Connect County 2018- financial-6 - MalaysiaStock.Biz › GetReport.aspx?file...No. 1, Jalan PJU 7/3...

(618933-D)CONNECT SECURITY SOLUTION SDN BHDIBEX PICTURES ENTERTAINMENT SDN BHD

RAPID CONN (SHENZHEN) CO LTD

RAPID CONN INC

RAPID CONN (S) PTE LTD

Level 16, BO1-A, Menara 2,No. 3, Jalan Bangsar, KL Eco City,59200 Kuala Lumpur, Malaysia.Tel: +6 03 2202 3399 Ext: 1613Fax: +6 03 2202 2244

No. 12, Long Shan Road, 6th Lane, Luo Tian Social DistrictYan Luo Street, Bao An DistrictShenzhen City 518105, ChinaTel: +86 755 2972 6660Fax: +86 755 2972 6744

SHENZHEN RAPID POWER CO LTD2-4 Floor, B Building, Tongfuhanhaida Creative Zone10th, Jiangfu Road, XinZhuang Area, MaTian TownGuangMing district, Shenzhen City, ChinaTel: +86 755 3321 0968Fax: +86 755 3321 0969

19571 Pauling, Foothill RanchCA 92610-2619 USATel: +1 949 951 1020 Fax: +1 949 951 8265

4012 Ang Mo Kio Ave 10 #03-07Tech Place 1 Singapore 569628Tel: +65 6841 4517 Fax: +65 6841 4519

(618933-D)

W W W . C O N N E C T C O U N T Y. C O M

Level 16, BO1-A, Menara 2,No. 3, Jalan Bangsar, KL Eco City,

59200 Kuala Lumpur, Malaysia.Tel: +6 03 2202 3399 Ext: 1613

Fax: +6 03 2202 2244

CO

NN

ECTC

OU

NTY H

OLD

ING

S BERHA

D (618933-D

)

A

NN

UA

L REPORT 2018

ANNUAL REPORT2018

Corporate Information Corporate Profile and Structure Chairman’s Statement Board of Directors’ Profile Senior Management’s (Corporate) Profile Statement on Management Discussion and AnalysisCorporate Governance Overview StatementSustainability Statement Audit Committee Report Statement on Risk Management and Internal ControlAdditional Compliance Information Statement on Directors’ Responsibility for Preparing the Financial StatementsDirectors’ Report Statement by Directors Statutory Declaration Independent Auditors’ Report to the Members Statements of Profit or Loss Statements of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Statement of Cash FlowsNotes to the Financial Statements Statistics of ShareholdingsStatistics of WarrantholdingsNotice of Annual General MeetingProxy Form Enclosed

23571417293946515859606565667172737475777981144148152

TA B L E O FC O N T E N T S

CONNECTCOUNTY HOLDINGS BERHAD ( Company No. 618933 - D )

2

CORPORATEINFORMATION

BOARD OF DIRECTORS

MAJOR GENERAL DATO’ MAMAT ARIFFIN BIN ABDULLAH (R) | Independent Non-Executive Chairman (Appointed w.e.f. 20 March 2019)

ANG CHUANG JUAY | Executive Deputy Chairman

WONG POOI FATT | Executive Director (Appointed w.e.f. 8 March 2019)

LEE SU LIN | Executive Director (Appointed w.e.f. 8 March 2019)

LIM BEE SAN | Independent Non-Executive Director

THONG MEI MEI | Independent Non-Executive Director

NG KEOK CHAI | Independent Non-Executive Director (Appointed w.e.f. 29 March 2019)

TAN SRI DATO’ AHMAD FUZI BIN ABDUL RAZAK | Non-Independent Non-Executive Chairman (Resigned w.e.f. 8 March 2019)

CHANG CHOON MING | Non-Independent Non-Executive Director (Resigned w.e.f. 8 March 2019)

TAN SZE CHONG | Non-Independent Non-Executive Director (Appointed w.e.f. 1 November 2018 and resigned w.e.f. 8 March 2019)

MOK SHIAW HANG | Independent Non-Executive Director (Resigned w.e.f. 29 March 2019)

REMUNERATION COMMITTEE

Lim Bee San (Chairperson)

Major General Dato’ Mamat Ariffin Bin Abdullah (Appointed w.e.f. 29 March 2019)

Thong Mei Mei(Appointed w.e.f. 28 November 2018)

Ng Keok Chai(Appointed w.e.f. 29 March 2019)

Ang Chuang Juay(Resigned w.e.f. 28 November 2018)

RISK MANAGEMENT COMMITTEE

Ang Chuang Juay (Chairman)Thong Mei MeiLim Yew Chai

AUDITORS

Moore Stephens Associates PLTChartered AccountantsUnit 3.3A, 3rd Floor, Surian TowerNo. 1, Jalan PJU 7/3Mutiara Damansara47810 Petaling JayaSelangor Darul EhsanTel : +6 03 7728 1800Fax : +6 03 7728 9800

SHARE REGISTRAR

Securities Services (Holdings) Sdn. Bhd.Level 7, Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala LumpurWilayah PersekutuanTel : +6 03 2084 9000Fax : +6 03 2094 9940 FORM OF LEGAL ENTITY

Incorporated in Malaysia on the 18 June 2003 as a private limited company

Converted to a public limited company on 19 December 2003, and listed on the ACE Market on 20 October 2005

COMPANY SECRETARY

Chua Siew Chuan(MAICSA 0777689)

Cheng Chia Ping(MAICSA 1032514)

AUDIT COMMITTEE

Thong Mei Mei (Chairperson)

Lim Bee San

Major General Dato’ Mamat Ariffin Bin Abdullah (Appointed w.e.f. 29 March 2019)


Mok Shiaw Hang (Resigned w.e.f. 29 March 2019)

NOMINATION COMMITTEE

Major General Dato’ Mamat Ariffin Bin Abdullah (Chairman)(Appointed w.e.f. 29 March 2019)

Lim Bee San

Thong Mei Mei(Appointed w.e.f. 24 May 2018)


Mok Shiaw Hang(Resigned w.e.f. 29 March 2019)

COMPANY NUMBER

618933-D

REGISTERED OFFICE

Level 7, Menara MileniumJalan DamanlelaPusat Bandar DamansaraDamansara Heights50490 Kuala LumpurWilayah Persekutuan

Tel : +6 03 2084 9000Fax : +6 03 2094 9940

BUSINESS OFFICE

Level 16, BO1-A, Menara 2No. 3, Jalan BangsarKL Eco City59200 Kuala Lumpur Wilayah Persekutuan

Tel : +6 03 2202 3399 Ext: 1613 Fax : +6 03 2202 2244

STOCK EXCHANGE LISTING

ACE Market ofBursa Malaysia Securities BerhadBursa Code : 0102Reuters Code : 0102.KLBloomberg Code : CCHB MKDate of Listing : 20 October 2005

PRINCIPAL BANKERS

Malayan Banking Berhad

CORPORATE WEBSITE

http://www.connectcounty.com

A N N U A L R E P O R T 2 0 1 8

3

CORPORATEPROFILE AND STRUCTURE

ConnectCounty Holdings Berhad (“CCHB” or “the Company”) is an investment holding company headquartered in Kuala Lumpur, Malaysia. The Company’s division operating in China, the United States of America (“USA”) and Singapore is collectively known as the Rapid Conn Group (“RCG”). The Company also has subsidiaries in Malaysia namely Connect Security Solution Sdn. Bhd. (“CSS”) and IBEX Pictures Entertainment Sdn. Bhd. (“IBEX”).

RCG consists of Rapid Conn (Shenzhen) Co. Ltd. (“RCC”), Rapid Conn Inc. (“RCI”), Rapid Conn (S) Pte. Ltd. (“RCS”), Shenzhen Rapid Power Co. Ltd. (“RCP”) and Shenzhen Rapid Resin Co. Ltd. (“RCR”). RCP is an associate company of RCC whereas RCR is sub-subsidiary of the Company, being majority owned by RCC.

The RCG is an integrated provider of interconnect solutions. The principal activities are designing, manufacturing, sales and services of cables, connectors, injection moulded cable harnesses and related products. It also includes manufacture and sales of high-end cable extrusion, thermoplastic and elastomer materials.

The advanced interconnect and cable solution serve customers ranging from small and medium sized companies to large multinational corporations and caters for diverse industries and application globally. Our key industries include connected homes and offices (i.e. set-top boxes and broadband), smart connected devices (i.e. mobile and wearables), white goods (i.e. kitchen appliances), automotive, interactive kiosks and security, medical and others.

^ The Company had disposed 40% of total share capital of CSS. The transfer of shares was completed on 14 February 2018.

* RCP became an associate company following the transfer of shares approved by the State Administration of Industry and Commerce of China on 8 January 2019.

# IBEX was incorporated on 22 March 2019.


4

A key aspect of the RCG’s business model is offering vertically integrated services and is enroute to providing our customers vertically integrated solutions. Our advanced interconnect and cable solutions cater for diverse industries and applications globally. The manufacturing operations and research and development activities are undertaken by RCC, a highly automated Shenzhen-based plant. Research and development activities are also undertaken by the USA-based company, RCI, which also provides customisation for its customers within its own portfolio on an ad-hoc basis.

As an integrated provider of interconnect solutions, we provide solutions covering:

1. Synchronisation of both supply and demand along the lines of production in order to improve production lead time. This is achieved by reducing RCG’s overall reliance on suppliers for raw materials and critical component parts by way of vertical integration;

2. Value-added products and services where we enhance industry standard cables and connectors in terms of additional features, improved product performance and product quality; and

3. Customisation of products where we provide product development inclusive of conceptualisation, design, prototyping, tool building, testing, debugging and tooling, all of which are undertaken based on our customers’ requirements.

The Company in 2018 started cybersecurity business operational under CSS which is providing information technology security consultation, technical assistance on operating computers, training programs and related services.

The Company also incorporated a subsidiary, IBEX for a new business opportunity.

For more information on the RCG, please visit its official website at http://www.rapidconn.org.

CORPORATE PROFILE AND STRUCTURE (cont’d)

A N N U A L R E P O R T 2 0 1 8

5

CHAIRMAN’SSTATEMENT

We involve in interconnect business producing cable connection. An interconnect is a cable connection that seamlessly connects two (2) or more devices and it consists of two (2) main components namely cable assembly and connectors.

The Company and its subsidiaries’ (“the Group”) presence in its core market, the Connected Homes and Offices industry. Despite continued market challenges, we are able to increase the market share in Automotive and White Goods industries.

FINANCIAL PERFORMANCE OVERVIEW

In FYE 2018, the Group recorded a revenue of RM99.6 million or 18.4% decrease as compared to RM122.2 million in the financial year ended 31 December 2017 (“FYE 2017”).

The drop was mainly in United States of America and Singapore segments by 27.9%. and 35.2% respectively, as a result of lower demand in Connected Homes and Offices industry particularly from the video market. We have certain supply of products which has reached the final phase of the projects. Also, during FYE 2018, the slow-down of orders from customers who took the apprehensive view amid global trade tension.

Other factors to the decline in revenue are the price competition in the market and the continuous pressure to lower our prices due to end user expectation. Also, the lower average foreign exchange rates used in 2018 from the sales denominated in United States Dollar (“USD”).

Consequently, the Group’s gross profit and gross profit margin dropped to RM12.2 million and 12.2% in FYE 2018, and the Group recorded a loss before tax (“LBT”) of approximately RM10.0 million in FYE 2018, as compared to FYE 2017 profit before tax of RM52,349/-.

Despite implementation of cost saving initiative, operating losses were also caused by other expenses such as impairment on trade and others receivables. The Group’s results were also affected by higher professional fees and one-off expenses such as write-off of equipment related to certain products which has reached the final phase of the projects, write-off certain assets which are damaged beyond repair and write-off assets related to the thermoplastic elastomers production which ceased operation due to loss of major customers and stringent environmental requirements imposed. Total one-off other expenses were amounted to approximately RM5.1 million.

OPERATIONS OVERVIEW

For the year under review, the Group managed to increase its market penetration in Automotive and White Goods industries despite decrease in market share in its core market, i.e. Connected Homes and Offices.

Expansion into cable extrusion operations being the backward integration strategy enable us to be more self-reliant to ensure the consistency of high product quality while keeping the costs low and manageable, and reliability of delivery.

For more details on the Group’s financial performance and operations, including its various strategic and marketing initiatives, please refer to the Statement of Management Discussion and Analysis in this Annual Report.

On behalf of the Board of Directors, I am pleased to present to you the Annual Report and the Audited Financial Statements of ConnectCounty Holdings Berhad (“CCHB” or “the Company”) for the financial year ended 31 December 2018 (“FYE 2018”).


6

CORPORATE DEVELOPMENT

Diversification plan is our essential long-term strategy to achieve consistent returns over time and reduce overall risk to the Company.

One of the potential diversification’s initiative is venturing into cybersecurity related business. The Company has explored the opportunity in collaboration with experienced partners to this area.

The Board is of the view that the prospect for the business is positive as we see an increase in global incidents of cyber threats and crime; impact from new security legislation and mandates; and increase in outsourcing services in the industry. Despite small-scale activities in 2018, we look forward to future growth in these business opportunities.

On 22 March 2019, we have incorporated a new company namely IBEX Pictures Entertainment Sdn. Bhd. to be ready for a new business venture.

The Company implemented restructuring of operation in Shenzhen Rapid Power Co. Ltd. (“RCP”) and Shenzhen Rapid Resin Co. Ltd. (“RCR”). The details and rationale are as follows:-

The Company’s wholly-owned subsidiary, Rapid Conn (Shenzhen) Co. Ltd. (“RCC”) had disposed of 31% of the equity interests in RCP to the existing business partner. Increase in equity participation is our plan to retain the partner’s expertise and knowledge in the fast-changing technology and environment. Upon the disposal, RCP has ceased to be indirect subsidiary of the Company and in turn, became an associate company during the year.

The Company ceased its thermoplastic elastomers production operated under RCR. The decision was made due to the loss of major customer amid changing in business environment in China and stringent environmental requirements imposed. RCR was in operations until November 2018. The decision to cease RCR’s operation will help to reduce losses to the Company.

APPRECIATION

On behalf of the Board of Directors, I wish to extend my sincere thanks to all our valued customers, suppliers, financiers, business associates, government authorities and shareholders for their continuing support, co-operation and confidence in the Group. I would also like to send my sincere appreciation and gratitude to my fellow Directors (past and present), the Management and staff for their dedication and commitment.

Major General Dato’ Mamat Ariffin Abdullah (R)Independent Non-Executive Chairman5 April 2019

CHAIRMAN’S STATEMENT (cont’d)

A N N U A L R E P O R T 2 0 1 8

7

BOARD OF DIRECTORS’ PROFILE

MAJOR GENERAL DATO’MAMAT ARIFFIN BIN ABDULLAH (R)Independent Non-Executive Chairman

Malaysian, Male, aged 69

Date of Appointment as Director

Length of Service since the Date of Appointment (as at 29 March 2019)

Board Committee(s) Served on

Academic/ Professional Qualification(s) and Certification(s)

Present Directorship(s) in Other Public Listed and Non-Listed Public Companies

Family Relationship with any Director and/or Major Shareholder of the Company

20 March 2019

Less than 1 month

• Chairman of the Nomination Committee (Appointed w.e.f. 29 March 2019)

• Member of the Audit Committee (Appointed w.e.f. 29 March 2019)

• Member of the Remuneration Committee (Appointed w.e.f. 29 March 2019)

• Masters of Sciences in Training and Human Resources from Leicester University, United Kingdom

• Diploma in Strategic Studies from Armed Forces Defence College, Kuala Lumpur

• Management Development Programme from Wolfson College, University of Cambridge

Nil

No family relationship with any Director and/or major shareholder of ConnectCounty Holdings Berhad

Working Experience and Occupation:

Major General Dato’ Mamat served the Malaysian Army for 37 years and retired in June 2005. His last appointment in the Malaysian Army was the Commanding General of the Army Logistics Command (ALC).

Upon his retirement from the Malaysian Army, Lembaga Tabung Angkatan Tentera (LTAT) appointed him as an Independent Non-Executive Director of Affin Fund Asset Management Berhad on 18 April 2012. Whilst serving at Affin Asset Management Fund Berhad, he was also appointed as Chairman of the Audit Committee. Due to the merger of Affin Fund Asset Management Berhad with Hwang Asset Management Berhad, he had resigned from the position in June 2014.

Earlier in July 2011, he was appointed as an Independent Non-Executive Director of Sterling Progress Berhad, a public listed company and was subsequently appointed to the Board as an Independent Non-Executive Chairman. In addition, he was also appointed as a member of the Audit Committee and Remuneration Committee. However, he retired from the Board after he was appointed by the government as Grand Chamberlain of Istana Negara on 14 December 2016.

As Grand Chamberlain at Istana Negara, he was given the trust and responsibility by the Malaysian government to serve KDYMM Seri Paduka Baginda Yang di-Pertuan Agong XV, Sultan Muhammad V on all matters pertaining to the ceremonies and protocols.

At the same time, he had also served with distinction under DYMM Sultan Nazrin Muizzudin Shah Ibni-Almarhum Sultan Azlan Muhibuddin Shah Almagfur-Lah, Timbalan Yang di-Pertuan Agong from 2 November 2018 until 31 December 2018.

After serving KDYMM Seri Paduka Baginda Yang Di-Pertuan Agong XV for more than 2 years, he had submitted his resignation as Grand Chamberlain on 14 January 2019.

Time Committed:

Major General Dato’ Mamat was appointed on 20 March 2019 and therefore, he attended none of the Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.


8

BOARD OF DIRECTORS’ PROFILE (cont’d)

ANG CHUANG JUAYExecutive Deputy ChairmanSingaporean, Male, aged 61







18 August 2003

15 years 7 months

Chairman of the Risk Management Committee

Bachelor Degree in Engineering from the National University of Singapore

Nil



Mr. Ang began his career with Wearnes Technology as the Head of its Printed Circuit Board assembly operations. He remained with the Company for six (6) years throughout which he obtained extensive exposure in surface mount technology, floppy disk drive (“FDD”) and hard disk drive operation. He was seconded to Taiwan to head the production unit and was subsequently sent to China to set up the FDD operation. He also worked as the Managing Director of a United Kingdom (“UK”) information technology (“IT”) company based in Singapore specialising in networking.

After the takeover of the UK IT company by another firm, he became a consultant to NS-Tech Co. Ltd. His talents and natural drive was spotted by the founding member of NS-Tech Co. Ltd. and was roped in to assist in the expansion into the United States of America and set up a presence in Singapore. Not satisfied with merely being a subcontractor for Original Equipment Manufacturer and with his mind firmly set on working in the forefront technology with multinational companies, he decided to pursue his own goals and visions by divesting his interests in NS-Tech Co. Ltd. and thereafter, formed ConnectCounty Holdings Berhad.

Time Committed:

Mr. Ang attended five (5) out of six (6) Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.

A N N U A L R E P O R T 2 0 1 8

9


WONG POOI FATTExecutive Director








8 March 2019

Less than 1 month

Nil

Bachelor of Arts specialising in design, graphic design and multimedia from LimKokWing University, Malaysia

Nil

Mr. Wong is the spouse of Ms. Lee Su Lin, who is an Executive Director of the Company. Mr. Wong is also the major shareholder of the Company


Mr. Wong started his career as a music producer in 2001. Four years later, he established Nexus Creative (Mal) Sdn. Bhd. (“Nexus Creative”), a multimedia agency. It was in Nexus Creative that Mr. Wong was able to freely experiment with bold ideas and exercised his skills in visual and aural design. His creations eventually earned him several international design awards.

As his core background is in music and sound, over the past decade, he has written and scored music for movies, released two music albums and produced music for Discovery, Crime Investigation Channel, ASTRO, Tourism Malaysia and many more.

He continued to amass a set of skills from photography, video editing, sound design, art direction and in 2010, he ventured into film making. He debuted as a feature director in 2016 for THE SPIRAL and subsequently in 2018, it was selected in competition at International Horror and Sci-Fi Film Festival 2019.

He joined ACE Pictures Entertainment Sdn. Bhd. (“ACE Pictures”) in 2017. Primarily as film financiers, he analyses, selects and then recommends screenplays pitched to him. Working closely with producers and filmmakers, he and his team take proactive roles in shaping each project into perfection.

Now, he and his colleagues spearheaded an initiative to nurture emerging, diverse filmmakers both locally and internationally, to produce world class content alongside with their United States of America counterparts, putting ACE Pictures into the world map as a recognisable, global brand.

Alongside his career, he has also been actively volunteering his time and knowledge to nurture the younger talents through guest lecturing and workshops and as a teaching partner at various institutions.

Time Committed:

Mr. Wong was appointed on 8 March 2019 and therefore, he attended none of the Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.


10

LEE SU LINExecutive Director

Malaysian, Female, aged 40







8 March 2019

Less than 1 month

Nil

Bachelor of Commerce from Deakin University of Australia

Nil

Ms. Lee is the spouse of Mr. Wong Pooi Fatt, who is an Executive Director of the Company. Ms. Lee is also the major shareholder of the Company


Ms. Lee first started her career at TNS (a global market research agency), managing local and regional projects, both in qualitative and quantitative. She has her skills honed in developing screeners, questionnaires and discussion guides, moderating focus group discussions, in-depth interviews and home visits, conducting analysis and writing reports and eventually promoted as Qualitative Senior Manager at Insight Asia and later, Qualitative Associate Director at Millward Brown (a multinational market research firm) in year 2014.

As an Associate Director, she was responsible in planning, guiding and executing qualitative research studies, pitching for new businesses, writing proposals, supervising the work and mentoring qualitative junior researchers, co-ordinating international research studies and providing support to the company’s affiliates on regional projects, servicing both local and international clients.

Moving on, she then joined Nexus Creative (Mal) Sdn. Bhd. as a Director and she was actively involved in market analysis, business planning, business development, project planning and management, providing inputs on concept development and occasionally, she played the role as production manager.

In 2017, she was approached by ACE Pictures Entertainment Sdn. Bhd. to conduct a research study on international landscape in film industry. She and her colleagues had travelled to few film festivals around the world and made the first trip to United States of America to further explore the opportunity in Hollywood. Eventually, she and her team set foot in Hollywood and she has helped to set up ACE Pictures Entertainment LLC in California and is overseeing the day to day operations and company’s expansion as well as developing business plans and overseeing the company’s expansion.

Time Committed:

Ms. Lee was appointed on 8 March 2019 and therefore, she attended none of the Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.


A N N U A L R E P O R T 2 0 1 8

11

LIM BEE SANIndependent Non-Executive Director








19 July 2016

2 year 8 months

• Chairperson of the Remuneration Committee• Member of the Audit Committee• Member of the Nomination Committee

• BA (Hons) Law, Accounting & Finance from Oxford Brookes University, United Kingdom

• Barrister-at-Law from Middle Temple, London

Nil



Ms. Lim had previously practiced in two (2) legal firms as a legal assistant from years 1996 to 1999. She became a partner of a legal firm from 2000 to 2006. She is the Founding Partner of Messrs. The Law Chambers of Yeap & Lim which was established since 2006.

Time Committed:

Ms. Lim attended all the six (6) Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.



12

THONG MEI MEIIndependent Non-Executive Director








27 November 2017

1 year 4 months

• Chairperson of the Audit Committee

• Member of the Nomination Committee (Appointed w.e.f. 24 May 2018)

• Member of the Remuneration Committee (Appointed w.e.f. 28 November 2018)

• Member of the Risk Management Committee

• Diploma in Commerce (Management Accounting), Tunku Abdul Rahman University College, Kuala Lumpur

• Member of the Malaysian Institute of Accountants (MIA)• Associate member of Chartered Institute of the Management

Accountants (ACMA), United Kingdom

Nil



Ms. Thong is a Chartered Accountant with ACMA. She has 26 years’ experience in financial management reporting and general accounting, including 11 years in senior management position leading the finance function.

She had worked for various organisations, including GlaxoSmithKline (GSK), Avon Cosmetics, Bristol-Meyers (Mead Johnson Nutrition), Coca-Cola and PricewaterhouseCoopers (PwC), Hong Leong Credit Berhad and Navis Capital Group.

She is highly recognised for the ability to strategic business partnering roles and proactive for continuous change actions to drive business growth. During her 26 years of experiences, she had supervised up to a team of 26 across different markets in the cluster environment.

Time Committed:

Ms. Thong attended all the six (6) Board of Directors’ Meeting of the Company held in the financial year ended 31 December 2018.


A N N U A L R E P O R T 2 0 1 8

13

NG KEOK CHAIIndependent Non-Executive Director








29 March 2019

Less than 1 month

• Member of the Audit Committee (Appointed w.e.f. 29 March 2019)

• Member of the Nomination Committee (Appointed w.e.f. 29 March 2019)

• Member of the Remuneration Committee (Appointed w.e.f. 29 March 2019)

• Bachelor of Laws (Hons.) from University of Wolverhampton, London

• Certificate in Legal Practice from Legal Profession Qualifying Board

Nil



Tuan Ng started his early career as a Police Inspector with the Royal Malaysia Police in 1982. He was then posted to serve in Sarawak until the rank of Assistant Superintendent of Police for 20 years. During his tenure in Sarawak, his exposure included the Criminal Investigation Department (“CID”), General Duty and Police Field Force.

In 2003, Tuan Ng was transferred to Selangor Police Contingent Headquarters. In 2005, he was promoted to Deputy Superintendent of Police and served in the Commercial CID, Selangor Police Contingent Headquarters. He left this posting as Superintendent of Police.

After that, Tuan Ng was posted to the Johor Police Contingent Headquarters as Deputy Head of Commercial Crimes Investigation Department in 2014. Then in the same year, he was posted to the Commercial CID, Royal Malaysia Police Bukit Aman as Assistant Director in the Forensic Accounting Investigation Division.

The last held position of Tuan Ng was Principal Assistant Director in Forensic Accounting Investigation Division, Commercial CID, Royal Malaysia Police, Bukit Aman.

Throughout his 36 years service in Royal Malaysia Police, he was very much involved in police investigations due to his legal background. He specialises in criminal investigation across various fields which include commercial crime, general crime and forensic accounting with ample management and special operations experience.

Time Committed:

Tuan Ng was appointed on 29 March 2019 and therefore, he attended none of the Board of Directors’ Meetings of the Company held in the financial year ended 31 December 2018.


NOTES:

1. CONFLICT OF INTEREST None of the Directors of the Company has any conflict of interest with the Company.2. CONVICTIONS FOR OFFENCES AND PUBLIC SANCTION OR PENALTY IMPOSED BY THE RELEVANT REGULATORY

BODIES DURING THE FINANCIAL YEAR None of the Directors has any conviction for offences within the past five (5) years, other than traffic offence, if any, nor any public

sanction or penalty imposed by the relevant regulatory bodies during the financial year ended 31 December 2018.


14

SENIOR MANAGEMENT’S (CORPORATE) PROFILE

ANG CHUANG JUAYExecutive Deputy Chairman

The Senior Management team is headed by the Mr. Ang who is also the de facto Chief Executive Officer of the Group.He is temporary leading the operation of Rapid Conn (Shenzhen) Co. Ltd (“RCC”) while pending the position of General Manager of RCC to be taken up.

WONG POOI FATTExecutive Director

Mr. Wong is overseeing the business development of IBEX Pictures Entertainment Sdn. Bhd. (“IBEX”) of which he is a Director. Mr. Wong is the spouse of Ms. Lee Su Lin, who is an Executive Director of the Company.

LEE SU LINExecutive Director

Ms. Lee is overseeing the business development of IBEX of which she is a Director. Ms. Lee is the spouse of Mr. Wong Pooi Fatt, who is an Executive Director of the Company.

BALAJI RAGHUNATHANVice President, Group Engineeringand Research & DevelopmentVice President of Operations, Rapid Conn Inc.Indian National, United States of America (“USA”) Permanent Resident, Male, aged 43

Date of Employment: 28 June 2004

Working Experience:

Mr. Balaji Raghunathan graduated with a Bachelor Degree in Mechanical Engineering from the Vellore Institute of Technology, Tamil Nadu, India in 1996. He graduated with honours, which earned him a Silver Medal award from the University. In 1999, he went on for further studies and completed his Masters in Industrial Engineering with special focus on Production Systems from the State University of New York, Buffalo, New York, USA and graduated in 2001.

Mr. Balaji started his career in 1996 working for a leading automotive turbo charger manufacturing company in India. He gained valuable knowledge in manufacturing process and operations during his first three (3) years before opting to pursue his Master Degree in the USA. During that time, Mr. Balaji was an intern at General Motors automotive plant in Buffalo, New York. He further honed his skills in manufacturing technologies in the world’s largest engine manufacturing plants of General Motors.

Upon graduation, Mr. Balaji started as a supplier and a process and quality control engineer for Hughes Network Systems, Maryland, USA in 2001. He left Hughes in 2004 to join RCI, USA. His skills were recognised quickly by the Management and he was appointed as the RCI’s Vice President of Operations in 2008.

Directorship held: Rapid Conn Inc. (“RCI”), USA

Qualification(s)/Certification(s):1. Bachelor in Mechanical Engineering, Vellore Institute of Technology, India2. Masters in Industrial Engineering, State University, USA

A N N U A L R E P O R T 2 0 1 8

15

SENIOR MANAGEMENT’S (CORPORATE) PROFILE (cont’d)

CORINA YONGVice President, Group Business DevelopmentGeneral Manager, Rapid Conn (S) Pte. Ltd.Singaporean, Female, aged 56

Date of Employment: 13 June 2011

Working Experience:

Ms. Corina Yong specialises in building and leading integrated sales and marketing, business development and operational management in the Information Technology, Telecommunications and Financial Services industries. She is also a certified Professional Trainer from the Workforce Development Authority of Singapore.

Ms. Corina had a dynamic sales career in the multi-billion life insurance industry with American International Assurance Ltd. for eight (8) years prior to undertaking a position as publisher of a leading automobile magazine, AutoNews. Her career in multinational companies (“MNC”) saw her holding positions as Consultant for Cisco Systems, Head of the Asia Pacific Marcoms team in Lenovo, Director of Business Development in Sigma Delphi and regional marketing and channel marketing roles in Agilent and Racal Data Group.

Prior to joining RCS, Ms. Corina was a Training Consultant to various multinational corporations. In her regional roles with these companies, Ms. Corina travelled extensively to USA and Asia Pacific countries. Her keen perception of the country markets enabled her to develop creative branding strategies successfully. Her in-depth understanding of the markets is demonstrated in her ingenuity to enhance company’s branding, and to continuously develop and drive successful sales and marketing strategies in these countries.

Directorship held: Rapid Conn (S) Pte. Ltd. (“RCS”)

Qualification(s)/Certification(s):1. Post Graduate in Strategic Marketing, Chartered Institute of Marketing, United Kingdom2. Certified Professional Trainer, Workforce Development Agency, Singapore


16

LIM YEW CHAIGroup AccountantMalaysian, Male, aged 48

Date of Employment: 3 July 2017

Working Experience :

Mr. Lim has over twenty-three (23) years of experience in the field of accounting and finance, which includes financial audits, taxation, management accounting and costing, financial planning and forecasting, enterprise resources planning and treasury management.

He started his career with an audit firm in Kuala Lumpur, and subsequently worked for various local commercial enterprises and overseas-based MNC with businesses ranging from manufacturing, project development and trading.

Prior to his appointment in the Company, Mr. Lim spent a total of eleven (11) years in a few public listed companies mainly attached to the corporate office which he assumed the role of Assistant-Vice-President and Group Accountant in listing exercise, corporate finance, acquisition, risk management and group reporting. Presently, he is also a member of the Risk Management Committee of the Company.

NOTES:

Save as disclosed above, none of the members of the senior management team has:1. any directorship in public companies and listed issuers;2. any family relationship with any directors and/or major shareholders of the Company;3. any conflict of interest with the Company;4. any conviction for offences (other than traffic offences) within the past five (5) years; and5. any public sanction or penalty imposed by the relevant regulatory bodies during the financial year.

SENIOR MANAGEMENT’S (CORPORATE) PROFILE (cont’d)

Directorship held: None

Qualification(s)/Certification(s) :1. Professional Degree from Chartered Institute of Management Accountant (CIMA),

United Kingdom (“UK”)2. Diploma in Commerce (Management Accounting), Tunku Abdul Rahman University

College, Kuala Lumpur3. Member of the Malaysian Institute of Accountants (MIA) 4. Associate member of CIMA, UK

A N N U A L R E P O R T 2 0 1 8

17

STATEMENT ON MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL PERFORMANCE REVIEW

The Group’s revenue and gross profit for the financial year ended 31 December 2018 (“FYE 2018”) had decreased as compared to financial year ended 31 December 2017 (“FYE 2017”). The revenue was recorded at RM99.6 million, a 18.4% decrease as compared to RM122.2 million in FYE 2017. Whereas the gross profit declined to RM12.2 million from RM18.4 million in FYE 2017.

The Group’s 5-Year Revenue and Gross Profit Trend

Weighted Average Gross Gross (Forex ProfitFYE Malaysia China Singapore USA Revenue Profit Rate) Margin RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM:USD1 %

2018 200 44,786 17,353 37,302 99,641 12,179 4.04 : 1 12.222017 - 43,658 26,790 51,715 122,163 18,415 4.30 : 1 15.072016 - 20,946 25,230 35,535 81,711 16,923 4.14 : 1 20.712015 - 12,314 21,107 31,456 64,877 15,771 3.90 : 1 24.312014 744 9,380 12,162 30,324 52,610 11,827 3.27 : 1 22.48

Revenue

The decrease in revenue at Group level can be seen mainly from United States of America (“USA”) and Singapore segment. Rapid Conn Inc. (“RCI”) in USA, recorded a 27.9% decrease over the preceding year, while Rapid Conn (S) Pte. Ltd. (“RCS”) in Singapore, recorded a 35.2% decrease.

The lower contribution was partly driven by lower video demand in the market which is indicated from our industry breakdown table showing the reduction in Connected Homes & Offices industry. Moreover, there was certain supply of products which reached the final phase of the projects in 2018. Also, during the year, customers took the apprehensive view amid global trade tension resulted in lower orders received.

Other factors to the decline are, for example, keen competition in the interconnect market from diversified manufactures and highly specialised manufactures, and the lower average foreign exchange rates for the sales denominated in United States dollar (“USD”).

Group Revenue RM’000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

-2014 2015 2016 2017 2018

52,61064,877

81,711

122,163

99,641


18

FINANCIAL PERFORMANCE REVIEW (Cont’d)

Revenue (Cont’d)

We are facing continuous pressure to lower our prices. Due to the evolving innovation in the industry, our customers experience pressure to reduce their prices to meet consumer expectations. As a result, component suppliers are generally expected to lower the prices. This factor continues to pose a challenge to the Group and it is being addressed by several strategic initiatives currently undertaken by the Group, such as the vertical integration, automation and cost reduction programs.

Nevertheless, the Group has increased its market share in Automotive and White Goods sector despite continued market challenges.

Gross Profit and Gross Profit Margin

The Group’s gross profit and gross profit margin recorded a decrease to RM12.2 million and 12.22% respectively in FYE 2018.

The decrease in gross profit was mainly attributable to the lower revenue in FYE 2018. Both gross profit and gross profit margin were affected by relatively lower product margin primary because of general reduction in selling price and competitive pricing despite efforts implemented on cost reduction programs.

Among other factors such as the lower average foreign exchange rates e.g. USD, negative impact of changes in foreign currency in inventory and increase in factory overheads (i.e. factory rental and minimum labour wages).

STATEMENT ON MANAGEMENT DISCUSSION AND ANALYSIS (cont’d)

2014 2015 2016 2017 2018

Gross Profit (RM’000) & GP Margin (%)

20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

-

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0%

11,827

15,77116,923

18,415

12,179

22.5 24.3

20.7

15.1

12.2

Group Gross Profit Gross Profit Margin

A N N U A L R E P O R T 2 0 1 8

19


FINANCIAL PERFORMANCE REVIEW (Cont’d)

Loss Before Tax

The Group recorded a loss before tax (“LBT”) of approximately RM10.0 million in FYE 2018, compared to FYE 2017 profit before tax of RM52,349/-.

The losses were not only affected by the reduction in revenue and gross margin but also affected by other operating expenses for example, Impairment on trade receivables based on expected credit loss and realised and unrealised loss on foreign exchange. Despite implementation of further cost saving, the lower results were also caused by professional fees and one-off expenses such as:

1. Write-off of equipment related to certain products which reached the final phase of the projects;

2. Write-off certain assets which were damaged beyond repair;

3. Write-off assets related to the thermoplastic elastomers production which ceased operation due to loss of major customers and stringent environmental requirements imposed; and

4. Impairment on others receivables.

Total professional fees and one-off other expenses were amounted to approximately RM5.1 million.

Financial Position and Liquidity

The Group’s total assets and total liabilities as at the end of FYE 2018 decreased to RM48.5 million and RM17.8 million respectively. The major movements highlighted are as follows:

1. Drop in trade and others receivables and inventories generated additional cash from operation. It was then funded to reduce trade payables and others payables.

2. The total borrowings of the Group increased in FYE 2018 mainly due to the finance lease for motor vehicle.

3. After changes in working capital, the Group recorded a negative cash generated from operations mainly attributable to losses incurred for the year and reduction in payables.

4. Total assets and total liabilities reduced in 2018 as a result of Shenzhen Rapid Power Co. Ltd. (RCP) being recognised as an associate company. Those like items of assets and liabilities of RCP were not combined accordingly.

5. Other factors resulted in reduction of assets are aforementioned impairment on trade and others receivables and write-off of assets.

6. Proceeds were raised from allotment and issuance of shares capital by conversion of irredeemable convertible preference shares (“ICPS”) and exercise of Warrants.


20


BUSINESS DIRECTION OF THE GROUP

Core Business

We manufacture and market interconnect products and it can be seen in our proven track record of being in the business for more than twenty-one (21) years. An affirmation to our fine finished goods and outstanding sales and aftersales services are our top and faithful customers who have been staying with us over the years.

Leveraging on our experience and industrial expertise which we have accumulated over the years in the cable and interconnect business, it would be most prudent to harness our resources and core competencies as a springboard to expand sales and to increase market penetration, both demographically and regionally, as well as expand our core business into other industry sectors (i.e. automotive, white goods, wearables). We continue to maintain and grow our current market share in the Connected Homes & Offices segment, which is still our biggest revenue earner to date.

The Group’s vision statement below communicates, in a nutshell, our strategic objectives and business direction, and underscores the importance we place on great teamwork and commitment to succeed in the mindset of every employee of the subsidiaries operating within the Group:-

“To be a leading global interconnect solutions provider, harnessing the vast experience and expertise of our R & D team, offering the most innovative, yet cost effective, vertically integrated solutions at competitive pricing and quality”.

In order to realise our vision, we currently focuse on certain strategic initiatives which translate into the Group’s unique selling points (“USPs”), which in turn give us a distinct competitive edge over our competitors in this highly dynamic and competitive market.

Restructuring of operations

The Company wholly-owned subsidiary, Rapid Conn (Shenzhen) Co. Ltd. (“RCC”) had disposed of 31% of the equity interests in RCP in 2018 to allow existing business partner to increase its equity participation. This is part of our plan to retain the strategic partner who is having the relevant expertise and knowledge in fast-changing markets and technologies. Consequential to the disposal, RCP has ceased to be an indirect subsidiary of the Company and in turn became an associate company.

The Company ceased thermoplastic elastomers production operated under Shenzhen Rapid Resin Co. Ltd. (“RCR”) due to the loss of major customer amid changing in business environment in China and stringent environmental requirements imposed. RCR was operational until November 2018. The decision made is expected to improve the results of the Company.

Diversification Plan

Maintaining a diversified business is essential to our long-term strategy. A diversification strategy can help to achieve more consistent returns over time and reduce overall risk.

One of the potential diversification’s initiative is venturing into cybersecurity related business. The Company explored the opportunity in collaboration with experienced partners. We began the business with a small-scale activity in 2018 under Connect Security Solution Sdn. Bhd. (“CSS”).

We are also planning to venture into a business to develop, finance and produce screenplay, film, soundtrack and other media, talent management and business of merchandising in relation to film and music. On 22 March 2019, we have incorporated IBEX Pictures Entertainment Sdn. Bhd. (“IBEX”) for the intended purpose.

A N N U A L R E P O R T 2 0 1 8

21


COPPEREXTRUSION

PLASTIC RESINAND PLASTIC

COMPOUNDING

CABLE EXTRUSION

CONNECTORPRODUCTION

CABLE ASSEMBLY

FINAL TESTING

BUSINESS FOCUS AND STRATEGIC ACTION PLANS

Vertically Integrated Solutions Provider

Our Rapid Conn Group (“RCG”) aim to be a fully vertically integrated solutions provider which give the benefits include:-

1. Eliminating intermediary in the business, thus raising profit margins and increasing profitability.2. Acquiring instant know-how of the supplier’s trade and their teams of experienced workforce, thus learning curve will

be minimised, while the utilisation of resources can be maximised.3. Inheriting valuable database of supplier’s list of customers which opens up opportunities of cross-selling.4. Gaining distinct competitive advantage over all our competitors in term of full integrated solutions.5. Benefiting our customers in term of value for money such as faster turnaround time, lower purchase price and lower

probability of quality issues occurring.

This business model is an important and distinct unique selling points that elevate us above our competitors in terms of attractive pricing, more efficient order processing and shorter lead time. This will be the Group’s strategic competitive advantage which will give us a clear competitive edge over our competitors in the interconnect industry and this is where the Group’s backward integration strategy plays a key role in this initiative.

Backward Integration

Backward integration is one form of vertical integration that enables a business to obtain control over its supplies and improve supply chain efficiency. Through increasing the cable extrusion capabilities in RCP, it become main part of the Group’s vertical integration strategy and it serve as strategic advantages over its competitors.

Through expansion into cable extrusion operations, we are more self-reliant resulted from backward integration which is to ensure the consistency in high product quality while keeping the costs low and manageable, and is able to provide better delivery process by reducing delivery lead times. The cable extrusion business also expands the scope of our current business.

The diagram below illustrates the entire process that would be undertaken by a fully integrated cable house. With the incorporation of RCP, the Group is able to cover the two final stages in the process.

• Shenzhen Rapid Power Co. Ltd. (“RCP”)

RCP’s business focuses solely on cable extrusion operations. It will provide raw cables to RCC, while at the same time, engage in external trade with its own portfolio of customers. Prior to RCP’s incorporation, the bulk of cable extrusion was outsourced to third parties. The Group will continue to invest to further enhance the technology behind this process as it intends to expand the current production of high-end cables such as HDMI, Universal Serial Bus (“USB”) 3.0, USB3.1, and cables used in medical and automotive applications.


22


Vertically Integrated Services

We offer complete vertically integrated services for in-house parts and sourcing services with following features and benefits:-

1. Excellent sales and customer support services – our sales team are fully supported by a superior team of customer support services personnel to ensure efficient and on-time processing of all orders and enquiries.

2. Engineering and prototyping – for customised solutions, our team of qualified and experienced engineers will meet the customers engineering design and prototyping needs.

3. In-house tooling solution capabilities – for some tooling to secure quicker sample response time.4. Fully equipped in-house testing capabilities – a range of testing capabilities & equipment will warrant all our products

to meet with all the necessary industry requirements and customer’s specifications.5. Mass production – trained production team, and a fully equipped plant with automated processes.6. Qualified assurance system innovation – our quality assurance (“QA”) team enforces stringent QA processes to

ensure 100% quality control pass rates.7. Global supply chain and logistics management – highly experienced logistics and customs personnel to assure quick

and timely delivery in minimum time and costs thus to relieve customer from excess inventories.

The Group’s interconnect strategic action plans will enable the Group to achieve the following:-

1. To harness our expertise in our core industry (Connected Homes & Offices), using it as our USPs to secure at least two (2) new customers in the same industry;

2. To grow new industries such as Smart Connected Devices, White Goods, Automotive, Medical, ATM, Kiosk & Security, while at the same time reduce the Group’s reliance on its core industry, i.e. Connected Homes & Offices, though we will still continue to develop and expand our business operations in our core business and expand our market share;

3. To achieve at least a 30% growth in the new industries, namely Smart Connected Devices, White Goods and Automotive.

A N N U A L R E P O R T 2 0 1 8

23


Product Certification and Standard

1. MFi (Made For iPhone, iPad and iPod)

We have been MFi approved in mid-2015. It has opened up more project opportunities to supply Apple related accessories and we started some MFi projects since 2016.

2. USB 3.1 Type C

We are USB 3.1 Type C cables certified manufacturer to produce. The certification allows us to facilitate thinner and sleeker product designs, enhance usability and provide a growth path for performance enhancements for future versions of USB.

3. IATF 16949:2016

We have upgraded to IATF-16949:2016. It is a certification of our quality management system that is applicable to the manufacturing of connecting wires for products in Automotive Industry.

4. UL Cert No. E321220

Cable extrusion manufacturing.

5. UL Cert No. E257769

Cable assembly manufacturing.

6. HDMI, USB and Serial AT Attachment (“SATA”) standards

We are members of HDMI, USB and SATA and hence all our cable products comply with the standards.

7. TIA/EIA 568b.2 Compliance

A Commercial Building Telecommunications Cabling Standard by the Telecommunications Industry Association (TIA).

8. Australia Cabling Standard AS/ACIF S008:2006 Compliance

Cable extrusion and assembly manufacturing standard for Australia and New Zealand market.

Quality Management Systems (“QMS”)

Our QMS practices are entrenched in our business policies and complement our manufacturing standard operating procedures. The QMS are strictly observed to consistently meet our customers’ requirements and gain greater customers’ satisfaction. The certifications and standards we have attained and followed are as follows:-

1. Quality Management System - ISO 9001:20152. Environment Management System - ISO 14001:20043. Automotive Industrial Quality Management System - IATF 16949:20164. Product Quality Control - IPC/WHMA-A6205. Electronic Industry Citizenship Coalition - EICC Code of Conduct6. Hazardous Substance Control:-

a. EU RoHS 2.0 - Restriction of Hazardous Substancesb. China RoHs - Restriction of Hazardous Substancesc. REACH - Registration, Evaluation, Authorisation and Restriction of Chemicalsd. JIG - Joint Industry Guide-Material Composition Declaration for Electronic Products

For insights into the detail of our QMS, please refer to the Sustainability Statement in this Annual Report.


24


MARKET PENETRATION AND DEVELOPMENT

The Industry Landscape – 2018

We traditionally involve in the Connected Homes & Offices, Smart Connected Devises and White Goods industries, which covers e.g. home digital devices and networking devices. These formed about 88.6% revenue in 2018 compared to 96.2% in 2017.

In 2018, we increased the penetration into more lucrative industries in the Automotive. This was achieved through various initiatives covering training, certification, revamping current and setting up new production processes/lines and increasing investment in research and development activities as well as implementing the appropriate marketing strategies.

The table below illustrates the Group’s market composition and percentage contribution to revenue in terms of industry over a five (5)-years period. Despite continued market challenges, our highest revenue contribution remains from the Connected Home & Offices. Efforts was made to create growth in Automotive markets and it saw an increase to 7% in 2018 from 2% in 2017. Also, the growth in White Goods markets saw an increase to 10.6% in 2018 compared to 5.8% in 2017.

RAPID CONN INDUSTRY BREAKDOWN FOR FYE 2014-2018

2018 2017 2016 2015 2014Industries % % % % %

Connected Homes & Offices 72.4% 84.0% 75.0% 71.0% 71.0%Smart Connected Devices 5.6% 6.4% 6.9% 9.0% 15.0%White Goods 10.6% 5.8% 9.7% 8.0% 7.0%Automotive 7.0% 2.0% 3.5% 2.0% 1.0%Medical 1.2% 0.5% 0.7% 1.0% 1.0%Interactive Kiosks & Security 0.5% 0.5% 2.8% 2.0% 2.0%Others 2.7% 0.8% 1.4% 7.0% 3.0%

100% 100% 100% 100% 100%

Despite challenges faced, we have various plans and strategies in place that will enable us to further increase market penetration in these markets, while at the same time, to enhance our credibility and visibility amongst major customers and key players in the interconnect and related markets. We are also working closely with the existing and potential customer that will maintain and further improve our market share.

RAPID CONN GROUPBY INDUSTRIES(2018)

A N N U A L R E P O R T 2 0 1 8

25


SALES AND MARKETING STRATEGY

We continue to invest our resources in research and development for product innovation particularly in automotive segment, while keeping abreast of advances in technologies affecting the market and changing consumers’ tastes and requirements. This is vital as it may not only provide critical information that will guide us in crafting our marketing strategy, but will also influence our approach in the planning and implementation stages of automation along our production and assembly lines, which is a critical part of our cost reduction initiatives.

The Group is taking steps to improve and strengthen its customer relations management in order to further enhance its existing relationships with its key customers, while taking appropriate steps to improve its business ties with its other customers within its portfolio and seeking new customers to expand its market share in the various sectors in the cable and interconnect markets.

Unique Selling Points (USPs)

1. Vertically Integrated Services (“VIS”)

The VIS model provides a “one-stop centre” for customers: enquiries, customising & designs, prototyping, tooling, mass production, logistic, warehousing and after-sales service.

2. Vertically Integrated Solutions Provider

This gives us a strategic competitive edge over our competitors as we are able to past cost savings to customers in terms of attractive pricing. This will also result in more efficient order processing and enhance delivery process due to shorter lead time.

3. Highly Experienced R&D Team

With two strong R&D teams located in RCC, China and RCI, USA, we are able to sell our experience and capability to undertake in-house engineering design, customisation and product development.

4. Warehousing Solutions

RCI, the Group’s subsidiary in USA is occupying around 25,000 square feet (2,322.6 square metres) in office cum warehousing space and providing a team of experience logistic personnel for prompt and uninterrupted product delivery. In addition, we have a warehouse located strategically to provide better satisfaction in customer service.

Positioning

1. Rapid Conn is a global company with manufacturing facilities in China.

2. A global presence – sales offices are strategically located in USA, Singapore and China, to serve all time zones and all markets worldwide.

3. We have the expertise to operate in the various industries mainly:-

a. Connected Homes & Officesb. Smart Connected Devicesc. White Goodsd. Automotive


26

SALES AND MARKETING STRATEGY (Cont’d)

Marketing Tactics

1. Sales Representatives (“Reps”) & Strategic Partners

In addition to the existing sales headcount, RCG has developed a network of appointed reps and strategic partners in different subsidiaries.

a. Quarterly Statement of Activities & Commission to be sent out to reps and strategic partners as a monitoring tool to assess their performance.

b. Quarterly review of Reps & Strategic Partners performance to be conducted to sieve out barriers and give incentives to spur them to pursue more opportunities for RCG.

c. Expanding regionally via the recruitment of Reps and Strategic Partners.

2. Existing Customers

Much effort and time have been spent enhancing our business and working relationship with our existing customers. Thus, an aggressive campaign has been launched to maintain an even closer rapport with our customers so that we will continue to be in their preferred list of suppliers:-

a. To be alerted of new projects and to ensure that RCG is in the running for these new projects.b. To secure introductions or referrals to different departments or divisions.

RCG has managed to forge and maintained stellar relationships with our major customers over the last ten (10) years. As mentioned earlier, this is a testament to our major customers increasing confidence and trust in us, as they continue to support us unwaveringly throughout the years while we remain resolute in our commitment to service them to the best of our capabilities.

3. Electronic Manufacturing Services (“EMS”) Partners

Over the years, we have established a strong working relationship with major contract manufacturers in the EMS industry. As these EMS contractors service various OEMs, we benefit greatly either through referrals from them or sub-contracting jobs awarded by them.

COST REDUCTION PROGRAMS

We implemented additional cost reduction programs in 2018 which resulted in costs saving in our subsidiaries. Moreover, the costs savings attained could be passed on to the Group’s customers in the form of attractive pricing, which invariably helped the Group to maintain competitive advantage over its competitors. Cost reduction will also act as a buffer should customers request for (or insist on) lower prices during negotiations or at any point in time during the course of the business.

Additionally, apart from managing our cost drivers (i.e. labour costs, factory overheads), the Group maintains its costs reduction initiatives as is an ongoing effort:-

1. Reviewing employee efficiency programs on a periodic basis to ensure that the programs are up to date, relevant and in sync with corporate’s objectives. These programs are designed to improve skills and enhance productivity.

2. Reviewing and updating the production remuneration scheme for production workers, where the employees would be remunerated according to productivity.


A N N U A L R E P O R T 2 0 1 8

27

COST REDUCTION PROGRAMS (Cont’d)

3. Progressive automation of our manufacturing processes – potentially new areas of automation both in terms of revenue generating machines and production lines are periodically under review. The inherent benefits of automation:-

a. Reduce overall manufacturing costs;b. Improve space utilisation;c. Reduce manufacturing turnaround time;d. Consider larger orders, particularly additional orders, without delaying and affecting quality and lead times

subject to the quantum of the order and any changes in the product specs requirement; ande. Enables multiple tasks in a particular process to be undertaken by a single machine (e.g. wire harnessing).

We have implemented automation in the following areas along our assembly lines:-

a. Wire harnessing – This activity consists of several tasks undertaken by different operators (i.e. assembly line workers) such as auto wire cut, wire strip, wire crimp and wire tin. These tasks were combined into a single activity and undertaken seamlessly by a single automated machine.

b. Wrapping – We have moved from manual wrapping wire activities to automated wrapping, which have enabled us to combine both automatic wrapping and tie activities into a single process. We have installed an additional machine with added testing function before wrapping process.

c. Soldering – This is one of the most labour-intensive process. It has been replaced by auto-soldering machine. Under manual soldering, a single production worker can only manage around 250 pieces per hour. In contrast, an automated soldering machine can easily achieve between 500 and 800 pieces per hour without operated by skilled worker.

d. Auto-Cutting, Stripping, Crimping & Dipping – Each of which is capable of performing the tasks of at least three production workers. This will not only save costs and increase productivity, but will also free up factory space and capacity.

We have also automated certain key activities in the manufacturing of HDMI cables:-

a. Testing and Hanking; b. HDMI soldering; and c. HDMI metal casing.

4. Outsourcing of manufacturing activities (i.e. mainly production phases that are labour intensive) to contractors located in the inland provinces of China, where the costs of labour are considerably lower. In order to ensure that our contractors comply with our manufacturing and quality standards, and product specification requirements, we perform a comprehensive operations audit of their plant, and provide training to their employees if and when necessary. We also monitor them periodically to ensure compliance on their part.

5. Where feasible, it is part of our policy to perform re-engineering of products to increase the efficiency of material and labour consumption, which will not only save costs but is also consistent with our role in promoting EHS, an environmental sustainability of our Group.



28

RISK FACTORS

Given the fact that we are a global company as our entire business operations, including our customers are located overseas, and we are constantly exposed to external risks, apart from the internal risks that are inherent not only in our industry but also in the business environment in which we operate.

Risks such as international trade tensions that affect the global economic growth, fluctuations in forex rates particularly the United States of America Dollar and commodity prices mainly the copper and PVC, local labour laws particularly those relating to workers compensation (i.e. wage rates, minimum wage, workers benefits, etc.), overtime, trade and custom laws and regulations (i.e. tariff rates), monetary policy, etc., all of which have the propensity to change from time to time. If these changes are unfavourable, the impact will adversely affect our business operations. The unfavourable conditions may even frustrate our planned initiatives that we have discussed earlier.

Other risks worth mentioning are that we are highly dependent on our customers whose majority customers are end-product consumers. Any changes in consumer tastes and preferences in their own markets, a downturn in overall demand due to the product’s end-of-life cycles and/or introduction of newer products in the market, or even stiff competition from their business rivals, will adversely affect them, which in turn will invariably affect us.

Despite the revenue from the Connected Homes & Offices which has always been our top market, the Group continues to expand its footprint in other industry sectors of the market such as Automotive, Smart Connected Devices (wearables) and White Goods, which will not only increase the Group’s revenue but also the profitability as these markets involves high margin products. This, in turn, will further increase our exposure to risks inherent in these industries as we continue to increase our presence in their respective markets.

The list of risk areas identified, which covers both internal and external risks, that may have an impact on our business should they occur, and our risk management process are set out in the Statement of Risk Management and Internal Control in this Annual Report.

OUTLOOK AND PROSPECT

While we continue to invest in exiting interconnect business contributed mainly in the home entertainment market, we have taken efforts to expend further into Automotive market. Moving forward, the Automotive market will be aimed as one of the main contributions from the interconnect market.

In addition, existing and emerging products are relied on interconnect solution in devices, smartphone, tablets and wearable such as health and fitness devices, smartwatches and smart eyewear. In this regard, we have been working with key players in this industry to specially design and customise cables for these smart connected devices to penetrate new markets as well as expand our current portfolio.

DIVIDEND POLICY

There is no dividend policy for the Group at the moment, however the Board strives to adopt a consistent approach in declaring dividends after considering various factors, such as future investment and working capital needs, profitability and liquidity of the Company.


A N N U A L R E P O R T 2 0 1 8

29

CORPORATE GOVERNANCE OVERVIEWSTATEMENT

The Board of Directors (“Board”) recognises that corporate governance is of paramount importance in ensuring the Company is managed in the best interest of the shareholders.

The Board is pleased to present this Corporate Governance Overview Statement (“Statement”) to provide investors with an overview of the extent of compliance with three (3) Principles as set out in the Malaysian Code on Corporate Governance (“MCCG”) under the stewardship of the Board throughout the financial year ended 31 December 2018 (“FYE 2018”) and up to the latest practicable date of 29 March 2019 (“LPD”).

This Statement also serves as a compliance with Rule 15.25 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“ACE LR”).

The Corporate Governance Report for FYE 2018 (“CG Report 2018”) which sets out the application of each Practice is available for viewing in the Company’s corporate website at www.connectcounty.com.

PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS

Part 1 - Board Responsibilities 1.0 Board’s Leadership on Objectives and Goals

1.1 Values and Standards

The Board is responsible for the leadership, oversight and the long-term success of the Company and its subsidiaries (“the Group”). The Board fully understands their collective responsibilities in guiding the business activities of the Group in reaching an optimum balance of a sound and sustainable business operation with an optimal corporate governance framework in order to safeguard shareholders’ value.

The Board has reserved certain items for its review as provided in its Board Charter. The Board has also delegated certain responsibilities to other Board Committees, which operate within clearly their respective defined Terms of Reference. Standing Board Committees include the Audit Committee, Nomination Committee, Remuneration Committee and Risk Management Committee. The Board receives reports at its meetings from the Chairman of each Board Committee on current activities. It is the general policy of the Company that all major decisions be considered by the Board as a whole.

The Board is responsible for the overall corporate governance, strategic direction, and corporate goals and

therefore, monitors the achievement of these goals. It provides effective leadership and manages overall control of the Group’s affairs through the discharge of the following principal duties and responsibilities:-

(a) Reviewing and adopting a strategic plan for the Company;(b) Overseeing the conduct of the Company’s business;(c) Identification of principal risks and implementation of appropriate internal control and mitigation measures;(d) Succession planning;(e) Overseeing the development and implementation of a shareholder communications policy for the company;

and(f) Reviewing the adequacy and the integrity of the Group’s internal control systems and management

information systems.

1.2 The Chairman

Major General Dato’ Mamat Ariffin Bin Abdullah (“Dato’ Mamat”) was appointed to the Board as an Independent Non-Executive Chairman with effect from 20 March 2019.

The Chairman is primarily responsible for overall matters of the Board and conduct of the Group.

The key roles and responsibilities of the Chairman are set out in the Board Charter of the Company which is available on its corporate website at www.connectcounty.com.


30

Part 1 - Board Responsibilities (Cont’d) 1.0 Board’s Leadership on Objectives and Goals (Cont’d)

1.3 The Chairman and the Chief Executive Officer (“CEO”)

As at the LPD, Dato’ Mamat is an Independent Non-Executive Chairman while Mr. Ang Chuang Juay is the Executive Deputy Chairman, the de facto CEO of the Group.

The roles and responsibilities of the Chairman and the Executive Deputy Chairman are segregated and clearly defined in the Board Charter of the Company.

The Chairman is responsible for leading the Board while the Executive Deputy Chairman focuses on the business and day-to-day management of the Group.

1.4 Company Secretaries

The Board is supported by two (2) suitably qualified and competent Company Secretaries as follows:- • Ms. Chua Siew Chuan, FCIS • Mr. Cheng Chia Ping, ACIS

Both of the Company Secretaries are members of the Malaysian Institute of Chartered Secretaries and Administrators (“MAICSA”) and are qualified to act as Company Secretaries under Section 235(2) of the Companies Act 2016.

All Directors have access to the advice and services of the Company Secretaries, who are responsible for providing advice on corporate governance best practices, ensuring that board procedures are followed and that applicable rules and regulations are complied with. The Company Secretaries would ensure that the deliberations at the Board’s and Board Committees’ meetings are well captured and minuted. The Company Secretaries also play a key role to facilitate communication between the Board and Management.

1.5 Circulation of Meeting Materials

Prior to each Board meeting, the agenda together with the detailed reports, relevant documentation and supplementary papers are circulated to the Directors at least three (3) business days in advance. This is to enable the Directors to obtain further explanations, where necessary, in order to be adequately informed before the meeting.

During the FYE 2018, the Minutes of meetings are circulated to the Directors in a timely manner after conclusion of the meetings.

2.0 Demarcation of Responsibilities

2.1 Board Charter

The Board has adopted a Board Charter which governs the conducts of the Company’s affairs. The Board Charter is applicable to all Directors of the Company and, amongst other things, provides that all Directors must avoid conflicts of interest between their private financial activities and their part in the conduct of company business.

The Board Charter is available on the Company’s website at www.connectcounty.com.

CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont’d)

A N N U A L R E P O R T 2 0 1 8

31

Part 1 - Board Responsibilities (Cont’d)

3.0 Business Conduct

3.1 Code of Conduct and Ethics

The Board has adopted a Code of Conduct and Ethics for Directors (“the Code”) which sets forth the values, expectations and standards of business ethics and conduct to guide the Board, in attaining the best corporate governance practices as well as compliance with the relevant legislations.

The Code is established based on the principles in relation to the Board’s duty of care, integrity, responsibilities as well as corporate social responsibilities. It applies to both executive and non-executive Directors of the Company.

The Code has been entrenched into the Board Charter and is available on the Company’s website at www.connectcounty.com.

3.2 Whistle Blowing Policy

The Board has adopted a Whistle Blowing Policy since 19 November 2015.

This policy is also similarly applied to any vendors, partners, associates or any individuals, including the general public, in the performance of their assignment or conducting the business for or on behalf of the Company.

A copy of the Whistle Blowing Policy is available for viewing on the Company’s website at www.connectcounty.com.

Part 2 - Board Composition

4.0 Board’s Objectivity

4.1 Composition of the Board

As at the LPD, the Board consists of four (4) Independent Non-Executive Directors and three (3) Executive Directors as indicated in the table below. Hence, the Board complies with Practice 4.1 of the MCCG which stated that at least half of the Board comprises Independent Directors.

Name Designation

Major General Dato’ Mamat Ariffin Bin Abdullah Independent Non-Executive ChairmanAng Chuang Juay Executive Deputy ChairmanWong Pooi Fatt Executive DirectorLee Su Lin Executive DirectorLim Bee San Independent Non-Executive DirectorThong Mei Mei Independent Non-Executive DirectorNg Keok Chai Independent Non-Executive Director

4.2 Tenure of Independent Directors

There are no Independent Directors whose tenure exceeds a cumulative term of nine (9) years in the Company.



32

Part 2 - Board Composition (Cont’d)

4.0 Board’s Objectivity (Cont’d)

4.3 Appointment of Board and Senior Management

In relation to appointment of Board member, the Board, vide the Nomination Committee (“NC”), would undergo the three-staged nomination process as follows:-

• Stage 1: Review of the potential candidates based on the criteria set• Stage 2: Board gaps review• Stage 3: Recommendation to the Board

The new appointment of senior management would be reviewed by the NC based on objective criteria, merit and with due regard for diversity in skills, experience, age, cultural background and gender.

4.4 Diversity of the Board and Senior Management Team

The Board consists of three (3) female Directors out of seven (7) Directors, namely Ms. Lim Bee San, Ms. Thong Mei Mei and Ms. Lee Su Lin, representing 43% of female representatives on Board, which has achieved the target of at least 30% women Directors.

The Board is supportive of boardroom and senior management level gender diversity to promote constructive debates and add vibrancy to its decision-making process.

4.5 Source of Identifying New Directors

In identifying new Directors for appointment, the Board would consider recommendation from the existing Board members, management, or major shareholders.

In view of cost consideration and effectiveness, taking into account the operational requirement of the Group, the Board did not utilise independent sources to identify suitably qualified candidates.

Notwithstanding the above, all appointment of Directors would need to undergo the three-staged nomination process by the NC as mentioned in paragraph 4.3 above.

4.6 Nomination Committee

As at the LPD, the membership and meeting attendance of the NC are as follows:-

No. of meeting attended /held during Designation/ the financial year Members Directorate under review %

Major General Dato’ Mamat Chairman Ariffin Bin Abdullah (Independent Non-(Appointed w.e.f. 29 March 2019) Executive Chairman) Not applicable Not applicable

Mok Shiaw Hang Chairman(Resigned w.e.f. 29 March 2019) (Independent Non- Executive Director) 3/3 100.0

Lim Bee San Member (Independent Non- Executive Director) 3/3 100.0


A N N U A L R E P O R T 2 0 1 8

33



4.6 Nomination Committee (Cont’d) No. of meeting attended /held during Designation/ the financial year Members Directorate under review %

Thong Mei Mei Member(Appointed w.e.f. 24 May 2018) (Independent Non- Executive Director) 1/1 100.0

Ng Keok Chai Member(Appointed w.e.f. 29 March 2019) (Independent Non- Executive Director) Not applicable Not applicable

The NC has undertaken the following activities during the financial year under review:-

(i) Confirmed minutes of the preceding meetings.(ii) Examined size of the Board and the composition of Board Committees.(iii) Reviewed the required mix of skills, experience, gender diversity and other qualities of the Board.(iv) Reviewed the term office and performance of the Audit Committee and each of its members in respect of

financial year ended 31 December 2017 (“FYE 2017”) and FYE 2018.(v) Conducted evaluation on the effectiveness of the Board, as a whole, and the Committees of the Board in

respect of FYE 2017 and FYE 2018.(vi) Conducted evaluation on the contribution and performance of each individual Director in respect of FYE

2017 and FYE 2018.(vii) Assessed the independence of the Independent Non-Executive Directors.(viii) Reviewed and recommended to the Board, the re-election of the Directors who will be retiring at the Fifteenth

Annual General Meeting of the Company.(ix) Deliberated the appointments of new Directors based on the established criteria.

The Terms of Reference of the NC is available on the Company’s corporate website at www.connectcounty.com.

Directors’ Training

In order for the enlarged ConnectCounty Holdings Berhad Group to remain competitive, the Board ensures that the Directors continuously enhance their skills and expand their knowledge to meet the challenges of the Board.

The Board has cultivated the following best practices:-

• All newly appointed Directors are to attend the Mandatory Accreditation Programme as prescribed by the ACE LR within the stipulated timeframe;

• All Directors are encouraged to attend talks, training programmes and seminars to update their knowledge on the latest regulatory and business environment;

• The Directors may be requested to attend additional training courses according to their individual needs as a Director or member of Board Committees on which they serve;

• The Directors are briefed by the Company Secretaries on the letters/circulars issued by Bursa Securities at every Board meeting; and

• The Directors are to undertake reconnaissance trip/ Board meetings at subsidiary(ies) of different jurisdiction to have a first-hand knowledge of the operations of the Group.

Upon assessing the training needs of the Directors, the Board recognised that continuing education would be the way forward in ensuring its members are continually equipped with the necessary skills and knowledge to meet the challenges ahead. The details on the continuing education programmes attended by the Directors are disclosed in the CG Report 2018.



34



4.6 Nomination Committee (Cont’d)

2019 Training Needs

Upon review of the training needs of the Directors for the financial year ending 31 December 2019 (“FYE 2019”) and recognising the need to keep abreast with the fast changing business and regulatory environment, the NC has encouraged the Directors to continue to attend more than one (1) continuing education programme in FYE 2019, whereby it should be related to the industry-specific knowledge, corporate governance, sustainability or ACE LR.

5.0 Overall Board Effectiveness

5.1 Annual Assessments

During the FYE 2018, the NC had conducted the

Connect County 2018- financial-6 - MalaysiaStock.Biz › GetReport.aspx?file...No. 1, Jalan PJU 7/3...

Documents

Transcript of Connect County 2018- financial-6 - MalaysiaStock.Biz › GetReport.aspx?file...No. 1, Jalan PJU 7/3...