GULA PERAK BERHAD (“GPB”) 8104-X
Part A - Explanatory Notes to the Financial Report for the 2ndQuarter Ended 30 September 2010
-Unaudited
(a) / ACCOUNTING POLICIESThe interim financial report is unaudited and has been prepared in accordance with the requirements of FRS 134 : Interim Financial Reporting and paragraph 9.22 of the Listing Requirements of Bursa Malaysia Securities Berhad.The interim financial report should be read in conjunction with the audited financial statements of the Group for the year ended 31st March, 2010. These explanatory notes attached to the interim financial report provide an explanation of events and transactions that are significant to an understanding of the changes in the financial position and performance of the Group since the financial year ended 31st March, 2010.
The accounting policies and methods of computation adopted by the Group in this interim financial report are consistent with those of the audited financial statements for the financial year ended 31st March, 2010 except for the adoption of the following new Financial Reporting Standards (“FRSs”), Amendments and Issues Committee (“IC”) Interpretations with effect from 1 January 2010.
As of 30 June 2010, the Group adopted the following FRSs:-
FRSs, Amendments and IC Interpretations
FRS 7 Financial Instruments: Disclosures
FRS 8 Operating Segments
FRS 101 Presentation of Financial Statements (Revised 2009)
FRS 123 Borrowing Costs
FRS 139 Financial Instruments: Recognition and Measurement
Amendment to FRS 7 Financial Instruments: Disclosures
Amendment to FRS 8 Operating Segments
Amendment to FRS 107 Statement of Cash Flows
Amendment to FRS 108 Accounting Policies, Changes in Accounting Estimates and Errors
Amendment to FRS 110 Events after the Reporting Period
Amendment to FRS 116 Property, Plant and Equipment
Amendment to FRS 117 Leases
Amendment to FRS 118 Revenue
Amendment to FRS 119 Employee Benefits
Amendment to FRS 123 Borrowing Costs
Amendment to FRS 127 Consolidated and Separate Financial Statements
Amendment to FRS 132 Financial Instruments: Presentation
Amendment to FRS 134 Interim Financial Reporting
Amendment to FRS 136 Impairment of Assets
Amendment to FRS 139 Financial Instruments: Recognition and Measurement
Amendment to FRS 140 Investment Property
IC Interpretation 10 Interim Financial Reporting and Impairment
The adoption of the above FRSs, Amendments and IC Interpretations did not result in any significant financial
impact on the results of the Group except for the following:
(a) FRS 101 (revised), Presentation of Financial Statements
The Group applies revised FRS 101 (2009) which became applicable to the Group on 30 June 2010. As a result, theGroup presents all non-owner changes in equity in the consolidated statement of comprehensive income.
Comparative information has been re-presented so that it is in conformity with the revised standard. Since thechange only affects presentation aspects, there is no impact on earnings per ordinary share.
(b) Amendment to FRS 117: Leases
The adoption of the Amendment to FRS 117 has resulted in retrospective change in the accounting policyrelating to the classification of the leasehold land. Prior to 31 March 2010, the considerations paid for theleasehold land were classified and presented as prepaid lease payments in the statement of financial position.With the adoption of the Amendment to FRS 117, the classification of a leasehold land as finance lease or anoperating lease is based on the extent to which risks and rewards incident to ownership. In making thisjudgment, the directors have concluded that lands with and initial lease period of 50 years or more are financeleases because the present value of the minimum lease payments is substantially equal to the fair value ofthe land. Accordingly, the Group changed the classification of long term leasehold lands from operatingleases to finance leases in the current quarter.
The following comparative figures on the face of statement of financial position have been restated following
the adoption of the amendments to FRS 117:
31 March 2010 / As previously reported
RM'000 / Reclassification
RM'000 / As restated
RM'000
Property, plant and equipment / 142,168 / 1,283 / 143,451
Prepaid lease payments / 1,283 / (1,283) / -
(c) FRS 139: Financial Instruments – Recognition and Measurement
Prior to the adoption of FRS 139, financial derivatives were recognised on their settlement dates. Outstandingderivatives at the balance sheet date were not recognised. With the adoption of FRS 139, all financial assetsand financial liabilities, including derivatives, are recognised at contract dates when and only when, theCompany or any subsidiary becomes a party to the contractual provisions of the instruments.
With the adoption of FRS 139, financial assets and financial liabilities recognised and unrecognised in theprior financial year are classed into the following categories:
Pre-FRS 139 / Post-FRS 139
1 / Trade and other receivables / Loans and receivables
The measurement bases applied to the financial assets and financial liabilities in the prior financial year arechanged to conform to the measurement standards of FRS 139 in the current quarter. At initial recognition, allfinancial assets and financial liabilities are measured at their fair value plus in the case of financial instrumentsnot at fair value through profit or loss, transaction costs directly attributable to the acquisition or issuance ofthe instruments. Subsequent to their initial recognition, the financial assets and financial liabilitiesaremeasured as follows:
Category / Measurement basis
1 / Financial instruments at fair value through profitor loss / At fair value through profit or loss
2 / Loans and receivables / At amortised cost effective interest method
3 / Loans and other financial liabilities / At amortised cost effective interest method
(b) /
QUALIFICATION
The auditor’s report on the Group’s annual financial statements for the financial year ended 31 March 2010 was subject to qualification on the Group’s ability to continue as a going concern due to the deficit in shareholders’ funds and it is dependent on the formulation of a comprehensive regularization plan which is required as a result of the Company’s classification as an affected issuer under PN17 of Bursa Malaysia Berhad’s amendments to the Listing Requirements as the Company did not provide Bursa Malaysia Berhad with the PN1 solvency declaration.(c) / SEASONAL OR CYCLICAL FACTORS
There is no material seasonal or cyclical effect on the Company's operations.
(d) /
UNUSUAL ITEMS
Other than as disclosed in Part B Section 9 below with regards to the Redeemable Secured Bods 2000/2005, there were no unusual items that affected the assets, liabilities, equity, net income or cash flows of the Group during the financial period ended 30/9/2010.(e) / CHANGES IN ACCOUNTING ESTIMATES
There were no other changes in estimates that have a material effect on the financial statements for the quarter ended 30/9/2010.
(f) / ISSUANCES, CANCELLATIONS, REPURCHASES, RESALE AND REPAYMENTS OF DEBT AND EQUITY SECURITIES
Other than the partial payment of the Redeemable Secured Bonds 2000/2005in 12August 2009, there were no issuance and repayment of debt and equity securities, share buy-backs, share cancellations, shares held as treasury shares and resale of treasury shares for the current financial year to date.
(g) / DIVIDENDS
There was no dividend paid during the current financial period ended 30/9/2010.
(h) /
SEGMENTAL REPORTING BY ACTIVITIES
6 months endedOperating
Revenue
30/9/2010
RM’000
/ Profit/(Loss)Before Taxation
30/9/2010
RM’000
Continuing Operations :Property / - / 58
Discontinued Operations :
Hotel operations / 14,606 / (84,299)
14,606 / (84,241)
Add : HQ Other income / 814
Less : HQ Expenses / (10,283)
Less : Finance Cost / (1,976)
14,606 / (95,686)
All activities of the Group’s operations are carried out in Malaysia.
(i) /VALUATIONS OF PROPERTY, PLANT AND EQUIPMENT
The values of properties, plant and equipment have been brought forward with impairment loss from the last annual audited financial statements as a result of impairment losses on the hotel properties.(j) / MATERIAL EVENTS SUBSEQUENT TO THE END OF THE YEAR
(i)On 13 May 2010, the Company announced that it has triggered one of the prescribed criterions under paragraph 2.1(f) and become an affected listed issuer pursuant to the Practice Note 17 (“PN17”) of the Listing Requirements of Bursa Malaysia Securities Berhad which arose from the requirements under Practice Note 1 (“PN1”) of the Listing Requirements that the Company is to provide a solvency declaration. Consequently, the Group and the Company are required to undertake a plan to regularise their financial position and to submit the regularisation plan to relevant authorities for approval within 12 months from 13 May 2010.
(ii)Pursuant to the expiry of the RCSN on 22 April 2008, which was secured by the subsidiary companies’ hotel properties and the Company’s investment properties, and as an integral part of the Company’s restructuring efforts, the Company has entered into the following agreements:
- On 25 June 2010, the Company entered into sale and purchase agreements with Perth International Limited, a company incorporated in Hong Kong, to dispose of two (2) pieces of freehold land held for property development for a total cash consideration of RM 19,000,000 and RM 6,100,000 respectively; and
- On 28 June 2010, the subsidiary companies, Dynawell Corporation (M) Sdn. Bhd. and KSB Requirements & Rest Sdn. Bhd. respectively entered into sale and purchase agreements with Time Glory Investment Limited, a company incorporated in Hong Kong, to dispose of Dynasty Hotel and Empress Hotel for a total cash consideration of RM 151,000,000 and RM 42,900,000 respectively.
(k) / CHANGES IN THE COMPOSITION There were no changes in the composition of the Company during the current financial period ended 30/9/2010.
(l) / CHANGES IN CONTINGENT LIABILITIES OR ASSETS
There were no changes in contingent liabilities or assets since the last annual balance sheet.
(m) /
DISCONTINUED OPERATION
On 28 October 2005, the Group had disposed a leasehold agriculture land held under H.S. (D) 1668 No. PT 1058 known as Sitiawan Estate to Faithmont Estate Sdn Bhd which situated in Mukim Durian Sebatang, Hilir Perak, Perak Darul Ridzuan.The major classes of assets and liabilities of the leasehold agriculture land classified as held for sale as at 30/9/2010 are as follow:-
RM’000
Assets:Leasehold land / 1,927
Property, plant and equipment / 3,937
Total assets classified as held for sale / 5,864
On 25 June 2010, the Company entered into sale and purchase agreements with Perth International Limited, a company incorporated in Hong Kong, to dispose of two (2) pieces of freehold land held for property development.
The major classes of assets and liabilities of the land held for property development classified as held for sale as at 30/9/2010 are as follow:-
RM’000
Assets:Land held for property development / 33,500
Impairment loss / (8,400)
Total assets classified as held for sale / 25,100
On 28 June 2010, the subsidiary companies, Dynawell Corporation (M) Sdn. Bhd. And KSB Requirements & Rest Sdn. Bhd. respectively entered into sale and purchase agreements with Time Glory Investment Limited, a company incorporated in Hong Kong, to dispose of Dynasty Hotel and Empress Hotel.
The major classes of assets and liabilities of the land held for property development classified as held for sale as at 30/9/2010 are as follow:-
RM’000
Assets:Leasehold land / -
Property plant and equipment / 139,386
Investment property / 135,100
Impairment loss / (80,586)
Total assets classified as held for sale / 193,900
Part B – Explanatory Notes Pursuant to Appendix 9B of the Listing Requirements of BursaMalaysia Securities Berhad
1. / REVIEW OF PERFORMANCEThe Group’s loss for the period ended 30/9/2010 was RM33.071 million compared to a loss of RM2.796 million in the same period previous year. This is mainly due to further impairment loss from the effects of adopting FRS 5 during the period.
2. / COMPARISON WITH PRECEDING QUARTERLY RESULTS
2nd Qtr ending 30/9/2010
RM'000 / 1st Qtr ending 30/6/2010
RM'000 / Increase/ (Decrease)
RM'000
Revenue from discontinued operations / 7,758 / 6,848 / 910
Comprehensive loss for the period from discontinued operations / (33,071) / (91,099) / (58,028)
Turnover for this quarter increased by approximately RM910,000 mainly due to increase in hotel revenue in current quarter. The loss of RM33.071 million in the current quarter (loss of RM91.099 million in previous quarter) was mainly due to further impairment losses at the subsidiary level in the current quarter.
3. / PROSPECTS
With the pending completion of the sale of the Group’s assets and the classification of GPB as an affected issuer under PN17, the Group has approximately another 6 months to submit its regularization plan to the relevant authorities for approval.
The Company is preparing a comprehensive regularization plan to address its PN17 status. The Board of Directors is focused to turn the Group around under the regularization plan and together with senior management and employees,are jointly committed to the successful formulation and implementation of a turnaround plan that will comprehensively address the various issues and with the approvals of relevant authorities and shareholders, to upliftthe PN17 classification.
4. / VARIANCE OF ACTUAL FINANCIAL RESULTS FROM FORECASTED RESULTS
This is not applicable as the Group did not announce any forecast results for the period.
5. / TAXATION
No provision has been made for income tax in respect of income earned by the Group as the Group has adequate unabsorbed tax losses brought forward.
6. / SALE OF UNQUOTED INVESTMENT OR PROPERTIES
There were no sales of unquoted investment or properties save as disclosed in Note (j) during the period ended 30/9/2010.
7. / PURCHASE OR DISPOSAL OF QUOTED SECURITIES
The Group does not have any investment in quoted shares. There were no purchases or disposals of quoted shares during quarter ended 30/9/2010.
8. / STATUS OF CORPORATE PROPOSALS
(i) / On 23 April 2007, on behalf of Gula Perak Berhad (GPB), RHB Investment Bank Berhad announced that the Company intends to vary the terms of the 5-year Redeemable Convertible Secured Notes (RCSN) issued by the Company (“Proposed Variations”) which inter-alia, will address the Company’s default in payment of the coupon of the RCSN amounting to RM17,240,000 due on 22 April 2007.
On 24 April 2008, GPB announced that the maturity date of the RCSN had already set in on 22 April 2008 together with the 5th coupon payment due on 22 April 2008 and that the adjourned RCSN Holders meeting be adjourned sine die. Hence, the special resolution on the Proposed Restructuring of the RCSN to be contemplated at the adjourned RCSN Holders meeting cannot be implemented. The RCSN has since been reclassified as Redeemable Secured Notes 2003/2008 (“RSN”).
Presently, the negotiation on the restructuring with the RSN Holders is still ongoing.
9. /
GROUP BORROWINGS
Group borrowings as at 30 September 2010 are as follows: /RM'000
Short term borrowings – SecuredTerm loan
Redeemable Secured Notes (‘RSN’)*
Secured loan**
(Note*: As a result of the reclassification of the RCSN into RSN, the equity component amounting to RM30.773 million has been reclassified as short term borrowings and aggregated as RSN. / 24,824
287,335
52,999
Note **: This is in relation to the expired 3% Redeemable Secured Bonds (“RSB”) on 18/12/05, the redemption of which will be made via the sale of collateral pledged.)
The Redeemable Secured Bonds 2000/2005 (“the Bonds”) issued on 18 December 2000 is constituted by a 2000/2005 Global Certificate dated 18 December 2000. The Bonds are secured by legal charges over the Company’s leasehold land included in assets classified as held for sale and a subsidiary company’s hotel properties and investment properties.
The principal terms of the Bonds are as follows:
- Face value: RM 90,124,000;
- Coupon: Coupon on the Bonds will accrue at 3% per annum based on the face value and shall be paid in arrears on each of the first four anniversaries of the issue date. The last payment will be made on the maturity date;
- Tenure: 5 years from the date of issue;
- Maturity date: The date preceding the fifth anniversary of the date of issue of the Bonds;
- Purchase and redemption: the Company shall not be at liberty to redeem the Bonds except in accordance with:
(ii)Mandatory redemption - Unless previously redeemed and cancelled, the Bonds will be redeemed by the Company at 100% of the nominal amount on the Maturity Date together with the last annual coupon payment;
- Status of Bonds: The Bonds will rank pari passu without any preference or priority among themselves but will rank in priority to the holders of Irredeemable Convertible Secured Loan Stocks 2000/2005 in relation to the assets secured; and
- Listing: The Bonds will not be listed on the BursaMalaysia Securities Berhad.
(a)redemption of 3,925.66 acres of plantation land at RM 54,000,000 payable in four months from 27 February 2008;
(b)the sum of RM 10,000,000 payable in sixteen quarterly intervals of RM 625,000 each where the first payment shall commence on the third month after the redemption mentioned in item (a) above or four months from 27 February 2008; and
(c)property titles valued at not less than RM 14,000,000 is to be deposited with the Bonds holder where a charge will be created to secure the transactions mentioned in (a) and (b) above.
On 7 August 2009, the Bonds holder has agreed to a revised settlement sum of RM 22,875,000 for the balance outstanding of RM 29,000,000 after the redemption of the 2,925.66 acres of Bernam plantation land for RM 35,000,000. The new settlement agreement is payable in the following manner and subject to the strict fulfilment of the following terms and conditions:
(i)the sum of RM 875,000 shall be payable upon acceptance of the letter of offer; and
(ii)the remaining settlement sum of RM 22,000,000 payable within six months of the Acceptance Date. The Company accepted the revised settlement on 12 August 2009. However, the balance sum of RM 22,000,000 remained outstanding six months after the Acceptance Date.
On 12 August 2010, AmBank vide their lawyers have terminated the revised settlement offer and that the Company is now indebted in the sum of RM74,897,326.66 with interest at the rate of 4% from 1 August 2010 until full settlement. The discount of RM26.124 million which was taken up in the financial statements for the financial year ended 31 March 2008 has been reversed in this financial period.
10. /
OFF BALANCE SHEET FINANCIAL INSTRUMENTS
The Group does not have any off balance sheets financial instruments risks as at the date of this announcement.11. / MATERIAL LITIGATION
The changes in material litigation (including status of pending material litigation) of the Group since the last annual balance sheet date up to the date not earlier than 7 days from the date of issue of this report are as follow:
(i) / Kuala Lumpur High Court Summons Winding-Up No. D1-28-345-99 by Dynawell Corporation (M) Sdn. Bhd. (“Plaintiff”), dated 23 April 1999 against Chang An Holidays (M) Sdn. Bhd. (“Defendant”) for RM698,763.31, being claims for room charges and services rendered to and incurred by the Defendant which is under receivership. The matter is pending the first Creditor’s Meeting to be fixed by the Official Receiver;