasers is shown as accrued billings under trade and other receivables and the excess of billings to purchasers over revenue recognised in the income statement is shown as progress billings under trade and other payables.
(g) Inventories
(i) Developed properties held for sale Completed properties held for sale are measured at the lower of cost and net realisable value. The cost of
developed properties consists of costs associated with the acquisition of land, direct costs and appropriate proportions of common cost attributable to developing the properties to completion. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessarytomakethesale.
2. Significant accounting policies (continued)
(g) Inventories (continued)
(ii) Consumables Consumables are measured at the lower of cost and net realisable value. Cost of consumables is determined on
the first-in first-out basis and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.
(h) Receivables Receivables are initially recognised at their cost when the contractual right to receive cash or other financial asset
from another entity is established.
Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts.
Receivables are not held for the purpose of trading.
(i) Amounts due from/to contract customers Amount due from contract customers is stated at cost plus profit recognised to date less progress billing and recognised
losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variableoverheads incurred in the Group and the Company’s contract activities based on normal operating capacity.
Amount due from contract customers is presented as part of trade and other receivables in the balance sheet. Where progress billings exceed cost plus attributable profits less foreseeable losses, the net credit balance on all such contracts is shown in trade and other payables as amount due to contract customers.
(j) Cash and cash equivalents Cashandcashequivalentsconsistofcashonhand,balancesanddepositswithbanksandhighlyliquidinvestments
whichhavean insignificant riskofchanges invalue. For thepurposeof thecash flowstatement,cashandcashequivalentsarepresentednetofbankoverdraftsandpledgeddeposits.
(k) Impairment of assets Thecarryingamountsofassetsexceptforinventories[referNote2(g)],assetsarisingfromconstructioncontracts[refer
Note2(i)]andfinancialassets(excludinginvestmentinsubsidiariesthatisnotclassifiedasheldforsaleorincludedinadisposalgroupthatisclassifiedasheldforsale)arereviewedateachreportingdatetodeterminewhetherthereis any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflowsfromcontinuingusethatarelargelyindependentofthecashinflowsofotherassetsorgroupsofassets(the“cash-generatingunit”).
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statements. Impairment losses recognised in respect of cash-generatingunitsareallocatedfirsttoreducethecarryingamountoftheassetsintheunit(groupsofunits)onaprorata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exist. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the income statements in the year in which the reversals are recognised.
2. Significant accounting policies (continued)
(l) Repurchase of share capital When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly
attributable costs, is recognised as a deduction from equity and is not re-valued for subsequent changes in the fair valueormarketpriceof the shares.Repurchased shares are classifiedas treasury shares andarepresentedas adeduction from total 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.
Wheretreasurysharesarereissuedbyre-saleintheopenmarket,thedifferencebetweenthesalesconsiderationnetof directly attributable costs and the carrying amount of the treasury shares is recognised in equity.
Where treasury shares are cancelled, their nominal amounts are eliminated and the difference between their cost and nominalamountsistakentoreservesasappropriate.
(m) Employee benefits
Short-termemployeebenefitobligationsinrespectofsalaries,annualbonuses,paidannualleaveandsickleavearemeasured on an undiscounted basis and are expensed as the related service is provided.
A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employees and the obligation can be estimated reliably.
Contributions to statutory pension funds are charged to the income statements in the year to which they relate. Once the contributions have been paid, the Group has no further payment obligations.
(n) Payables Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual
obligation to deliver cash or other financial asset to another entity.
(o) Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated
reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable thattheCompanywillberequiredtomakeapaymentundertheguarantee.
(p) Revenue recognition
(i) Construction contracts As soon as the outcome of a construction contract can be estimated reliably, contract revenue and expenses are
recognised in the income statements in proportion to the stage of completion of the contract. Contract revenue includestheinitialamountagreedinthecontractplusanyvariationsincontractwork,claimsandincentivepayments to the extent that it is probable that they will result in revenue and can be measured reliably.
Thestageofcompletionisassessedbyreferencetotheproportionthatcontractcostsincurredforcontractworkperformed to date bear to the estimated total contract costs. When the outcome of a construction contract cannot beestimatedreliably,contractrevenueisrecognisedonlytotheextentofcontractcostsincurredthatarelikelyto be recoverable. An expected loss on a contract is recognised immediately in the income statement.
(ii) Property development Revenue from property development activities is recognised based on the stage of completion of properties sold
measuredbyreferencetotheproportionthatpropertydevelopmentcostsincurredforworkperformedtodatebear to the estimated total property development costs.
2. Significant accounting policies (continued)
(p) Revenue recognition (continued)
(ii) Property development (continued) Where the financial outcome of a property development activity cannot be reliably estimated, property
development revenue is recognised only to the extent of property development costs incurred that is probable to be recoverable, and property development costs on the development units sold are recognised as an expense in the period in which they are incurred.
Anyexpectedlossonadevelopmentproject,includingcoststobeincurredoverthedefectsliabilityperiod,isrecognised immediately in the income statement.
(iii) Rental income Rental income is recognised in the income statement as it accrues, based on rates agreed with tenants.
(q) Interest income and borrowing costs Interest income is recognised as it accrues, using the effective interest method.
All borrowing costs are recognised in the income statements using the effective interest method, in the period in which they are incurred except to the extent that they are capitalised as being directly attributable to the acquisition, constructionorproductionofanassetwhichnecessarily takesa substantialperiodof time tobeprepared for itsintended use.
The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.
(r) Tax expense Tax expense comprises current and deferred tax. Tax expense is recognised in the income statements except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enactedatthebalancesheetdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the initial recognition of assets or liabilities in a transaction that affects neither accounting nor taxableprofit(nortaxloss).Deferredtaxismeasuredatthetaxratesthatareexpectedtobeappliedtothetemporarydifferences when they reverse, based on the laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax liability is recognised for all taxable temporary differences.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced by the extent that it is no longer probable that the related tax benefit will be realised.
(s) Earnings per share TheGrouppresentsbasicanddilutedearningspershare(EPS)dataforitsordinaryshares.BasicEPSiscalculatedby
dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinarysharesoutstandingduringtheperiod.DilutedEPSisdeterminedbyadjustingtheprofitorlossattributabletoordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
(t) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services
(business segment),or inprovidingproductsor serviceswithinaparticulareconomicenvironment (geographicalsegment),whichissubjecttorisksandrewardsthataredifferentfromthoseofothersegment.
3. Property, plant and equipment Plant, Furniture machinery vessels and Motor and and Buildings fittings vehicles equipment wharf TotalGroup RM RM RM RM RM RM CostAt 1 January 2008 3,554,665 1,168,048 12,906,973 42,195,843 60,575,361 120,400,890Additions 54,737 151,692 1,783,137 7,037,238 9,186,496 18,213,300Disposals - (1,594 (460,524 (961,634 (134,000 (1,557,752 At 31 December 2008/ 1 January 2009 3,609,402 1,318,146 14,229,586 48,271,447 69,627,857 137,056,438Additions - 148,249 2,650,840 26,319,490 - 29,118,579Disposals - - - (491,409 (5,817,862 (6,309,271Writeoffs - (10,781 (289,088 (632,470 - (932,339 At 31 December 2009 3,609,402 1,455,614 16,591,338 73,467,058 63,809,995 158,933,407
DepreciationAt 1 January 2008 450,530 777,840 8,739,715 34,181,202 41,334,661 85,483,948Depreciation for the year 76,257 103,201 705,714 1,210,246 2,278,508 4,373,926Disposals - (1,553 (337,612 (680,089 (71,628 (1,090,882
At 31 December 2008/ 1 January 2009 526,787 879,488 9,107,817 34,711,359 43,541,541 88,766,992Depreciation for the year 76,856 114,303 860,707 1,902,813 2,449,583 5,404,262Disposals - - - (38,736 (4,502,402 (4,541,138Writeoffs - (10,167 (218,350 (579,670 - (808,187
At 31 December 2009 603,643 983,624 9,750,174 35,995,766 41,488,722 88,821,929
Carrying amountsAt 1 January 2008 3,104,135 390,208 4,167,258 8,014,641 19,240,700 34,916,942
At 31 December 2008/ 1 January 2009 3,082,615 438,658 5,121,769 13,560,088 26,086,316 48,289,446
At 31 December 2009 3,005,759 471,990 6,841,164 37,471,292 22,321,273 70,111,478
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3. Property, plant and equipment(continued) Plant, Furniture machinery vessels and Motor and and Buildings fittings vehicles equipment wharf TotalCompany RM RM RM RM RM RM CostAt 1 January 2008 3,554,665 1,129,531 12,760,973 42,016,065 60,575,361 120,036,595Additions 54,737 149,762 1,783,137 6,941,616 9,186,496 18,115,748Disposals - (1,594 (460,524 (940,072 (134,000 (1,536,190 At 31 December 2008/ 1 January 2009 3,609,402 1,277,699 14,083,586 48,017,609 69,627,857 136,616,153Additions - 147,929 2,650,840 26,295,421 - 29,094,190Disposals - (10,781 (289,088 (1,123,554 (5,817,862 (7,241,285
At 31 December 2009 3,609,402 1,414,847 16,445,338 73,189,476 63,809,995 158,469,058
DepreciationAt 1 January 2008 450,530 763,955 8,664,031 34,118,018 41,334,661 85,331,195Depreciation for the year 76,257 100,386 693,421 1,184,258 2,278,508 4,332,830Disposals - (1,553 (337,612 (659,476 (71,628 (1,070,269
At 31 December 2008/ 1 January 2009 526,787 862,788 9,019,840 34,642,800 43,541,541 88,593,756Depreciation for the year 76,856 111,850 848,416 1,869,467 2,449,583 5,356,172Disposals - (10,167 (218,350 (618,239 (4,502,403 (5,349,159
At 31 December 2009 603,643 964,471 9,649,906 35,894,028 41,488,721 88,600,769
Carrying amountsAt 1 January 2008 3,104,135 365,576 4,096,942 7,898,047 19,240,700 34,705,400
At 31 December 2008/ 1 January 2009 3,082,615 414,911 5,063,746 13,374,809 26,086,316 48,022,397
At 31 December 2009 3,005,759 450,376 6,795,432 37,295,448 22,321,274 69,868,289
Depreciation for the year is allocated as follows:
Group Company 2009 2008 2009 2008 Note RM RM RM RM Income statements 16 487,180 456,642 445,220 415,546Construction contracts 10 4,910,952 3,917,284 4,910,952 3,917,284Property development costs 8 6,130 - - -
5,404,262 4,373,926 5,356,172 4,332,830
BuildingscostingRM534,398(2008:RM534,398)arebuiltonlandrentedfromthirdparties.
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4. Prepaidleasepayments–GroupandCompany
Leasehold land (unexpired period less than 50 years) RMCostAt 1 January 2008, 31 December 2008/1 January 2009 and 31 December 2009 1,280,021
AmortisationAt 1 January 2008 208,774Amortisation for the year 25,470
At 31 December 2008/1 January 2009 234,244Amortisation for the year 25,470
At 31 December 2009 259,714
Carrying amountsAt 1 January 2008 1,071,247
At 31 December 2008/1 January 2009 1,045,777
At 31 December 2009 1,020,307
5. Investment in subsidiaries Company 2009 2008 RM RM Unquoted shares, at cost 62,799,999 1,000,100 Details of the subsidiaries are as follows:
Country of Principal Effective Name of subsidiary incorporation activities ownership interest 2009 2008 % %
HockSengLeeConstruction Malaysia Propertydevelopment 100 100 SendirianBerhad andbuildingconstruction
HSLHydroSdn.Bhd. Malaysia Presentlydormant. 100 100 Its intended activities are shipbuilding and ship repair
BrightTrenchless Malaysia Presentlydormant. 80 - EngineeringSdn.Bhd.* Itsintendedactivitiesare civil engineering and construction
* This subsidiary was incorporated on 24 September 2009. The consolidated financial statements for the year ended 31 December 2009 include the unaudited accounts of the said subsidiary for the period then ended, which are not material to the Group.
6. Land held for property development - Group
Development Land costs Total Note RM RM RM At 1 January 2008 63,727,806 7,837,746 71,565,552 Additions - 587,290 587,290
At 31 December 2008/1 January 2009 63,727,806 8,425,036 72,152,842
Additions - 1,004,921 1,004,921Transfertopropertydevelopmentcosts 8 (4,187,858 (2,249,385 (6,437,243
At 31 December 2009 59,539,948 7,180,572 66,720,520
Includedinlandheldforpropertydevelopmentat31December2009isacumulativeamountofRM5,338,072(2008:RM8,802,974)incurredonone(2008:two)parcelsofland,thetitletowhichisintheprocessofbeingtransferredtotheGroup.
7. Amount due from subsidiaries - Company
The amount due from subsidiaries subsisting at 31 December 2008 was non-trade in nature, unsecured, interest free.
On 22 December 2009, the Company subscribed for 600,000 new redeemable preference shares of RM1.00 each at the issuepriceofRM100.00per share in a subsidiary,HockSengLeeConstructionSendirianBerhad,byconvertingRM60,000,000outoftheamountduefromthesubsidiaryforthatpurpose(seealsoNote26).Theremainingbalancesdue from subsidiaries have been fully settled in cash during the year.
8. Property development costs - Group Accumulated costs charged Development to income Land costs statement Total Note RM RM RM RM
At 1 January 2008 9,148,313 23,538,115 (12,059,273 20,627,155
Costs incurred during the year 548,131 20,113,642 - 20,661,773Costschargedtoincomestatement - - (20,454,507 (20,454,507
At 31 December 2008/1 January 2009 9,696,444 43,651,757 (32,513,780 20,834,421 Transfer from land held for property development 6 4,187,858 2,249,385 - 6,437,243Costs incurred during the year 2,787 19,356,439 - 19,359,226Costschargedtoincomestatement - - (20,776,799 (20,776,799Transferofcompletedpropertiestoinventories (737,465 (14,941,920 15,451,333 (228,052
At 31 December 2009 13,149,624 50,315,661 (37,839,246 25,626,039
Property development costs incurred during the financial year include: 2009 2008 Note RM RM
Depreciation of property, plant and equipment 3 6,130 -Hiring of equipment 122,171 411,553Interest expense 349 32,163
Interestiscapitalisedinpropertydevelopmentcostsattherateof6.80%(2008:8.0%)perannum.
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9. Inventories
Group Company 2009 2008 2009 2008 RM RM RM RM At cost Developed properties held for sale 705,814 1,428,111 - - Consumables 10,276,180 4,607,587 10,081,047 4,607,587 10,981,994 6,035,698 10,081,047 4,607,587
10. Trade and other receivables
Group Company 2009 2008 2009 2008 Note RM RM RM RM
Trade Trade receivables 12,065,739 21,584,453 1,871,515 6,517,507 Progress billings receivable 10.1 168,674,658 143,572,224 168,674,658 142,074,391Allowancefordoubtfuldebts - (1,000,000 - (1,000,000 168,674,658 142,572,224 168,674,658 141,074,391
Amount due from contract customers 10.2 24,794,842 14,423,109 24,794,842 14,423,109Accrued billings 6,137,122 4,871,520 - -
30,931,964 19,294,629 24,794,842 14,423,109
Non-tradeOther receivables 406,919 341,940 400,426 309,183Deposits 4,442,810 8,293,510 3,380,587 7,060,388Prepayments 10,413,138 4,221,660 10,413,138 4,221,660
15,262,867 12,857,110 14,194,151 11,591,231
226,935,228 196,308,416 209,535,166 173,606,238
10.1 Progress billings receivableIncludedinprogressbillingsreceivableoftheGroupandoftheCompanyareretentionsofRM21,693,710(2008:RM19,574,569)receivablefromcontractcustomers.
The retentions are unsecured, interest-free and are expected to be collected as follows: Group/Company 2009 2008 RM RM
Within 1 year 9,242,297 5,776,3211-2 years 9,564,485 7,358,7482-3 years 2,886,928 6,439,500 21,693,710 19,574,569
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10. Trade and other receivables (continued)
10.2 Amount due from contract customers
Group/Company 2009 2008 Note RM RM
Aggregate costs incurred to date 702,790,025 701,829,285Add: Attributable profits 182,902,787 167,732,197 885,692,812 869,561,482Cumulativeprogressbillingsrendered (976,310,123 (957,336,666
(90,617,311 (87,775,184
Amount due to contract customers 14 115,412,153 102,198,293 24,794,842 14,423,109
Additions to aggregate costs incurred during the financial year include: Group/Company 2009 2008 Note RM RM
Depreciation on property, plant and equipment 3 4,910,952 3,917,284Hiring of equipment 6,817,815 7,571,606Rental of premises 357,461 261,970
11. Cash and cash equivalents Group Company 2009 2008 2009 2008 RM RM RM RM Deposits 57,695,551 50,950,000 56,705,551 50,950,000 Cashandbankbalances 18,664,452 5,991,779 17,635,134 4,827,551 76,360,003 56,941,779 74,340,685 55,777,551
Deposits placed with licensed banks pledged for a bank facility – Group and Company IncludedindepositsplacedwithlicensedbanksisRM450,000(2008:RM450,000)pledgedforabankfacilitygrantedto
the Company.
12. Share capital and reserves
12.1 Share capital ________________ Group and Company _________________
Amount Number Amount Number RM of shares RM of shares 2009 2009 2008 2008 Authorised: Ordinary shares of RM0.20 each 300,000,000 1,500,000,000 300,000,000 1,500,000,000 Issued and fully paid: Ordinary shares of RM0.20 each 116,535,200 582,676,000 116,535,200 582,676,000
12.2 Capital redemption reserve Capital redemption reserve arose from the cancellation of 2,165,500 treasury shares on 17 November 2003,
whereupon an amount equivalent to their nominal value was transferred to the reserve.
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12. Share capital and reserves (continued)
12.3 Treasury shares The shareholders of the Company, at an Extraordinary General Meeting held on 29 November 2001, approved
the Company’s plan to repurchase its own shares. The mandate was subsequently renewed on a yearly basis. The Directors of the Company are committed to enhancing the value of the Company to its shareholders and believe that the repurchase plan can be applied in the best interest of the Company and its shareholders.
During the financialyear, theCompany repurchased798,200 (2008:4,841,900)of itsownordinary sharesofRM0.20eachfromtheopenmarketatanaveragepriceofRM0.51perordinaryshareofRM0.20each(2008:RM0.659 per ordinary share of RM0.20 each). The shares repurchased are retained as treasury shares. Thetotal consideration paidwas RM409,669 (2008: RM3,189,301) including transaction cost of RM2,004 (2008:RM16,579).Therepurchasetransactionswerefinancedbyinternallygeneratedfunds.
The treasury shares held by the Company at 31 December 2009 totalled 33,179,100 ordinary shares of RM0.20 each(2008:32,380,900ordinarysharesofRM0.20each).
12.4 Retained earnings SubjecttoagreementwiththeInlandRevenueBoard,theCompanyhassufficientSection108taxcreditandtax
exempt income arising from the 1999 tax waiver year at 31 December 2009 to distribute all of its retained earnings asfrankeddividendsandexemptdividends,asthecasemaybe.
The Company may however elect for early migration to the single-tier company income tax system enacted via the Finance Act 2007, under which retained earnings are distributable as exempt dividends. The system, which is effective from 1 January 2008, allows for a transitional period of six years. Unless so migrated to the system, the Section 108 tax credit will be available to the Company until such time the credit is fully utilised or upon the expiry of the transitional period on 31 December 2013, whichever is earlier.
13. Deferred tax liabilities
Recognised deferred tax liabilities Deferred tax liabilities are attributable to the following:
Assets Liabilities Net 2009 2008 2009 2008 2009 2008Group RM RM RM RM RM RM
Property, plant and equipment - - 10,458,500 6,875,900 10,458,500 6,875,900Allowances - (250,000 - - - (250,000Unrealised inter-company profitonconsolidation (91,000 (95,000 - - (91,000 (95,000
Tax(assets)/liabilities (91,000 (345,000 10,458,500 6,875,900 10,367,500 6,530,900Setoff 91,000 345,000 (91,000 (345,000 - -
Net tax liabilities - - 10,367,500 6,530,900 10,367,500 6,530,900
Liabilities 2009 2008Company RM RM
Property, plant and equipment 10,420,000 6,838,000Allowances - (250,000
Deferred tax liabilities 10,420,000 6,588,000
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13. Deferred tax liabilities (continued)
Movements in temporary differences during the year are as follows:
Recognised At Recognised At in income 31.12.2008/ in income At 1.1.2008 statement 1.1.2009 statement 31.12.2009 RM RM RM RM RMGroup
Property, plant and equipment 6,295,600 580,300 6,875,900 3,582,600 10,458,500Allowances (300,000 50,000 (250,000 250,000 -Unrealised inter-company profitonconsolidation (132,500 37,500 (95,000 4,000 (91,000
5,863,100 667,800 6,530,900 3,836,600 10,367,500
(Note18) (Note18)Company
Property, plant and equipment 6,264,000 574,000 6,838,000 3,582,000 10,420,000Allowances (300,000 50,000 (250,000 250,000 -
5,964,000 624,000 6,588,000 3,832,000 10,420,000
(Note18) (Note18)
14. Trade and other payables Group Company 2009 2008 2009 2008 Note RM RM RM RM TradeTrade payables 52,458,502 44,259,531 48,151,206 36,432,188Amount due to contract customers 10 115,412,153 102,198,293 115,412,153 102,198,293Progress billings 20,448 19,417 - - 167,891,103 146,477,241 163,563,359 138,630,481 Non-tradeAccrued expenses 2,718,279 2,386,770 2,627,194 2,250,953 170,609,382 148,864,011 166,190,553 140,881,434
Included in amount due to contract customers of the Group and of the Company at 31 December 2009 were advances receivedofRM58,958,164(2008:RM43,947,588).
15. Revenue and cost of sales Group Company 2009 2008 2009 2008 Note RM RM RM RM
Revenue - contract revenue 345,641,708 277,192,326 345,641,708 277,081,670- sale of development properties 29,379,293 31,876,410 - - 375,021,001 309,068,736 345,641,708 277,081,670
Cost of sales - contract costs 265,925,951 218,729,940 265,925,951 218,680,816- property development costs 21,649,798 22,470,015 - - 287,575,749 241,199,955 265,925,951 218,680,816
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16. Profit before taxation
Group Company 2009 2008 2009 2008 Note RM RM RM RM
Profit before tax is arrived at after charging:
Amortisation of prepaid lease payments 4 25,470 25,470 25,740 25,470Auditors’ remuneration - statutory audit 63,000 53,000 47,000 40,000 - other services 14,000 14,000 14,000 14,000Depreciation of property, plant and equipment 3 487,180 456,642 445,220 415,546Personnel expenses (includingkeymanagementpersonnel): - Contributions to the Employees Provident Fund 1,258,266 1,153,374 1,173,427 1,025,509 - Wages, salaries and others 14,664,097 13,312,594 13,744,390 12,070,264Property, plant and equipment written off 124,310 105,678 124,153 104,729Realised foreign exchange loss 41 25 41 25Rental expenses on property leases 102,745 65,700 85,945 60,900
and after crediting:
Gain on disposal of property, plant and equipment 547,160 64,987 547,160 64,987 Hire of plant and machinery 347,578 57,946 347,578 57,946Realised foreign exchange gain - - - -Rental income from property subleases 258,000 261,400 258,000 247,000
17. Key management personnel compensation
Compensationstokeymanagementpersonnelcomprise:
Group Company 2009 2008 2009 2008 RM RM RM RM Directors- Fees 160,000 160,000 160,000 160,000- Remuneration 3,285,900 3,103,350 3,285,900 3,103,350- Employees Provident Fund 624,327 584,271 624,327 584,271- Other short-term employee benefits* 66,250 66,250 66,250 66,250 4,136,477 3,913,871 4,136,477 3,913,871 Other key management personnel- Short-term employee benefits 3,257,348 2,927,131 3,013,818 2,448,951
Otherkeymanagementpersonnelcomprisepersons,other than theDirectorsofGroupentities,havingauthorityandresponsibility for planning, directing and controlling the activities of the entity either directly or indirectly.
* Directors’othershort-termemployeebenefitsincludetheestimatedmonetaryvalueofbenefits-in-kindenjoyedbytheDirectors.
18. Tax expense
Recognised in the income statements
Group Company 2009 2008 2009 2008 RM RM RM RM Current tax expense Malaysian - current year 15,438,142 13,951,000 13,737,000 11,823,000 - prioryears (29,178 (69 (31,094 (3,674 15,408,964 13,950,931 13,705,906 11,819,326 Deferred tax expense (Note 13) - current 3,836,600 895,300 3,832,000 860,000 - prior - 28,000 - 28,000 -effectofchangesintaxrates - (255,500 - (264,000 3,836,600 667,800 3,832,000 624,000 19,245,564 14,618,731 17,537,906 12,443,326
Reconciliation of effective tax expense
Group Company 2009 2008 2009 2008 RM RM RM RM Profit for the year 56,322,991 41,839,128 51,237,352 35,613,847Total tax expense 19,245,564 14,618,731 17,537,906 12,443,326
Profit excluding tax 75,568,555 56,457,859 68,775,258 48,057,173
TaxatMalaysiantaxrateof25%(2008:26%) 18,892,000 14,679,000 17,194,000 12,495,000Effectoflowertaxrateforasubsidiary* - (30,000 - -Effectofchangeintaxrate** - (255,500 - (264,000Non-deductible expenses 382,742 197,300 375,000 188,000
19,274,742 14,590,800 17,569,000 12,419,000(Over)/Underprovisioninprioryears (29,178 27,931 (31,094 24,326
Tax expense 19,245,564 14,618,731 17,537,906 12,443,326
* The subsidiaries, which have ceased to be small medium enterprises, are subject to corporate tax at 25% on all their chargeable income in the current financial year. In contrast, they were subject to corporate tax at 20% on the first RM500,000 and 26% on the remainder of their respective chargeable income in the last financial year.
** The adjustment was due to a change in the corporate tax rate from 27% in year of assessment 2007 to 26% in year of assessment 2008 and 25% for subsequent years of assessment.
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19. Earnings per ordinary share - Group
Basic earnings per ordinary shareThe calculation of basic earnings per ordinary share at 31 December 2009 was based on the profit attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, as follows:
Group 2009 2008 RM RM
Profit attributable to ordinary shareholders 56,323,850 41,839,128
Weighted average number of ordinary shares 2009 2008
Issuedordinarysharesaftersharesboughtbackat1January 550,295,100 555,137,000Effect of ordinary shares purchased in:- January (657,500 -- March (6,500 (873,000- April - (40,500- May - (87,500- June - (109,000- July - (49,600- August (24,000 (26,000- September - (401,400- October - (184,500- November - (2,500
Weighted average number of ordinary shares at 31 December 549,607,100 553,363,000
Basic/dilutedearningsperordinaryshare(sen) 10.25 7.56
20. DividendsDividends recognised in the current year by the Company are: Sen Total per share amount Date of (net of tax) RM payment2009 Interim 2009 ordinary 0.75 4,121,227 8 October 2009Final 2008 ordinary 0.45 2,473,060 9 June 2009
6,594,287
2008Interim 2008 ordinary 1.184 6,544,291 8 October 2008Final 2007 ordinary 1.184 6,558,324 9 June 2008 13,102,615
After the balance sheet date, the Directors have proposed the following dividends which will be paid upon being approved by shareholders and recognised in subsequent financial statements: Sen Total per share amount (net of tax) RM
Final ordinary dividend - 2009 0.75 4,121,000Special dividend - 2009 0.30 1,648,000
5,769,000
The dividends per ordinary share as disclosed in the income statements relates to the total dividends declared or proposed for the financial year.
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21. Capital and other commitments
Group Company 2009 2008 2009 2008 RM RM RM RM Property, plant and equipmentContracted but not provided for Within one year 12,341,000 8,544,000 4,727,000 -
22. Segmental reportingSegment information is presented in respect of the Group’s business segments and is based on the Group’s management and internal reporting structure.
The activities of the Group are carried out in Malaysia and as such, segmental reporting by geographical locations is not presented.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise interest income and corporate tax expense.
Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment. Business segmentsThe Group comprises the following main business segments:
Construction : Marineandcivilengineeringworksandconstruction.
Property development : Development of residential and commercial properties.
Construction Property development Consolidated 2009 2008 2009 2008 2009 2008 RM RM RM RM RM RM
Total segment revenue 345,641,708 277,192,326 29,379,293 31,876,410 375,021,001 309,068,736
Segment result 67,355,111 47,503,411 6,725,597 8,216,063 74,080,708 55,719,474
Interest income 1,487,847 738,385 Taxexpense (19,245,564 (14,618,731
Profit for the year 56,322,991 41,839,128
Segment assets 366,827,045 285,526,359 110,928,524 116,082,020 477,755,569 401,608,379
Segment liabilities 180,757,695 150,928,033 4,837,329 8,038,836 185,595,024 158,966,869
Capital expenditure 29,094,190 18,116,085 24,388 97,215 29,118,578 18,213,300
Depreciation 5,362,301 4,332,972 41,961 40,954 5,404,262 4,373,926
Amortisation 25,470 25,470 - - 25,470 25,470
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23. Financial instruments The Group and the Company have established a risk management framework with which, and undertake ongoingexercise,toidentify,assessandmanagekeyfinancialrisks.
Credit risksMost of the construction projects undertaken by theGroup and theCompany are government funded. TheGroup’sexposuretocreditriskforpropertydevelopmentislowastitlestopropertiesareonlytransferredtopurchasersuponfullsettlement.
Cashandcashequivalentsareonlyplacedwithlicensedbanks.
Atbalancesheetdatetherewerenosignificantconcentrationsofcreditriskotherthanthefollowing:
Group Company 2009 2008 2009 2008 RM RM RM RM Non-currentAmount due from subsidiaries - - - 69,253,996
CurrentTrade receivables:- Government and its agencies 89,481,628 105,581,629 89,481,628 105,581,629
Themaximumexposuretocreditriskisrepresentedbythecarryingamountofeachfinancialassetinthebalancesheets.
Interest rate risk TheoverdraftfacilitiesoftheGroupandoftheCompanybearinterestrangingfrom1.00%to1.25%(2008:1.00%to1.25%)perannumabovethebank’sbaselendingrateandwerenotutilisedasattheyearend.TheprimaryinterestraterisktowhichtheGroupandtheCompanyareexposedrelatestofixeddepositsplacedwithfinancialinstitutions.
The world economy is gradually recovering from the worldwide economic and financial crisis started in September 2008, exerting an upwards pressure on interest rates. The Group is expected to pay interest at higher rates on borrowings going forward.
Effective interest rates and repricing analysis In respect of interest-earning financial assets, the following table indicates their average effective interest rates at the
balance sheet date and the periods in which they mature, or if earlier, reprice.
Average effective Less than interest rate Total 1 year Group % RM RM Fixed rate instrument 2009 Deposits 1.50 - 2.30 57,695,551 57,695,551
2008 Deposits 2.00 - 3.50 50,950,000 50,950,000
Company
Fixed rate instrument 2009 Deposits 1.50 - 2.30 56,705,551 56,705,551 2008 Deposits 2.00 - 3.50 50,950,000 50,950,000
23. Financial instruments (continued) Foreign currency risk TheGroupandtheCompanyincurforeigncurrencyriskonpurchasesthataredenominatedinacurrencyotherthanRinggitMalaysia.ThecurrenciesgivingrisetothisriskareUnitedStatesDollar(USD),Euro(EUR)andSingaporeDollar(SGD).Asitisnotpossibletopredict,withanycertainty,thefluctuationsintheexchangerates,thisriskismanagedonan ongoing basis. As at balance sheet date, the Group and the Company do not have any outstanding forward foreign currency contracts.
Fair values The carrying amounts in respect of cash and cash equivalents, trade and other receivables, and trade and other payables
approximate fair values due to the relatively short-term nature of these financial instruments.
24. Contingent liability - Company - Unsecured TheCompanyprovides financialguarantees totallingRM8,000,000 (2008:RM8,000,000) tobanks forcredit facilities
extended to a wholly owned subsidiary. The fair value of such financial guarantees is not expected to be material as the facilities have yet to be utilised and the probability of the subsidiary defaulting on the credit lines, when utilised, is remote.
25. Related parties For the purposes of the financial statements, parties are considered to be related to the Group or the Company if the Group
or the Company has the ability, directly or indirectly, to control the parties or exercise significant influence over the parties inmakingfinancialandoperatingdecisions,orviceversa,orwheretheGrouportheCompanyandthepartiesaresubjectto common control or common significant influence. Related parties may be individuals or other entities.
Key management personnel are defined as those persons having authority and responsibility for planning, directing and controllingtheactivitiesoftheGroupeitherdirectlyorindirectly.ThekeymanagementpersonnelincludealltheDirectorsof the Group and certain members of senior management of the Group.
The Company has a related party transaction relationship with:
(i) itssubsidiary;and(ii) companiesconnectedtocertainDirectorsoftheCompany.
SignificantrelatedpartytransactionsoftheGroupandoftheCompany,otherthankeymanagementpersonnelcompensation(seeNote17),areasfollows:
Transaction value 2009 2008 RM RM Group Related parties * Incomeonhiringplantandmachinery (2,804,645 (3,424,071 Purchase of motor vehicles and machinery 724,400 4,291,500 Purchase of consumables and raw materials 21,044,990 19,644,814 Repair and maintenance services 3,044,498 2,995,813 Hire of plant and machinery and vessels 2,155,284 2,345,098 Rental of premises 78,000 78,000 Freight and handling charges 2,456,982 2,370,496
Balancesowingtorelatedpartiesatyearend 9,126,999 6,289,600
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25. Related parties (continued)
Transaction value 2009 2008 RM RM Company
Subsidiary Interest recharged 349 25,353
Related parties (excluding subsidiaries)* Incomeonhiringplantandmachinery (2,804,645 (3,424,071 Purchase of motor vehicles and machinery 724,400 4,215,500 Purchase of consumables and raw materials 19,926,224 17,667,810 Repair and maintenance services 3,003,316 2,965,764 Hire of plant and machinery and vessels 2,081,680 2,116,144 Rental of premises 66,000 78,000 Freight and handling charges 2,419,130 2,334,726
Balancesowingtorelatedpartiesatyearend 8,756,036 5,922,123
* Consisting of companies controlled by/or connected to certain substantial shareholders and/or Directors of the Group and the Company.
The related party transactions were effected based on negotiated terms and all amounts outstanding at the balance sheet date are unsecured and expected to be settled in cash.
26. Significant events during the year On24September2009,theCompanysubscribedfor80%oftheissuedandpaidupsharecapitalofanewlyincorporated
subsidiary,BrightTrechlessEngineeringSdn.Bhd.,comprising800,000ordinarysharesofRM1.00eachtherein,foratotalconsideration of RM800,000 paid for in cash.
On 8 December 2009, the Company subscribed for 999,900 new ordinary shares of RM1.00 each for a total consideration ofRM999,900inanexistingsubsidiary,HSLHydroSdn.Bhd.,paidforincash.
On 22 December 2009, the Company subscribed for 600,000 new redeemable preference shares of RM1.00 each at the issuepriceofRM100.00persharein theotherexistingsubsidiary,HockSengLeeConstructionSendirianBerhad,byconverting RM60,000,000 out of the amount due from the subsidiary for that purpose.
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Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965
In the opinion of the Directors, the financial statements set out on pages 26 to 53 are drawn up in accordance with Financial
Reporting Standards and 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 at 31 December 2009 and of their financial performance and cash flows for the year then ended.
SignedonbehalfoftheBoardofDirectorsinaccordancewitharesolutionoftheDirectors:
…………………………….Dato Yu Chee Hoe
…………………………….Lau Kiing Kang
Kuching,
Date: 25 February 2010
Statutory declaration pursuant to Section 169(16) of the Companies Act, 1965
I, Augustine Law Sek Hian, theofficerprimarilyresponsibleforthefinancialmanagementofHockSengLeeBerhad,do
solemnlyandsincerelydeclarethatthefinancialstatementssetoutonpages26to53are,tothebestofmyknowledgeand
belief,correctandImakethissolemndeclarationconscientiouslybelievingthesametobetrue,andbyvirtueoftheprovisions
of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the above named
inKuchingintheStateofSarawak
on 25 February 2010 .......................................
AugustineLawSekHian
Beforeme:
Independent Auditors’ Report To The Members Of Hock Seng Lee Berhad
Report on the Financial Statements
WehaveauditedthefinancialstatementsofHockSengLeeBerhad,whichcomprisethebalancesheetsasat31December2009ofthe Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 26 to 53.
Directors’ Responsibility for the Financial StatementsThe directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthat are reasonable in the circumstances.
Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The proceduresselecteddependonourjudgment,includingtheassessmentofrisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalcontrolrelevanttotheCompany’spreparationand fair presentation of the financial statements 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 Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and 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 of 31 December 2009 and of their financial performance and cash flows for the year then ended.
Report on Other Legal and Regulatory Requirements
In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following:
a) Inouropinion, theaccountingandother recordsand the registers requiredby theAct tobekeptby theCompanyand thesubsidiariesofwhichwehaveactedasauditorshavebeenproperlykeptinaccordancewiththeprovisionsoftheAct.
b) WearesatisfiedthattheaccountsofthesubsidiariesthathavebeenconsolidatedwiththeCompany’sfinancialstatementsarein 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) Ourauditreportsontheaccountsoftwosubsidiaries,namelyHockSengLeeConstructionsSendirianBerhadandHSLHydroSdn.Bhd.,didnotcontainanyqualificationoranyadversecommentmadeunderSection174(3)oftheAct.Theaccountsoftheremaining,newlyincorporatedsubsidiary,BrightTrenchlessEngineeringSdn.Bhd.,fortheperiodfrom24September2009(dateofincorporation)to31December2009havenotbeenaudited.
Other Matters
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
KPMG Wee Beng ChuanFirmNumber:AF0758 ApprovalNumber:2677/12/10(J)Chartered Accountants Chartered Accountant
Kuching
Date: 25 February 2010
as at 31 December 2009
No Location Land area Tenure / Date Usage Carrying Cost Year of (acres) lease expires (RM’000) acquisition
1 Lot674Block14 200.3 Leasehold/ Commercial/ 34,694 2006 Muara Tuang Land District 05/06/2066 residential Sarawak development
2 Lots 4570-4763, 4767, 5280, 37.8 Leasehold/ Mixed 9,225 2006 5285-5287&5289Block225 20/08/2066 development Kuching North Land District Sarawak
3 Lot1966Block9 31.5 Leasehold/ Commercial 5,670 2005 SalakLandDistrictSarawak 08/04/2098 development 4 PartofLot903Block37 200.0 Leasehold/ Mixed 5,338 2005 KemenaLandDistrictSarawak 25/05/2065 Development
5 Lots8182&Lot8183Block11 6.8 Leasehold/ On-going 5,254 2006 Muara Tebas Land District 20/08/2066 residential Sarawak development 6 Lots110&112Block223 8.9 Leasehold/ On-going 4,995 2000 Kuching North Land District 31/12/2038 residential Sarawak development
7 Lot202PhaseIIIBlock83 9.9 Leasehold/ Residential 4,017 2000 Kuching Central Land District 31/12/2048 development Sarawak 8 Plot3&4ofLot5334Block9 41.9 Leasehold/ Residential 3,909 2005 SalakLandDistrictSarawak 08/04/2098 development
9 Lot 9967 Section 64 1.0 Leasehold/ Commercial 2,827 2000 Kuching Town Land District 31/12/2024 development Sarawak 10 Lot1781Block216 4.7 Leasehold/ Residential 2,727 2002 Kuching North Land District 31/12/2038 development Sarawak
Revaluation Policy on landed propertiesThe Group does not adopt a policy of revaluation on landed properties in respect of the financial year ended 31 December 2009.
Top 10 Properties
Other Information
Material Contracts Involving Directors And Major ShareholdersThere were no material contracts of the Company and it subsidiaries involving directors and substantial shareholders during thefinancialyearended31December2009otherthantherecurrentrelatedpartytransactions(“RPT”)asdisclosedbelow.
Recurrent Related Party TransactionsThe Shareholder mandate for the Group to enter into RPT of revenue and trading nature was renewed at the last Annual GeneralMeetingofHockSengLeeBerhadheldon19May2009.DetailsoftheRPTconductedduringthefinancialyearended 31 December 2009 pursuant to the Shareholder mandate are as follows:
The Related Parties are companies controlled by or connected to certain substantial shareholders and/or Directors of the Company, namely:1. YiiChiHau,YuCheeLieng,YuCheeHoeandYiiCheeSing(Yu/YiiBrothers);and2. LauKiingKangandLauKiingYiing(brothers-in-lawoftheYu/YiiBrothers).
Share Buy-BackTheCompanyhaspurchased798,200ofitsownsharesfromtheopenmarketduringthefinancialyearended31December2009atanaveragepriceofRM0.513perordinaryshare.Allthe798,200sharespurchasedbackbytheCompanyareretainedas treasury shares.
Themonthlybreakdownforthesharespurchasedbackduringthefinancialyearended31December2009aresetoutbelow:-
Therewerenoresaleorcancellationofsharespurchasedbackduringthefinancialyearended31December2009.
Non-Audit FeesThe amount of non-audit fees paid by the Group to the external auditors for professional services rendered for the financial year ended 31 December 2009 was RM14,000.00.
Nature of Transactions
Income on hiring plant and machinery and vessels
Purchase of motor vehicles and machinery
Purchase of consumables and raw materials
Repair and maintenance services
Hire of plant and machinery and vessels
Rental of premises
Freight and handling charges
Related Parties
HockSengCorporationSdnBhdanditssubsidiaries
HockSengLeeTimberSdnBhdanditssubsidiaries
HockSengCorporationSdnBhdanditssubsidiariesMegapronEngineeringSdnBhdLauKouChiong&SonsSdnBhdHockSengLeeRealtySdnBhd
HockSengLeeTimberSdnBhdanditssubsidiaries
HockSengLeeTimberSdnBhdanditssubsidiariesHockSengLeeHeavyIndustriesSdnBhdHockSengCorporationSdnBhdanditssubsidiariesJenteraCeriaSdnBhd
HockSengLeeRealtySdnBhdHockSengLeeTimberSdnBhdHockSengLeeHoldingsSdnBhdanditssubsidiaries
HockSengLeeTimberSdnBhdanditssubsidiariesMegakinaShippingSdnBhdJenteraCeriaSdnBhd
Aggregate Gross value
value of RPT (RM’000)
(2,805)
724
21,045
3,045
2,155
78
2,457
32,309
Month
January 2009March 2009August 2009
Total for 2009
No. of shares purchased and held as treasury shares
717,200 9,000 72,000
798,200
Lowest(RM)
0.4600.4650.955
0.460
Highest(RM)
0.4800.4650.960
0.960
Average(RM)
0.4680.4650.958
0.513
Total Purchase Consideration
(RM)
335,935 4,231 69,503
409,669
Purchase Price
Shareholding Analysis
as at 31 March 2010
Authorised share capital : RM300,000,000 divided into 1,500,000,000 ordinary shares of RM.20 eachIssued and paid-up capital : RM116,535,200 comprising 582,676,000 ordinary shares of RM.20 eachClass of shares : Ordinary Shares of RM0.20 eachVotingrights : One(1)voteperordinaryshareNo. of treasury shares held : 33,179,100 ordinary shares
ANALYSIS BY SIZE OF HOLDINGS
Size of holdings
Less than 100100–1,0001,001–10,00010,001–100,000100,001–lessthan5%ofissuedshares5%andaboveofissuedsharesTOTAL
HockSengLeeEnterpriseSdnBhdA
Yii Chi HauB
Yu Chee LiengDato Yu Chee HoeYii Chee Sing C
AmanahRayaTrusteesBerhad-SkimAmanahSahamBumiputeraEmployeesProvidentFundBoard D
No. of shares308,792,010
8,784,0006,089,2004,533,6003,407,000
60,720,000
36,782,100
No. of shares-
308,792,010*308,792,010*308,792,010*308,792,010*
-
-
%56.1954
1.59861.10810.82500.6200
11.0501
6.6938
%-
56.195456.195456.195456.1954
-
-
Number of shareholders/
depositors
8213
2,0431,198
1164
3,582
Percentage of shareholders/
depositors
0.225.95
57.0433.44
3.240.11
100.00
Number of shares held
268187,522
11,970,90033,411,100
106,683,000397,244,110
549,496,900
Percentage ofissued capital
0.000.032.186.08
19.4272.29
100.00
Dato Yu Chee HoeYii Chi HauB
Yu Chee LiengLau Kiing Kang E
Yii Chee Sing C
Lau Kiing YiingYBSenatorDato’IdrisBinBuangDato’Mohd.NadzirBinMahmudDr Chou Chii MingTuanHjAbangKashimBinAbangMorshidi
No. of shares4,533,6008,784,0006,089,2001,175,0003,407,000
276,000--
120,000-
%0.82501.59861.10810.21380.62000.0502
--
0.0218-
No. of shares308,792,010*308,792,010*308,792,010*
-308,792,010*
-----
%56.195456.195456.1954
-56.1954
-----
SUBSTANTIAL SHAREHOLDERSas shown in the register of substantial shareholders
Direct interests Indirect interests
DIRECTORS’ INTERESTSas shown in the Register of Directors’ Interests
Direct interests Indirect interests
A heldthroughitselfandPublicNominees(Tempatan)SdnBhdB heldthroughhimselfandPublicNominees(Tempatan)SdnBhdC heldthroughhimselfandKenangaNominees(Tempatan)SdnBhdD heldthroughitselfandHSBCNominees(Tempatan)SdnBhd–NomuraAssetMgmtMalaysiaforEmployeesProvidentFundE heldthroughhimselfandTANominees(Tempatan)SdnBhd
* DeemedinterestedbyvirtueofhissubstantialshareholdinginHockSengLeeEnterpriseSdnBhd
TOP 30 SECURITIES ACCOUNT HOLDERS
Name
1 HOCKSENGLEEENTERPRISESENDIRIANBERHAD
2 PUBLIC NOMINESS (TEMPATAN) SDN BHD – PLEDGED SECURITIESACCOUNTFORHOCKSENGLEEENTERPRISESDNBHD
3 AMANAHRAYATRUSTEESBERHAD–SKIMAMANAHSAHAMBUMIPUTERA
4 EMPLOYEESPROVIDENTFUNDBOARD
5 KENANGA NOMINEES (TEMPATAN) SDN BHD – PLEDGED SECURITIESACCOUNT FOR NGU SOON HIENG
6 MAYBANNOMINEES (ASING)SDNBHD–NOMURASINGAPORELIMITEDFOR HIDEAKI TSUOKA
7 HSBCNOMINEES(TEMPATAN)SDNBHD–NOMURAASSETMGMTMALAYSIAFOR EMPLOYEES PROVIDENT FUND
8 YU CHEE LIENG
9 PUBLIC NOMINEES (TEMPATAN) SDN BHD – PLEDGED SECURITIESACCOUNT FOR YII CHI HAU
10 AMANAHRAYA TRUSTEES BERHAD – PUBLIC ISLAMIC OPPORTUNITIESFUND
11 YU CHEE HOE
12 MAYBANNOMINEES (ASING)SDNBHD–NOMURASINGAPORELIMITEDFOR GAN OWEN SENG YEW
13 YII CHI HAU
14 AMANAHRAYATRUSTEESBERHAD–PUBLICSMALLCAPFUND
15 KENANGA NOMINEES (TEMPATAN) SDN BHD – PLEDGED SECURITIESACCOUNT FOR YII CHEE SING
16 UNIVERSAL TRUSTEE (MALAYSIA) BERHAD – CIMB ISLAMIC SMALL CAPFUND
17 AMANAHRAYATRUSTEESBERHAD–PUBLICISLAMICEQUITYFUND
18 PERTUBUHANKESELAMATANSOSIAL
19 AMANAHRAYATRUSTEES BERHAD –CIMB ISLAMIC EQUITYAGGRESSIVEFUND
20 KUMPULAN WANG SIMPANAN PEKERJA
21 TANOMINEES (TEMPATAN) SDNBHD– PLEDGED SECURITIESACCOUNTFOR LAU KIING KANG
22 MAYBANNOMINEES(TEMPATAN)SDNBHD–MAYBANTRUSTEESBERHADFORCIMB-PRINCIPALSMALLCAPFUND
23 CITIGROUPNOMINEES (ASING) SDN BHD – CBNY FORDFA EMERGINGMARKETS SMALL CAP SERIES
24 AMANAHRAYATRUSTEESBERHAD–PBISLAMICEQUITYFUND
25 PUBLICNOMINEES(TEMPATAN)SDNBHD–PBTRUSTEESERVICESBERHAD(CIMBIBIF)
26 ONG TOO @ ONG OH CHOO
27 KURNIAINSURANS(MALAYSIA)BERHAD
28 CHAN LING LEE
29 SBBNOMINEES(TEMPATAN)SDNBHD–MANULIFEINSURANCE(MALAYSIA)BERHAD–(EQUITYFUND)
30 CITIGROUPNOMINEES(TEMPATAN)SDNBHD–INGINSURANCEBERHAD(DANASURIAEKT)
TOTAL
No. of Shares held
181,843,310
126,948,700
60,720,000
27,732,100
18,612,500
8,326,000
7,550,000
6,089,200
5,244,000
4,663,500
4,533,600
4,089,000
3,540,000
3,537,300
3,136,000
2,245,800
1,914,900
1,703,600
1,513,000
1,500,000
1,151,000
1,034,200
1,010,300
930,000
925,000
915,000
800,000
721,400
592,500
480,000
484,001,910
Holdings%
33.09
23.10
11.05
5.05
3.39
1.52
1.37
1.11
0.95
0.85
0.83
0.74
0.64
0.64
0.57
0.41
0.35
0.31
0.28
0.27
0.21
0.19
0.18
0.17
0.17
0.17
0.15
0.13
0.11
0.09
88.09
Notice of Annual General Meeting
NOTICE IS HEREBY GIvEN THAT theTwenty-NinthAnnualGeneralMeeting (“AGM”)ofHockSengLeeBerhad (“theCompany”)willbeheldatRiversideMajesticHotel,JalanTunkuAbdulRahman,93100Kuching,Sarawak,Malaysiaat9.00am on 25 May 2010 for the following business:
ORDINARY BUSINESS1. To receive and adopt the Audited Financial Statements for the year ended 31 December 2009
together with the Reports of the Directors and Auditors thereon.
2. Toapprovethepaymentofafinalordinarydividendof5%persharelesstaxat25%fortheyearended 31 December 2009 as recommended by the Directors.
3. Toapprovethepaymentofaspecialdividendof2%persharelesstaxat25%fortheyearended31 December 2009 as recommended by the Directors.
4. ToapprovethepaymentofDirectors’feeofuptoRM175,000(2009:RM160,000)forthefinancialyear ending 31 December 2010.
5. To re-elect as a Director, Mr Yu Chee Lieng, who retires by rotation pursuant to Article 115 of the Company’s Article of Association.
6. Tore-electasaDirector,Dato’Mohd.NadzirBinMahmud,whoretiresbyrotationpursuanttoArticle 115 of the Company’s Article of Association.
7. Tore-electasaDirector,TuanHajiAbangKashimBinAbangMorshidi,whoretiresbyrotationpursuant to Article 115 of the Company’s Article of Association.
8. Tore-appointMessrsKPMGasauditorsoftheCompanyandtoauthorisetheBoardofDirectorstofix their remuneration.
SPECIAL BUSINESSTo consider and if thought fit, pass the following Ordinary Resolutions:
9. PROPOSED RENEWAL OF AUTHORITY FOR SHARE BUY-BACK “THAT, subject to the Companies Act, 1965, the Company’s Articles of Association and the
requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) and any other relevantauthorities, the Company be and is hereby authorised to purchase such number of ordinary shares ofRM0.20each(“Shares”)intheCompany(“ProposedShareBuy-Back”)asmaybedeterminedby theDirectorsof theCompany (“Directors”) from time to time throughBursaMalaysiauponsuch terms and conditions as the Directors may deem fit, necessary and expedient in the interest of the Company provided that the total aggregate number of Shares purchased or to be purchased pursuant to this resolution shall not exceed ten percent (10%) of the total issued and paid-upshare capital of the Company AND THAT an amount not exceeding the Company’s latest audited retained earnings of RM148,803,214 as at 31 December 2009, be allocated by the Company for the ProposedShareBuy-BackAND THAT authority be and is hereby given to the Directors to decide in their absolute discretion to either retain the Shares purchased by the Company as treasury shares tobeeitherdistributedassharedividendsorresoldonBursaMalaysiaorsubsequentlycancelled,or to cancel the Shares so purchased, or a combination of both AND THAT the Directors of the Companybeandareherebyauthorisedtoactandtotakeallsuchstepsandtodoallthingsastheymay deem necessary or expedient to implement, finalise and to give full effect to the Proposed ShareBuy-Back.
AND FURTHER THAT the authority hereby given shall commence immediately upon passing of this ordinary resolution and shall continue in force until:-
(a) the conclusion of the next AGM of the Company atwhich time it shall lapse, unless byordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subjecttoconditions;
(b) theexpirationoftheperiodwithinwhichthenextAGMisrequiredbylawtobeheld;
(c) revokedorvariedbyordinaryresolutionpassedbytheshareholderingeneralmeeting,
whicheveroccursfirst”
RESOLUTION1
2
3
4
5
6
7
8
9
NOTICE OF DIvIDEND ENTITLEMENT DATE AND PAYMENTNOTICEISALSOHEREBYGIVENTHAT,subjecttotheapprovaloftheshareholdersattheTwenty-NinthAGMafinalordinarydividendof5%persharelessincometaxat25%andaspecialdividendof2%persharelessincometaxat25%inrespectofthe year ended 31 December 2009 will be paid on 15 June 2010 to Depositors whose name appear in the Record of Depositors on 3 June 2010.
A Depositor shall qualify for entitlement to the Dividend only in respect of:
(a) SharestransferredintotheDepositor’sSecuritiesAccountbefore4.00pmon3June2010inrespectoftransfers;and
(b) SharesboughtonBursaMalaysiaSecuritiesBerhadonacumentitlementbasisinaccordancewiththeRulesofBursaMalaysiaSecuritiesBerhad.
ByOrderoftheBoardYuCheeHung(MIANo.3926)AugustineLaw(MIANo.10087)Company Secretaries
Kuching27 April 2010
10. PROPOSED RENEWAL OF SHAREHOLDER MANDATE IN RELATION TO THE RELATED PARTY TRANSACTIONS INvOLvING RECURRENT TRANSACTIONS OF A REvENUE OR TRADING NATURE(“Proposed Shareholder Mandate”)
“THATpursuanttoParagraph10.09ofChapter10oftheListingRequirementsofBursaMalaysia,
the Directors of the Company be and are hereby empowered to enter into recurrent related party transactions of revenue or trading nature of the activities as set out in Section 3.1.1 of the Circular to shareholders which are necessary for its day-to-day operations and are in the ordinary course of business and are on terms not more favourable to the related party than those generally available to the public at any time until:-
(a) theconclusionofthenextAGMoftheCompany,atwhichtimetheshareholdermandatewilllapse, unless by a resolution passed at the meeting, the authority is renewed;
(b) theexpirationoftheperiodwithinwhichthenextAGMafterthedateitisrequiredtobeheldpursuanttosection143(1)oftheCompaniesAct,1965(butshallnotextendtosuchextensionasmaybeallowedpursuanttosection143(2)oftheCompaniesAct,1965);or
(c) revokedorvariedbyresolutionpassedbytheshareholdersingeneralmeeting,
whichever is the earlier, upon such terms and conditions as the Directors of the Company, may in their absolute discretion deem fit.
AND THAT the Directors of the Company be and are hereby authorised to complete and to do
all such acts and things they may consider expedient or necessary to give effect to the Proposed ShareholderMandate.”
11. To consider and if thought fit, to pass the following Special Resolution in accordance with section 129(6)oftheCompaniesAct1965:
“THATDrChouChiiMing,whoretirespursuanttoSection129(2)oftheCompanyAct1965beandisherebyre-appointedasDirectoroftheCompanytoholdofficeuntilthenextAGM.”
12. To transact any other business for which due notice shall have been given in accordance with the Company’s Articles of Association and the Companies Act, 1965.
10
11
GENERAL MEETING RECORD OF DEPOSITORSForthepurposeofdeterminingamemberwhoshallbeentitledtoattendthisAGM,theCompanyshallrequestBursaMalaysiaDepositorySdnBhd to issueaGeneralMeetingRecordofDepositorsasat18May2010.Onlyadepositorwhosenameappears on the General Meeting Record of Depositors as at 18 May 2010 shall be entitled to attend this AGM or to appoint proxies to attend and/or vote on his/her behalf.
PROXYA member of the Company entitled to attend and vote at this meeting is entitled to appoint a proxy, who may or may not be a membertoattendandvoteinhisstead,subjecttotheprovisionofsection149(1)oftheCompaniesAct1965.Whereamemberappoints two proxies, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. The instrument appointing a proxy in the case of an individual shall be signed by the appointor, or his attorney duly authorised in writing and in the case of a corporation the instrument appointing a proxy must be under Seal or under the hand of an attorney duly authorised in writing. The instrument appointing a proxy must be completed, signed and deposited attheRegisteredOfficeoftheCompanyatLot1004,KwongLeeBankRoad,93450Kuching,Sarawak,Malaysianotlessthanforty-eight(48)hoursbeforethetimesetforholdingthemeetingoranyadjournmentthereof.
ABSTENTION FROM vOTINGThe payment of Directors’ fee shall be distributed to the Non-executive Directors. All the Non-executive Directors of the Company who are shareholders of the Company will abstain from voting on Resolution 4 concerning the payment of Directors’ Fee.
TheDirectorsandmajorshareholdersandpersonsconnectedtothemasdisclosedin3.2oftheCirculartoShareholderswillabstain from voting on Resolution 10 pertaining to the Proposed Renewal of Shareholder Mandate in relation to the related party transactions involving recurrent transactions of a revenue or trading nature.
EXPLANATORY NOTES ON SPECIAL BUSINESSOrdinary Resolution Pursuant To Proposed Renewal Of Authority For Share Buy-Back The proposed Ordinary Resolution 9, if passed, will give the Directors of the Company authority to purchase the Company’s SharesthroughBursaMalaysiaSecuritiesBerhaduptoten(10%)oftheissuedandpaidupsharecapitaloftheCompanyandthefundallocatedwhichshallnotexceedthetotalretainedearningsoftheCompany.Thisauthority,unlessrevokedorvariedat a general meeting, will expire at the conclusion of the next AGM of the Company. Further information on the Proposed RenewalofAuthorityforShareBuy-BackissetoutintheCirculartoShareholdersoftheCompanydated27April2010whichis dispatched together with the Company’s Annual Report 2009.
Ordinary Resolution Pursuant To Proposed Renewal of Shareholder Mandate In Relation To Related Party TransactionsFor Ordinary Resolution 10, further information on the Proposed Renewal of Shareholder Mandate in relation to the related party transactions involving recurrent transactions of a revenue or trading nature is set out in the Circular to Shareholders of the Company dated 27 April 2010 which is dispatched together with the Company’s Annual Report 2009. This mandate, if renewed,willexpireattheconclusionofthenextAGMoftheCompanyunlessrevokedorvariedatageneralmeeting.
Special Resolution pursuant to Section 129(6) of the Companies Act 1965There-appointmentofDrChouChiiMing,apersonwhohasattainedtheageofseventy(70)yearsoldtoholdofficeuntiltheconclusionofthenextannualgeneralmeetingoftheCompanyshalltakeeffectiftheproposedResolution11hasbeenpassedbyamajorityofnotlessthanthree-fourth(3/4)ofsuchmembersasbeingentitledtovoteinpersonorwhoseproxiesare allowed, by proxy at the 29th AGM.
FURTHER DETAILS OF DIRECTORS WHO ARE STANDING FOR RE-ELECTION/RE-APPOINTMENTDetails of Directors who are standing for re-election/re-appointment are set out in the Profile of Directors on pages 12 to 13 of the Annual Report 2009. Information relating to the respective Director’s interest in the securities of the Company and its subsidiaries is set out on pages 23 to 24 of the Annual Report 2009.
HOCK SENG LEE BERHAD
FORM OF PROXY
(CompanyNo.:045556-X)
I/We(fullnameasperNRIC/companynameinblockcapitals)________________________________________________________
NRIC/CompanyNo. _____________________________________________________________________________________________
of (full address) _________________________________________________________________________________________________
being a member of HOCK SENG LEE BERHAD herebyappoint(fullnameasperNRICinblockcapitals)________________
______________________________________________________________________________NRIC____________________________
of (full address) _________________________________________________________________________________________________
or failinghim/her_____________________________________________________________NRIC____________________________
of (full address) _________________________________________________________________________________________________
as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on
25May2010oratanyadjournmentthereof.
RESOLUTIONS
1. Adoption of the Audited Financial Statements for the year ended 31 December 2009 together with the Reports of the Directors and Auditors thereon
2. Declarationoffinalordinarydividendof5%persharelesstaxat25%fortheyearended 31 December 2009
3. Declarationofspecialdividendof2%persharelesstaxat25%fortheyearended 31 December 2009
4. Approval of the payment of Directors’ fees of up to RM175,000 for the financial year ending 31 December 2010
5. Re-election of Mr Yu Chee Lieng as Director6. Re-electionofDato’Mohd.NadzirBinMahmudasDirector7. Re-electionofTuanHajiAbangKashimBinAbangMorshidiasDirector8. Re-appointment of Messrs KPMG as auditors of the Company and to authorise the
BoardofDirectorstofixtheirremuneration.9. RenewalofAuthorityfortheProposedShareBuy-Back10. Renewal of Shareholder Mandate in relation to the related party transactions
involving recurrent transactions of a revenue or trading nature11. Re-appointment of Dr Chou Chii Ming as Director
FOR AGAINST
(Pleaseindicatewitha“”inthespaceabovehowyouwishyourvotetobecast. Ifnospecificdirectionastovotingisindicatedabove,theproxywillvoteorabstainfromvotingashe/shethinksfit.)
Dated this ................. day of ......................……………… 2010
Signature of shareholder
NOTES:A member of the Company entitled to attend and vote at this meeting is entitled to appoint a proxy, who may or may not be a member, to attendandvoteinhisstead,subjecttotheprovisionofsection149(1)oftheCompaniesAct1965.Whereamemberappointstwoproxies,theappointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. The instrument appointing a proxy in the case of an individual shall be signed by the appointor, or his attorney duly authorised in writing and in the case of a corporation the instrument appointing a proxy must be under Seal or under the hand of an attorney duly authorised in writing. The instrument appointing a proxymustbecompleted,signedanddepositedattheRegisteredOfficeoftheCompanyatLot1004,KwongLeeBankRoad,93450Kuching,Sarawak,Malaysianotlessthanforty-eight(48)hoursbeforethetimesetforholdingthemeetingoranyadjournmentthereof.
No. of shares held
The Company SecretaryHOCK SENG LEE BERHADLot1004,JalanKwongLeeBank93450 KuchingSarawakMalaysia
stamp
HOCK SENG LEE BERHAD045556-X
We’re building yourfuturetoday
Annual Report 2009
HOCK SENG LEE BERHAD
Lot 1004, Jalan Kwong Lee Bank 93450 Kuching, Sarawak,MalaysiaTel : 6 082 - 332 755 Fax : 6 082 - 484 653Email : [email protected]
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